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<SEC-DOCUMENT>0001362310-08-002349.txt : 20080502
<SEC-HEADER>0001362310-08-002349.hdr.sgml : 20080502
<ACCEPTANCE-DATETIME>20080502103101
ACCESSION NUMBER:		0001362310-08-002349
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		9
CONFORMED PERIOD OF REPORT:	20080331
FILED AS OF DATE:		20080502
DATE AS OF CHANGE:		20080502

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:	001-33067
		FILM NUMBER:		08797086

	BUSINESS ADDRESS:	
		STREET 1:		40 WANTAGE AVENUE
		CITY:			BRANCHVILLE
		STATE:			NJ
		ZIP:			07890
		BUSINESS PHONE:		9739483000

	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>c73164e10vq.htm
<DESCRIPTION>FORM 10-Q
<TEXT>
<HTML>
<HEAD>
<TITLE>Filed by Bowne Pure Compliance</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 1pt solid black; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="font-size: 14pt; margin-top: 10pt"><B>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B>Washington, D.C. 20549</B>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 10pt"><B>FORM 10-Q</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">(Mark One)

</DIV>
<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 10pt">
    <TD width="7%"></TD>
    <TD width="5%"></TD>
    <TD width="88%"></TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#254;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 12%"><B>For the quarterly period ended: March&nbsp;31, 2008
</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 10pt"><B>or</B>

</DIV>
<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 10pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 12%"><B>For the transition period from
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</U> to <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>
</B>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 10pt"><B>Commission File Number: 001-33067</B>
</DIV>

<DIV align="center" style="font-size: 24pt; margin-top: 10pt"><B><FONT style="border-bottom: 1px solid #000000">SELECTIVE INSURANCE GROUP, INC.</FONT></B>
</DIV>

<DIV align="center" style="font-size: 10pt">(Exact name of registrant as specified in its charter)</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="48%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">New Jersey
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">22-2168890</TD>
</TR>
<TR style="font-size: 1px">
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">(State or Other Jurisdiction of Incorporation or Organization)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(I.R.S. Employer Identification No.)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">40 Wantage Avenue</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">Branchville, New Jersey
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">07890</TD>
</TR>
<TR style="font-size: 1px">
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">(Address of Principal Executive Offices)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(Zip Code)</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 10pt">(973)&nbsp;948-3000<BR>
<DIV style="margin-top: 1px"><FONT style="border-top: 1px solid #000000">(Registrant&#146;s Telephone Number, Including Area Code)</FONT>
</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">&nbsp;</DIV>
<DIV align="Center" style="font-size: 10pt; margin-top: 10pt"><DIV style="margin-top: 1px"><FONT style="border-top: 1px solid #000000">(Former name, former address and former fiscal year, if changed since last report)</FONT></DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Indicate by check mark whether the registrant (1)&nbsp;has filed all reports required to be filed by
Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12&nbsp;months (or for
such shorter period that the registrant was required to file such report), and (2)&nbsp;has been subject
to such filing requirements for the past 90&nbsp;days.
<FONT style="white-space: nowrap">Yes <FONT face="Wingdings">&#254;</FONT> No <FONT face="Wingdings">&#111;</FONT></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer or a smaller reporting company. See definitions of &#147;large accelerated
filer,&#148; &#147;accelerated filer&#148; and &#147;smaller reporting company&#148; in Rule&nbsp;12b-2 of the Exchange Act.
(Check one):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="22%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top" nowrap>Large accelerated filer <FONT face="Wingdings">&#254;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" nowrap>Accelerated filer <FONT face="Wingdings">&#111;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" nowrap>Non-accelerated filer <FONT face="Wingdings">&#111;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" nowrap><FONT style="white-space: nowrap">Smaller reporting company <FONT face="Wingdings">&#111;</FONT></FONT></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD colspan="5" align="center" valign="top"><FONT style="white-space: nowrap">(Do not check if a smaller reporting company)</FONT></TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Indicate by check mark whether the registrant is a shell company (as defined in Rule&nbsp;12b-2 of the Exchange Act).
<FONT style="white-space: nowrap"> Yes <FONT face="Wingdings">&#111;</FONT> No <FONT face="Wingdings">&#254;</FONT></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">As of March&nbsp;31, 2008, there were 53,306,769 shares of common stock, par value $2.00 per share,
outstanding.
</DIV>

<DIV style="width: 100%; border-bottom: 1pt solid black; margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>






<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">
<DIV align="left">
<!-- TOC -->
</DIV>
<DIV align="left">
<A name="tocpage"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>SELECTIVE INSURANCE GROUP, INC.</B><BR>
Table of Contents
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="96%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Page No</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#101"><B>PART I. FINANCIAL INFORMATION</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#102"><B>Item&nbsp;1. Financial Statements</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#103">Consolidated Balance Sheets as of March&nbsp;31, 2008 (Unaudited)
and December&nbsp;31, 2007</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#104">Unaudited Consolidated Statements of Income for the Quarters Ended
March&nbsp;31, 2008 and 2007</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#105">Unaudited Consolidated Statements of Stockholders&#146; Equity for the
Quarters Ended March&nbsp;31, 2008 and 2007</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#106">Unaudited Consolidated Statements of Cash Flow for the
Quarters Ended March&nbsp;31, 2008 and 2007</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#107">Notes to Unaudited Interim Consolidated Financial Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#108"><B>Item&nbsp;2. Management&#146;s Discussion and Analysis of Financial Condition
and Results of Operations</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#109">Forward-Looking Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#110">Introduction</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#111">Critical Accounting Policies and Estimates</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#112">Financial Highlights of Results for First Quarter 2008 and First Quarter 2007</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#113">Results of Operations and Related Information by Segment</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#114">Financial Condition, Liquidity, and Capital Resources</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#115">Off-Balance Sheet Arrangements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#116">Contractual Obligations and Contingent Liabilities and Commitments</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#117">Federal Income Taxes</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#118"><B>Item&nbsp;3. Quantitative and Qualitative Disclosures About Market Risk</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#119"><B>Item&nbsp;4. Controls and Procedures</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#120"><B>PART II. OTHER INFORMATION</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#121"><B>Item&nbsp;1. Legal Proceedings</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#122"><B>Item&nbsp;2. Unregistered Sales of Equity Securities and Use of Proceeds</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#123"><B>Item&nbsp;4. Submission of Matters to a Vote of Security Holders</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#124"><B>Item&nbsp;6. Exhibits</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="c73164exv10w18i.htm">Exhibit 10.18i</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="c73164exv10w18j.htm">Exhibit 10.18j</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="c73164exv10w18k.htm">Exhibit 10.18k</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="c73164exv11.htm">Exhibit 11</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="c73164exv31w1.htm">Exhibit 31.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="c73164exv31w2.htm">Exhibit 31.2</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="c73164exv32w1.htm">Exhibit 32.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="c73164exv32w2.htm">Exhibit 32.2</A></FONT></TD></TR>
<!-- End Table Body --></TABLE>
</DIV>

<DIV align="left">
<!-- /TOC -->
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->1<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">
<DIV align="left">
<A name="101"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 8pt"><B>PART I. FINANCIAL INFORMATION</B>
</DIV>

<DIV align="left">
<A name="102"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 8pt"><B>ITEM 1. FINANCIAL STATEMENTS</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 8pt"><B>SELECTIVE INSURANCE GROUP, INC.</B>

</DIV>
<DIV align="left">
<A name="103"></A>
</DIV>

<DIV align="left" style="font-size: 10pt"><B>CONSOLIDATED BALANCE SHEETS</B></DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Unaudited</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>March 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">($ in thousands, except share amounts)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>ASSETS</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Investments:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fixed maturity securities, held-to-maturity &#150; at amortized cost<br>
(fair value of: $4,429 &#150; 2008; $5,927 &#150; 2007)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>4,304</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,783</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fixed maturity securities, available-for-sale &#150; at fair value<br>
(amortized cost of: $3,016,348 &#150; 2008; $3,049,913 &#150; 2007)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,021,670</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,073,547</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity securities, available-for-sale &#150; at fair value<br>
(cost of: $147,174 &#150; 2008; $160,390 &#150; 2007)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>232,787</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">274,705</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Short-term investments &#150; at cost which approximates fair value</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>212,545</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">190,167</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity securities, trading &#150; at fair value (cost of: $17,358 &#150; 2008)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>23,219</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>197,097</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">188,827</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 1pt">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,691,622</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,733,029</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>9,837</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,383</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest and dividends due or accrued</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>35,153</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,141</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Premiums receivable, net of allowance for uncollectible
accounts of:<br> $4,254 &#150; 2008; $3,905 &#150; 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>496,548</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">496,363</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other trade receivables, net of allowance for uncollectible
accounts of:<br> $184 &#150; 2008; $244 &#150; 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>22,493</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,875</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Reinsurance recoverable on paid losses and loss expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>7,307</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,429</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Reinsurance recoverable on unpaid losses and loss expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>222,968</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">227,801</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Prepaid reinsurance premiums</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>82,761</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82,182</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current federal income tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,235</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred federal income tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>42,302</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,375</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Property and equipment &#150; at cost, net of accumulated
depreciation and amortization of: $121,693 &#150; 2008; $117,832 &#150; 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>56,418</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,561</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred policy acquisition costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>225,558</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">226,434</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>33,637</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,637</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>43,882</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,547</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 1pt">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>4,970,486</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,001,992</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 1pt">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 7pt"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>LIABILITIES AND STOCKHOLDERS&#146; EQUITY</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Liabilities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Reserve for losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>2,199,024</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,182,572</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Reserve for loss expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>368,274</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">359,975</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unearned premiums</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>850,494</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">841,348</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Senior convertible notes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,740</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Notes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>286,158</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">286,151</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current federal income tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,619</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commissions payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>34,436</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,178</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accrued salaries and benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>78,257</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">88,079</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>102,532</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">98,906</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 1pt">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,924,794</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,925,949</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 1pt">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 7pt"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Stockholders&#146; Equity:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Preferred stock of $0 par value per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Authorized shares: 5,000,000; no shares issued or outstanding </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Common stock of $2 par value per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Authorized shares: 360,000,000</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Issued: 94,851,326 - 2008; 94,652,930 - 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>189,703</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">189,306</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Additional paid-in capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>203,789</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">192,627</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Retained earnings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,125,597</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,105,946</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accumulated other comprehensive income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>53,205</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">86,043</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Treasury stock &#150; at cost (shares: 41,544,557 &#150; 2008; 40,347,894 &#150; 2007)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(526,602</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(497,879</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="top" style="font-size: 1pt">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,045,692</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,076,043</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 1pt">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Commitments and contingencies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total liabilities and stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>4,970,486</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,001,992</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 8pt">The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->2<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>




<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>SELECTIVE INSURANCE GROUP, INC.</B>
</DIV>
<DIV align="left">
<A name="104"></A>
</DIV>

<DIV align="left" style="font-size: 10pt"><B>UNAUDITED CONSOLIDATED STATEMENTS OF INCOME</B></DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>

<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Quarters ended March 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">($ in thousands, except per share amounts)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Revenues:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net premiums written</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>389,840</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">417,185</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net increase in unearned premiums and prepaid reinsurance premiums</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(8,567</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(37,172</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net premiums earned</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>381,273</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">380,013</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net investment income earned</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>37,866</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,863</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net realized gains</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,515</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,243</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diversified Insurance Services revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>29,799</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,178</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>660</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,812</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>451,113</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">462,109</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Expenses:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Losses incurred</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>210,130</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">203,310</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss expenses incurred</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>43,049</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,983</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Policy acquisition costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>128,680</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">122,918</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividends to policyholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>535</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,487</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,309</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,331</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diversified Insurance Services expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>25,514</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,811</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>11,294</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,070</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>424,511</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">412,910</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income before federal income tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>26,602</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,199</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Federal income tax expense (benefit):</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>11,135</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,611</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(5,036</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,664</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total federal income tax expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6,099</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,947</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>20,503</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,252</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<tr style="font-size: 10pt"><td>&nbsp;</td></tr>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Earnings per share:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>0.39</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.68</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>0.38</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.62</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividends to stockholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>0.13</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.12</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The accompanying notes are an integral part of these unaudited interim consolidated financial statements.

</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->3<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>SELECTIVE INSURANCE GROUP, INC.</B>

</DIV>
<DIV align="left">
<A name="105"></A>
</DIV>

<DIV align="left" style="font-size: 10pt"><B>UNAUDITED CONSOLIDATED STATEMENTS OF</B></DIV>



<DIV align="left" style="font-size: 10pt"><B>STOCKHOLDERS&#146; EQUITY</B></DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="44%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" style="border-bottom: 1px solid #000000"><B>Quarters ended March 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">($ in thousands, except per share amounts)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Common stock:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>189,306</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">183,124</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividend reinvestment plan<br>
(shares: 19,298 &#150; 2008; 18,764 &#150; 2007)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>38</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Convertible debentures<br>
(shares: 45,759 &#150; 2008; 107,344 &#150; 2007)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>92</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">215</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stock purchase and compensation plans<br>
(shares: 133,339 &#150; 2008; 586,729 &#150; 2007)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>267</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,173</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">End of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>189,703</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">184,550</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Additional paid-in capital:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>192,627</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">153,246</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividend reinvestment plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>429</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">422</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Convertible debentures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>645</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">171</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stock purchase and compensation plans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>10,088</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,702</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">End of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>203,789</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">164,541</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Retained earnings:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,105,946</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">986,017</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cumulative-effect adjustment due to adoption of FAS 159,
net of deferred income tax effect of $3,344</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6,210</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>20,503</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>20,503</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,252</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,252</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash dividends to stockholders ($0.13 per share &#150; 2008;
$0.12 per share &#150; 2007)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(7,062</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,842</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">End of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,125,597</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,016,427</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Accumulated other comprehensive income:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>86,043</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,601</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cumulative-effect adjustment due to adoption of FAS 159,
net of deferred income tax effect of $(3,344)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(6,210</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other
comprehensive (loss)&nbsp;income (decrease) <BR>increase in:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net unrealized gains on investment securities,
Net of deferred income tax effect of
$(14,357) &#150; 2008; $(1,740) &#150; 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(26,663</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(26,663</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,232</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,232</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Defined benefit pension plans, net of deferred income tax effect of
$19 &#150; 2008; $51 &#150; 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>35</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>35</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">93</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">End of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>53,205</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97,462</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Comprehensive (loss)&nbsp;income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(6,125</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,113</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Treasury stock:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(497,879</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(345,761</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Acquisition of treasury stock<br>
(shares: 1,196,663 &#150; 2008; 3,127,376 &#150; 2007)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(28,723</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(78,355</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">End of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(526,602</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(424,116</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>1,045,692</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,038,864</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Selective Insurance Group, Inc. also has authorized, but not issued, 5,000,000 shares of preferred
stock without par value, of which 300,000 shares have been designated Series&nbsp;A junior preferred
stock without par value.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The accompanying notes are an integral part of these unaudited interim consolidated financial
statements.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->4<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 8pt"><B>SELECTIVE INSURANCE GROUP, INC.</B>

</DIV>
<DIV align="left">
<A name="106"></A>
</DIV>

<DIV align="left" style="font-size: 8pt"><B>UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOW</B></DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Quarters ended March 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">($ in thousands)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Operating Activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>20,503</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,252</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><I>Adjustments to reconcile net income to net cash provided by operating activities:</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>7,129</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,975</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Share-based compensation expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>8,896</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,630</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net realized gains</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(1,515</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11,243</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(5,036</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,664</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unrealized loss on trading securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,888</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><I>Changes in assets and liabilities:</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Increase in reserves for losses and loss expenses, net of reinsurance recoverable
on unpaid losses and loss expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>29,598</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63,053</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Increase in unearned premiums, net of prepaid reinsurance and advance premiums</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>8,295</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,107</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Increase in net federal income tax payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>9,854</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,206</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Increase in premiums receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(185</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(37,163</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(Increase) decrease in other trade receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(618</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,633</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Decrease (increase)&nbsp;in deferred policy acquisition costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>876</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,656</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Decrease in interest and dividends due or accrued</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,033</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">822</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Decrease in reinsurance recoverable on paid losses and loss expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>122</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">983</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Decrease in accrued salaries and benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(11,724</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(20,874</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Decrease in accrued insurance expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(24,950</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(24,887</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase of trading securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(4,530</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sale of trading securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,696</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other-net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,621</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,030</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>25,450</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,952</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash provided by operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>45,953</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75,204</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Investing Activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase of fixed maturity securities, available-for-sale</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(77,944</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(89,915</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase of equity securities, available-for-sale</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(7,212</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(31,550</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase of other investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(15,506</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(20,228</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase of short-term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(341,234</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(285,836</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sale of fixed maturity securities, available-for-sale</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>30,452</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,351</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sale of short-term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>318,696</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">325,948</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Redemption and maturities of fixed maturity securities, held-to-maturity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,492</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">172</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Redemption and maturities of fixed maturity securities, available-for-sale</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>79,566</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63,004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sale of equity securities, available-for-sale</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6,995</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,149</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proceeds from other investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,609</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,578</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase of property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(1,825</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,292</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash (used in) provided by investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(3,911</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,381</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Financing Activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividends to stockholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(6,572</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,262</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Acquisition of treasury stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(28,723</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(78,355</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net proceeds from stock purchase and compensation plans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,196</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,980</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Excess tax benefits from share-based payment arrangements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,265</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,486</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Principal payments of convertible bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(8,754</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash used in financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(40,588</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(80,151</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net increase (decrease)&nbsp;in cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,454</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,566</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents, beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>8,383</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,443</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents, end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>9,837</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,877</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Supplemental Disclosures of Cash Flow Information</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash paid during the year for:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>1,968</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,095</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Federal income tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">400</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Supplemental schedule of non-cash financing activity:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Conversion of convertible debentures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>169</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">380</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The accompanying notes are an integral part of these unaudited interim consolidated financial
statements.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->5<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">
<DIV align="left">
<A name="107"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>NOTE 1. Organization</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Selective Insurance Group, Inc., through its subsidiaries, (collectively referred to as &#147;we&#148; or
&#147;our&#148;) offers property and casualty insurance products and diversified insurance services and
products. Selective Insurance Group, Inc. was incorporated in New Jersey in 1977 and its main
offices are located in Branchville, New Jersey. Selective Insurance Group, Inc.&#146;s common stock is
publicly traded on the NASDAQ Global Select Market under the symbol &#147;SIGI.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We classify our business into three operating segments:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Insurance Operations, which sells property and casualty insurance products and services
primarily in 21 states in the Eastern and Midwestern United States;</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Investments; and</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Diversified Insurance Services, which provides human resource administration outsourcing
products and services, and federal flood insurance administrative services.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>NOTE 2. Basis of Presentation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">These interim unaudited consolidated financial statements (&#147;Financial Statements&#148;) include the
accounts of our parent company and its subsidiaries, and have been prepared in conformity with (i)
U.S. generally accepted accounting principles (&#147;GAAP&#148;); and (ii)&nbsp;the rules and regulations of the
U.S. Securities and Exchange Commission (&#147;SEC&#148;) regarding interim financial reporting. The
preparation of Financial Statements in conformity with GAAP requires us to make estimates and
assumptions that affect the reported financial statement balances, as well as the disclosure of
contingent assets and liabilities. Actual results could differ from those estimates. All
significant intercompany accounts and transactions between our parent company and its subsidiaries
are eliminated in consolidation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">These Financial Statements reflect all adjustments that, in our opinion, are normal, recurring, and
necessary for a fair presentation of our results of operations and financial condition. These
Financial Statements cover the first quarters ended March&nbsp;31, 2008 (&#147;First Quarter 2008&#148;) and March
31, 2007 (&#147;First Quarter 2007&#148;). These Financial Statements do not include all of the information
and disclosures required by GAAP and the SEC for audited financial statements. Results of
operations for any interim period are not necessarily indicative of results for a full year.
Consequently, these Financial Statements should be read in conjunction with the consolidated
financial statements contained in our Annual Report on Form 10-K for the year ended December&nbsp;31,
2007 (&#147;2007 Annual Report&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>NOTE 3. Adoption of Accounting Pronouncements</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">In June&nbsp;2007, the Emerging Issues Task Force (&#147;EITF&#148;) of the Financial Accounting Standards Board
(&#147;FASB&#148;) issued EITF Issue No.&nbsp;06-11 <I>Accounting for Income Tax Benefits of Dividends on Share-Based
Payment Awards </I>(&#147;EITF 06-11&#148;). EITF 06-11 requires that the tax benefit from dividends or dividend
equivalents that are charged to retained earnings and are paid to employees for equity classified
nonvested equity shares, nonvested equity share units, and outstanding equity share options be
recognized as an increase to additional paid-in capital. We applied the provisions of this EITF,
which was effective on a prospective basis beginning with dividends declared in fiscal years
beginning after December&nbsp;15, 2007, in the first quarter of 2008. The adoption of this EITF did not
have a material impact on our results of operations or financial condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>NOTE 4. Fair Value Measurements</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">On January&nbsp;1, 2008, we adopted FASB Statement of Financial Accounting Standards No.&nbsp;159, <I>The Fair
Value Option for Financial Assets and Financial Liabilities &#151; Including an amendment of FASB
Statement No.&nbsp;115 </I>(&#147;FAS 159&#148;). FAS 159 provides companies with an option to report selected
financial assets and liabilities at fair value (&#147;fair value option&#148;). We elected to apply the fair
value option to a portfolio of securities currently being managed by one outside manager, as this
manager requires the flexibility to trade as necessary in order to maximize returns; therefore, we
do not have the ability or intent to hold these securities throughout any anticipated recovery
periods. The securities for which we elected the fair value option were previously held as
available-for-sale securities and are now classified as trading securities.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->6<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The following table provides information regarding the reclassification and corresponding
cumulative-effect adjustment on retained earnings resulting from the initial application of FAS 159
for this portfolio:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="49%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Pre-Adoption</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Impact of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Post-Adoption</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Carrying/Fair</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Fair Value</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Carrying/Fair</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Value at</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Election</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Value at</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>January 1, 2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Adoption</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>January 1, 2008</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity Securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Available-for-sale securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>274,705</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(25,113</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>249,592</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Trading securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>25,113</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>25,113</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total Equity Securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>274,705</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>274,705</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="49%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Accumulated</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Other</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Retained</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Comprehensive</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Earnings</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Income</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Total</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Beginning balance at January&nbsp;1, 2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>1,105,946</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>86,043</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,191,989</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pre-tax cumulative effect of adoption of fair value
option</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>9,554</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(9,554</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax impact</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(3,344</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,344</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Adjusted beginning balance at January&nbsp;1, 2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,112,156</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>79,833</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,191,989</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">On January&nbsp;1, 2008, we also adopted FASB Statement of Financial Accounting Standards No.&nbsp;157, <I>Fair
Value Measurements </I>(&#147;FAS 157&#148;), which defines fair value, establishes a framework for measuring
fair value, and expands disclosure about fair value measurements. The impact of adopting this
standard did not have a material impact on our results of operations or financial condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The following table provides quantitative disclosures regarding fair value measurements of our
invested assets:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="32%">&nbsp;</TD>
    <TD width="3">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B>Fair Value Measurements at 3/31/08 Using</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Assets</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Quoted Prices in</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Significant</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Measured</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Active Markets</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Other</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Significant</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>at</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>for Identical</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Observable</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Unobservable</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 0px solid #000000"><B>($ in 000s)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Fair Value</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Assets</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Inputs</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Inputs</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Description</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>at 3/31/08</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>(Level 1)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>(Level 2)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>(Level 3)</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Trading securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Equity securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>23,148</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>23,148</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Available-for-sale securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Fixed maturity securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,021,669</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>45,010</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,976,659</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Equity securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>232,787</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>232,787</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Short-term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>212,545</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>212,545</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other investments<SUP style="font-size: 85%; vertical-align: text-top">1</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>28,649</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>28,649</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>3,518,798</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>513,490</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,005,308</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>




<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">1</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>Alternative investments are not included in the above table as they are accounted for
under the equity method of accounting and are not carried at fair value.</TD>
</TR>

</TABLE>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Investment income associated with the above invested assets is included in net investment income in
the Consolidated Income Statement, including unrealized gains and losses on our trading securities.
In First Quarter 2008, net investment income included $1.9&nbsp;million of loss that was recognized
representing the change in market value on our trading securities, the majority of which related to
trading securities that we still held as of March&nbsp;31, 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Fair market valuations in the above table were generated using various valuation techniques. Level
1 fair market values were derived through the use of quoted prices in an active market for
identical assets. Level 2 fair market values were derived through matrix pricing, which is a
mathematical technique used principally to value debt securities by relying on the securities&#146;
relationship to other benchmark quoted securities and not by relying exclusively on quoted prices
for specific securities. There were no Level 3 fair market values as of March&nbsp;31, 2008.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->7<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>NOTE 5. Reinsurance</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The following table summarizes the direct, assumed, and ceded reinsurance amounts by income
statement caption. For more information concerning reinsurance, refer to Note 7, &#147;Reinsurance&#148; in
Item&nbsp;8. &#147;Financial Statements and Supplementary Data&#148; in our 2007 Annual Report.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Unaudited</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Quarter ended March 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">($ in thousands)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Premiums written:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Direct</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>435,376</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">456,479</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Assumed</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,670</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,484</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ceded</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(50,206</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(43,778</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>389,840</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">417,185</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Premiums earned:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Direct</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>423,175</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">414,764</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Assumed</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>7,724</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,370</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ceded</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(49,626</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(43,121</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>381,273</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">380,013</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Losses and loss expenses incurred:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Direct</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>258,954</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">251,744</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Assumed</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,017</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,671</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ceded</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(10,792</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12,122</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>253,179</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">246,293</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The ceded premiums and losses related to our Flood operations are as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Unaudited</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Quarter ended March 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">($ in thousands)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ceded premiums written</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(37,778</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(32,019</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ceded premiums earned</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(36,507</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(30,881</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ceded losses and loss expenses incurred</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(4,788</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,263</TD>
    <TD nowrap>)</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>NOTE 6. Segment Information</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We have classified our operations into three segments, the disaggregated results of which are
reported to and used by senior management to manage our operations:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Insurance Operations, which are evaluated based on statutory underwriting results (net
premiums earned (&#147;NPE&#148;), incurred losses and loss expenses, policyholders dividends,
policy acquisition costs, and other underwriting expenses), and statutory combined ratios;</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Investments, which are evaluated based on net investment income and net realized gains
and losses; and</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Diversified Insurance Services, which, because they are not dependent on insurance
underwriting cycles, are evaluated based on several measures including, but not limited
to, results of operations in accordance with GAAP, with a focus on return on revenues (net
income divided by revenues).</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->8<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV style="margin-top: 10pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We do not aggregate any of our operating segments. The Insurance Operations and Diversified
Insurance Services segments share a common marketing or distribution system and create new
opportunities for independent insurance agents to bring value-added services and products to our
customers. Our commercial and personal lines property and casualty insurance products, flood
insurance, and human resource administration outsourcing products are sold through independent
insurance agents.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Our subsidiaries also provide services to each other in the normal course of business. These
transactions totaled $3.4&nbsp;million in First Quarter 2008 and $4.4&nbsp;million in First Quarter 2007.
These transactions were eliminated in all consolidated statements. In computing the results of
each segment, we do not make adjustments for interest expense, net general corporate expenses, or
federal income taxes. We do not maintain separate investment portfolios for the segments and
therefore, do not allocate assets to the segments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The following tables present revenues (net investment income and net realized gains on investments
in the case of the Investments segment) and pre-tax income for the individual segments:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Unaudited</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Quarter ended</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 0px solid #000000"><B>Revenue by segment</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>March 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">($ in thousands)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Insurance Operations:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net premiums earned:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Commercial automobile</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>79,224</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">78,789</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Workers compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>78,466</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82,476</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">General liability</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>103,269</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">103,460</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Commercial property</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>49,936</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,568</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Business owners&#146; policy</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>14,142</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,841</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,775</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,700</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>165</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">177</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total commercial lines</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>329,977</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">329,011</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Personal automobile</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>32,605</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,936</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Homeowners</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>16,571</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,142</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,120</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,924</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total personal lines</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>51,296</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,002</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total net premiums earned</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>381,273</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">380,013</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Miscellaneous income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>660</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,751</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total insurance operations revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>381,933</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">381,764</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Investments:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net investment income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>37,866</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,863</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net realized gain on investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,515</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,243</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total investment revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>39,381</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,106</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Diversified Insurance Services:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Human resource administration outsourcing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>15,118</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,795</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Flood insurance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>12,097</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,410</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,584</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,973</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total Diversified Insurance Services revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>29,799</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,178</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total all segments</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>451,113</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">462,048</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total revenues</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>451,113</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">462,109</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>



<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->9<!-- /Folio -->
</DIV>



<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Unaudited</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Quarter ended</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left"><B>Income (loss) before federal income tax</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>March 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">($ in thousands)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Insurance Operations:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Commercial lines underwriting</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>4,371</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,630</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Personal lines underwriting</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(5,823</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,913</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Underwriting (loss)&nbsp;income, before federal income tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(1,452</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,717</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">GAAP combined ratio</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>100.4          </B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Statutory combined ratio</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>98.3          </B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">95.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Investments:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net investment income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>37,866</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,863</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net realized gain on investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,515</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,243</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total investment income, before federal income tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>39,381</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,106</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Diversified Insurance Services:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income before federal income tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,285</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,367</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total all segments</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>42,214</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,190</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(5,309</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,331</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">General corporate expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(10,303</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9,660</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Income before federal income tax</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>26,602</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,199</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>NOTE 7. Retirement Plans</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The following tables show the costs of the Retirement Income Plan for Selective Insurance Company
of America (&#147;Retirement Income Plan&#148;) and the retirement life insurance component (&#147;Retirement Life
Plan&#148;) of the Welfare Benefits Plan for Employees of Selective Insurance Company of America. For
more information concerning these plans, refer to Note 16, &#147;Retirement Plans&#148; in Item&nbsp;8. &#147;Financial
Statements and Supplementary Data&#148; in our 2007 Annual Report.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="44%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Retirement Income Plan</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Retirement Life Plan</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Unaudited,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Unaudited,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Quarter ended March 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Quarter ended March 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">($ in thousands)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><B>Components of Net Periodic Benefit Cost:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-0px">Service cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>1,759</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,788</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>81</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-0px">Interest cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,440</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,184</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>134</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">125</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-0px">Expected return on plan assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(2,961</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,710</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-0px">Amortization of unrecognized prior service cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>37</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(8</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-0px">Amortization of unrecognized net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>25</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">114</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-0px">Net periodic cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>1,300</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,414</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>207</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">198</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Weighted-Average Expense Assumptions
for the years ended December&nbsp;31:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-0px">Discount rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>6.50              </B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>6.50               </B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.90</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-0px">Expected return on plan assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>8.00              </B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-0px">Rate of compensation increase</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>4.00              </B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>4.00               </B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.00</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->10<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Note 8. Comprehensive (Loss) Income</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The components of comprehensive (loss)&nbsp;income, both gross and net of tax, are as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left"><B>Quarter ended March 31, 2008</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">($ in thousands)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Gross</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Tax</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Net</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net Income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>26,602</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6,099</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>20,503</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Components of other comprehensive loss:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><I>Unrealized losses on securities</I>:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Unrealized holding losses during the period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(39,515</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(13,830</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(25,685</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Less: Reclassification adjustment for
gains included in net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(1,505</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(527</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(978</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net unrealized losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(41,020</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(14,357</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(26,663</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><I>Defined benefit pension plans:</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Reversal of amortization items:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net actuarial loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>25</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>9</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>16</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Prior service cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>29</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>10</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>19</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Defined benefit pension plans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>54</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>19</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>35</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Comprehensive loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(14,364</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(8,239</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(6,125</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left"><B>Quarter ended March 31, 2007</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">($ in thousands)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Gross</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Tax</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Net</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">49,199</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,947</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,252</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Components of other comprehensive income:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><I>Unrealized gains/(losses) on securities:</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Unrealized holding gains during the period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,271</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,076</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Previous unrealized gains currently
realized in net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11,243</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,935</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,308</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net unrealized losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,972</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,740</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,232</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><I>Defined benefit pension plans:</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Reversal of amortization items:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net actuarial loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">114</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Prior service cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Defined benefit pension plans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">93</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Comprehensive income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">44,371</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,258</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,113</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>NOTE 9. Commitments and Contingencies</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">At March&nbsp;31, 2008, we had contractual obligations that expire at various dates through 2022 to
invest up to an additional $146.5&nbsp;million in other investments. There is no certainty that any such
additional investment will be required.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->11<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>NOTE 10. Litigation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">In the ordinary course of conducting business, we are named as defendants in various legal
proceedings. Most of these proceedings are claims litigation involving our seven insurance
subsidiaries (the &#147;Insurance Subsidiaries&#148;) as either (a)&nbsp;liability insurers defending or providing
indemnity for third-party claims brought against insureds or (b)&nbsp;insurers defending first-party
coverage claims brought against us. We account for such activity through the establishment of
unpaid loss and loss adjustment expense reserves. We expect that the ultimate liability, if any,
with respect to such ordinary-course claims litigation, after consideration of provisions made for
potential losses and costs of defense, will not be material to our consolidated financial
condition, results of operations, or cash flows.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Our Insurance Subsidiaries are also from time to time involved in other legal actions, some of
which assert claims for substantial amounts. These actions include, among others, putative state
class actions seeking certification of a state or national class. Such putative class actions have
alleged, for example, improper reimbursement of medical providers paid under workers compensation
and personal and commercial automobile insurance policies. Our Insurance Subsidiaries are also
from time to time involved in individual actions in which extra-contractual damages, punitive
damages, or penalties are sought, such as claims alleging bad faith in the handling of insurance
claims. We believe that we have valid defenses to these cases. We expect that the ultimate
liability, if any, with respect to such lawsuits, after consideration of provisions made for
estimated losses, will not be material to our consolidated financial condition. Nonetheless, given
the large or indeterminate amounts sought in certain of these actions, and the inherent
unpredictability of litigation, an adverse outcome in certain matters could, from time to time,
have a material adverse effect on our consolidated results of operations or cash flows in
particular quarterly or annual periods.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->12<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">
<DIV align="left">
<A name="108"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>ITEM 2. MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</B>
</DIV>

<DIV align="left">
<A name="109"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Forward-Looking Statements</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">In this Quarterly Report on Form 10-Q, we discuss and make statements regarding our intentions,
beliefs, current expectations, and projections regarding our company&#146;s future operations and
performance. Such statements are &#147;forward-looking&#148; statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward-looking statements are often identified by
words such as &#147;anticipates,&#148; &#147;believes,&#148; &#147;expects,&#148; &#147;will,&#148; &#147;should,&#148; and &#147;intends&#148; and their
negatives. We caution prospective investors that such forward-looking statements are not
guarantees of future performance. Risks and uncertainties are inherent in our future performance.
Factors that could cause actual results to differ materially from those indicated by such
forward-looking statements include, but are not limited to, those discussed under Item&nbsp;1A. &#147;Risk
Factors&#148; in our 2007 Annual Report. These risk factors may not be exhaustive. We operate in a
continually changing business environment and new risk factors may emerge from time to time. We
can neither predict such new risk factors nor can we assess the impact, if any, of such new risk
factors on our businesses or the extent to which any factor or combination of factors may cause
actual results to differ materially from those expressed or implied in any forward-looking
statements in this report. In light of these risks, uncertainties, and assumptions, the
forward-looking events discussed in this report might not occur. We 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.
</DIV>
<DIV align="left">
<A name="110"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Introduction</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We offer property and casualty insurance products and diversified insurance services through our
various subsidiaries. We classify our businesses into three operating segments: (i)&nbsp;Insurance
Operations, (ii)&nbsp;Investments, and (iii)&nbsp;Diversified Insurance Services.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The purpose of the Management&#146;s Discussion and Analysis (&#147;MD&#038;A&#148;) is to provide an understanding of
the consolidated results of operations and financial condition and known trends and uncertainties
that may have a material impact in future periods. Consequently, investors should read the MD&#038;A in
conjunction with the consolidated financial statements in our 2007 Annual Report.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">In the MD&#038;A, we will discuss and analyze the following:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Critical Accounting Policies and Estimates;</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Financial Highlights of Results for First Quarter 2008 and First Quarter 2007;</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Results of Operations and Related Information by Segment;</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Financial Condition, Liquidity, and Capital Resources;</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Off-Balance Sheet Arrangements;</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Contractual Obligations and Contingent Liabilities and Commitments; and</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Federal Income Taxes.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left">
<A name="111"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Critical Accounting Policies and Estimates</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">These unaudited interim consolidated financial statements include amounts based on our informed
estimates and judgments for those transactions that are not yet complete. Such estimates and
judgments affect the reported amounts in the financial statements. Those estimates and judgments
that were most critical to the preparation of the financial statements involved the following: (i)
reserves for losses and loss expenses; (ii)&nbsp;deferred policy acquisition costs; (iii)&nbsp;pension and
postretirement benefit plan actuarial assumptions; (iv)&nbsp;other-than-temporary investment
impairments; (v)&nbsp;goodwill; and (vi)&nbsp;reinsurance. These estimates and judgments require the use of
assumptions about matters that are highly uncertain and, therefore, are subject to change as facts
and circumstances develop. If different estimates and judgments had been applied, materially
different amounts might have been reported in the financial statements. Our 2007 Annual Report,
pages 37 through 44, provides a discussion of each of these critical accounting policies.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->13<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">
<DIV align="left">
<A name="112"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Financial Highlights of Results for First Quarter 2008 and First Quarter 2007</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Unaudited</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Quarter ended</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Change</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>March 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>% or</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">($ in thousands, except per share amounts)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Points</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>451,113</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">462,109</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2       </TD>
    <TD nowrap>)%</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>20,503</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,252</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(45</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted net income per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.38</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(39</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted weighted-average outstanding shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>53,882</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,372</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">GAAP combined ratio</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>100.4        </B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">3.0</TD>
    <TD nowrap>&nbsp;pts</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Statutory combined ratio</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>98.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">95.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Annualized return on average equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>7.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6.4</TD>
    <TD nowrap>)</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Net income decreased in First Quarter 2008 compared to First Quarter 2007 reflecting:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A $9.7&nbsp;million revenue decrease related to net realized investment gains that were
$1.5&nbsp;million in First Quarter 2008 compared to $11.2&nbsp;million in First Quarter 2007.
This decrease, which was $6.3&nbsp;million on an after-tax basis, resulted from the sale of
various equity securities in First Quarter 2007 to reallocate sector exposures.</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A $2.0&nbsp;million revenue decrease related to net investment income that was $37.9
million in First Quarter 2008 compared to $39.9&nbsp;million in First Quarter 2007. This
decrease, which was $1.8&nbsp;million on an after-tax basis, was primarily the result of a
$1.9&nbsp;million pre-tax decrease in the fair value of our trading portfolio.</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A $2.3&nbsp;million after-tax restructuring charge reflecting costs associated with our
workforce reduction expense initiative in which approximately 80 positions were
eliminated, including 60 employees that were displaced. As the result of this
initiative, we anticipate realizing annualized pre-tax savings of approximately $7
million.</TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">The physical damage portion of our commercial automobile line of business and our commercial
property line of business reflect increased severity reflected in after-tax property losses
of $3.7&nbsp;million. In addition, our Commercial Lines have put some pressure on the GAAP loss
and loss expense ratio compared to the same period last year reflecting ongoing pure price
reductions on renewal business, as evidenced by pure price decreases that amounted to 3% in
First Quarter 2008. Partially offsetting these items are continued profitability
improvements in our workers compensation line of business due to the execution of our
strategic initiatives on this line.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">Diluted net income per share decreased in First Quarter 2008 compared to First Quarter 2007 due
to the net income decreases described above, partially offset by the reduction in diluted
weighted-average shares outstanding. As part of our capital management program, in the
twelve-month period ending March&nbsp;31, 2008, we repurchased approximately 3.8&nbsp;million shares under
our authorized repurchase programs and, during the fourth quarter of 2007, we net-share settled
our senior convertible notes resulting in the issuance of approximately 1.2&nbsp;million shares as
well as the elimination of approximately 3.2&nbsp;million common stock equivalents.
</DIV>
<DIV align="left">
<A name="113"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Results of Operations and Related Information by Segment</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Insurance Operations</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Our Insurance Operations segment writes property and casualty insurance business through seven
insurance subsidiaries (the &#147;Insurance Subsidiaries&#148;). Our Insurance Operations segment sells
property and casualty insurance products and services primarily in 21 states in the Eastern and
Midwestern United States through approximately 900 independent insurance agencies. Our Insurance
Operations segment consists of two components: (i)&nbsp;commercial lines (&#147;Commercial Lines&#148;), which
markets primarily to businesses, and represents approximately 86% of net premiums written (&#147;NPW&#148;),
and (ii)&nbsp;personal lines (&#147;Personal Lines&#148;), which markets primarily to individuals and represents
approximately 14% of NPW. The underwriting performance of these lines are generally measured by
four different statutory ratios: (i)&nbsp;loss and loss expense ratio; (ii)&nbsp;underwriting expense ratio;
(iii)&nbsp;dividend ratio; and (iv)&nbsp;combined ratio. For further details regarding these ratios see the
discussion in the &#147;Insurance Operations Results&#148; section of Item&nbsp;1. &#147;Business.&#148; of our 2007 Annual
Report.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->14<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><U><B>Summary of Insurance Operations </B></U>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Unaudited</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Quarter ended</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Change</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left"><B>All Lines</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>March 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>% or</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">($ in thousands)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Points</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>GAAP Insurance Operations Results:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">NPW</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>389,840</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">417,185</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7      </TD>
    <TD nowrap>)%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">NPE</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>381,273</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">380,013</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Less:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Losses and loss expenses incurred</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>253,179</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">246,293</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net underwriting expenses incurred</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>129,011</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">122,516</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Dividends to policyholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>535</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,487</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(64</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Underwriting (loss)&nbsp;income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(1,452</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,717</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(115      </TD>
    <TD nowrap>)%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>GAAP Ratios:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Loss and loss expense ratio</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>66.4           </B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">1.6</TD>
    <TD nowrap>&nbsp;pts</TD>

</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Underwriting expense ratio</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>33.9           </B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Dividends to policyholders ratio</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>0.1           </B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.3</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Combined ratio</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>100.4           </B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Statutory Ratios:</B><SUP style="font-size: 85%; vertical-align: text-top">1</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Loss and loss expense ratio</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>65.9           </B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Underwriting expense ratio</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>32.3           </B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Dividends to policyholders ratio</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>0.1           </B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.3</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Combined ratio</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>98.3           </B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">95.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">2.7       </TD>
    <TD nowrap>&nbsp;pts</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>




<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">1</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>The statutory ratios include our flood line of business, which is included in the
Diversified Insurance Services segment on a GAAP basis and therefore excluded from the GAAP ratios.
The total statutory combined ratio excluding flood was 98.9% for First Quarter 2008 compared to
96.1% for First Quarter 2007.</TD>
</TR>

</TABLE>


<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>NPW decreased in First Quarter 2008 compared to First Quarter 2007 due to the highly
competitive insurance marketplace and the slowing economy. These factors are evidenced in
our new business, which was $74.7&nbsp;million, down from $85.2&nbsp;million in First Quarter 2007,
and the following:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A $5.6&nbsp;million decrease in net renewals, reflecting relatively flat retention
of 78% and commercial line renewal price decreases of 0.4% in First Quarter 2008
compared to renewal price increases of 0.4% in First Quarter 2007.</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A $6.5&nbsp;million decrease in endorsement and audit activity.</TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">These decreases were partially offset by a $2.8&nbsp;million increase in Personal Lines NPW due
to increased retention in our homeowners&#146; line of business and higher rates on both
homeowners and personal automobile written outside of New Jersey, partially offset by a
decrease in New Jersey personal automobile business resulting from the loss of a portion of
our book that was repriced at higher pricing levels through our MATRIX<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> pricing
system and subsequently did not renew.
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The 1.6-point increase in the GAAP loss and loss expense ratio in First Quarter 2008
compared to First Quarter 2007 was primarily attributable to an increase of 1.5 points
attributable to the physical damage portion of our commercial automobile line of business
and our commercial property line of business. In addition, our Commercial Lines have put
some pressure on the GAAP loss and loss expense ratio compared to the same period last year
reflecting ongoing pure price reductions on renewal business, as evidenced by pure price
decreases that amounted to 3% in First Quarter 2008. Partially offsetting these items are
continued profitability improvements in our workers compensation line of business due to
the execution of our strategic initiatives on this line.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->15<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The increase in the GAAP underwriting expense ratio in First Quarter 2008 compared to First
Quarter 2007 was primarily attributable to increases in underwriting expenses and a decline
in NPW. The expense increases are primarily driven by a $3.6&nbsp;million, or 1.0 point,
restructuring charge in First Quarter 2008 that is expected to generate $7&nbsp;million in
annualized pre-tax savings. While the restructuring will reduce labor costs, the GAAP
underwriting expense ratio will not realize the benefit of this initiative until previously
deferred labor costs are fully recognized in expense over the next twelve months. It is our
expectation that as these higher labor costs are recognized, deferred policy acquisition
costs as a percentage of our unearned premium balance will decline. In addition to the
restructuring charge in First Quarter 2008, we announced targeted changes to agency
commissions that will be implemented in most states in July&nbsp;2008. These changes maintain
highly competitive awards for agents who produce the strongest results for us, while
reducing commissions where our historically higher payments have not generated an
appropriate level of profitable growth. The changes will bring our program more in line
with the competition; however commissions on 87% of our direct premiums written will not be
affected and the supplemental commission program that rewards agencies that generate
profitable growth will not be affected by the changes. These commission revisions are
expected to generate annualized pre-tax savings of approximately $7&nbsp;million.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><U><I>Insurance Operations Outlook</I></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Historically, the results of the property and casualty insurance industry have experienced
significant fluctuations due to competition, economic conditions, interest rates, loss cost trends,
and other factors. During 2007, the industry experienced low levels of catastrophe losses and a
softening market characterized by accelerated competition, leading to pricing deterioration in the
primary insurance market that was worse than originally anticipated. This trend is intensifying
and we expect it to continue throughout 2008 and potentially into 2009. The average forecast,
according to the &#147;U.S. Property/Casualty &#151; Review &#038; Preview&#148; from A.M. Best (the &#147;Forecast&#148;) dated
January&nbsp;28, 2008, calls for negative growth in NPW of 0.6% in 2008 and an increase in expected
statutory combined ratios, both of which indicate underwriting deterioration. Accelerated
marketplace competition, coupled with low premium growth rates, has also led to an increased
interest in merger and acquisition activity within the industry. In First Quarter 2008, Standard &#038;
Poor&#146;s (&#147;S&#038;P&#148;) indicated their belief that, if price declines continue at their current pace,
analyst outlooks on some commercial lines carriers will likely be revised downward in the second
half of 2008, possibly leading to a negative outlook for the commercial lines sector by the end of
the year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">In an effort to grow our business profitably in these challenging market conditions, we have
implemented a clearly defined plan to improve risk selection and mitigate higher frequency and
severity trends to compliment our strong agency relationships and unique field-based model. Some
of the tools we use to lower frequency and severity are knowledge management, predictive modeling,
safety management, managed care, and enhanced claims review. We have developed market-planning
tools that allow us to strategically appoint additional independent agencies and agency management
specialists (&#147;AMSs&#148;) in under-penetrated territories that have classes of business we know
historically have been profitable. Through the end of First Quarter 2008, the Insurance
Subsidiaries wrote business through approximately 900 independent insurance agencies, who are
serviced by approximately 100 field-based AMSs making hands-on underwriting decisions on a daily
basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">In addition to this &#147;high touch&#148; component of our business model, we have developed technology that
allows agents and the Insurance Subsidiaries&#146; field teams to input business seamlessly into our
systems, while also allowing them to select and price accounts at optimal levels through predictive
modeling. Technology that allows for the seamless placement of business into our systems includes
our One &#038; Done<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> small business system and our xSELerate<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> straight-through
processing system. Premiums of $271,000 per workday were processed through our One &#038;
Done<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> small business system in First Quarter 2008, up 27% from First Quarter 2007. We
have set a multi-year small business growth target of $350,000 in One &#038; Done<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> business
per work day, and in 2008 our efforts are centered on: (i)&nbsp;better managing price points and scale;
(ii)&nbsp;implementing a more comprehensive marketing and branding strategy; and (iii)&nbsp;updating the
distribution model to address agent and customer needs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We also continue to pursue our organic growth strategy. In 2007, we entered our 21<SUP style="font-size: 85%; vertical-align: text-top">st</SUP>
primary state, Massachusetts, for Commercial Lines only, and we have expanded Personal Lines into
Rhode Island, Minnesota, and Iowa, states already within our existing Commercial Lines footprint.
In 2008, we have plans to expand our footprint to Tennessee, where we expect to make an initial
appointment of 20 agencies and to start writing Commercial Lines business in June or July of 2008,
with Personal Lines business later in 2008. In addition to our organic growth strategy, we are
taking note of opportunities that marketplace competition may be creating and do not rule out
making an opportunistic acquisition.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->16<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><U><B>Review of Underwriting Results by Line of Business </B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><U><B><I>Commercial Lines Results</I></B></U>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Unaudited</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Quarter ended</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Change</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left"><B>Commercial Lines</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>March 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>% or</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">($ in thousands)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Points</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>GAAP Insurance Operations Results:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">NPW</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>340,086</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">370,256</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8      </TD>
    <TD nowrap>)%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">NPE</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>329,977</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">329,011</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Less:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Losses and loss expenses incurred</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>213,189</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">208,259</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net underwriting expenses incurred</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>111,882</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">106,635</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Dividends to policyholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>535</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,487</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(64</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Underwriting income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>4,371</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,630</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(65      </TD>
    <TD nowrap>)%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>GAAP Ratios:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Loss and loss expense ratio</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>64.6           </B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">1.3       </TD>
    <TD nowrap>&nbsp;pts</TD>

</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Underwriting expense ratio</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>33.9           </B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Dividends to policyholders ratio</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>0.2           </B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.3</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Combined ratio</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>98.7           </B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">96.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Statutory Ratios:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Loss and loss expense ratio</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>64.2           </B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Underwriting expense ratio</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>32.5           </B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Dividends to policyholders ratio</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>0.2           </B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.2</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Combined ratio</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>96.9           </B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">94.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">2.9       </TD>
    <TD nowrap>&nbsp;pts</TD>

</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>NPW decreased in First Quarter 2008 compared to First Quarter 2007 due to the highly
competitive insurance marketplace and the slowing economy, which is primarily impacting our
contractors business, which represents 45% of our Commercial Lines operations. These
factors are evidenced in total Commercial Lines new business, which amounted to $63.6
million in First Quarter 2008, down from $76.7&nbsp;million in First Quarter 2007, and the
following:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A $5.8&nbsp;million decrease in Commercial Lines net renewals, which includes
relatively flat retention of 78% and commercial lines renewal price decreases of
0.4% in First Quarter 2008 compared to renewal price increases of 0.4% in First
Quarter 2007. We are experiencing the most pressure on the high end of our middle
market and large account business, in response to which our agents are actively
managing our book by renewing accounts as much as 60&nbsp;days in advance of the
expiration date.</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A $6.4&nbsp;million decrease in Commercial Lines endorsement and audit
activity.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>NPE was flat in First Quarter 2008 compared to First Quarter 2007, consistent with the
fluctuation in NPW for the twelve-month period ended March&nbsp;31, 2008 as compared to the
twelve-month period ended March&nbsp;31, 2007.</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The 1.3-point increase in the GAAP loss and loss expense ratio in First Quarter 2008
compared to First Quarter 2007 was primarily attributable to the physical damage portion of
our commercial automobile line of business and our commercial property line of business.
In addition, our Commercial Lines have put some pressure on the GAAP loss and loss expense
ratio compared to the same period last year reflecting ongoing pure price reductions on
renewal business, as evidenced by pure price decreases that amounted to 3% in First Quarter
2008. Partially offsetting these items are continued profitability improvements in our
workers compensation line of business due to the execution of our strategic initiatives on
this line.</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The deterioration in the GAAP underwriting expense ratio in First Quarter 2008 compared
to First Quarter 2007 was primarily driven by a $3.6&nbsp;million restructuring charge in First
Quarter 2008, of which $3.1&nbsp;million was related to our Commercial Lines business. The
restructuring charge, which added approximately 1.0 point to the Commercial Lines GAAP
underwriting ratio, reflects costs associated with our workforce reduction expense
initiative in First Quarter 2008. While the restructuring will reduce labor costs, the
GAAP underwriting expense ratio will not realize the benefit of this initiative until
previously deferred labor costs are fully recognized in expense over the next twelve
months. It is our expectation that as these higher labor costs are recognized, deferred
policy acquisition costs as a percentage of our unearned premium balance will decline.</TD>
</TR>


</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->17<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV style="margin-top: 10pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The following is a discussion of our most significant commercial lines of business:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><U><I>General Liability</I></U>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Unaudited</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Quarter ended</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Change</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>March 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>% or</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">($ in thousands)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Points</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Statutory NPW</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>111,283</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">118,691</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6      </TD>
    <TD nowrap>)%</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Statutory NPE</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>103,269</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">103,460</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Statutory combined ratio</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>97.1           </B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">95.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">2.1       </TD>
    <TD nowrap>&nbsp;pts</TD>

</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">% of total statutory commercial NPW</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>33           </B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">New business premiums in this line of business were down $2.9&nbsp;million, or 13%, in First Quarter
2008 compared to First Quarter 2007; and premiums for endorsement and audit activity were down $3.2
million, or 76%, for the same comparative periods. In addition, retention on this line decreased
one point to 76% in First Quarter 2008 compared to 77% in First Quarter 2007. These decreases are
primarily driven by the competitive nature of the insurance marketplace. We are experiencing the
highest level of competition in our middle market and large account business, while our small
account business, which we define as policies with premiums less than $25,000, experienced moderate
growth. Overall policy counts for this line increased 6% in First Quarter 2008 compared to First
Quarter 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Pricing pressure and higher loss costs continue to put pressure on profitability in this line of
business. However we continue to concentrate on our long-term strategy to improve profitability,
which focuses on: (i)&nbsp;contractor growth in business segments with lower completed operations
exposures; and (ii)&nbsp;contract and subcontractor underwriting guidelines to minimize losses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><U><I>Workers Compensation</I></U>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Unaudited</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Quarter ended</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Change</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>March 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>% or</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">($ in thousands)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Points</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Statutory NPW</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>80,300</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">93,651</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(14      </TD>
    <TD nowrap>)%</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Statutory NPE</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>78,466</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82,489</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Statutory combined ratio</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>94.5           </B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">98.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">(3.7      </TD>
    <TD nowrap>)&nbsp;pts</TD>

</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">% of total statutory commercial NPW</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>23           </B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">In First Quarter 2008, NPW on this line decreased, despite a 3% increase in total policy counts,
which is primarily the result of: (i)&nbsp;competitive pressure, mainly on the upper end of our middle
market business and our large account business; (ii)&nbsp;a one-point decrease in retention to 78% in
First Quarter 2008 compared to 79% in First Quarter 2007; and (iii)&nbsp;renewal price increases,
including exposure, which were 0.9% in First Quarter 2008 compared to 2.9% in First Quarter 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The 3.7-point improvement in the statutory combined ratio of this line in First Quarter 2008
compared to First Quarter 2007 reflects: (i)&nbsp;the ongoing progress resulting from the execution of
our multi-faceted workers compensation strategy, which incorporates our knowledge management and
predictive modeling initiatives and underwriting process improvements, that enable us to retain and
write more of our best accounts; and (ii)&nbsp;favorable prior year statutory development of
approximately $4&nbsp;million, or 5.1 points, in First Quarter 2008 compared to favorable development in
First Quarter 2007 of approximately $2&nbsp;million, or 2.4 points.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->18<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><U><I>Commercial Automobile</I></U>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Unaudited</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Quarter ended</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Change</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>March 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>% or</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">($ in thousands)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Points</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Statutory NPW</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>80,198</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">87,747</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9      </TD>
    <TD nowrap>)%</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Statutory NPE</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>79,224</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">78,789</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Statutory combined ratio</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>100.1          </B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">88.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">12.1       </TD>
    <TD nowrap>&nbsp;pts</TD>

</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">% of total statutory commercial NPW</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>23        </B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">NPW for this line of business decreased in First Quarter 2008 compared to First Quarter 2007, while
total policy counts increased 4% for the comparable periods. Renewal prices, including exposure,
decreased 3.2% in First Quarter 2008 compared to a 2.1% decrease in First Quarter 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The increase in the statutory combined ratio for this line is primarily due to:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Physical damage losses that were $3.8&nbsp;million or approximately 5 points higher in First
Quarter 2008 compared to First Quarter 2007. These increases reflect normal volatility
that is inherent in property line results.</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>No favorable prior year development in First Quarter 2008 compared to favorable prior
year development of $3&nbsp;million in First Quarter 2007 that reduced the combined ratio by
approximately 4 points in First Quarter 2007. During First Quarter 2008, accident year
2007 developed unfavorably because of an increase in claims severity; however, this
activity was completely offset by favorable emergence related to prior accident years.</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Renewal price decreases, as mentioned above, contributed approximately 3 points to the
combined ratio in First Quarter 2008.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><U><I>Commercial Property</I></U>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Unaudited</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Quarter ended</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Change</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>March 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>% or</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">($ in thousands)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Points</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Statutory NPW</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>48,244</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,067</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6      </TD>
    <TD nowrap>)%</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Statutory NPE</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>49,936</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,568</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Statutory combined ratio</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>96.6          </B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">92.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">4.5       </TD>
    <TD nowrap>&nbsp;pts</TD>

</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">% of total statutory commercial NPW</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>14          </B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">NPW for this line of business decreased in First Quarter 2008 compared to First Quarter 2007 due
to: (i)&nbsp;decreased retention to approximately 76% in First Quarter 2008 compared to 79% in First
Quarter 2007; (ii)&nbsp;renewal price decreases, including exposure, of 0.2% in First Quarter 2008
compared to renewal price increases of 1.6% in First Quarter 2007; and (iii)&nbsp;decreased direct new
policy premium of 13% in First Quarter 2008 to $10.3&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The statutory combined ratio on this line was impacted by increased severity in First Quarter 2008
and also by pricing, as mentioned above. Property losses, by their very nature, are volatile.
Despite the volatility that we experienced in the quarter, results remained profitable at a 96.6%
statutory combined ratio. In First Quarter 2008, catastrophe losses decreased by $0.2&nbsp;million to
$3.3&nbsp;million compared to First Quarter 2007.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->19<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><U><B><I>Personal Lines Results</I></B></U>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Unaudited</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Quarter ended</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Change</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left"><B>Personal Lines</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>March 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>% or</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">($ in thousands)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Points</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>GAAP Insurance Operations Results:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">NPW</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>49,754</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,929</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">6       </TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">NPE</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>51,296</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Less:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Losses and loss expenses incurred</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>39,990</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,034</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net underwriting expenses incurred</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>17,129</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,881</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Underwriting income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(5,823</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,913</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(100      </TD>
    <TD nowrap>)%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>GAAP Ratios:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Loss and loss expense ratio</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>78.0           </B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">3.4       </TD>
    <TD nowrap>&nbsp;pts</TD>

</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Underwriting expense ratio</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>33.4           </B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Combined ratio</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>111.4           </B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">105.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Statutory Ratios:</B><SUP style="font-size: 85%; vertical-align: text-top">1</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Loss and loss expense ratio</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>77.6           </B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Underwriting expense ratio</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>30.2           </B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.5</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Combined ratio</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>107.8           </B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">106.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">1.8       </TD>
    <TD nowrap>&nbsp;pts</TD>

</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>




<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">1</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>The statutory ratios include our flood line of business, which is included in the
Diversified Insurance Services segment on a GAAP basis and therefore excluded from the GAAP ratios.
The total Personal Lines statutory combined ratio excluding flood was 112.0% for First Quarter 2008
compared to 110.3% for First Quarter 2007.</TD>
</TR>

</TABLE>


<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>NPW increased in First Quarter 2008 compared to First Quarter 2007 due to:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Increased retention in our homeowners line of business of two points to
87%, and renewal rate increases in the range of 5% &#151; 7% that were filed in New
Jersey, Virginia and South Carolina and were effective subsequent to First Quarter
2007; and</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Increased personal automobile business outside of New Jersey driven by
average renewal rate increases of 13.1% in Pennsylvania effective August&nbsp;1, 2007,
and 8.5% in Maryland effective September&nbsp;1, 2007. These changes applied to business
written prior to the implementation of our Matrix<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> program in these
states. To a lesser extent, we have also increased auto rates in four other states
during First Quarter 2008.</TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">These items were partially offset by a decline in NPW for our New Jersey personal automobile
business of $0.6&nbsp;million to $19.9&nbsp;million for First Quarter 2008 compared to $20.5&nbsp;million
for First Quarter 2007. The New Jersey personal automobile market has been impacted by the
introduction of new competitors writing business in the state with rating plans that allow
them to price accounts competitively without the legacy issue of repricing existing accounts
through filed rate increases. In the third quarter of 2007, we completed the transition of
our entire existing renewal inventory into our new pricing and tiering structure in New
Jersey. This transition has caused a dislocation in this book of business due to the
repricing of certain business at higher levels, some of which did not renew, as evidenced by
a reduction in the number of New Jersey personal automobiles that we insure to 70,296 at
March&nbsp;31, 2008, from 74,709 at March&nbsp;31, 2007.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->20<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>



<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The deterioration in the GAAP loss and loss expense ratio in First Quarter 2008 compared
to First Quarter 2007 was primarily attributable to the following:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Increases in property losses of $0.7&nbsp;million, or 1.2 points, including
increases in catastrophe losses of $0.4&nbsp;million, or 0.9 points; and</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Insignificant prior year development in First Quarter 2008 compared to
net favorable prior year loss and loss expense development of $2&nbsp;million, or 3.6
points, in First Quarter 2007.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The deterioration in the GAAP underwriting expense ratio in First Quarter 2008 compared
to First Quarter 2007 was primarily driven by a $3.6&nbsp;million restructuring charge in First
Quarter 2008, of which $0.5&nbsp;million was related to our Personal Lines business. As
mentioned in the &#147;Financial Highlights&#148; section above, the restructuring charge, which
added approximately 1.0 point to the Personal Lines GAAP underwriting ratio, reflects costs
associated with our workforce reduction expense initiative in First Quarter 2008. While
the restructuring will reduce labor costs, the GAAP underwriting expense ratio will not
realize the benefit of this initiative until previously deferred labor costs are fully
recognized in expense over the next twelve months. It is our expectation that as these
higher labor costs are recognized, deferred policy acquisition costs as a percentage of our
unearned premium balance will decline.</TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">In order to address profitability concerns in our Personal Lines, we have developed an
improvement plan that incorporates the following:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Automobile rate increases of 6.8% in New Jersey, which has been approved and will
be effective May&nbsp;15, 2008, 7.3% in Pennsylvania, which has been filed and we expect
to be able to implement in July, and 6% in Maryland, which we expect to implement in
August. Three additional auto rate increases are targeted for the second quarter of
2008. The New Jersey change applies to all business. The Pennsylvania and Maryland
changes apply to business originally written prior to the implementation of our
MATRIX<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> program and address regulatory restrictions on moving the renewal
book into our new pricing methodology.</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Homeowners rate increases of 6% in Illinois and 10% in Indiana, which have been
approved and was effective May&nbsp;1, 2008.</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In August&nbsp;2008, we will be able to receive the full indicated rate on all
MATRIX<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> automobile renewal business, as these policies will no longer be
subject to the 20% annual cap imposed by the New Jersey Department of Banking and
Insurance.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Investments</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Our investment portfolio consists primarily of fixed maturity securities (82%), but also contains
equity securities (7%), short-term investments (6%), and other investments (5%). Our investment
philosophy includes certain return and risk objectives for the fixed maturity and equity
portfolios. The primary return objective of the fixed maturity portfolio is to maximize after-tax
investment yield and income while balancing risk; a secondary objective is to meet or exceed a
weighted-average benchmark of public fixed income indices. The return objective of the equity
portfolio is to meet or exceed a weighted-average benchmark of public equity indices. We aim to
structure our portfolio conservatively with a focus on: (i)&nbsp;asset diversification; (ii)&nbsp;investment
quality; (iii)&nbsp;liquidity, particularly to meet the cash obligations of the Insurance Operations
segment; (iv)&nbsp;consideration of taxes; and (v)&nbsp;preservation of capital.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Unaudited</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Quarter ended</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Change</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>March 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>% or</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">($ in thousands)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Points</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net investment income, before tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>37,866</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,863</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5      </TD>
    <TD nowrap>)%</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net investment income, after tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>29,371</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,157</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total invested assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,691,622</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,592,015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effective tax rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>22.4      </B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">0.6       </TD>
    <TD nowrap>&nbsp;pts</TD>

</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Annual after-tax yield on fixed
maturity securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">&#151;      </TD>
    <TD nowrap>&nbsp;pts</TD>

</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Annual after-tax yield on total
investment portfolio</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">(0.3      </TD>
    <TD nowrap>)&nbsp;pts</TD>

</TR>
<!-- End Table Body --></TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->21<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">A decrease in net investment income, before tax, of $2.0&nbsp;million for First Quarter 2008 compared to
First Quarter 2007 was primarily attributable to a $1.9&nbsp;million decrease in the fair value of our
equity trading portfolio, which was established on January&nbsp;1, 2008 upon our adoption of FAS 159
(see Note 4. &#147;Fair Value Measurements&#148; in Item&nbsp;1. &#147;Financial Information&#148; of this Form 10-Q for
further details). The value of the investment portfolio reached $3.7&nbsp;billion at March&nbsp;31, 2008, an
increase of 3% compared to $3.6&nbsp;billion at March&nbsp;31, 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">In First Quarter 2008, we determined that it was prudent to increase our minimum targeted cash and
short-term investment balances due to the volatility in the financial markets, despite the
opportunity cost associated with this decision. As a result, our average short-term balance of
$236&nbsp;million in First Quarter 2008 is 17% higher than the $202&nbsp;million average balance in First
Quarter 2007. In addition, First Quarter 2008 short-term investment balances were invested in a
U.S. Treasury money market fund, which earns a lower yield than a money market fund, our
traditional short-term investment vehicle. This decision was made to address potential liquidity
concerns regarding the underlying investments generally held by money market funds.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We continue to maintain a conservative, diversified investment portfolio, with fixed maturity
investments representing 82% of invested assets. Sixty four percent (64%) of the fixed maturities
portfolio is rated &#147;AAA,&#148; while the portfolio has an average rating of &#147;AA&#043;,&#148; S&#038;P&#146;s second highest
credit quality rating. The shift in the percentage of securities rated &#147;AAA&#148; to those rated &#147;AA&#148;
since December&nbsp;31, 2007 is primarily due to downgrades of mono-line insurers, which have adversely
impacted the ratings on our municipal bond and asset-backed portfolios. At March&nbsp;31, 2008,
securities with insurance enhancement represented 29% of our fixed maturity securities portfolio.
The underlying fixed maturity securities have an average credit rating of &#147;AA-&#148;, without the
insurance enhancement. High credit quality continues to be a cornerstone of our investment
strategy, as evidenced by the fact that almost 100% of the fixed maturity securities are investment
grade. At March&nbsp;31, 2008, non-investment grade securities (below &#147;BBB-&#148; ) represented less than
1%, or approximately $10.0&nbsp;million, of the fixed maturity portfolio. Our mortgage-backed
securities portfolio totaled $675.1&nbsp;million at March&nbsp;31, 2008, with an average credit rating of
&#147;AA&#043;.&#148; We have minimal sub-prime mortgage exposure. Prior to investing in mortgage-backed
securities, we analyze, among other credit factors, the underlying FICO credit scores and loan to
value ratios.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The following table presents the Moody&#146;s Investor Service (&#147;Moody&#146;s&#148;) and S&#038;P&#146;s ratings of the
fixed maturities portfolio:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Unaudited</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Unaudited</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>March 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Rating</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Aaa/AAA</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>64</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">69</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Aa/AA</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>19</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">16</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">A/A</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>11</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">9</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Baa/BBB</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>6</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">6</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ba/BB or below</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>&#060;1</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">&#060;1</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>100</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Our fixed maturity investment strategy is to make security purchases that are attractively priced
in relation to perceived credit risks. We manage the interest rate risk associated with holding
fixed maturity investments by monitoring and maintaining the average duration of the portfolio to
achieve an adequate after-tax return without subjecting the portfolio to an unreasonable level of
interest rate risk. We invest the fixed maturities portfolio primarily in intermediate-term
securities to limit the overall interest rate risk of fixed maturity investments. Generally, the
Insurance Subsidiaries have a duration mismatch between assets and liabilities. The duration of
the fixed maturity portfolio, including short-term investments, is 3.8&nbsp;years compared to a
liability duration of approximately 3.4&nbsp;years for the Insurance Subsidiaries. The current duration
of the fixed maturities is within Selective&#146;s historical range and is monitored and managed to
maximize yield and limit interest rate risk. The duration mismatch is managed with a laddered
maturity structure and an appropriate level of short-term investments that avoids liquidation of
available-for-sale fixed maturities in the ordinary course of business. Liquidity is always a
consideration when buying or selling securities but, because of the high quality and active market
for the majority of securities in our investment portfolio, the securities sold have not diminished
the overall liquidity of our portfolio. Our normal liquidity requirements have historically been
met by operating cash flow from the Insurance Operations and Diversified Insurance Services
segments. We expect future liquidity requirements to be met by these sources of funds or, if
necessary, from the issuance of debt and equity securities and borrowings under our credit
facility. Managing investment risk by adhering to these strategies is intended to protect the
interests of our stockholders and the policyholders of our Insurance Subsidiaries, while enhancing
our financial strength and underwriting capacity.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->22<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>



<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><U><B>Realized Gains and Losses</B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Realized gains and losses are determined on the basis of the cost of specific investments sold and
are credited or charged to income. Also included in realized gains and losses are write-downs for
other-than-temporary impairment charges. Our Investments segment included net realized gains
before tax of $1.5&nbsp;million in First Quarter 2008 compared to $11.2&nbsp;million in First Quarter 2007.
In both quarters, the realized gains were principally from the sale of equity securities. During
First Quarter 2008 and 2007, there were no impairment charges recorded. We maintain a high quality
and liquid investment portfolio and the sale of the securities producing realized gains did not
change the overall liquidity of the investment portfolio. Our general philosophy for sales of
securities is to reduce our exposure to securities and sectors based upon economic evaluations and
when the fundamentals for that security or sector have deteriorated. We typically have a long
investment time horizon and the turnover is low, which has resulted in many securities accumulating
large unrealized gains. Every purchase or sale is made with the intent of improving future
investment returns.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The following table summarizes our net realized gains by investment type:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Unaudited</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Unaudited</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Quarter ended</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Quarter ended</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">($ in thousands)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>March 31, 2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>March 31, 2007</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Held-to-maturity fixed maturities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gains</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>10</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Available-for-sale fixed maturities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gains</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>533</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">216</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(1,154</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(305</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Available-for-sale equity securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gains</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,597</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,690</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(471</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(358</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total net realized gains</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>1,515</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,243</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Our realized gains from equity securities in First Quarter 2007 were primarily due to the sale of
several equity securities in an effort to reallocate various sector exposures.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We realized gains and losses from the sale of available-for-sale fixed maturity and equity
securities during First Quarter 2008 and First Quarter 2007. The following tables present the
period of time that securities sold at a loss were continuously in an unrealized loss position
prior to sale:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="44%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Unaudited</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Unaudited</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Quarter ended</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Quarter ended</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>March 31, 2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>March 31, 2007</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left"><B>Period of time in an</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Fair</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Fair</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left"><B>unrealized loss position</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Value on</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Realized</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Value on</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Realized</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">($ in millions)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Sale Date</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Loss</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Sale Date</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Loss</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fixed maturities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">7 &#150; 12&nbsp;months</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>4.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total fixed maturities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity Securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">0 - 6&nbsp;months</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">7 &#150; 12&nbsp;months</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total equity securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>8.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->23<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><U><B>Unrealized Losses</B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The following table summarizes the aggregate fair value and gross pre-tax unrealized loss recorded
in our accumulated other comprehensive income by asset class and by length of time for all
available-for-sale securities that have continuously been in an unrealized loss position at March
31, 2008 and December&nbsp;31, 2007:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="44%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Unaudited</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>March 31, 2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>December 31, 2007</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left"><B>Period of time in an</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Gross</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Gross</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left"><B> unrealized loss position</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Fair</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Unrealized</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Fair</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Unrealized</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">($ in millions)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Value</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Loss</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Value</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Loss</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fixed maturities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">0 &#150; 6&nbsp;months</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>485.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>20.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">219.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7 &#150; 12&nbsp;months</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>177.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>31.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">188.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Greater than 12&nbsp;months</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>159.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>7.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">340.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total fixed maturities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>822.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>59.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">748.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">0 &#150; 6&nbsp;months</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>34.4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7 &#150; 12&nbsp;months</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total equity securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>35.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>858.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>62.7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">775.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Although overall interest rates decreased in First Quarter 2008, the unrealized losses for fixed
maturity securities increased, primarily due to the credit stress and dislocation in the capital
markets, inflation worries and general uncertainty about the U.S. economy, all of which caused
fixed maturity credit spreads to widen. In addition, some of our mortgage- and asset-backed
securities are priced relative to certain credit-derivative indices, such as the Markit Group&#146;s
&#147;CMBX&#148; for commercial mortgages and &#147;ABX&#148; for asset-backed securities. Recently, these indices
have seen heavy speculation, which has driven credit-derivative spreads to widen to unprecedented
levels. As the market became less liquid in First Quarter 2008, these very wide credit-derivative
spreads were used to value our mortgage- and asset-backed securities, and have negatively impacted
the value of these securities. As of March&nbsp;31, 2008, there were 265 securities in an unrealized
loss position. Broad changes in the overall market or interest rate environment generally do not
lead to impairment charges and, therefore, based on our analyses, which include our review of the
credit worthiness of the issuers, none of the 265 securities are considered other-than-temporarily
impaired.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The following table presents information regarding our available-for-sale fixed maturity securities
that were in an unrealized loss position at March&nbsp;31, 2008 by contractual maturity:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left"><B>Contractual Maturities</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Amortized</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Fair</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">($ in millions)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Cost</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Value</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">One year or less</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>50.2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>46.7</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Due after one year through five years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>401.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>379.3</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Due after five years through ten years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>339.5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>317.1</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Due after ten years through fifteen years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>54.6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>48.0</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Due after fifteen years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>36.8</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>31.4</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>882.1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>822.5</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><U><I>Investments Outlook</I></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">As we look forward, we continue to see a number of risks on the horizon that could contribute to an
extended period of uncertainty and downside volatility in the marketplace. Recession fears abound
as negative economic predictions have become more frequent, and the U.S. slowdown has expanded from
housing to retail sales, which has been affected by high energy and food costs. Banks remain
cautious to extend credit to borrowers, which ultimately could have negative economic consequences,
as shrinking credit availability typically leads to reduced economic activity. Although the credit
crisis is not over, new Federal Reserve measures to ease liquidity have had some stabilizing
effects. Federal Fund rates have been cut from 3.50% in January to the present 2.25%, a 1.25-point
decrease over a 2-month time frame. Although problems remain in the securitization markets, a few
new structured finance transactions have recently come to market.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->24<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>



<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">This year, we envision adding select municipal bonds to the fixed income portfolio if, on an
absolute and risk-adjusted relative basis, they remain attractive. The municipal bond yield curve
is very steep at this point, leading us to invest in longer dated securities to add incremental
yield to the portfolio. However, we will remain disciplined in terms of looking at underlying
credit quality.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">With the presence of these risks, we are now more cautious regarding the equities markets than we
were at the end of 2007. We will continue to manage through this period of uncertainty by
investing in companies with more defensive characteristics, such as solid free cash flow, exposure
to secular growth themes, strong balance sheets, and reasonable valuations. Other considerations
are favorable long-term corporate performance and attractive relative
historical valuations. </div>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt">

Our outlook for the alternative investment strategy continues to be positive over the longer-term.
Investors with capital in these markets are finding assets for sale at attractive terms. However,
in the near term, we expect the current credit crisis to continue to slow the pace of merger &#038;
acquisition activity, which we expect will work to reduce the returns that many private equity
sponsors have historically been able to realize.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Diversified Insurance Services Segment</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The Diversified Insurance Services operations consist of two core functions: human resource
administration outsourcing (&#147;HR Outsourcing&#148;) and flood insurance. We believe these operations are
within markets that continue to offer opportunity for growth. These operations contributed $0.05
per diluted share in both First Quarter 2008 and First Quarter 2007. Contributions from the
Diversified Insurance Services segment, particularly the flood business, continue to mitigate
insurance pricing cycles and the adverse impact that catastrophe losses have on our Insurance
Operations segment. We evaluate the performance of these operations based on several measures,
including, but not limited to, results of operations in accordance with GAAP, with a focus on our
return on revenue (net income divided by revenues). The results for this segment&#146;s continuing
operations are as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Unaudited</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Quarter ended</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Change</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>March 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>% or</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">($ in thousands)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Points</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>HR Outsourcing</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>15,118</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,795</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10      </TD>
    <TD nowrap>)%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Pre-tax profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>737</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,258</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(41</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Flood Insurance</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>12,097</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,410</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Pre-tax profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,060</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Other</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,584</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,973</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Pre-tax profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,488</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,107</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>29,799</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,178</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Pre-tax profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,285</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,367</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">After-tax profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,813</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,903</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">After-tax return on
revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>9.4          </B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="1" align="right">(0.6      </TD>
    <TD nowrap>)&nbsp;pts</TD>

</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><U><B>HR Outsourcing</B></U>
</DIV>


<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>HR Outsourcing revenue declined in First Quarter 2008 compared to First Quarter 2007
primarily as a result of a reduction in worksite lives. As of March&nbsp;31, 2008, our
worksite lives were down 10% to 24,017, compared to 26,689 as of March&nbsp;31, 2007, due to
the economic downturn and the loss of worksite lives from the acquisition of three
large HR Outsourcing clients by companies that manage their own payroll and human
resources activities.</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Pre-tax profit decreased in our HR Outsourcing business in First Quarter 2008
compared to First Quarter 2007 mainly due to pricing pressure on our workers
compensation product and reduced worksite lives. Workers compensation rates have been
reduced by Florida regulators by 18.4% for 2008, after a 15.7% rate decrease that was
effective January&nbsp;1, 2007 for voluntary industrial classes. In the fourth quarter of
2007, we reduced our internal workforce at this operation by 11% to better align
expenses with production.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->25<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV style="margin-top: 10pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><U><B>Flood Insurance</B></U>
</DIV>


<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Our Flood revenues are primarily derived from two activities: (i)&nbsp;fees associated
with servicing policy premium; and (ii)&nbsp;fees associated with handling claims. Revenue
increases of 16% in First Quarter 2008 compared to First Quarter 2007 were mainly
attributable to the increase in servicing in-force flood premium, which increased 19%
to $148.6&nbsp;million as of March&nbsp;31, 2008 compared to March&nbsp;31, 2007. Revenues associated
with handling flood claims increased slightly to $0.2&nbsp;million in First Quarter 2008
compared to $0.1&nbsp;million in First Quarter 2007.</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The pre-tax profit remained relatively flat in First Quarter 2008 compared to First
Quarter 2007 primarily due to increased commissions to agents that largely offset the
increase in revenues noted above.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><U><B><I>Diversified Insurance Services Outlook</I></B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Consistent with trends in the professional employer industry that are pointing to flat to negative
worksite lives growth and the current economic downturn, we expect client sales for our HR
Outsourcing products to continue to be difficult.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The viability of the National Flood Insurance Program&#146;s (&#147;NFIP&#148;) reinsurance program under the
&#147;Write-Your-Own&#148; (&#147;WYO&#148;) Program is an essential component of our Diversified Insurance Services
operations. The following changes will be made to this program in 2008:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Effective May&nbsp;5, 2008, the claims handling fee that will be paid to us by the NFIP will
be: (i)&nbsp;1% of direct premiums written; and (ii)&nbsp;1.5% of incurred losses. The percentage of
direct premiums written will be paid to us even in non-catastrophe years. Currently, the
program calls for payment of claims handling fees in the amount of 3.3% of incurred losses.</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Effective June&nbsp;1, 2008, the fee paid to us by the NFIP in relation to servicing premium
will be reduced 0.5 points to 29.7%.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The current WYO program is set to expire on September&nbsp;30, 2008, but there are several bills pending
in the U.S. Congress under which the program may be revised. These bills contain substantial
proposed changes to the NFIP and WYO Program, which may be favorable or unfavorable for us. It is
presently unclear as to the impact this legislation, if enacted, would have on our operations.
</DIV>
<DIV align="left">
<A name="114"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Financial Condition, Liquidity, and Capital Resources</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Capital resources and liquidity reflects our ability to generate cash flows from business
operations, borrow funds at competitive rates, and raise new capital to meet operating and growth
needs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Liquidity</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Liquidity is a measure of our ability to generate sufficient cash flows to meet the short-term and
long-term cash requirements of our business operations. Our cash and short-term investments
position at March&nbsp;31, 2008 was $222.4&nbsp;million, up from $198.6&nbsp;million at December&nbsp;31, 2007. In
First Quarter 2008, we determined that it was prudent to increase our minimum targeted cash and
short-term investment balances due to the volatility in the financial markets, even though there is
an opportunity cost associated with this decision. In addition, First Quarter 2008 short-term
investment balances were invested in a U.S. Treasury money market fund, which earns a lower yield
than a money market fund, our traditional short-term investment vehicle. This decision was made to
address potential liquidity concerns regarding the underlying investments generally held by money
market funds.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Sources of cash consist of dividends from our subsidiaries, the issuance of debt and equity
securities, and the sale of our common stock under our employee and agent stock purchase plans.
However, our ability to receive dividends from our subsidiaries is restricted. Dividends from our
Insurance Subsidiaries are subject to the approval and/or review of the insurance regulators in
their respective domiciliary states under insurance holding company acts, and are generally payable
only from earned surplus as reported in the statutory annual statements of those subsidiaries as of
the preceding December&nbsp;31st. Based on the 2007 unaudited statutory financial statements, the
Insurance Subsidiaries are permitted to pay to Selective Insurance Group, Inc., in 2008, ordinary
dividends in the aggregate amount of approximately $139.4&nbsp;million. For additional information
regarding dividend restrictions, refer to Note 9, &#147;Indebtedness&#148; and Note 10, &#147;Stockholders&#146;
Equity&#148; in Item&nbsp;8. &#147;Financial Statements and Supplementary Data&#148; of our 2007 Annual Report.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->26<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Our Insurance Subsidiaries generate cash flows primarily from insurance float, which is created by
collecting premiums and earning investment income before losses are paid. The period of the float
can extend over many years. To provide liquidity while maintaining consistent investment
performance, we ladder our fixed maturity investments so that some issues are always maturing and
providing a source of predictable cash flow for claim payments in the ordinary course of business.
The duration of the fixed maturity portfolio, including short-term investments, was 3.8&nbsp;years as of
March&nbsp;31, 2008, while the liabilities of our Insurance Subsidiaries have a duration of 3.4&nbsp;years.
In addition, the Insurance Subsidiaries purchase reinsurance coverage for protection against any
significantly large claims or catastrophes that may occur during the year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Another potential source of cash flows is our syndicated line of credit agreement with Wachovia
Bank, National Association, as administrative agent. Under this agreement, we have access to a $50
million credit facility, which can be increased to $75&nbsp;million with the consent of all lending
parties. At March&nbsp;31, 2008, no balances were outstanding under this credit facility.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Selective HR Solutions (&#147;Selective HR&#148;), our HR Outsourcing business, generates cash flows from its
operations. Dividends from Selective HR are restricted by it&#146;s operating needs and professional
employer organization licensing requirements that it maintain a current ratio of at least 1:1. The
current ratio, which Selective HR generally maintains just above 1:1, provides an indication of a
company&#146;s ability to meet its short-term obligations and is calculated by dividing current assets
by current liabilities. Selective HR provided dividends to Selective Insurance Group, Inc. of $0.9
million in First Quarter 2008 and $1.4&nbsp;million in First Quarter 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Dividends on shares of our common stock are declared and paid at the discretion of our Board of
Directors based on our operating results, financial condition, capital requirements, contractual
restrictions, and other relevant factors. Our ability to declare dividends is restricted by
covenants contained in the notes payable we issued on May&nbsp;4, 2000 (the &#147;2000 Senior Notes&#148;). All
such covenants were met during First Quarter 2008 and First Quarter 2007. For further information
regarding our notes payable, see Note 9, &#147;Indebtedness,&#148; included in Item&nbsp;8. &#147;Financial Statements
and Supplementary Data&#148; of our 2007 Annual Report. At March&nbsp;31, 2008, the amount available for
dividends to holders of our common stock, in accordance with the restrictions of the 2000 Senior
Notes, was $318.0&nbsp;million. Book value per share decreased slightly to $19.62 as of March&nbsp;31, 2008
from $19.81 as of December&nbsp;31, 2007. Our ability to continue to pay dividends to our stockholders
is also dependent in large part on the ability of our Insurance Subsidiaries and Selective HR to
pay dividends. Restrictions on the ability of our subsidiaries, particularly the Insurance
Subsidiaries, to declare and pay dividends, could materially affect our ability to pay principal
and interest on indebtedness and dividends on common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We have historically met our liquidity requirements through dividends from our subsidiaries and by
issuing debt and equity securities. We expect to meet our liquidity requirements by these sources
in the future. The Insurance Subsidiaries have historically met their liquidity requirements from
insurance premiums and investment income. These items have historically provided more than
sufficient funds to pay losses, operating expenses, and dividends.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Capital Resources</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Capital resources provide protection for policyholders, furnish the financial strength to support
the business of underwriting insurance risks, and facilitate continued business growth. At March
31, 2008, we had stockholders&#146; equity of $1,045.7&nbsp;million and total debt of $286.2&nbsp;million. In
addition, we have an irrevocable trust valued at $13.2&nbsp;million to provide for the repayment of
notes having maturities in 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Our cash requirements include, but are not limited to, principal and interest payments on various
notes payable and dividends to stockholders, payment of claims, payment of commitments under
limited partnership agreements and capital expenditures, as well as other operating expenses, which
include agents&#146; commissions, labor costs, premium taxes, general and administrative expenses, and
income taxes. For further details regarding our cash requirements, refer to the section below
titled &#147;Contractual Obligations and Contingent Liabilities and Commitments.&#148;
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->27<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">As active capital managers, we continually monitor our cash requirements and the amount of capital
resources that we maintain at the holding company and operating subsidiary levels. As part of our
long-term capital strategy, we strive to maintain a 25% debt-to-capital ratio and a premiums to
surplus ratio sufficient to maintain an &#147;A&#043;&#148; (Superior) financial strength A.M. Best rating for our
Insurance Subsidiaries. Based on our analysis and market conditions, we may take a variety of
actions, including, but not limited to, contributing capital to our subsidiaries in our Insurance
Operations and Diversified Insurance Services segments, issuing additional debt and/or equity
securities, repurchasing shares of our common stock, or increasing stockholders&#146; dividends. In
First Quarter 2008, we repurchased approximately 1.0&nbsp;million shares of our common stock under our
authorized share repurchase program at a cost of $24.5&nbsp;million. As of March&nbsp;31, 2008, there were
2.5&nbsp;million shares remaining under the current repurchase authorization that extends through July
26, 2009.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B><I>Ratings</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">We are rated by major rating agencies, which provide opinions of our financial strength, operating
performance, strategic position, and ability to meet policyholder obligations. We believe that our
ability to write insurance business is most influenced by our rating from A.M. Best, which
currently rates us &#147;A&#043; (Superior),&#148; their second highest of fifteen ratings, and has been our
rating for 46 consecutive years. The financial strength reflected by our A.M. Best rating is a
competitive advantage in the marketplace and influences where independent insurance agents place
their business. A downgrade from A.M. Best, could: (i)&nbsp;affect our ability to write new business
with customers and/or agents, some of whom are required (under various third party agreements) to
maintain insurance with a carrier that maintains a specified A.M. Best minimum rating; (ii)&nbsp;be an
event of default under our line of credit; or (iii)&nbsp;make it more expensive for us to access capital
markets. In the third quarter of 2007, S&#038;P&#146;s Insurance Rating Services reaffirmed our financial
strength rating of &#147;A&#043;.&#148; This reaffirmation cited our strong competitive position with close ties
to our agents, strong operating performance, very strong operating company capitalization, and good
financial flexibility. The financial strength of our insurance business has been rated, &#147;A2&#148; by
Moody&#146;s since 2001 and &#147;A&#043;&#148; by Fitch Ratings since 2004. Our Moody&#146;s and S&#038;P financial strength
ratings affect our ability to access capital markets, and our interest rate under our line of
credit varies based upon Selective Insurance Group, Inc.&#146;s debt ratings from Moody&#146;s and S&#038;P.
There can be no assurance that our ratings will continue for any given period of time or that they
will not be changed. It is possible that positive or negative ratings actions by one or more of
the rating agencies may occur in the future. We review our financial debt agreements for any
potential rating triggers that could dictate a material change in terms if our credit ratings were
to change.
</DIV>
<DIV align="left">
<A name="115"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Off-Balance Sheet Arrangements</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">At March&nbsp;31, 2008 and December&nbsp;31, 2007, we did not have any relationships with unconsolidated
entities or financial partnerships, such as entities often referred to as structured finance or
special purpose entities, which would have been established for the purpose of facilitating
off-balance sheet arrangements or for other contractually narrow or limited purposes. As such, we
are not exposed to any financing, liquidity, market, or credit risk that could arise if we had
engaged in such relationships.
</DIV>
<DIV align="left">
<A name="116"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Contractual Obligations and Contingent Liabilities and Commitments</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Our future cash payments associated with loss and loss expense reserves, and contractual
obligations pursuant to operating leases for office space and equipment, and notes payable have not
materially changed since December&nbsp;31, 2007. We expect to have the capacity to repay and/or
refinance these obligations as they come due.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">At March&nbsp;31, 2008, we have contractual obligations that expire at various dates through 2022 to
invest up to an additional $146.5&nbsp;million in other investments. There is no certainty that any
such additional investment will be required. We have issued no material guarantees on behalf of
others and have no trading activities involving non-exchange traded contracts accounted for at fair
value. We have no material transactions with related parties other than those disclosed in Note
18, &#147;Related Party Transactions&#148; included in Item&nbsp;8. &#147;Financial Statements and Supplementary Data&#148;
of our 2007 Annual Report.
</DIV>
<DIV align="left">
<A name="117"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Federal Income Taxes</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Total federal income tax expense decreased $5.8&nbsp;million for First Quarter 2008 to $6.1&nbsp;million,
compared to $11.9&nbsp;million for First Quarter 2007. The decrease was attributable to decreased
pre-tax income from our Insurance Operations segment. Our effective tax rate differs from the
federal corporate rate of 35% primarily as a result of tax-advantaged investment income. The
effective tax rate for First Quarter 2008 was 23%, compared with 24% for First Quarter 2007.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->28<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">
<DIV align="left">
<A name="118"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">There have been no material changes in the information about market risk set forth in our 2007
Annual Report.
</DIV>
<DIV align="left">
<A name="119"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>ITEM 4. CONTROLS AND PROCEDURES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Our management, with the participation of our Chief Executive Officer and Chief Financial Officer,
have evaluated the effectiveness of our disclosure controls and procedures (as such term is defined
in Rules&nbsp;13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (&#147;Exchange
Act&#148;), as of the end of the period covered by this report. Based on such evaluation, our Chief
Executive Officer and Chief Financial Officer have concluded that, as of the end of such period,
our disclosure controls and procedures are: (i)&nbsp;effective in recording, processing, summarizing,
and reporting information on a timely basis that we are required to disclose in the reports that we
file or submit under the Exchange Act; and (ii)&nbsp;effective in ensuring that information that we are
required to disclose in the reports that we file or submit under the Exchange Act is accumulated
and communicated to our management, including our Chief Executive Officer and Chief Financial
Officer, as appropriate, to allow timely decisions regarding required disclosure. No changes in
our internal control over financial reporting (as such term is defined in Rule&nbsp;13a-15(f) of the
Exchange Act) occurred during First Quarter 2008 that materially affected, or are reasonably likely
to materially affect, our internal control over financial reporting.
</DIV>
<DIV align="left">
<A name="120"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>PART II &#151; OTHER INFORMATION</B>
</DIV>

<DIV align="left">
<A name="121"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>ITEM
1. LEGAL PROCEEDINGS</B></div>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt">
In the ordinary course of conducting business, we are named as defendants in various legal
proceedings. Most of these proceedings are claims litigation involving our Insurance Subsidiaries
as either (a)&nbsp;liability insurers defending or providing indemnity for third-party claims brought
against insureds or (b)&nbsp;insurers defending first-party coverage claims brought against us. We
account for such activity through the establishment of unpaid loss and loss adjustment expense
reserves. We expect that the ultimate liability, if any, with respect to such ordinary-course
claims litigation, after consideration of provisions made for potential losses and costs of
defense, will not be material to our consolidated financial condition, results of operations, or
cash flows.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Our Insurance Subsidiaries are also from time to time involved in other legal actions, some of
which assert claims for substantial amounts. These actions include, among others, putative state
class actions seeking certification of a state or national class. Such putative class actions have
alleged, for example, improper reimbursement of medical providers paid under workers compensation
and personal and commercial automobile insurance policies. Our Insurance Subsidiaries are also
from time to time involved in individual actions in which extra-contractual damages, punitive
damages, or penalties are sought, such as claims alleging bad faith in the handling of insurance
claims. We believe that we have valid defenses to these cases. We expect that the ultimate
liability, if any, with respect to such lawsuits, after consideration of provisions made for
estimated losses, will not be material to our consolidated financial condition. Nonetheless, given
the large or indeterminate amounts sought in certain of these actions, and the inherent
unpredictability of litigation, an adverse outcome in certain matters could, from time to time,
have a material adverse effect on our consolidated results of operations or cash flows in
particular quarterly or annual periods.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->29<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">
<DIV align="left">
<A name="122"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">The following table provides information regarding our purchases of our common stock in First
Quarter 2008:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="24%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="14%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="14%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="14%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="14%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Total Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Maximum Number</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Total Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Average</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Shares Purchased</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>of Shares that May Yet</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Price Paid</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>as Part of Publicly</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Be Purchased Under the</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Period</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Purchased</B><SUP style="font-size: 85%; vertical-align: text-top"><B>1</B></SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>per Share</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Announced Program</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Announced Program</B><SUP style="font-size: 85%; vertical-align: text-top"><B>2</B></SUP></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">January 1-31, 2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,645</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>22.31</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,519,300</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">February 1-29, 2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>966,461</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>24.05</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>812,683</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,706,617</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">March 1-31, 2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>226,557</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>23.83</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>205,782</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,500,835</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,196,663</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>24.00</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,018,465</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>




<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">1</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>During First Quarter 2008, 159,027 shares were purchased
from employees in connection with the vesting of
restricted stock and 19,171 shares were purchased in
connection with the exercise of stock options. All of
these repurchases were made in connection with satisfying
tax withholding obligations with respect to those
employees. These shares were not purchased as part of
the publicly announced program. The shares were
purchased at the current market prices of our common
stock on the dates of the purchases.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">2</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>On July&nbsp;24, 2007, the Board of Directors authorized a
stock repurchase program of up to 4.0&nbsp;million shares,
which is scheduled to expire on July&nbsp;26, 2009.</TD>
</TR>

</TABLE>

<DIV align="left">
<A name="123"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Our 2008 Annual Meeting of Stockholders was held on April&nbsp;24, 2008. Voting was conducted in person
and by proxy as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">(a)&nbsp;Stockholders voted to elect the following five (5)&nbsp;Class&nbsp;III directors, each to serve until the
2011 annual meeting of stockholders or until a successor has been duly elected and qualified, as
follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>For</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Withheld</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Paul D. Bauer</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,616,416</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">431,375</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">John C. Burville</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,578,845</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">468,946</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Joan M. Lamm-Tennant</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,474,158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">573,633</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Michael J. Morrissey</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,416,461</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">631,330</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ronald L. O&#146;Kelley</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,616,963</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">430,828</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Continuing directors whose terms do not expire until the 2009 annual meeting of stockholders are:
A. David Brown, William M. Kearns, Jr., S. Griffin McClellan III, and J. Brian Thebault.
Continuing directors whose terms do not expire until the 2010 annual meeting of stockholders are:
W. Marston Becker, Gregory E. Murphy, and William M. Rue.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">(b)&nbsp;Stockholders voted to ratify the appointment of KPMG LLP as independent public accountants for
the fiscal year ending December&nbsp;31, 2008 as follows: 45,428,027 shares voted for this proposal;
312,819 shares voted against it; and 306,945 shares abstained.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->30<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">
<DIV align="left">
<A name="124"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>ITEM 6. EXHIBITS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">(a)&nbsp;Exhibits:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="11%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Exhibit No.</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD align="left" valign="top">* 10.18i
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Employment Agreement between Selective Insurance Company of America and John J. Marchioni dated as of March&nbsp;1, 2007 and Amendment No.&nbsp;1 to Employment Agreement dated as of
April&nbsp;15,
2008.</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD align="left" valign="top">* 10.18j
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Employment Agreement between Selective Insurance Company of America and Mary T. Porter dated as of January&nbsp;1, 2007 and
Amendment No.&nbsp;1 to Employment Agreement dated as of April&nbsp;15,
2008.</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD align="left" valign="top">* 10.18k
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Employment Agreement between Selective Insurance Company of America and Eduard J. Pulkstenis dated as of January&nbsp;1, 2007 and
Amendment No.&nbsp;1 to Employment Agreement dated as of April&nbsp;15,
2008.</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD align="left" valign="top">* 11
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Statement Re: Computation of Per Share Earnings.</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD align="left" valign="top">* 31.1
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Rule&nbsp;13a-14(a) Certification of the Chief Executive Officer of
Selective Insurance Group, Inc. (Section&nbsp;302 of the Sarbanes-Oxley
Act of 2002).</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD align="left" valign="top">* 31.2
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Rule&nbsp;13a-14(a) Certification of the Chief Financial Officer of
Selective Insurance Group, Inc. (Section&nbsp;302 of the Sarbanes-Oxley
Act of 2002).</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD align="left" valign="top">* 32.1
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Certification of Chief Executive Officer of Selective Insurance
Group, Inc. pursuant to 18 U.S.C. Section&nbsp;1350, as adopted
pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act of 2002.</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD align="left" valign="top">* 32.2
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Certification of Chief Financial Officer of Selective Insurance
Group, Inc. pursuant to 18 U.S.C. Section&nbsp;1350, as adopted
pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act of 2002.</DIV></TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left">
<DIV style="font-size: 1pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>


<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>
<tr style="font-size: 3pt"><td>&nbsp;</td></tr>
<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>Filed herewith</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->31<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>






<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">




<DIV align="left">
<A name="125"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>SIGNATURES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused
this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>SELECTIVE INSURANCE GROUP, INC.<BR>
Registrant</B>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="65%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">By:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Gregory E. Murphy
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">May&nbsp;2, 2008</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD colspan="1" valign="top" align="left">Gregory E. Murphy</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD colspan="1" valign="top" align="left" nowrap>Chairman of the Board, President and Chief Executive Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">By:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Dale A. Thatcher
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">May&nbsp;2, 2008</TD>
</TR>
<TR style="font-size: 1px">

    <TD valign="top" style="border-top: 0px solid #000000"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD colspan="1" valign="top" align="left">Dale A. Thatcher</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD colspan="1" valign="top" align="left" nowrap>Executive Vice President, Chief Financial Officer and Treasurer</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->32<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">
<DIV align="left">
<A name="126"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>EXHIBIT INDEX</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="11%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Exhibit No.</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD align="left" valign="top">* 10.18i
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Employment Agreement between Selective Insurance Company of
America and John J. Marchioni dated as of March&nbsp;1, 2007 and
Amendment No.&nbsp;1 to Employment Agreement dated as of April&nbsp;15,
2008.</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD align="left" valign="top">* 10.18j
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Employment Agreement between Selective Insurance Company of
America and Mary T. Porter dated as of January&nbsp;1, 2007 and
Amendment No.&nbsp;1 to Employment Agreement dated as of April&nbsp;15,
2008.</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD align="left" valign="top">* 10.18k
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Employment Agreement between Selective Insurance Company of
America and Eduard J. Pulkstenis dated as of January&nbsp;1, 2007 and
Amendment No.&nbsp;1 to Employment Agreement dated as of April&nbsp;15,
2008.</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD align="left" valign="top">* 11
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Statement Re: Computation of Per Share Earnings.</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD align="left" valign="top">* 31.1
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Rule&nbsp;13a-14(a) Certification of the Chief Executive Officer of
Selective Insurance Group, Inc. (Section&nbsp;302 of the Sarbanes-Oxley
Act of 2002).</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD align="left" valign="top">* 31.2
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Rule&nbsp;13a-14(a) Certification of the Chief Financial Officer of
Selective Insurance Group, Inc. (Section&nbsp;302 of the Sarbanes-Oxley
Act of 2002).</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD align="left" valign="top">* 32.1
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Certification of Chief Executive Officer of Selective Insurance
Group, Inc. pursuant to 18 U.S.C. Section&nbsp;1350, as adopted
pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act of 2002.</DIV></TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD align="left" valign="top">* 32.2
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Certification of Chief Financial Officer of Selective Insurance
Group, Inc. pursuant to 18 U.S.C. Section&nbsp;1350, as adopted
pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act of 2002.</DIV></TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>

<DIV align="left">
<DIV style="font-size: 1pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>
<tr style="font-size: 3pt"><td>&nbsp;</td></tr>
<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>Filed herewith</TD>
</TR>

</TABLE>



<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->33<!-- /Folio -->
</DIV>



</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.18I
<SEQUENCE>2
<FILENAME>c73164exv10w18i.htm
<DESCRIPTION>EXHIBIT 10.18I
<TEXT>
<HTML>
<HEAD>
<TITLE>Filed by Bowne Pure Compliance</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: Helvetica,Arial,sans-serif; margin-left: .25in; width: 7.20in">

<DIV align="right" style="font-size: 10pt; margin-top: 10pt"><U><b>Exhibit&nbsp;10-18i</b></U>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><U><B>EMPLOYMENT AGREEMENT</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">This Employment Agreement, (the &#147;<B>Agreement</B>&#148;) is made as of the 1<SUP style="font-size: 85%; vertical-align: text-top">st</SUP> day of March, 2007,
between <B>Selective Insurance Company of America</B>, a New Jersey corporation with a principal place of
business at 40 Wantage Avenue, Branchville, New Jersey 07890 (the &#147;<B>Company</B>&#148;) and <B>John J. Marchioni</B>,
an individual residing at 2 Manor Drive, Andover, NJ 07821 (the &#147;<B>Executive</B>&#148;).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><B>SECTION 1. </B><U><B>DEFINITIONS</B></U><B>.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>1.1. </B><U><B>Definitions</B></U><B>. </B>For purposes of this Agreement, the following terms shall have the
meanings set forth below:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">&#147;<B>Accounting Firm</B>&#148; has the meaning given to such term in Section&nbsp;3.6(b) hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">&#147;<B>Agreement</B>&#148; has the meaning given to such term in the Preamble hereto.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">&#147;<B>Board</B>&#148; means the Board of Directors of the Company&#146;s Parent.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">&#147;<B>Cause</B>&#148; means any one or more of the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(i)&nbsp;the Executive shall have been convicted by a court of competent jurisdiction of, or
pleaded guilty or nolo contendere to, any felony under, or within the meaning of, applicable
United States federal or state law;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(ii)&nbsp;the Executive shall have breached in any respect any one or more of the material
provisions of this Agreement, including, without limitation, any failure to comply with the
Code of Conduct, and, to the extent such breach may be cured, such breach shall have
continued for a period of thirty (30)&nbsp;days after written notice by the Chief Executive
Officer to the Executive specifying such breach; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(iii)&nbsp;the Executive shall have engaged in acts of insubordination, gross negligence or
willful misconduct in the performance of the Executive&#146;s duties and obligations to the
Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">For purposes of clauses (ii)&nbsp;and (iii)&nbsp;of this definition of &#147;Cause&#148;, no act, or failure to act, on
the part of the Executive shall be considered grounds for &#147;Cause&#148; under such clauses if such act,
or such failure to act, was done or omitted to be done based upon authority or express direction
given by the Chief Executive Officer, Senior Executive Vice President of Insurance Operations, or
such other executive as the Chief Executive Officer may designate, or based upon the advice of
counsel for the Company.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<DIV style="font-family: Helvetica,Arial,sans-serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Change in Control</B>&#148; means the occurrence of an event of a nature that would be required to be
reported by the Company&#146;s Parent in response to Item&nbsp;5.01 of a Current Report on Form 8-K, as in
effect on the date thereof, pursuant to Section&nbsp;13 or 15(d) of the Securities Exchange Act;
<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:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(i)&nbsp;The acquisition by any &#147;person&#148; or &#147;group&#148; (as such terms are used in Sections
13(d)(3) and 14(d)(2) of the Securities Exchange Act or any successor provisions to either
of the foregoing), including, without limitation, any current shareholder or shareholders of
the Company&#146;s Parent, of securities of the Company&#146;s Parent resulting in such person or
group being a &#147;beneficial owner&#148; (as defined in Rule&nbsp;13d-3 under the Securities Exchange
Act) of twenty-five percent (25%) or more of any class of Voting Securities of the Company&#146;s
Parent;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(ii)&nbsp;The acquisition by any &#147;person&#148; or &#147;group&#148; (as such terms are used in Sections
13(d)(3) and 14(d)(2) of the Securities Exchange Act or any successor provisions to either
of the foregoing), including, without limitation, any current shareholder or shareholders of
the Company&#146;s Parent, of securities of the Company&#146;s Parent resulting in such person or
group being a &#147;beneficial owner&#148; (as defined in Rule&nbsp;13d-3 under the Securities Exchange
Act) of twenty percent (20%) or more, but less than twenty-five percent (25%), of any class
of Voting Securities of the Company&#146;s Parent, if the Board adopts a resolution that such
acquisition constitutes a Change in Control;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(iii)&nbsp;The sale or disposition of more than fifty percent (50%) of the Company&#146;s
Parent&#146;s assets on a consolidated basis, as shown in the Company&#146;s Parent&#146;s then most recent
audited consolidated balance sheet;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(iv)&nbsp;The reorganization, recapitalization, merger, consolidation or other business
combination involving the Company&#146;s Parent the result of which is the ownership by the
shareholders of the Company&#146;s Parent of less than eighty percent (80%) of those Voting
Securities of the resulting or acquiring Person having the power to vote in the elections of
the board of directors of such Person; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(v)&nbsp;A change in the membership in the Board which, taken in conjunction with any other
prior or concurrent changes, results in twenty percent (20%) or more of the Board&#146;s
membership being persons not nominated by the Company&#146;s Parent&#146;s management or the Board as
set forth in the Company&#146;s Parent&#146;s then most recent proxy statement, excluding changes
resulting from substitutions by the Board because of retirement or death of a director or
directors, removal of a director or directors by the Board or resignation of a director or
directors due to demonstrated disability or incapacity.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(vi)&nbsp;Anything in this definition of Change in Control to the contrary notwithstanding,
no Change in Control shall be deemed to have occurred for 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 the Company.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 4%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->- 2 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: Helvetica,Arial,sans-serif; margin-left: .25in; width: 7.20in">


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">&#147;<B>Code</B>&#148; means the Internal Revenue Code of 1986, as amended from time to time.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">&#147;<B>Code of Conduct</B>&#148; has the meaning given to such term in Section&nbsp;2.3(a) hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">&#147;<B>Commencement Date</B>&#148; has the meaning given to such term in Section&nbsp;2.2 hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Company</B>&#148; has the meaning given to such term in the Preamble hereto and includes any Person
which shall succeed to or assume the obligations of the Company hereunder pursuant to Section&nbsp;5.6
hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Company&#146;s Parent</B>&#148; means Selective Insurance Group, Inc., a publicly traded New Jersey
corporation with a principal office at 40 Wantage Avenue, Branchville, New Jersey 07890.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">&#147;<B>Determination</B>&#148; has the meaning given to such term in Section&nbsp;3.6(b) hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Disability</B>&#148; means the Executive&#146;s physical injury or physical or mental illness which causes
him to be absent from his duties with the Company on a full-time basis for a continuous period in
excess of the greater of: (i)&nbsp;the period of disability constituting permanent disability as
specified under the Company&#146;s long-term disability insurance coverage applicable to the Executive
at the time of the determination of the existence of a disability (or, if such determination is
made after the occurrence of a Change in Control, as specified under the long-term disability
insurance coverage applicable to the Executive prior to a Change in Control) or (ii)&nbsp;180&nbsp;days,
unless within thirty (30)&nbsp;days after a Notice of Termination is thereafter given the Executive
shall have returned to the full-time performance of his duties.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">&#147;<B>Early Termination</B>&#148; has the meaning given to such term in Section&nbsp;3.2 hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">&#147;<B>Excise Tax</B>&#148; has the meaning given to such term in Section&nbsp;3.6(a) hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">&#147;<B>Executive</B>&#148; has the meaning given to such term in the Preamble hereto.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">&#147;<B>Extended Benefit Period</B>&#148; has the meaning given to such term in Section&nbsp;3.3(c) hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">&#147;<B>Good Reason</B>&#148; means the occurrence of any one or more of the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(i)&nbsp;any reduction in the Executive&#146;s Salary below the annualized rate in effect on the
date preceding the date on which a Change in Control shall have occurred unless such
reduction is implemented for the senior executive staff generally, provided, however, that
such reduction shall constitute Good Reason even if implemented for senior executive staff
generally if such reduction occurs within two years after a Change in Control;
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(ii) (A)&nbsp;a failure by the Company to continue in effect benefits that are comparable in
the aggregate to the benefits the Executive receives under the Plans in which the Executive
participates, other than as a result of the normal expiration of any such Plan as to other
eligible employees in accordance with its terms as in effect on the date preceding the date
on which a Change in Control shall have occurred, or (B)&nbsp;the taking of any action, or the
failure to act, by the Company which would adversely affect the Executive&#146;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&#146;s benefits in the future under any such Plans, unless,
in any of the cases described in sub-clauses (A)&nbsp;and (B)&nbsp;of this clause (ii), such failure
to continue in effect, taking of any action or failure to act affects all participants of
such Plan generally;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(iii)&nbsp;without the Executive&#146;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 material diminution in the
Executive&#146;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&#146;s titles or office as in effect immediately prior to a Change in Control, or any
removal of the Executive from, any of such positions, except in connection with the
termination of the Executive&#146;s employment for Cause, Disability or Retirement or as a result
of the Executive&#146;s death, or by his termination of his employment other than for Good
Reason;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(iv)&nbsp;without the Executive&#146;s express prior written consent, the imposition of a
requirement by the Company that the Executive be based at any location in excess of fifty
(50)&nbsp;miles from the location of the Executive&#146;s office on the date preceding the date on
which a Change in Control shall have occurred;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(v)&nbsp;without the Executive&#146;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;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(vi)&nbsp;the failure by the Company to obtain from any Person with which it may merge or
consolidate or to which it may sell all or substantially all of its assets, the agreement of
such Person as set forth in the proviso in Section&nbsp;5.6 hereof; <U>provided</U> that such
merger, consolidation or sale constitutes a Change in Control;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(vii)&nbsp;subsequent to a Change in Control, any purported termination of the Executive&#146;s
employment which is not effected pursuant to a Notice of Termination given in accordance
with Section&nbsp;3.2 hereof; or
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(viii)&nbsp;within two years after a Change in Control shall have occurred, any material
breach by the Company of any of the terms and conditions of this
Agreement or any Plans referred to in clause (ii)&nbsp;of this definition of &#147;Good Reason&#148;
to which the Executive is entitled to receive benefits thereunder, provided, to the extent
such breach may be cured, such breach shall have continued for a period of thirty (30)&nbsp;days
after written notice of the Company specifying such breach.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">&#147;<B>Gross-Up Payment</B>&#148; has the meaning given to such term in Section&nbsp;3.6(a) hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Notice of Termination</B>&#148; means a written notice which shall (i)&nbsp;indicate the specific
termination provision in this Agreement relied upon, (ii)&nbsp;set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive&#146;s employment under
the provision so indicated and, (iii)&nbsp;specify the date of termination in accordance with this
Agreement (other than for a termination for Cause).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">&#147;<B>Overpayments</B>&#148; has the meaning given to such term in Section&nbsp;3.6(c) hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Person</B>&#148; means an individual, partnership, corporation, association, limited liability
company, trust, joint venture, unincorporated organization, and any government, governmental
department or agency or political subdivision thereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">&#147;<B>Plans</B>&#148; has the meaning given to such term in Section&nbsp;2.4(b) hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">&#147;<B>Rabbi Trust</B>&#148; has the meaning given to such term in Section&nbsp;3.4(d) hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">&#147;<B>Release</B>&#148; has the meaning given to such term in Section&nbsp;3.5 hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">&#147;<B>Restrictive Covenants</B>&#148; has the meaning given to such term in Section&nbsp;3.5 hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Retirement</B>&#148; means a termination of the Executive&#146;s employment by the Company or the Executive
(i)&nbsp;at such age as shall be established by the Board for mandatory or normal retirement of Company
executives in general (which age shall be, if the determination of Retirement is made after the
occurrence of a Change in Control, the age established by the Board prior to a Change in Control),
which shall not be less than age 65, or (ii)&nbsp;at any other retirement age set by mutual agreement of
the Company and the Executive and approved by the Board.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">&#147;<B>Salary</B>&#148; has the meaning given to such term in Section&nbsp;2.4(a) hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">&#147;<B>Section&nbsp;409A Tax</B>&#148; has the meaning given to such term in Section&nbsp;3.7 hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Securities Exchange Act</B>&#148; means the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Term</B>&#148; has the meaning given to such term in Section&nbsp;2.2 hereof.
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Termination Date</B>&#148; means (i)&nbsp;if the Executive&#146;s employment is to be terminated by the Company
for Disability, thirty (30)&nbsp;days after a Notice of Termination is given; <U>provided</U> that the
Executive shall not have returned to the performance of the Executive&#146;s duties on a full-time basis
during such thirty (30)&nbsp;day period; and (ii)&nbsp;if the Executive&#146;s employment is to be terminated by
either the Company or the Executive for any other reason, the date on which a Notice of Termination
is given.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">&#147;<B>Total Payments</B>&#148; has the meaning given to such term in Section&nbsp;3.6(a) hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">&#147;<B>Triggering Event</B>&#148; has the meaning given to such term in Section&nbsp;3.4(d) hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">&#147;<B>Trustee</B>&#148; has the meaning given to such term in Section&nbsp;3.4(d) hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">&#147;<B>Underpayments</B>&#148; has the meaning given to such term in Section&nbsp;3.6(c) hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Voting Securities</B>&#148; means, with respect to a specified Person, any security of such Person
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 such Person would have a right to
vote.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>1.2. </B><U><B>Terms Generally</B></U>. Unless the context of this Agreement requires otherwise, words
importing the singular number shall include the plural and vice versa, and any pronoun shall
include the corresponding masculine, feminine and neuter forms.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>1.3. </B><U><B>Cross-References</B></U>. Unless otherwise specified, references in this Agreement to
any Paragraph or Section are references to such Paragraph or Section of this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>SECTION 2. </B><U><B>EMPLOYMENT AND COMPENSATION</B></U>. The following terms and conditions will
govern the Executive&#146;s employment with the Company throughout the Term.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>2.1. </B><U><B>Employment</B></U>. The Company hereby employs the Executive, and the Executive hereby
accepts employment with the Company, on the terms and conditions set forth herein.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>2.2. </B><U><B>Term</B></U>. The term of employment of the Executive under this Agreement shall
commence as of the date hereof (the &#147;<B>Commencement Date</B>&#148;) and, subject to Section&nbsp;3.1 hereof, shall
terminate three (3)&nbsp;year(s) after the Commencement Date, and shall automatically be extended for
additional one (1)&nbsp;year periods thereafter (any such renewal periods, together with the initial
three (3)&nbsp;year period, being referred to as the &#147;<B>Term</B>&#148;) unless terminated by either party by
written notice to the other party.
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>2.3. </B><U><B>Duties</B></U>.
</div>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">
<B>(a) </B>The Executive agrees to serve as Senior Vice President during the
Term. In such capacity, the Executive shall have the responsibilities and duties customary for
such office(s) and such other executive responsibilities and duties as are assigned by the Chief
Executive Officer, Senior Executive Vice President of Insurance Operations, or such other executive
as the Chief Executive Officer may
designate, which are consistent with the Executive&#146;s position(s). The Executive agrees to
devote substantially all his business time, attention and services to the business and affairs of
the Company and its subsidiaries and to perform his duties to the best of his ability. At all
times during the performance of this Agreement, the Executive will adhere to the Code of Conduct of
the Company (the &#147;<B>Code of Conduct</B>&#148;) that has been or may hereafter be established and communicated
by the Company to the Executive for the conduct of the position or positions held by the Executive.
The Executive may not accept directorships on the board of directors of for-profit corporations
without the prior written consent of the Executive Vice President, Human Resources of the Company.
The Executive may accept directorships on the board of directors of not-for-profit corporations
without the prior, written consent of the Executive Vice President, Human Resources so long as
(a)&nbsp;such directorships do not interfere with Executive&#146;s ability to carry out his responsibilities
under this Agreement, and (b)&nbsp;Executive promptly notifies the Executive Vice President, Human
Resources in writing of the fact that he has accepted such a non-profit directorship.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(b)&nbsp;</B>If the Company or the Executive elects not to renew the Term pursuant to Section&nbsp;2.2,
the Executive shall continue to be employed under this Agreement until the expiration of the
then current Term (unless earlier terminated pursuant to Section&nbsp;3.1 hereof), shall cooperate
fully with the Chief Executive Officer, Senior Executive Vice President of Insurance
Operations, or such other executive as the Chief Executive Officer may designate and shall
perform such duties not inconsistent with the provisions hereof as he shall be assigned by the
Chief Executive Officer, Senior Executive Vice President of Insurance Operations, or such other
executive as the Chief Executive Officer may designate.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><B>2.4. </B><U><B>Compensation</B></U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(a)&nbsp;</B><U><B>Salary</B></U>. For all services rendered by the Executive under this Agreement, the
Company shall pay the Executive a salary during the Term at a rate of not less than TWO HUNDRED
THIRTY THOUSAND AND NO/100 DOLLARS ($230,000.00) per year, which may be increased but not
decreased unless decreased for the senior executive staff generally (the &#147;<B>Salary</B>&#148;), payable in
installments in accordance with the Company&#146;s policy from time to time in effect for payment of
salary to executives. The Salary shall be reviewed no less than annually and nothing contained
herein shall prevent the Company from at any time increasing the Salary or other benefits
herein provided to be paid or provided to the Executive or from providing additional or
contingent benefits to the Executive as it deems appropriate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(b)&nbsp;</B><U><B>Benefits</B></U>. During the Term, the Company shall permit the Executive to
participate in or receive benefits based on eligibility under the Selective Insurance Group,
Inc. 2005 Omnibus Stock Plan, the Selective Insurance Group, Inc. Cash Incentive Plan, the
Selective Insurance Retirement Savings Plan, the Retirement Income Plan For Selective Insurance
Company of America, as amended, the Selective Insurance Company of America Deferred
Compensation Plan, the Selective Insurance Supplemental Pension Plan and any other incentive
compensation, stock option, stock appreciation right, stock bonus, pension, group
insurance, retirement, profit sharing, medical, disability, accident, life insurance plan,
relocation plan or policy, or any other plan, program, policy or arrangement of the Company
intended to benefit the employees of the Company generally, if any, in accordance with the
respective provisions thereof, from time to time in effect (collectively, the &#147;<B>Plans</B>&#148;).
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(c)&nbsp;</B><U><B>Vacations and Reimbursements</B></U>. During the Term, the Executive shall be
entitled to vacation time off and reimbursements for ordinary and necessary business travel and
entertainment expenses in accordance with the Company&#146;s policies on such matters from time to
time in effect.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(d)&nbsp;</B><U><B>Perquisites</B></U>. During the Term, the Company shall provide the Executive with
suitable offices, secretarial and other services, and other perquisites to which other
executives of the Company generally are (or become) entitled, to the extent as are suitable to
the character of the Executive&#146;s position with the Company, subject to such specific limits on
such perquisites as may from time to time be imposed by the Company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><B>SECTION 3. </B><U><B>TERMINATION AND SEVERANCE</B></U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>3.1. </B><U><B>Termination</B></U>. The Executive&#146;s employment hereunder shall commence on the
Commencement Date and continue until the expiration of the Term, except that the employment of the
Executive hereunder shall earlier terminate:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%"><B>(a) </B><U><B>Death</B></U>. Upon the Executive&#146;s death.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(b)&nbsp;</B><U><B>Disability</B></U>. At the option of the Company, upon the Disability of the
Executive.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%"><B>(c) </B><U><B>For Cause</B></U>. At the option of the Company, for Cause.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(d)&nbsp;</B><U><B>Resignation</B></U>. At any time at the option of the Executive, by resignation
(other than a resignation for Good Reason).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(e)&nbsp;</B><U><B>Without Cause</B></U>. At any time at the option of the Company, without Cause;
<U>provided</U>, that a termination of the Executive&#146;s employment hereunder by the Company
based on Retirement, death, or Disability shall not be deemed to be a termination without
Cause.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(f)&nbsp;</B><U><B>Relocation</B></U>. At the option of the Executive at any time prior to a Change in
Control, if the Company imposes a requirement without the consent of the Executive that the
Executive be based at a location in excess of fifty (50)&nbsp;miles from the location of the
Executive&#146;s office on the Commencement Date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(g)&nbsp;</B><U><B>For Good Reason</B></U>. At any time at the option of the Executive within two (2)
years following the occurrence of a Change in Control, for Good Reason.
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>3.2. </B><U><B>Procedure For Termination</B></U>. Any termination of the Executive&#146;s employment by the
Company or by the Executive prior to the expiration of the Term (an &#147;<B>Early Termination</B>&#148;) shall be
communicated by delivery of a Notice of Termination to the other party hereto given in accordance
with Section&nbsp;5.13 hereof. Any Early Termination shall become effective as of the applicable
Termination Date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>3.3. </B><U><B>Rights and Remedies on Termination</B></U>. The Executive will be entitled to receive
the payments and benefits specified below if there is an Early Termination.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(a)&nbsp;</B><U><B>Accrued Salary</B></U>. If the Executive&#146;s employment is terminated pursuant to any
of the Paragraphs set forth in Section&nbsp;3.1 hereof, then the Executive (or his legal
representative, as applicable) shall only be entitled to receive his accrued and unpaid Salary
through the Termination Date.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%"><B>(b) </B><U><B>Severance Payments</B></U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(i)&nbsp;If the Executive&#146;s employment is terminated pursuant to Paragraphs (a)&nbsp;or (b)&nbsp;in
Section&nbsp;3.1 hereof, then the Executive (or his legal representative, as applicable) shall be
entitled to receive a severance payment from the Company in an aggregate amount equal to the
product of (A)&nbsp;1 <U>times</U> (B)&nbsp;the Executive&#146;s Salary <U>plus</U> an amount equal to
the average of the three most recent annual cash incentive payments (each an &#147;ACIP&#148;) made
to the Executive; <U>provided</U> that any such severance payment shall be reduced by the
amount of payments the Executive receives under any life or disability insurance policies
with respect to which the premiums were paid by the Company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(ii)&nbsp;If the Executive&#146;s employment is terminated pursuant to Paragraph (e)&nbsp;or (f)&nbsp;in
Section&nbsp;3.1 hereof, then the Executive shall be entitled to receive a severance payment from
the Company in an aggregate amount equal to the product of (A)&nbsp;1.5 <U>times</U> (B)&nbsp;the
Executive&#146;s Salary <U>plus</U> an amount equal to the average of the three most recent ACIP
payments made to the Executive.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(iii)&nbsp;The severance payment required to be paid by the Company to the Executive
pursuant to Paragraph (b)(i) or (b)(ii) above, shall, subject to Section&nbsp;3.7, be paid in
equal monthly installments over the twelve (12)&nbsp;month period following the Termination Date.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%"><B>(c) </B><U><B>Severance Benefits</B></U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(i)&nbsp;If the Executive&#146;s employment is terminated pursuant to any of the Paragraphs set
forth in Section&nbsp;3.1 hereof, then the Executive (or his legal representative, as applicable)
shall be entitled to receive the benefits which the Executive has accrued or earned or which
have become payable under the Plans as of the Termination Date, but which have not yet been
paid to the Executive. Payment of any such benefits shall be made in accordance with the
terms of such Plans.
</DIV>
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<DIV style="font-family: Helvetica,Arial,sans-serif; margin-left: .25in; width: 7.20in">


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(ii)&nbsp;If the Executive&#146;s employment is terminated pursuant to Paragraph (e)&nbsp;or (f)&nbsp;in
Section&nbsp;3.1 hereof, then the Company shall, subject to Section&nbsp;3.7, maintain in full force
and effect for the continued benefit of the Executive and his dependents for a period
terminating on the earlier of (A)&nbsp;twelve (12)&nbsp;months following the applicable Termination
Date, or (B)&nbsp;the commencement date of equivalent benefits from a new employer, (any such
period being referred to as the applicable &#147;<B>Extended Benefit Period</B>&#148;) all insured and
self-insured medical, dental, vision, disability and life insurance employee benefit Plans
in which the Executive was entitled to participate immediately prior to the Termination
Date; <U>provided</U> that the Executive&#146;s continued participation is not barred under the
general terms and provisions of such Plans. Notwithstanding the foregoing, the Executive
shall continue to participate in such Plans during the Extended Benefit Period only to the
extent that such Plans remain in effect for other executives of the Company from time to
time during the Extended Benefit Period and subject to the terms of such Plans, including
any modifications and amendments thereto following the Termination Date. In the event that
the Executive&#146;s participation in any such Plan is barred by its terms, the Company shall
arrange, at its sole cost and expense, to have issued for the benefit of the Executive and
his dependents during the Extended Benefit Period individual policies of insurance providing
benefits substantially similar (on an after-tax basis) to those which the Executive
otherwise would have been entitled to receive under such Plans pursuant to this Paragraph
(c)(ii). Executive shall be responsible for making any required contributions to the cost
of such coverage, on an after-tax basis, at the rate which Executive was obligated to pay
immediately prior to the Termination Date. If, at the end of the applicable Extended
Benefit Period, 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 to enable the Executive to convert his and his dependents&#146; 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. In no event shall the Company&#146;s
obligation to provide disability benefits hereunder be reduced as a result of any individual
disability policy purchased by the Executive.
</DIV>
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<DIV style="font-family: Helvetica,Arial,sans-serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(d)&nbsp;</B><U><B>Rights Under Plans</B></U>. If the Executive&#146;s employment is terminated pursuant to
Paragraphs (a), (b), (e), or (f)&nbsp;in Section&nbsp;3.1 hereof, 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 (i)&nbsp;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 Termination Date, notwithstanding any provision to the contrary or any
provision requiring any act or acts by the Executive in any agreement with the Company or any
Plan; (ii)&nbsp;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, be the earlier of
(A)&nbsp;the later to occur of the fifteenth day of the third month following the date at which, or
the December&nbsp;31 of the calendar year in which, any such stock options, stock appreciation
rights, restricted stock grants, stock bonuses, long-term incentives or similar benefits would
otherwise have expired if not extended, or (B)&nbsp;the original expiration date had the Executive&#146;s
employment not so terminated; and (iii)&nbsp;if the vesting or exercise 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 Securities 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.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%"><B>(e) </B><U><B>No Double Dipping.</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(i)&nbsp;The severance payments and severance benefits the Executive may be entitled to
receive pursuant to this Section&nbsp;3.3 shall be in lieu of any of the payments and benefits
the Executive may be entitled to receive pursuant to any other agreement, plan or
arrangement providing for the payment of severance payments or benefits.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(ii)&nbsp;The Executive expressly disclaims any interest he may have in the Selective
Insurance Company of America Severance Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>3.4. </B><U><B>Rights and Remedies on Termination After Change in Control</B></U>. The Executive will
be entitled to receive the severance payments and severance benefits specified below in the event
there shall occur a termination of the Executive&#146;s employment pursuant to Paragraph (e)&nbsp;or (g)&nbsp;of
Section&nbsp;3.1 hereof within two (2)&nbsp;years following the occurrence of a Change in Control. The
severance payments and benefits the Executive may be entitled to receive pursuant to this Section
3.4 shall be in addition to, and not in lieu of, any of the payments and benefits the Executive may
be entitled to receive pursuant to Section&nbsp;3.3 hereof, unless expressly so stated to be in lieu of
such benefits and/or payments.
</DIV>
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</DIV>

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<DIV style="font-family: Helvetica,Arial,sans-serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(a)&nbsp;</B><U><B>Severance Payments</B></U>. The Executive shall be entitled to receive a severance
payment from the Company in an aggregate amount equal to the product of (i)&nbsp;1.5; and (ii)&nbsp;the
greater of:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%; text-indent: 4%">(1)&nbsp;the sum of the Executive&#146;s Salary <U>plus</U> the Executive&#146;s
target ACIP in effect as of the Termination Date, or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%; text-indent: 4%">(2)&nbsp;the sum of the Executive&#146;s Salary in effect as of the Termination
Date plus the Executive&#146;s average ACIP for the three calendar years prior to
the calendar year in which the Termination Date occurs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Such payment shall be made, subject to Section&nbsp;3.7, thirty (30)&nbsp;business days following the
Termination Date, provided that the Executive has executed and delivered a Release pursuant to
Section&nbsp;3.5 hereof <U>and</U> such Release has become effective and irrevocable. The severance
payment required to be paid by the Company to the Executive pursuant to this Section&nbsp;3.4(a) shall
be in lieu of, and not in addition to, any other severance payments required to be paid by the
Company to the Executive.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(b)&nbsp;</B><U><B>Severance Benefits</B></U>. Subject to Section&nbsp;3.7, 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 earlier of: (i)&nbsp;eighteen (18)&nbsp;months after the Termination Date or (ii)&nbsp;the
commencement date of equivalent benefits from a new employer (the &#147;<B>CIC Extended Benefit Period</B>&#148;),
all insured and self insured medical, dental, vision, disability and life insurance employee
welfare benefit plans in which the Executive was entitled to participate immediately prior to the
Termination Date; <U>provided</U> that the Executive&#146;s continued participation is not barred under
the general terms and provisions of such Plans. Notwithstanding the foregoing, the Executive shall
continue to participate in such Plans during the CIC Extended Benefit Period only to the extent
that such Plans remain in effect for other executives of the Company from time to time during the
CIC Extended Benefit Period and subject to the terms of such Plans, including any modifications and
amendments thereto following the Termination Date. In the event that the Executive&#146;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-tax basis) to those which the Executive
otherwise would have been entitled to receive under such Plans pursuant to this Paragraph (b).
Executive shall be responsible for making any required contributions to the cost of such coverage,
on an after-tax basis, at the rate which Executive was obligated to pay immediately prior to the
Termination Date. If, at the end of the applicable CIC Extended Benefit Period, 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 to enable the Executive to convert his
and his dependents&#146; 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.
The severance benefits required to be provided by the Company to the Executive pursuant to this
Paragraph (b)&nbsp;shall be in lieu of, and not in addition to, any severance benefits
required to be provided to the Executive pursuant to Section&nbsp;3.3(c)(ii) hereof. In no event
shall the Company&#146;s obligation to provide disability benefits hereunder be reduced as a result of
any individual disability policy purchased by the Executive.
</DIV>
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<DIV style="font-family: Helvetica,Arial,sans-serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(c)&nbsp;</B><U><B>Rights Under Plans</B></U>. 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 (i)&nbsp;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 Termination Date, notwithstanding
any provision to the contrary or any provision requiring any act or acts by the Executive in any
agreement with the Company or any Plan; (ii)&nbsp;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, be the earlier of (A)&nbsp;the later to occur of the fifteenth day of the third month following
the date at which, or the December&nbsp;31 of the calendar year in which, any such stock options, stock
appreciation rights, restricted stock grants, stock bonuses, long-term incentives or similar
benefits would otherwise have expired if not extended or (B)&nbsp;the original expiration date had the
Executive&#146;s employment not so terminated; and (iii)&nbsp;if the vesting or exercise 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 Securities 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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(d)&nbsp;</B><U><B>Rabbi Trust</B></U>. The Company shall maintain a trust intended to be a grantor trust
within the meaning of subpart E, Part&nbsp;I, subchapter J, chapter 1, subtitle A of the Code (the
&#147;<B>Rabbi Trust</B>&#148;). Coincident with the occurrence of a Change in Control, the Company shall promptly
deliver to a bank as trustee of the Rabbi Trust (the &#147;<B>Trustee</B>&#148;), an amount of cash or certificates
of deposit, treasury bills or irrevocable letters of credit adequate to fully fund the payment
obligations of the Company under this Section&nbsp;3.4. The Company and Trustee shall enter into a
trust agreement that shall provide that barring the insolvency of the Company, amounts payable to
the Executive under this Section&nbsp;3.4 (subject to Section&nbsp;3.7) shall be paid by the Trustee to the
Executive five (5)&nbsp;days after written demand by the Executive to the Trustee, with a copy to the
Company, certifying that such amounts are due and payable under this Section&nbsp;3.4 because the
Executive&#146;s employment has been terminated pursuant to Paragraph (e)&nbsp;or (g)&nbsp;in Section&nbsp;3.1 hereof
at a time which is within two (2)&nbsp;years following the occurrence of a Change in Control (a
&#147;<B>Triggering Event</B>&#148;). Such trust agreement shall also provide that if the Company shall, prior to
payment by the Trustee, object in writing to the Trustee, with a copy to the Executive, as to the
payment of any amounts demanded by the Executive under this Section&nbsp;3.4, certifying that such
amounts are not due and payable to the Executive because a Triggering Event has not
occurred, such dispute shall be resolved by binding arbitration as set forth in Section&nbsp;5.8
hereof.
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>3.5. </B><U><B>Conditions to Severance Payments and Benefits</B></U>. The Executive&#146;s right to receive
the severance payments and benefits pursuant to Sections&nbsp;3.3 and 3.4 hereof, is expressly
conditioned upon (a)&nbsp;receipt by the Company of a written release (a &#147;<B>Release</B>&#148;) executed by the
Executive in the form of Exhibit&nbsp;A hereto, and the expiration of the revocation period described
therein without such Release having been revoked, and (b)&nbsp;the compliance by the Executive with the
covenants, terms or provisions of Sections&nbsp;4.1 and 4.2 hereof (the &#147;<B>Restrictive Covenants</B>&#148;). If
the Executive shall fail to deliver a Release in accordance with the terms of this Section&nbsp;3.5 or
shall breach any of the Restrictive Covenants, the Company&#146;s obligation to make the severance
payments and to provide the severance benefits pursuant to Sections&nbsp;3.3 and 3.4 hereof shall
immediately and irrevocably terminate.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><B>3.6. </B><U><B>Tax Effect of Payments</B></U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(a)&nbsp;</B><U><B>Gross-Up Payment</B></U>. In the event that it is determined that any payment,
distribution or other benefit of any type to or for the Executive&#146;s benefit made by the Company, by
any of its affiliates, by any Person who acquires ownership or effective control of the Company or
ownership of a substantial portion of the Company&#146;s assets (within the meaning of Section&nbsp;280G of
the Code and the regulations thereunder) or by any affiliate of such Person, whether paid or
payable or distributed or distributable or otherwise made available pursuant to the terms of this
Agreement or otherwise (the &#147;<B>Total Payments</B>&#148;), would be subject to the excise tax imposed by
Section&nbsp;4999 of the Code or any interest or penalties with respect to such excise tax (such excise
tax, together with any such interest or penalties, are collectively referred to as the &#147;<B>Excise
Tax</B>&#148;), then the Executive shall be entitled to receive an additional payment (a &#147;<B>Gross-Up Payment</B>&#148;)
in an amount such that after payment by the Executive of all taxes imposed upon the Gross-Up
Payment, including any Excise Tax, the Executive retains an amount of the Gross-Up Payment equal to
the Excise Tax imposed on the Total Payments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(b)&nbsp;</B><U><B>Determination by Accountant</B></U>. All mathematical determinations and all
determinations of whether any of the Total Payments are &#147;parachute payments&#148; (within the meaning of
Section&nbsp;280G of the Code) that are required to be made under this Section, including all
determinations of whether a Gross-Up Payment is required, of the amount of such Gross-Up Payment
and of amounts relevant to the last sentence of this Section (collectively, the &#147;<B>Determination</B>&#148;),
shall be made 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 an
accounting firm acceptable to it, and such accounting firms shall together designate an independent
accounting firm, <U>provided</U>, <U>however</U>, that any accounting firm so designated shall
not have been previously retained by either party for a period of a least two (2)&nbsp;years subsequent
to the applicable Termination Date. Any independent accounting firm selected by the Executive and
the Company or designated pursuant to this Paragraph (b)&nbsp;shall be referred to herein as the
&#147;<B>Accounting Firm</B>&#148;. Subject to Section&nbsp;3.6(c) and Section&nbsp;3.7, if a
Gross-Up Payment is determined to be payable, it shall be paid by the Company to the Executive
within five (5)&nbsp;days after such Determination is delivered to the Company. Subject to Section
3.6(c), any Determination by the Accounting Firm shall be binding upon the Company and Executive,
absent manifest error. All of the costs and expenses of the Accounting Firm shall be borne by the
Company.
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(c)&nbsp;</B><U><B>Underpayments and Overpayments</B></U>. As a result of uncertainty in the application of
Section&nbsp;4999 of the Code at the time of the initial determination by the Accounting Firm hereunder,
it is possible that Gross-Up Payments not made by the Company should have been made
(&#147;<B>Underpayments</B>&#148;) or that Gross-Up Payments will have been made by the Company which should not
have been made (&#147;<B>Overpayments</B>&#148;). In either event, the Accounting Firm shall determine the amount
of the Underpayment or Overpayment that has occurred. In the case of an Underpayment, the amount
of such Underpayment shall promptly be paid by the Company to or for the Executive&#146;s benefit. In
the case of an Overpayment, the Executive shall, at the direction and expense of the Company, take
such steps as are reasonably necessary (including the filing of returns and claims for refund),
follow reasonable instructions from, and procedures established by, the Company and otherwise
reasonably cooperate with the Company to correct such Overpayment; <U>provided</U>,
<U>however</U>, that (i)&nbsp;the Executive shall in no event be obligated to return to the Company an
amount greater than the net after-tax portion of the Overpayment that the Executive has retained or
has received as a refund or has received the benefit of from the applicable taxing authorities and
(ii)&nbsp;this provision shall be interpreted in a manner consistent with the intent of this Section,
which is to make the Executive whole, on an after-tax basis, for the application of the Excise Tax,
it being understood that the correction of an Overpayment may result in the Executive&#146;s repaying to
the Company an amount which is less than the Overpayment. <FONT style="border-bottom: 3px double #000000">Anything herein to the contrary
notwithstanding, in the event of a final determination as to the liability for the Excise Tax
applicable to the Total Payments such determination shall be the basis for determining whether
there have been Underpayments or Overpayments pursuant to this Section&nbsp;3.6. For this purpose, a
final determination shall mean a final agreement reached with the Internal Revenue Service or a
final determination by a court with jurisdiction from which there is no appeal, in either case,
concluded in accordance with the provisions of this Paragraph (c)</FONT>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><b>(d)&nbsp;<U>Application of Section&nbsp;409A</U></B>. Notwithstanding anything contained in this Section
3.6, no portion of the Gross-Up Payment shall be paid to the Executive <FONT style="border-bottom: 3px double #000000">so as to cause the
Executive to be subject to tax under Section&nbsp;409A of the Code. In particular, if necessary to
avoid taxation under Code Section&nbsp;409A, the Gross-Up Payment shall be paid to Executive in a lump
sum at the same date that severance payments are paid to the Executive pursuant to Section&nbsp;3.4(a).
If the amount of the Gross-Up Payment cannot be fully determined pursuant to Section&nbsp;3.6(b) by such
date, the Company shall pay to the Executive on such date an estimate of the Gross-Up Payment, as
determined by the Accounting Firm, and shall pay the remainder (or the Executive shall reimburse
the Company the difference) 30&nbsp;days thereafter.</FONT>
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>3.7. </B><U><B>Section&nbsp;409A Tax</B></U>. Notwithstanding anything herein to the contrary, to the extent
any payment or provision of benefits under this Agreement upon the Executive&#146;s &#147;separation from
service&#148; is subject to Section&nbsp;409A of the Code, no such payment shall be made, <FONT style="border-bottom: 3px double #000000">and Executive
shall be responsible for the full cost of such benefits,</FONT> for six (6)&nbsp;months following the
Executive&#146;s &#147;separation from service&#148; if the Executive is a &#147;specified employee.&#148; On the
expiration of such six (6)&nbsp;month period, any payments delayed, and an amount sufficient to
reimburse the Executive for the cost of benefits met by the Executive, during such period shall be
aggregated (the &#147;<B>Make-Up Amount</B>&#148;) and paid in full to the Executive, and any succeeding payments
and benefits shall continue as scheduled hereunder. The <FONT style="border-bottom: 3px double #000000">Company shall credit the Make-Up
Amount with interest at no less than the interest rate it pays for short-term borrowed funds, such
interest to accrue from the date on which payments would have been made, or benefits would have
been provided, by the Company to the Executive absent the six month
delay.</FONT> The terms
&#147;separation from service&#148; and &#147;specified employee&#148; shall have the meanings set forth under Section
409A and the regulations and rulings issued thereunder. Furthermore, the Company shall not be
required to make, and the Executive shall not be required to receive, any severance or other
payment or benefit under Sections&nbsp;3.3, 3.4 or 3.6 hereof if the making of such payment or the
provision of such benefit or the receipt thereof shall result in a tax to the Executive arising
under Section&nbsp;409A of the Code (a &#147;<B>Section&nbsp;409A Tax</B>&#148;). In the event the Company cannot make a
payment or provide a benefit under Sections&nbsp;3.3, 3.4 or 3.6 hereof, or if the Executive cannot
receive any such payment or benefit, in accordance with the terms of such Sections, without the
Executive incurring a Section&nbsp;409A Tax, then the Company and the Executive shall work together in
good faith to agree on an alternative payment schedule or an alternative benefit of comparable
economic value acceptable to both parties (and to amend this Agreement, where necessary or
desirable) such that the Executive does not incur a Section&nbsp;409A Tax or the Executive incurs the
least amount of Section&nbsp;409A Tax as is possible under the
circumstances. <FONT style="border-bottom: 3px double #000000">If a satisfactory
alternative payment schedule or benefit cannot be agreed to by the later to occur of (i)&nbsp;the
originally scheduled payment, distribution or benefit date and (ii)&nbsp;six months following the date
of the Executive&#146;s &#147;separation from service,&#148; the Company shall provide such payment, distribution
or benefit to the Executive (&#147;<B>409A Amount</B>&#148;) on the originally scheduled date for such payment,
distribution or benefit together with an additional payment (a &#147;<B>409A Payment</B>&#148;) in an amount such
that after payment by the Executive of all taxes imposed on the 409A Payment (excluding any Excise
Tax to which payment to the Executive is made pursuant to Section&nbsp;3.6(a)), the Executive retains an
amount of the 409A Payment equal to any taxes (including taxes, penalties and interest under
Section&nbsp;409A) on the 409A Amount.</FONT>
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 4%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->- 16 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: Helvetica,Arial,sans-serif; margin-left: .25in; width: 7.20in">


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><B>SECTION 4. </B><U><B>RESTRICTIVE COVENANTS</B></U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>4.1. </B><U><B>Confidentiality</B></U>. The Executive agrees that he will not, either during the Term
or at any time after the expiration or termination of the Term, disclose to any other Person any
confidential or proprietary information of the Company, the Company&#146;s Parent, or any of their
subsidiaries, except for (a)&nbsp;disclosures to directors, officers, key employees, independent
accountants and counsel of the Company and its subsidiaries as may be necessary or appropriate in
the performance of the Executive&#146;s duties
hereunder, (b)&nbsp;disclosures which do not have a material adverse effect on the business or
operations of the Company and its subsidiaries, taken as a whole, (c)&nbsp;disclosures which the
Executive is required to make by law or by any court, arbitrator or administrative or legislative
body (including any committee thereof) with apparent jurisdiction to order the Executive to
disclose or make accessible any information, (d)&nbsp;disclosures with respect to any other litigation,
arbitration or mediation involving this Agreement, and (e)&nbsp;disclosures of any such confidential or
proprietary information that is, at the time of such disclosure, generally known to and available
for use by the public otherwise than by the Executive&#146;s wrongful act or omission. The Executive
agrees not to take with him upon leaving the employ of the Company any document or paper relating
to any confidential information or trade secret of the Company and its subsidiaries, except that
Executive shall be entitled to retain (i)&nbsp;papers and other materials of a personal nature,
including but limited to, photographs, correspondence, personal diaries, calendars and Rolodexes
(so long as such Rolodexes do not contain the Company&#146;s only copy of business contact information),
personal files and phone books, (ii)&nbsp;information showing his compensation or relating to his
reimbursement of expenses, (iii)&nbsp;information that he reasonably believes may be needed for tax
purposes, and (iv)&nbsp;copies of plans, programs and agreements relating to his employment, or
termination thereof, with the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>4.2. </B><U><B>Non-Solicitation of Employees</B></U>. The Executive agrees that, except in the course
of performing his duties hereunder, he will not, either during the Term and for a period of two (2)
years after the expiration or termination of the Term, directly or indirectly, solicit or induce or
attempt to solicit or induce or cause any of the employees of the Company, the Company&#146;s Parent, or
any of their subsidiaries to leave the employ of the Company, the Company&#146;s Parent, or of any of
their subsidiaries.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><B>SECTION 5. </B><U><B>MISCELLANEOUS PROVISIONS</B></U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>5.1. </B><U><B>No Mitigation; Offsets</B></U>. The Executive shall not be required to mitigate damages
or the amount of any payment provided for under this Agreement by seeking other employment or
otherwise and no future income earned by the Executive from employment or otherwise shall in any
way reduce or offset any payments due to the Executive hereunder. Assuming a payment or otherwise
is due Executive under this Agreement, the Company may offset against any amount due Executive
under this Agreement only those amounts due Company in respect of any undisputed, liquidated
obligation of Executive to the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>5.2. </B><U><B>Governing Law</B></U>. The provisions of this Agreement will be construed and
interpreted under the laws of the State of New Jersey, without regard to principles of conflicts of
law.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 4%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->- 17 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: Helvetica,Arial,sans-serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>5.3. </B><U><B>Injunctive Relief and Additional Remedy</B></U>. The Executive acknowledges that the
injury that would be suffered by the Company as a result of a breach of the provisions of Sections
4.1 and 4.2 hereof would be irreparable and that an award of monetary damages to the Company for
such a breach would be an inadequate remedy. Consequently, the Company will have the right, in
addition to any other rights it may
have, to obtain injunctive relief to restrain any breach or threatened breach or otherwise to
specifically enforce any provision of this Agreement, and the Company will not be obligated to post
bond or other security in seeking such relief. Each of the parties hereby irrevocably submits to
the exclusive jurisdiction of the federal and state courts of the State of New Jersey for the
purpose of injunctive relief.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>5.4. </B><U><B>Representations and Warranties by Executive</B></U>. The Executive represents and
warrants to the best of his knowledge that the execution and delivery by the Executive of this
Agreement do not, and the performance by the Executive of the Executive&#146;s obligations hereunder
will not, with or without the giving of notice or the passage of time, or both: (a)&nbsp;violate any
judgment, writ, injunction, or order of any court, arbitrator or governmental agency applicable to
the Executive or (b)&nbsp;conflict with, result in the breach of any provisions of or the termination
of, or constitute a default under, any agreement to which the Executive is a party or by which the
Executive is or may be bound.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>5.5. </B><U><B>Waiver</B></U>. The rights and remedies of the parties to this Agreement are cumulative
and not alternative. Neither the failure nor any delay by either party in exercising any right,
power, or privilege under this Agreement will operate as a waiver of such right, power, or
privilege, and no single or partial exercise of any such right, power, or privilege will preclude
any other or further exercise of such right, power, or privilege or the exercise of any other
right, power, or privilege. To the maximum extent permitted by applicable law, (a)&nbsp;no waiver that
may be given by a party will be applicable except in the specific instance for which it is given;
and (b)&nbsp;no notice to or demand on one party will be deemed to be a waiver of any obligation of such
party or of the right of the party giving such notice or demand to take further action without
notice or demand as provided in this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>5.6. </B><U><B>Assignment</B></U>. No right or benefit under this Agreement shall be assigned,
transferred, pledged or encumbered (a)&nbsp;by the Executive except by a beneficiary designation made by
will or the laws of descent and distribution or (b)&nbsp;by the Company except that the Company may
assign this Agreement and all of its rights hereunder to any Person with which it may merge or
consolidate or to which it may sell all or substantially all of its assets; <U>provided</U> that
such Person shall, by agreement in form and substance satisfactory to the Executive, 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 merger, consolidation or sale had taken place.
Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the
Company and each of its successors and assigns, and the Executive, his heirs, legal representatives
and any beneficiary or beneficiaries designated hereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>5.7. </B><U><B>Entire Agreement; Amendments</B></U>. This Agreement contains the entire agreement
between the parties with respect to the subject matter hereof and supersedes all prior agreements
and understandings, oral or written, between the parties hereto with respect to the subject matter
hereof. This Agreement may not be amended orally, but only by an agreement in writing signed by
the parties hereto.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 4%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->- 18 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: Helvetica,Arial,sans-serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>5.8. </B><U><B>Arbitration</B></U>. Any dispute which may arise between the Executive and the Company
with respect to the construction, interpretation or application of any of the terms, provisions,
covenants or conditions of this Agreement or any claim arising from or relating to this Agreement
will be submitted to final and binding arbitration by three (3)&nbsp;arbitrators in Newark, New Jersey,
under the expedited rules of the American Arbitration Association then obtaining. One such
arbitrator shall be selected by each of the Company and the Executive, and the two arbitrators so
selected shall select the third arbitrator. Selection of all three arbitrators shall be made
within thirty (30)&nbsp;days after the date the dispute arose. The written decision of the arbitrators
shall be rendered within ninety (90)&nbsp;days after selection of the third arbitrator. The decision of
the arbitrators shall be final and binding on the Company and the Executive and may be entered by
either party in any New Jersey federal or state court having jurisdiction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>5.9. </B><U><B>Legal Costs</B></U>. The Company shall pay any reasonable attorney&#146;s fees and costs
incurred by the Executive in connection with any dispute regarding this Agreement so long as
Executive&#146;s claim(s) or defense(s) in such action are asserted in the good faith belief that they
are not frivolous. The Company shall pay any such fees and costs promptly following its receipt of
written requests therefor, which requests shall be made no more frequently than once per calendar
month. The Company shall bear all legal costs and expenses incurred in the event the Company should
contest or dispute the characterization of any amounts paid pursuant to this Agreement as being
nondeductible under Section&nbsp;280G of the Code or subject to imposition of an excise tax under
Section&nbsp;4999 of the Code, including, without limitation, the reasonable costs and expenses of any
counsel selected by the Executive to represent him in connection with such a matter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>5.10. </B><U><B>Severability</B></U>. In the case that any one or more of the provisions contained in
this Agreement shall, for any reason, be held invalid or unenforceable, the other provisions of
this Agreement shall remain in full force and effect. Any provision of this Agreement held invalid
or unenforceable only in part or degree shall remain in full force and effect to the extent not
held invalid or unenforceable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>5.11. </B><U><B>Counterparts; Facsimile</B></U>. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this Agreement and all of
which, when taken together, will be deemed to constitute one and the same agreement. This
Agreement may be executed via facsimile.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>5.12. </B><U><B>Headings; Interpretation</B></U>. The various headings contained herein are for
reference purposes only and do not limit or otherwise affect any of the provisions of this
Agreement. It is the intent of the parties that this Agreement not be construed more strictly with
regard to one party than with regard to any other party.
</DIV>

<P align="center" style="font-size: 10pt; text-indent: 4%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->- 19 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: Helvetica,Arial,sans-serif; margin-left: .25in; width: 7.20in">


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>5.13. </B><U><B>Notices</B></U>.
</div>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">
<B>(a) </B>All notices, requests, demands and other communications required
or permitted under this Agreement shall be in writing and sent as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">If to the Company, to:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">Selective Insurance Company of America<BR>
40 Wantage Avenue<BR>
Branchville, New Jersey 07890<BR>
Attn: General Counsel<BR>
Fax: (973)&nbsp;948-0282
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">If to the Executive, to:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">John J. Marchioni<BR>
2 Manor Drive<BR>
Andover, NJ 07821
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(b)&nbsp;</B>All notices and other communications required or permitted under this Agreement which
are addressed as provided in Paragraph (a)&nbsp;of this Section&nbsp;5.13, (i)&nbsp;if delivered personally
against proper receipt shall be effective upon delivery, (ii)&nbsp;if sent by facsimile transmission
(with evidence supplied by the sender of the facsimile&#146;s receipt at a facsimile number
designated for receipt by the other party hereunder, which other party shall be obligated to
provide such a facsimile number) shall be effective upon dispatch, and (iii)&nbsp;if sent (A)&nbsp;by
certified or registered mail with postage prepaid or (B)&nbsp;by Federal Express or similar courier
service with courier fees paid by the sender, shall be effective upon receipt. The parties
hereto may from time to time change their respective addresses and/or facsimile numbers for the
purpose of notices to that party by a similar notice specifying a new address and/or facsimile
number, but no such change shall be deemed to have been given unless it is sent and received in
accordance with this Section&nbsp;5.13.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>5.14. </B><U><B>Withholding</B></U>. All amounts payable by the Company to the Executive hereunder
(including, but not limited to, the Salary or any amounts payable pursuant to Sections&nbsp;3.3 and/or
3.4 hereof) shall be reduced prior to the delivery of such payment to the Executive by an amount
sufficient to satisfy any applicable federal, state, local or other withholding tax requirements.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 4%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->- 20 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: Helvetica,Arial,sans-serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">IN WITNESS WHEREOF, the Company and Executive have executed this Agreement as of the
Commencement Date.
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left" nowrap><B>SELECTIVE INSURANCE COMPANY OF AMERICA</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Victor N. Daley
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Victor N. Daley&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" nowrap>Its Executive Vice President,
Human Resources&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>EXECUTIVE</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">/s/ John J. Marchioni
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left"> John J. Marchioni&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->- 21 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: Helvetica,Arial,sans-serif; margin-left: .25in; width: 7.20in">

<DIV align="right" style="font-size: 10pt; margin-top: 10pt"><B>
EXHIBIT A</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><U><B>FORM OF RELEASE</B></U>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Reference is hereby made to the Employment Agreement, dated as of
&nbsp;______, 200___&nbsp;
(the
&#147;<U>Employment</U> <U>Agreement</U>&#148;), by and between
&nbsp;_____&nbsp;

(the &#147;<U>Executive</U>&#148;) and
Selective Insurance Company of America, a New Jersey corporation (the &#147;<U>Company</U>&#148;).
Capitalized terms used but not defined herein shall have the meanings specified in the Employment
Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Pursuant to the terms of the Employment Agreement and in consideration of the payments to be
made to the Executive by the Company, which Executive acknowledges are in excess of what Executive
would otherwise be entitled to receive, the Executive hereby releases and forever discharges and
holds the Company and its parent, affiliates, and subsidiaries (collectively, the &#147;<U>Company</U>
<U>Parties</U>&#148; and each a &#147;<U>Company</U> <U>Party</U>&#148;), and the respective officers,
directors, employees, partners, stockholders, members, agents, affiliates, successors and assigns
and insurers of each Company Party, and any legal and personal representatives of each of the
foregoing, harmless from all claims or suits, of any nature whatsoever (whether known or unknown),
past, present or future, including those arising from the law, being directly or indirectly related
to the Executive&#146;s employment by or the termination of such employment by any Company Party,
including, without limiting the foregoing, any claims for notice, pay in lieu of notice, wrongful
dismissal, severance pay, bonus, overtime pay, incentive compensation, interest or vacation pay for
the Executive&#146;s service as an officer or director to any Company Party through the date hereof.
The Executive also hereby agrees not to file a lawsuit asserting any such claims. This release
(this &#147;<U>Release</U>&#148;) includes, but is not limited to, claims growing out of any legal
restriction on any Company Party&#146;s right to terminate its employees and claims or rights under
federal, state, and local laws prohibiting employment discrimination (including, but not limited
to, claims or rights under Title VII of the Civil Rights Act of 1964, as amended by the Civil
Rights Act of 1991, the Americans with Disabilities Act, the Family and Medical Leave Act, the Fair
Labor Standards Act, the Uniformed Services Employment and Reemployment Rights Act, the Employee
Retirement Income Security Act, the Equal Pay Act, the Age Discrimination in Employment Act of
1967, as amended by the Older Workers Benefit Protection Act of 1990, and the laws of the State of
New Jersey against discrimination, or any other federal or state statutes prohibiting
discrimination on the basis of age, sex, race, color, handicap, religion, national origin, and
sexual orientation, or any other federal, state or local employment law, regulation or other
requirement) which arose before the date this Release is signed, excepting only claims in the
nature of workers&#146; compensation, claims for vested benefits, and claims to enforce this agreement.
The Executive acknowledges that because this Release contains a release of claims and is an
important legal document, he has been advised to consult with counsel before executing it, that he
may take up to &#091;twenty-one (21)&#093;<SUP style="font-size: 85%; vertical-align: text-top">1</SUP> &#091;forty-five (45)&#093;<SUP style="font-size: 85%; vertical-align: text-top">2</SUP>
days to decide whether to execute it, and that he may revoke this Release by delivering or
mailing a signed notice of revocation to the Company at its offices within seven (7)&nbsp;days after
executing it. If Executive executes this Release and does not subsequently revoke the release
within seven (7)&nbsp;days after executing it, then this Release shall take effect as a legally binding
agreement between Executive and the Company.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><DIV align="left"><DIV style="font-size: 10pt; margin-top: 10pt; width: 18%; border-bottom: 1px solid #000000">&nbsp;</DIV></DIV>
</DIV>







<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">1</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>Delete brackets and use text enclosed therewith if 45
days is not otherwise required by Section&nbsp;7(f)(1)(F) of the Age Discrimination
in Employment Act and/or 29 C.F.R. Part&nbsp;1625. If 45&nbsp;days is so required,
delete bracketed text in its entirety.</TD>
</TR>

</TABLE>


<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">2</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>Delete brackets and use text enclosed therewith if 45
days is required by Section&nbsp;7(f)(1)(F) of the Age Discrimination in Employment
Act and/or 29 C.F.R. Part&nbsp;1625. If 45&nbsp;days is not so required, delete
bracketed text in its entirety.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->- 2 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: Helvetica,Arial,sans-serif; margin-left: .25in; width: 7.20in">





<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">If Executive does not deliver to the Company an original signed copy of this Release by

&nbsp;_____, or if Executive signs and revokes this Release within seven (7)&nbsp;days as set forth
above, the Company will assume that Executive rejects the Release and Executive will not receive
the payments referred to herein.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Executive acknowledges that there is a risk that after signing this Release he may
discover losses or claims that are released under this Release, but that are presently unknown to
him. The Executive assumes this risk and understands that this Release shall apply to any such
losses and claims.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Executive understands that this Release includes a full and final release covering all
known and unknown, injuries, debts, claims or damages which have arisen or may have arisen from
Executive&#146;s employment by or the termination of such employment by any Company party. The
Executive acknowledges that by accepting the benefits and payments set forth in the Employment
Agreement, he assumes and waives the risks that the facts and the law may be other than as he
believes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Notwithstanding the foregoing, this Release does not release, and the Executive continues to
be entitled to, (i)&nbsp;any rights to exculpation or indemnification that the Executive has under
contract or law with respect to his service as an officer or director of any Company Party and (ii)
receive the payments to be made to him by the Company pursuant to Section&nbsp;3.3 and/or 3.4 of the
Employment Agreement (including any plan, agreement or other arrangement that is referenced in or
the subject of the applicable Section), subject to the conditions set forth in Section&nbsp;3.5 of the
Employment Agreement, (iii)&nbsp;any right the Executive may have to obtain contribution as permitted by
law in the event of entry of judgment against him as a result of any act or failure to act for
which he and any Company party are jointly liable, and (iv)&nbsp;any claim in respect of any insurance
policy with any Company party entered into outside of the employment relationship.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">This Release constitutes the release referenced in Section&nbsp;3.5 of the Employment Agreement.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The undersigned Executive, having had the time to reflect, freely accepts and agrees to the
above Release. The Executive acknowledges and agrees that no Company representative has made any
representation to or agreement with the Executive relating to this Release which is not contained
in the express terms of this
Release. The Executive acknowledges and agrees that the execution and delivery of this
Release is based upon the Executive&#146;s independent review of this Release, and the Executive hereby
expressly waives any and all claims or defenses by the Executive against the enforcement of this
Release which are based upon allegations or representations, projections, estimates, understandings
or agreements by the Company or any of its representatives or any assumptions by the Executive that
are not contained in the express terms of this Release.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">EXECUTIVE</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Date:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>&#091;Attach disclosures required by the Older Workers Benefit Protection Act, if required&#093;</B>
</DIV>



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</DIV>

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<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">This AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT (the &#147;<B>Amendment</B>&#148;) is made effective as of this
15th day of April, 2008 between <B>Selective Insurance Company of America</B>, a New Jersey corporation
with a principal place of business at 40 Wantage Avenue, Branchville, New Jersey 07890 (the
&#147;<B>Company</B>&#148;), and <B>John J. Marchioni </B>, an individual residing at 2 Manor Drive, Andover, NJ 07821(the
&#147;<B>Executive</B>&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">WHEREAS, on March&nbsp;1, 2007, the parties entered into an Employment Agreement (the &#147;<B>Employment
Agreement</B>&#148;); and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">WHEREAS, the parties wish to amend the Employment Agreement to reflect recent guidance under
Sections&nbsp;409A and 162(m) of the Internal Revenue Code of 1986, as amended, and to reflect certain
changes in the terms of the Executive&#146;s employment as a result of the Executive&#146;s promotion to
Executive Vice President of the Company;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">NOW, THEREFORE, for and in consideration of the mutual promises, terms, provisions and
conditions set forth herein, the parties hereby amend the Employment Agreement, effective as of the
date first above written unless otherwise noted, as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">1.&nbsp;Effective January&nbsp;1, 2009, a new definition shall be added to Section&nbsp;1.1 of the Employment
Agreement (Definitions) as follows:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">&#147;<B>Section&nbsp;409A</B>&#148; means Section&nbsp;409A of the Code and the regulations of the
Treasury and other applicable guidance promulgated thereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">2.&nbsp;Effective January&nbsp;1, 2009, the definition of &#147;Good Reason&#148; in Section&nbsp;1.1 of the Employment
Agreement shall be deleted in its entirety and replaced with the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">&#147;<B>Good Reason</B>&#148; means the occurrence of any one or more of the following
conditions; <U>provided</U>, however, that no such condition shall be deemed
to constitute &#147;Good Reason&#148; unless the Executive provides notice of such
condition to the Company within ninety (90)&nbsp;days of its initial existence, and
the Company shall have failed to remedy the condition within thirty (30)&nbsp;days
of its receipt of such notice:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">(i)&nbsp;any material diminution in the Executive&#146;s Salary below the annualized rate
in effect on the date on which a Change in Control shall have occurred, unless
such reduction is implemented for the senior executive staff generally,
<U>provided</U>, however that such reduction shall constitute Good Reason even
if implemented for senior executive
staff generally if such reduction occurs within two years after a Change in
Control;
</DIV>
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</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">(ii)&nbsp;any material negative change in the aggregate benefits the Executive
receives, other than as a result of the normal expiration of any Plan as to
other eligible employees in accordance with its terms as in effect on the date
preceding the date on which a Change in Control shall have occurred, or unless
such change affects all participants of such Plan generally;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">(iii)&nbsp;without the Executive&#146;s express prior written consent, a material
diminution of the Executive&#146;s position, duties, responsibilities and status
with the Company immediately prior to a Change in Control, or any material
diminution in the Executive&#146;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 material negative change in the Executive&#146;s
titles or office as in effect immediately prior to a Change in Control, except
in connection with the termination of the Executive&#146;s employment for Cause,
Disability or Retirement or as a result of the Executive&#146;s death, or by his
termination of his employment other than for Good Reason;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">(iv)&nbsp;without the Executive&#146;s express prior written consent, the imposition of a
requirement by the Company that the Executive be based at any location in
excess of fifty (50)&nbsp;miles from the location of the Executive&#146;s office on the
date preceding the date on which a Change in Control shall have occurred;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">(vi)&nbsp;the failure by the Company to obtain from any Person with which it may
merge or consolidate or to which it may sell all or substantially all of its
assets, the agreement of such Person as set forth in the proviso in Section&nbsp;5.6
hereof; <U>provided</U> that such merger, consolidation or sale constitutes a
Change in Control; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">(vii)&nbsp;within two years after a Change in Control shall have occurred, any
action or inaction that constitutes a material breach by the Company of any of
the terms and conditions of this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">3.&nbsp;The first sentence of Section&nbsp;2.3(a) of the Employment Agreement shall be deleted and
replaced with the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">The Executive agrees to serve as Executive Vice President during the Term.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">4 The first sentence of Section&nbsp;2.4(a) of the Employment Agreement shall be deleted and
replaced with the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">For all services rendered by the Executive under this Agreement, the Company
shall pay the Executive a salary during the Term at a rate of not less than
THREE HUNDRED TWENTY-FIVE THOUSAND AND
00/100 DOLLARS ($325,000.00) per year, which may be increased but not decreased
unless decreased for the senior executive staff generally (the &#147;<B>Salary</B>&#148;),
payable in installments in accordance with the Company&#146;s policy from time to
time in effect for payment of salary to its executives.
</DIV>
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</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">5.&nbsp;Section&nbsp;3.3(b)(i) of the Employment Agreement shall be deleted and replaced with the
following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">If the Executive&#146;s employment is terminated pursuant to Paragraphs (a)&nbsp;or (b)
in Section&nbsp;3.1 hereof, then the Executive (or his legal representative, as
applicable) shall be entitled to receive a severance payment from the Company
in an aggregate amount equal to the product of (A)&nbsp;1.5 <U>times</U> (B)&nbsp;the
Executive&#146;s Salary <U>plus</U> an amount equal to the average of the three
most recent annual cash incentive payments (each an &#147;ACIP&#148;) made to the
Executive; <U>provided</U> that any such severance payment shall be reduced by
the amount of payments the Executive receives under any life or disability
insurance policies with respect to which the premiums were paid by the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">6.&nbsp;Section&nbsp;3.3(b)(ii) of the Employment Agreement shall be deleted and replaced with the
following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">If the Executive&#146;s employment is terminated pursuant to Paragraph (e)&nbsp;or (f)&nbsp;in
Section&nbsp;3.1 hereof, then the Executive shall be entitled to receive a severance
payment from the Company in an aggregate amount equal to the product of (A)&nbsp;1.5
<U>times</U> (B)&nbsp;the Executive&#146;s Salary <U>plus</U> an amount equal to the
average of the three most recent ACIP payments made to the Executive.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">7.&nbsp;The first sentence of Section&nbsp;3.3(c)(ii) of the Employment Agreement shall be amended
by substituting &#147;eighteen (18)&nbsp;months&#148; for &#147;twelve (12)&nbsp;months.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">8.&nbsp;Section&nbsp;3.4(a) of the Employment Agreement shall be deleted and replaced with the
following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">The Executive shall be entitled to receive a severance payment from the Company
in an aggregate amount equal to the product of (i)&nbsp;2; and (ii)&nbsp;the greater of:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%; text-indent: 4%">(1)&nbsp;the sum of the Executive&#146;s Salary <U>plus</U> the Executive&#146;s target
ACIP in effect as of the Termination Date; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%; text-indent: 4%">(2)&nbsp;the sum of the Executive&#146;s Salary as of the Termination Date
<U>plus</U> the Executive&#146;s average ACIP for the three (3)&nbsp;calendar years
prior to the calendar year in which the Termination Date occurs.&#148;
</DIV>


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</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">Such payment shall be made, subject to Section&nbsp;3.7, sixty (60)&nbsp;days following
the Executive&#146;s termination of employment; <U>provided, however</U>, that, if
and to the extent any payments under this Section&nbsp;3.4 constitute deferred
compensation subject to Section&nbsp;409A, then, unless the Change in Control
qualifies as a change in the ownership of the Company, a change in effective
control of the Company, or a change in the ownership of a substantial portion
of the assets of the Company, as described in Treasury Regulations Section
1.409A-3(i)(5), such payment shall be made at the times specified in Section
3.3(b)(iii) of the Employment Agreement. The severance payment(s) required to
be made by the Company to the Executive pursuant to this Section&nbsp;3.4(a) shall
be in lieu of, and not in addition to, any other severance payments required to
be paid by the Company to the Executive.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">9.&nbsp;The first sentence of Section&nbsp;3.4(b) of the Employment Agreement shall be amended by
substituting &#147;twenty-four (24)&nbsp;months&#148; for &#147;eighteen (18)&nbsp;months.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">10.&nbsp;Effective January&nbsp;1, 2009, Section&nbsp;3.4(c)(ii) of the Employment Agreement shall be deleted
and replaced with the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">(ii)&nbsp;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 their 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 Plan, be the earliest of (A)&nbsp;the later to occur of
the fifteenth day of the third month following the date on which, or the
December&nbsp;31 of the calendar year in which, any such stock options, stock
appreciation rights, restricted stock grants, stock bonuses, long-term
incentives or similar benefits would otherwise have expired if not extended,
(B)&nbsp;the original expiration date had the Executive&#146;s employment not so
terminated, and (C)&nbsp;with respect only to a stock option or stock appreciation
right, the tenth anniversary of the date of grant of such stock right;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">11.&nbsp;Effective January&nbsp;1, 2009, Section&nbsp;3.5 of the Employment Agreement shall be renumbered as
Section&nbsp;3.5(a) and retitled &#147;Release and Restrictive Covenants,&#148; and the first sentence of Section
3.5(a) of the Employment Agreement shall be deleted and replaced with the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">Within ten (10)&nbsp;days of the Executive&#146;s termination of employment, the Company
shall provide the Executive with a release substantially in the form of
<U>Exhibit&nbsp;A</U> attached hereto (the &#147;<B>Release</B>&#148;). The Executive&#146;s right to
receive the severance payments and benefits pursuant to Sections&nbsp;3.3 and 3.4
hereof is expressly conditioned upon (i)&nbsp;receipt by the Company of the Release
executed by the Executive within forty-five (45)&nbsp;days of receipt by the
Executive of such Release, and the expiration of the revocation period
described therein without such
Release having been revoked, and (ii)&nbsp;the compliance by the Executive with the
covenants, terms and provisions of Sections&nbsp;4.1 and 4.2 hereof (the
&#147;<B>Restrictive Covenants</B>&#148;).
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">12. A new Section&nbsp;3.5(b) of the Employment Agreement shall be added as follows:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">(b) <U><B>Performance-Based Compensation</B></U>. Upon the expiration of the initial
three (3)&nbsp;year period of the Term, during any calendar year in which the
Executive is a &#147;covered employee,&#148; as defined in Section&nbsp;162(m)(3) of the Code,
if any ACIP entitlements or stock-based awards of the Executive are intended to
qualify as &#147;performance based compensation&#148; within the meaning of Section
162(m) of the Code, then the Executive shall not be entitled to any severance
payments based on his ACIP payments or accelerated vesting of his stock-based
awards pursuant to Section&nbsp;3.3 or 3.4 of this Agreement if and to the extent
that such payments or accelerated vesting would cause any portion of such ACIP
entitlements or stock-based awards to fail to be deductible pursuant to Section
162(m) of the Code.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">13.&nbsp;Effective January&nbsp;1, 2009, Section&nbsp;3.6(d) of the Employment Agreement shall be deleted in
its entirety and replaced with the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%"><U><B>Application of Section&nbsp;409A</B></U>. Notwithstanding anything in this Section
3.6 to the contrary, all Gross-Up Payments shall be made by the end of the
Executive&#146;s taxable year next following the taxable year in which he remits the
related taxes to the applicable taxing authorities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">14.&nbsp;Effective January&nbsp;1, 2009, Section&nbsp;3.7 of the Employment Agreement shall be deleted in its
entirety and replaced with the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">(a) <U><B>Specified Employee Provisions</B></U>. &#147;Notwithstanding anything herein to
the contrary, if the Executive is a &#147;specified employee,&#148; as defined under
Section&nbsp;409A, of the Company, as determined by the Board or the Compensation
Committee of the Company or the Company&#146;s parent company from time to time,
upon the date of his &#147;separation from service,&#148; as defined in Section&nbsp;409A,
from the Company (his &#147;<B>Separation from Service</B>&#148;), then, to the extent any
payment or provision of benefits under this Agreement upon the Executive&#146;s
Separation from Service is subject to Section&nbsp;409A of the Code, no such payment
shall be made and the Executive shall be responsible for the full cost of such
benefits for six (6)&nbsp;months following the Executive&#146;s Separation from Service;
<U>provided</U>, however, that such six month delay of payments shall not
apply to any payments or benefits that are not subject to Section&nbsp;409A,
including the following: (a)&nbsp;any severance or other payments that become due
and payable during the period commencing with the date of the Executive&#146;s date
of termination of employment and ending on March&nbsp;15 of the succeeding calendar
year and which qualify as &#147;short term deferral payments&#148; under Section&nbsp;409A,
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">
and (b)&nbsp;any remaining severance or other payments paid after the Executive&#146;s
Separation from Service to the extent (i)&nbsp;that the dollar amount of such
payments does not exceed two (2)&nbsp;times the lesser of (x)&nbsp;the Executive&#146;s
annualized compensation (based on the Executive&#146;s annual rate of pay for the
calendar year preceding the calendar year in which the separation from service
occurred, adjusted to reflect any increase during such calendar year which was
expected to continue indefinitely had the Executive&#146;s separation from service
not occurred) or (y)&nbsp;the maximum amount of compensation that may be taken into
account under a qualified plan pursuant to Section&nbsp;401(a)(17) of the Code for
the calendar year in which the separation from service occurred, and (ii)&nbsp;such
severance or other payments are to be made to the Executive no later than the
last day of the second calendar year following the calendar year in which the
Separation from Service occurs. For purposes of Section&nbsp;409A, the severance
payments and each monthly provision of severance benefits under Sections&nbsp;3.3
and 3.4 of this Agreement shall be treated as a right to a series of
separate payments.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">(b) <U><B>Amendments and Acknowledgements</B></U>. All payments to the Executive
pursuant to this Agreement are intended to comply with, or to be exempt from,
the requirements of Section&nbsp;409A of the Code. The Company and Executive agree
that they will consider in good faith any and all amendments to this Agreement
either may deem necessary to ensure compliance with the provisions of Section
409A of the Code. However, the Executive acknowledges that, notwithstanding
the 409A Payment set forth in Section&nbsp;3.7 of this Agreement, the Executive
bears the entire risk of any adverse Federal and State tax consequences and
penalty taxes in the event any payment pursuant to this Agreement is deemed to
be subject to Section&nbsp;409A of the Code and that no representations have been
made to the Executive relating to the tax treatment of any payment pursuant to
this Agreement under Section&nbsp;409A of the Code and the corresponding provisions
of any applicable State income taxation laws &#091;(including California income
taxation laws)&#093;.&#148;
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">15.&nbsp;Effective January&nbsp;1, 2009, the second sentence in Section&nbsp;5.1 of the Employment Agreement
shall be deleted and replaced with the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">Assuming a payment or otherwise is due to the Executive under this Agreement,
the Company may offset against any amount due to the Executive under this
Agreement only those amounts due to the Company in respect of any undisputed,
liquidated obligation of the Executive to the Company; <U>provided,</U>
<U>however</U>, that any amount due to
the Company by the Executive shall first be applied to offset amounts due to
the Executive under this Agreement that are not deferred compensation subject
to Section&nbsp;409A, and then, to the extent applicable, to offset amounts due to
the Executive under this Agreement that are deemed to be deferred compensation
subject to Section&nbsp;409A; and <U>further</U> <U>provided</U> that, if and to
the extent required to satisfy the provisions of Treasury Regulation&nbsp;Section
1.409A-3(j)(xiii), any debt of the Executive to the Company may be offset
against any amount due to the Executive under this Agreement that constitutes
deferred compensation subject to Section&nbsp;409A only if (a)&nbsp;such debt is incurred
in the ordinary course of the service relationship between the Executive and
the Company, (b)&nbsp;the entire amount of the offset is limited to $5,000 in any of
the Company&#146;s taxable years, and (c)&nbsp;the offset is made at the same time and in
the same amount as the debt otherwise would have been due and collected from
the Executive.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">16. All other provisions of the Employment Agreement shall remain in full force and effect.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">IN WITNESS WHEREOF, the Company and the Executive have executed this Amendment effective as of
the date above written.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left" nowrap><B>SELECTIVE INSURANCE COMPANY OF AMERICA</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Victor N. Daley
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Victor N. Daley&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" nowrap>Its Executive Vice President, Human Resources&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>EXECUTIVE</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">/s/ John J. Marchioni
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">John J. Marchioni&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


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<P align="center" style="font-size: 10pt"><!-- Folio -->- 8 -<!-- /Folio -->
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<DOCUMENT>
<TYPE>EX-10.18J
<SEQUENCE>3
<FILENAME>c73164exv10w18j.htm
<DESCRIPTION>EXHIBIT 10.18J
<TEXT>
<HTML>
<HEAD>
<TITLE>Filed by Bowne Pure Compliance</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
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<DIV align="right" style="font-size: 10pt; margin-top: 10pt"><U><B>Exhibit&nbsp;10-18j</B></U>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><U><B>EMPLOYMENT AGREEMENT</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">This Employment Agreement, (the &#147;<B>Agreement</B>&#148;) is made as of the 1<SUP style="font-size: 85%; vertical-align: text-top">st</SUP> day of January, 2007,
between <B>Selective Insurance Company of America</B>, a New Jersey corporation with a principal place of
business at 40 Wantage Avenue, Branchville, New Jersey 07890 (the &#147;<B>Company</B>&#148;) and <B>Mary T. Porter</B>, an
individual residing at 139 Island View Drive, Annapolis, MD 21401 (the &#147;<B>Executive</B>&#148;).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><B>SECTION 1. </B><U><B>DEFINITIONS</B></U><B>.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>1.1. </B><U><B>Definitions</B></U><B>. </B>For purposes of this Agreement, the following terms shall have the
meanings set forth below:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">&#147;<B>Accounting Firm</B>&#148; has the meaning given to such term in Section&nbsp;3.6(b) hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">&#147;<B>Agreement</B>&#148; has the meaning given to such term in the Preamble hereto.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">&#147;<B>Board</B>&#148; means the Board of Directors of the Company&#146;s Parent.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">&#147;<B>Cause</B>&#148; means any one or more of the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(i)&nbsp;the Executive shall have been convicted by a court of competent jurisdiction of, or
pleaded guilty or nolo contendere to, any felony under, or within the meaning of, applicable
United States federal or state law;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(ii)&nbsp;the Executive shall have breached in any respect any one or more of the material
provisions of this Agreement, including, without limitation, any failure to comply with the
Code of Conduct, and, to the extent such breach may be cured, such breach shall have
continued for a period of thirty (30)&nbsp;days after written notice by the Chief Executive
Officer to the Executive specifying such breach; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(iii)&nbsp;the Executive shall have engaged in acts of insubordination, gross negligence or
willful misconduct in the performance of the Executive&#146;s duties and obligations to the
Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">For purposes of clauses (ii)&nbsp;and (iii)&nbsp;of this definition of &#147;Cause&#148;, no act, or failure to act, on
the part of the Executive shall be considered grounds for &#147;Cause&#148; under such clauses if such act,
or such failure to act, was done or omitted to be done based upon authority or express direction
given by the Chief Executive Officer, Senior Executive Vice President of Insurance Operations, or
such other executive as the Chief Executive Officer may designate, or based upon the advice of
counsel for the Company.
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Change in Control</B>&#148; means the occurrence of an event of a nature that would be required to be
reported by the Company&#146;s Parent in response to Item&nbsp;5.01 of a Current Report on Form 8-K, as in
effect on the date thereof, pursuant to Section&nbsp;13 or 15(d) of the Securities Exchange Act;
<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:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(i)&nbsp;The acquisition by any &#147;person&#148; or &#147;group&#148; (as such terms are used in Sections
13(d)(3) and 14(d)(2) of the Securities Exchange Act or any successor provisions to either
of the foregoing), including, without limitation, any current shareholder or shareholders of
the Company&#146;s Parent, of securities of the Company&#146;s Parent resulting in such person or
group being a &#147;beneficial owner&#148; (as defined in Rule&nbsp;13d-3 under the Securities Exchange
Act) of twenty-five percent (25%) or more of any class of Voting Securities of the Company&#146;s
Parent;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(ii)&nbsp;The acquisition by any &#147;person&#148; or &#147;group&#148; (as such terms are used in Sections
13(d)(3) and 14(d)(2) of the Securities Exchange Act or any successor provisions to either
of the foregoing), including, without limitation, any current shareholder or shareholders of
the Company&#146;s Parent, of securities of the Company&#146;s Parent resulting in such person or
group being a &#147;beneficial owner&#148; (as defined in Rule&nbsp;13d-3 under the Securities Exchange
Act) of twenty percent (20%) or more, but less than twenty-five percent (25%), of any class
of Voting Securities of the Company&#146;s Parent, if the Board adopts a resolution that such
acquisition constitutes a Change in Control;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(iii)&nbsp;The sale or disposition of more than fifty percent (50%) of the Company&#146;s
Parent&#146;s assets on a consolidated basis, as shown in the Company&#146;s Parent&#146;s then most recent
audited consolidated balance sheet;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(iv)&nbsp;The reorganization, recapitalization, merger, consolidation or other business
combination involving the Company&#146;s Parent the result of which is the ownership by the
shareholders of the Company&#146;s Parent of less than eighty percent (80%) of those Voting
Securities of the resulting or acquiring Person having the power to vote in the elections of
the board of directors of such Person; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(v)&nbsp;A change in the membership in the Board which, taken in conjunction with any other
prior or concurrent changes, results in twenty percent (20%) or more of the Board&#146;s
membership being persons not nominated by the Company&#146;s Parent&#146;s management or the Board as
set forth in the Company&#146;s Parent&#146;s then most recent proxy statement, excluding changes
resulting from substitutions by the Board because of retirement or death of a director or
directors, removal of a director or directors by the Board or resignation of a director or
directors due to demonstrated disability or incapacity.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(vi)&nbsp;Anything in this definition of Change in Control to the contrary notwithstanding,
no Change in Control shall be deemed to have occurred for 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 the Company.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 4%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->- 2 -<!-- /Folio -->
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">&#147;<B>Code</B>&#148; means the Internal Revenue Code of 1986, as amended from time to time.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">&#147;<B>Code of Conduct</B>&#148; has the meaning given to such term in Section&nbsp;2.3(a) hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">&#147;<B>Commencement Date</B>&#148; has the meaning given to such term in Section&nbsp;2.2 hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Company</B>&#148; has the meaning given to such term in the Preamble hereto and includes any Person
which shall succeed to or assume the obligations of the Company hereunder pursuant to Section&nbsp;5.6
hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Company&#146;s
Parent</B>&#148; means Selective Insurance Group, Inc., a publicly traded New Jersey
corporation with a principal office at 40 Wantage Avenue, Branchville, New Jersey 07890.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">&#147;<B>Determination</B>&#148; has the meaning given to such term in Section&nbsp;3.6(b) hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Disability</B>&#148; means the Executive&#146;s physical injury or physical or mental illness which causes
him to be absent from his duties with the Company on a full-time basis for a continuous period in
excess of the greater of: (i)&nbsp;the period of disability constituting permanent disability as
specified under the Company&#146;s long-term disability insurance coverage applicable to the Executive
at the time of the determination of the existence of a disability (or, if such determination is
made after the occurrence of a Change in Control, as specified under the long-term disability
insurance coverage applicable to the Executive prior to a Change in Control) or (ii)&nbsp;180&nbsp;days,
unless within thirty (30)&nbsp;days after a Notice of Termination is thereafter given the Executive
shall have returned to the full-time performance of his duties.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">&#147;<B>Early Termination</B>&#148; has the meaning given to such term in Section&nbsp;3.2 hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">&#147;<B>Excise Tax</B>&#148; has the meaning given to such term in Section&nbsp;3.6(a) hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">&#147;<B>Executive</B>&#148; has the meaning given to such term in the Preamble hereto.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">&#147;<B>Extended Benefit Period</B>&#148; has the meaning given to such term in Section&nbsp;3.3(c) hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">&#147;<B>Good Reason</B>&#148; means the occurrence of any one or more of the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(i)&nbsp;any reduction in the Executive&#146;s Salary below the annualized rate in effect on the
date preceding the date on which a Change in Control shall have occurred unless such
reduction is implemented for the senior executive staff generally, provided, however, that
such reduction shall constitute Good Reason even if implemented for senior executive staff
generally if such reduction occurs within two years after a Change in Control;
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 4%">&nbsp;

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</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(ii) (A)&nbsp;a failure by the Company to continue in effect benefits that are comparable in
the aggregate to the benefits the Executive receives under the Plans in which the Executive
participates, other than as a result of the normal expiration of any such Plan as to other
eligible employees in accordance with its terms as in effect on the date preceding the date
on which a Change in Control shall have occurred, or (B)&nbsp;the taking of any action, or the
failure to act, by the Company which would adversely affect the Executive&#146;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&#146;s benefits in the future under any such Plans, unless,
in any of the cases described in sub-clauses (A)&nbsp;and (B)&nbsp;of this clause (ii), such failure
to continue in effect, taking of any action or failure to act affects all participants of
such Plan generally;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(iii)&nbsp;without the Executive&#146;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 material diminution in the
Executive&#146;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&#146;s titles or office as in effect immediately prior to a Change in Control, or any
removal of the Executive from, any of such positions, except in connection with the
termination of the Executive&#146;s employment for Cause, Disability or Retirement or as a result
of the Executive&#146;s death, or by his termination of his employment other than for Good
Reason;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(iv)&nbsp;without the Executive&#146;s express prior written consent, the imposition of a
requirement by the Company that the Executive be based at any location in excess of fifty
(50)&nbsp;miles from the location of the Executive&#146;s office on the date preceding the date on
which a Change in Control shall have occurred;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(v)&nbsp;without the Executive&#146;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;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(vi)&nbsp;the failure by the Company to obtain from any Person with which it may merge or
consolidate or to which it may sell all or substantially all of its assets, the agreement of
such Person as set forth in the proviso in Section&nbsp;5.6 hereof; <U>provided</U> that such
merger, consolidation or sale constitutes a Change in Control;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(vii)&nbsp;subsequent to a Change in Control, any purported termination of the Executive&#146;s
employment which is not effected pursuant to a Notice of Termination given in accordance
with Section&nbsp;3.2 hereof; or
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(viii)&nbsp;within two years after a Change in Control shall have occurred, any material
breach by the Company of any of the terms and conditions of this
Agreement or any Plans referred to in clause (ii)&nbsp;of this definition of &#147;Good Reason&#148;
to which the Executive is entitled to receive benefits thereunder, provided, to the extent
such breach may be cured, such breach shall have continued for a period of thirty (30)&nbsp;days
after written notice of the Company specifying such breach.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">&#147;<B>Gross-Up Payment</B>&#148; has the meaning given to such term in Section&nbsp;3.6(a) hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Notice of Termination</B>&#148; means a written notice which shall (i)&nbsp;indicate the specific
termination provision in this Agreement relied upon, (ii)&nbsp;set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive&#146;s employment under
the provision so indicated and, (iii)&nbsp;specify the date of termination in accordance with this
Agreement (other than for a termination for Cause).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">&#147;<B>Overpayments</B>&#148; has the meaning given to such term in Section&nbsp;3.6(c) hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Person</B>&#148; means an individual, partnership, corporation, association, limited liability
company, trust, joint venture, unincorporated organization, and any government, governmental
department or agency or political subdivision thereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">&#147;<B>Plans</B>&#148; has the meaning given to such term in Section&nbsp;2.4(b) hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">&#147;<B>Rabbi Trust</B>&#148; has the meaning given to such term in Section&nbsp;3.4(d) hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">&#147;<B>Release</B>&#148; has the meaning given to such term in Section&nbsp;3.5 hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">&#147;<B>Restrictive Covenants</B>&#148; has the meaning given to such term in Section&nbsp;3.5 hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Retirement</B>&#148; means a termination of the Executive&#146;s employment by the Company or the Executive
(i)&nbsp;at such age as shall be established by the Board for mandatory or normal retirement of Company
executives in general (which age shall be, if the determination of Retirement is made after the
occurrence of a Change in Control, the age established by the Board prior to a Change in Control),
which shall not be less than age 65, or (ii)&nbsp;at any other retirement age set by mutual agreement of
the Company and the Executive and approved by the Board.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">&#147;<B>Salary</B>&#148; has the meaning given to such term in Section&nbsp;2.4(a) hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">&#147;<B>Section&nbsp;409A Tax</B>&#148; has the meaning given to such term in Section&nbsp;3.7 hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Securities Exchange Act</B>&#148; means the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Term</B>&#148; has the meaning given to such term in Section&nbsp;2.2 hereof.
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Termination Date</B>&#148; means (i)&nbsp;if the Executive&#146;s employment is to be terminated by the Company
for Disability, thirty (30)&nbsp;days after a Notice of Termination is given; <U>provided</U> that the
Executive shall not have returned to the performance of the Executive&#146;s duties on a full-time basis
during such thirty (30)&nbsp;day period; and (ii)&nbsp;if the Executive&#146;s employment is to be terminated by
either the Company or the Executive for any other reason, the date on which a Notice of Termination
is given.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">&#147;<B>Total Payments</B>&#148; has the meaning given to such term in Section&nbsp;3.6(a) hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">&#147;<B>Triggering Event</B>&#148; has the meaning given to such term in Section&nbsp;3.4(d) hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">&#147;<B>Trustee</B>&#148; has the meaning given to such term in Section&nbsp;3.4(d) hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">&#147;<B>Underpayments</B>&#148; has the meaning given to such term in Section&nbsp;3.6(c) hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Voting Securities</B>&#148; means, with respect to a specified Person, any security of such Person
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 such Person would have a right to
vote.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>1.2. </B><U><B>Terms Generally</B></U>. Unless the context of this Agreement requires otherwise, words
importing the singular number shall include the plural and vice versa, and any pronoun shall
include the corresponding masculine, feminine and neuter forms.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>1.3. </B><U><B>Cross-References</B></U>. Unless otherwise specified, references in this Agreement to
any Paragraph or Section are references to such Paragraph or Section of this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>SECTION 2. </B><U><B>EMPLOYMENT AND COMPENSATION</B></U>. The following terms and conditions will
govern the Executive&#146;s employment with the Company throughout the Term.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>2.1. </B><U><B>Employment</B></U>. The Company hereby employs the Executive, and the Executive hereby
accepts employment with the Company, on the terms and conditions set forth herein.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>2.2. </B><U><B>Term</B></U>. The term of employment of the Executive under this Agreement shall
commence as of the date hereof (the &#147;<B>Commencement Date</B>&#148;) and, subject to Section&nbsp;3.1 hereof, shall
terminate three (3)&nbsp;year(s) after the Commencement Date, and shall automatically be extended for
additional one (1)&nbsp;year periods thereafter (any such renewal periods, together with the initial
three (3)&nbsp;year period, being referred to as the &#147;<B>Term</B>&#148;) unless terminated by either party by
written notice to the other party.
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>2.3. </B><U><B>Duties</B></U>.

</div>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">
<B>(a) </B>The Executive agrees to serve as Senior Vice President during the
Term. In such capacity, the Executive shall have the responsibilities and duties customary for
such office(s) and such other executive responsibilities and duties as are assigned by the Chief
Executive Officer, Senior Executive Vice President of Insurance Operations, or such other executive
as the Chief Executive Officer may
designate, which are consistent with the Executive&#146;s position(s). The Executive agrees to
devote substantially all his business time, attention and services to the business and affairs of
the Company and its subsidiaries and to perform his duties to the best of his ability. At all
times during the performance of this Agreement, the Executive will adhere to the Code of Conduct of
the Company (the &#147;<B>Code of Conduct</B>&#148;) that has been or may hereafter be established and communicated
by the Company to the Executive for the conduct of the position or positions held by the Executive.
The Executive may not accept directorships on the board of directors of for-profit corporations
without the prior written consent of the Executive Vice President, Human Resources of the Company.
The Executive may accept directorships on the board of directors of not-for-profit corporations
without the prior, written consent of the Executive Vice President, Human Resources so long as
(a)&nbsp;such directorships do not interfere with Executive&#146;s ability to carry out his responsibilities
under this Agreement, and (b)&nbsp;Executive promptly notifies the Executive Vice President, Human
Resources in writing of the fact that he has accepted such a non-profit directorship.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(b)&nbsp;</B>If the Company or the Executive elects not to renew the Term pursuant to Section&nbsp;2.2,
the Executive shall continue to be employed under this Agreement until the expiration of the
then current Term (unless earlier terminated pursuant to Section&nbsp;3.1 hereof), shall cooperate
fully with the Chief Executive Officer, Senior Executive Vice President of Insurance
Operations, or such other executive as the Chief Executive Officer may designate and shall
perform such duties not inconsistent with the provisions hereof as he shall be assigned by the
Chief Executive Officer, Senior Executive Vice President of Insurance Operations, or such other
executive as the Chief Executive Officer may designate.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><B>2.4. </B><U><B>Compensation</B></U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(a)&nbsp;</B><U><B>Salary</B></U>. For all services rendered by the Executive under this Agreement, the
Company shall pay the Executive a salary during the Term at a rate of not less than TWO HUNDRED
FIFTY THOUSAND AND NO/100 DOLLARS ($250,000.00) per year, which may be increased but not
decreased unless decreased for the senior executive staff generally (the &#147;<B>Salary</B>&#148;), payable in
installments in accordance with the Company&#146;s policy from time to time in effect for payment of
salary to executives. The Salary shall be reviewed no less than annually and nothing contained
herein shall prevent the Company from at any time increasing the Salary or other benefits
herein provided to be paid or provided to the Executive or from providing additional or
contingent benefits to the Executive as it deems appropriate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(b)&nbsp;</B><U><B>Benefits</B></U>. During the Term, the Company shall permit the Executive to
participate in or receive benefits based on eligibility under the Selective Insurance Group,
Inc. 2005 Omnibus Stock Plan, the Selective Insurance Group, Inc. Cash Incentive Plan, the
Selective Insurance Retirement Savings Plan, the Selective Insurance Company of America
Deferred Compensation Plan, and any other incentive compensation, stock option, stock
appreciation right, stock bonus, pension, group insurance, retirement, profit sharing, medical,
disability, accident, life
insurance plan, relocation plan or policy, or any other plan, program, policy or
arrangement of the Company intended to benefit the employees of the Company generally, if any,
in accordance with the respective provisions thereof, from time to time in effect
(collectively, the &#147;<B>Plans</B>&#148;).
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(c)&nbsp;</B><U><B>Vacations and Reimbursements</B></U>. During the Term, the Executive shall be
entitled to vacation time off and reimbursements for ordinary and necessary business travel and
entertainment expenses in accordance with the Company&#146;s policies on such matters from time to
time in effect.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(d)&nbsp;</B><U><B>Perquisites</B></U>. During the Term, the Company shall provide the Executive with
suitable offices, secretarial and other services, and other perquisites to which other
executives of the Company generally are (or become) entitled, to the extent as are suitable to
the character of the Executive&#146;s position with the Company, subject to such specific limits on
such perquisites as may from time to time be imposed by the Company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><B>SECTION 3. </B><U><B>TERMINATION AND SEVERANCE</B></U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>3.1. </B><U><B>Termination</B></U>. The Executive&#146;s employment hereunder shall commence on the
Commencement Date and continue until the expiration of the Term, except that the employment of the
Executive hereunder shall earlier terminate:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%"><B>(a) </B><U><B>Death</B></U>. Upon the Executive&#146;s death.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(b)&nbsp;</B><U><B>Disability</B></U>. At the option of the Company, upon the Disability of the
Executive.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%"><B>(c) </B><U><B>For Cause</B></U>. At the option of the Company, for Cause.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(d)&nbsp;</B><U><B>Resignation</B></U>. At any time at the option of the Executive, by resignation
(other than a resignation for Good Reason).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(e)&nbsp;</B><U><B>Without Cause</B></U>. At any time at the option of the Company, without Cause;
<U>provided</U>, that a termination of the Executive&#146;s employment hereunder by the Company
based on Retirement, death, or Disability shall not be deemed to be a termination without
Cause.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(f)&nbsp;</B><U><B>Relocation</B></U>. At the option of the Executive at any time prior to a Change in
Control, if the Company imposes a requirement without the consent of the Executive that the
Executive be based at a location in excess of fifty (50)&nbsp;miles from the location of the
Executive&#146;s office on the Commencement Date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(g)&nbsp;</B><U><B>For Good Reason</B></U>. At any time at the option of the Executive within two (2)
years following the occurrence of a Change in Control, for Good Reason.
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>3.2. </B><U><B>Procedure For Termination</B></U>. Any termination of the Executive&#146;s employment by the
Company or by the Executive prior to the expiration of the Term (an &#147;<B>Early Termination</B>&#148;) shall be
communicated by delivery of a Notice of Termination to the other party hereto given in accordance
with Section&nbsp;5.13 hereof. Any Early Termination shall become effective as of the applicable
Termination Date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>3.3. </B><U><B>Rights and Remedies on Termination</B></U>. The Executive will be entitled to receive
the payments and benefits specified below if there is an Early Termination.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(a)&nbsp;</B><U><B>Accrued Salary</B></U>. If the Executive&#146;s employment is terminated pursuant to any
of the Paragraphs set forth in Section&nbsp;3.1 hereof, then the Executive (or his legal
representative, as applicable) shall only be entitled to receive his accrued and unpaid Salary
through the Termination Date.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%"><B>(b) </B><U><B>Severance Payments</B></U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(i)&nbsp;If the Executive&#146;s employment is terminated pursuant to Paragraphs (a)&nbsp;or (b)&nbsp;in
Section&nbsp;3.1 hereof, then the Executive (or his legal representative, as applicable) shall be
entitled to receive a severance payment from the Company in an aggregate amount equal to the
product of (A)&nbsp;1 <U>times</U> (B)&nbsp;the Executive&#146;s Salary <U>plus</U> an amount equal to
the average of the three most recent annual cash incentive payments (each an &#147;ACIP&#148;) made
to the Executive; <U>provided</U> that any such severance payment shall be reduced by the
amount of payments the Executive receives under any life or disability insurance policies
with respect to which the premiums were paid by the Company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(ii)&nbsp;If the Executive&#146;s employment is terminated pursuant to Paragraph (e)&nbsp;or (f)&nbsp;in
Section&nbsp;3.1 hereof, then the Executive shall be entitled to receive a severance payment from
the Company in an aggregate amount equal to the product of (A)&nbsp;1.5 <U>times</U> (B)&nbsp;the
Executive&#146;s Salary <U>plus</U> an amount equal to the average of the three most recent ACIP
payments made to the Executive.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(iii)&nbsp;The severance payment required to be paid by the Company to the Executive
pursuant to Paragraph (b)(i) or (b)(ii) above, shall, subject to Section&nbsp;3.7, be paid in
equal monthly installments over the twelve (12)&nbsp;month period following the Termination Date.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%"><B>(c) </B><U><B>Severance Benefits</B></U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(i)&nbsp;If the Executive&#146;s employment is terminated pursuant to any of the Paragraphs set
forth in Section&nbsp;3.1 hereof, then the Executive (or his legal representative, as applicable)
shall be entitled to receive the benefits which the Executive has accrued or earned or which
have become payable under the Plans as of the Termination Date, but which have not yet been
paid to the Executive. Payment of any such benefits shall be made in accordance with the
terms of such Plans.
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(ii)&nbsp;If the Executive&#146;s employment is terminated pursuant to Paragraph (e)&nbsp;or (f)&nbsp;in
Section&nbsp;3.1 hereof, then the Company shall, subject to Section&nbsp;3.7, maintain in full force
and effect for the continued benefit of the Executive and his dependents for a period
terminating on the earlier of (A)&nbsp;twelve (12)&nbsp;months following the applicable Termination
Date, or (B)&nbsp;the commencement date of equivalent benefits from a new employer, (any such
period being referred to as the applicable &#147;<B>Extended Benefit Period</B>&#148;) all insured and
self-insured medical, dental, vision, disability and life insurance employee benefit Plans
in which the Executive was entitled to participate immediately prior to the Termination
Date; <U>provided</U> that the Executive&#146;s continued participation is not barred under the
general terms and provisions of such Plans. Notwithstanding the foregoing, the Executive
shall continue to participate in such Plans during the Extended Benefit Period only to the
extent that such Plans remain in effect for other executives of the Company from time to
time during the Extended Benefit Period and subject to the terms of such Plans, including
any modifications and amendments thereto following the Termination Date. In the event that
the Executive&#146;s participation in any such Plan is barred by its terms, the Company shall
arrange, at its sole cost and expense, to have issued for the benefit of the Executive and
his dependents during the Extended Benefit Period individual policies of insurance providing
benefits substantially similar (on an after-tax basis) to those which the Executive
otherwise would have been entitled to receive under such Plans pursuant to this Paragraph
(c)(ii). Executive shall be responsible for making any required contributions to the cost
of such coverage, on an after-tax basis, at the rate which Executive was obligated to pay
immediately prior to the Termination Date. If, at the end of the applicable Extended
Benefit Period, 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 to enable the Executive to convert his and his dependents&#146; 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. In no event shall the Company&#146;s
obligation to provide disability benefits hereunder be reduced as a result of any individual
disability policy purchased by the Executive.
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(d)&nbsp;</B><U><B>Rights Under Plans</B></U>. If the Executive&#146;s employment is terminated pursuant to
Paragraphs (a), (b), (e), or (f)&nbsp;in Section&nbsp;3.1 hereof, 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 (i)&nbsp;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 Termination Date, notwithstanding any provision to the contrary or any
provision requiring any act or acts by the Executive in any agreement with the Company or any
Plan; (ii)&nbsp;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, be the earlier of
(A)&nbsp;the later to occur of the fifteenth day of the third month following the date at which, or
the December&nbsp;31 of the calendar year in which, any such stock options, stock appreciation
rights, restricted stock grants, stock bonuses, long-term incentives or similar benefits would
otherwise have expired if not extended, or (B)&nbsp;the original expiration date had the Executive&#146;s
employment not so terminated; and (iii)&nbsp;if the vesting or exercise 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 Securities 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.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%"><B>(e) </B><U><B>No Double Dipping.</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(i)&nbsp;The severance payments and severance benefits the Executive may be entitled to
receive pursuant to this Section&nbsp;3.3 shall be in lieu of any of the payments and benefits
the Executive may be entitled to receive pursuant to any other agreement, plan or
arrangement providing for the payment of severance payments or benefits.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(ii)&nbsp;The Executive expressly disclaims any interest he may have in the Selective
Insurance Company of America Severance Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>3.4. </B><U><B>Rights and Remedies on Termination After Change in Control</B></U>. The Executive will
be entitled to receive the severance payments and severance benefits specified below in the event
there shall occur a termination of the Executive&#146;s employment pursuant to Paragraph (e)&nbsp;or (g)&nbsp;of
Section&nbsp;3.1 hereof within two (2)&nbsp;years following the occurrence of a Change in Control. The
severance payments and benefits the Executive may be entitled to receive pursuant to this Section
3.4 shall be in addition to, and not in lieu of, any of the payments and benefits the Executive may
be entitled to receive pursuant to Section&nbsp;3.3 hereof, unless expressly so stated to be in lieu of
such benefits and/or payments.
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(a)&nbsp;</B><U><B>Severance Payments</B></U>. The Executive shall be entitled to receive a severance
payment from the Company in an aggregate amount equal to the product of (i)&nbsp;1.5; and (ii)&nbsp;the
greater of:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%; text-indent: 4%">(1)&nbsp;the sum of the Executive&#146;s Salary <U>plus</U> the Executive&#146;s
target ACIP in effect as of the Termination Date, or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%; text-indent: 4%">(2)&nbsp;the sum of the Executive&#146;s Salary in effect as of the Termination
Date plus the Executive&#146;s average ACIP for the three calendar years prior to
the calendar year in which the Termination Date occurs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Such payment shall be made, subject to Section&nbsp;3.7, thirty (30)&nbsp;business days following the
Termination Date, provided that the Executive has executed and delivered a Release pursuant to
Section&nbsp;3.5 hereof <U>and</U> such Release has become effective and irrevocable. The severance
payment required to be paid by the Company to the Executive pursuant to this Section&nbsp;3.4(a) shall
be in lieu of, and not in addition to, any other severance payments required to be paid by the
Company to the Executive.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(b)&nbsp;</B><U><B>Severance Benefits</B></U>. Subject to Section&nbsp;3.7, 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 earlier of: (i)&nbsp;eighteen (18)&nbsp;months after the Termination Date or (ii)&nbsp;the
commencement date of equivalent benefits from a new employer (the &#147;<B>CIC Extended Benefit Period</B>&#148;),
all insured and self insured medical, dental, vision, disability and life insurance employee
welfare benefit plans in which the Executive was entitled to participate immediately prior to the
Termination Date; <U>provided</U> that the Executive&#146;s continued participation is not barred under
the general terms and provisions of such Plans. Notwithstanding the foregoing, the Executive shall
continue to participate in such Plans during the CIC Extended Benefit Period only to the extent
that such Plans remain in effect for other executives of the Company from time to time during the
CIC Extended Benefit Period and subject to the terms of such Plans, including any modifications and
amendments thereto following the Termination Date. In the event that the Executive&#146;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-tax basis) to those which the Executive
otherwise would have been entitled to receive under such Plans pursuant to this Paragraph (b).
Executive shall be responsible for making any required contributions to the cost of such coverage,
on an after-tax basis, at the rate which Executive was obligated to pay immediately prior to the
Termination Date. If, at the end of the applicable CIC Extended Benefit Period, 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 to enable the Executive to convert his
and his dependents&#146; 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.
The severance benefits required to be provided by the Company to the Executive pursuant to this
Paragraph (b)&nbsp;shall be in lieu of, and not in addition to, any severance benefits
required to be provided to the Executive pursuant to Section&nbsp;3.3(c)(ii) hereof. In no event
shall the Company&#146;s obligation to provide disability benefits hereunder be reduced as a result of
any individual disability policy purchased by the Executive.
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(c)&nbsp;</B><U><B>Rights Under Plans</B></U>. 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 (i)&nbsp;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 Termination Date, notwithstanding
any provision to the contrary or any provision requiring any act or acts by the Executive in any
agreement with the Company or any Plan; (ii)&nbsp;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, be the earlier of (A)&nbsp;the later to occur of the fifteenth day of the third month following
the date at which, or the December&nbsp;31 of the calendar year in which, any such stock options, stock
appreciation rights, restricted stock grants, stock bonuses, long-term incentives or similar
benefits would otherwise have expired if not extended or (B)&nbsp;the original expiration date had the
Executive&#146;s employment not so terminated; and (iii)&nbsp;if the vesting or exercise 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 Securities 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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(d)&nbsp;</B><U><B>Rabbi Trust</B></U>. The Company shall maintain a trust intended to be a grantor trust
within the meaning of subpart E, Part&nbsp;I, subchapter J, chapter 1, subtitle A of the Code (the
&#147;<B>Rabbi Trust</B>&#148;). Coincident with the occurrence of a Change in Control, the Company shall promptly
deliver to a bank as trustee of the Rabbi Trust (the &#147;<B>Trustee</B>&#148;), an amount of cash or certificates
of deposit, treasury bills or irrevocable letters of credit adequate to fully fund the payment
obligations of the Company under this Section&nbsp;3.4. The Company and Trustee shall enter into a
trust agreement that shall provide that barring the insolvency of the Company, amounts payable to
the Executive under this Section&nbsp;3.4 (subject to Section&nbsp;3.7) shall be paid by the Trustee to the
Executive five (5)&nbsp;days after written demand by the Executive to the Trustee, with a copy to the
Company, certifying that such amounts are due and payable under this Section&nbsp;3.4 because the
Executive&#146;s employment has been terminated pursuant to Paragraph (e)&nbsp;or (g)&nbsp;in Section&nbsp;3.1 hereof
at a time which is within two (2)&nbsp;years following the occurrence of a Change in Control (a
&#147;<B>Triggering Event</B>&#148;). Such trust agreement shall also provide that if the Company shall, prior to
payment by the Trustee, object in writing to the Trustee, with a copy to the Executive, as to the
payment of any amounts demanded by the Executive under this Section&nbsp;3.4, certifying that such
amounts are not due and payable to the Executive because a Triggering Event has not
occurred, such dispute shall be resolved by binding arbitration as set forth in Section&nbsp;5.8
hereof.
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>3.5. </B><U><B>Conditions to Severance Payments and Benefits</B></U>. The Executive&#146;s right to receive
the severance payments and benefits pursuant to Sections&nbsp;3.3 and 3.4 hereof, is expressly
conditioned upon (a)&nbsp;receipt by the Company of a written release (a &#147;<B>Release</B>&#148;) executed by the
Executive in the form of <U>Exhibit</U>&nbsp;<U>A</U> hereto, and the expiration of the revocation period described
therein without such Release having been revoked, and (b)&nbsp;the compliance by the Executive with the
covenants, terms or provisions of Sections&nbsp;4.1 and 4.2 hereof (the &#147;<B>Restrictive Covenants</B>&#148;). If
the Executive shall fail to deliver a Release in accordance with the terms of this Section&nbsp;3.5 or
shall breach any of the Restrictive Covenants, the Company&#146;s obligation to make the severance
payments and to provide the severance benefits pursuant to Sections&nbsp;3.3 and 3.4 hereof shall
immediately and irrevocably terminate.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><B>3.6. </B><U><B>Tax Effect of Payments</B></U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(a)&nbsp;</B><U><B>Gross-Up Payment</B></U>. In the event that it is determined that any payment,
distribution or other benefit of any type to or for the Executive&#146;s benefit made by the Company, by
any of its affiliates, by any Person who acquires ownership or effective control of the Company or
ownership of a substantial portion of the Company&#146;s assets (within the meaning of Section&nbsp;280G of
the Code and the regulations thereunder) or by any affiliate of such Person, whether paid or
payable or distributed or distributable or otherwise made available pursuant to the terms of this
Agreement or otherwise (the &#147;<B>Total Payments</B>&#148;), would be subject to the excise tax imposed by
Section&nbsp;4999 of the Code or any interest or penalties with respect to such excise tax (such excise
tax, together with any such interest or penalties, are collectively referred to as the &#147;<B>Excise
Tax</B>&#148;), then the Executive shall be entitled to receive an additional payment (a &#147;<B>Gross-Up Payment</B>&#148;)
in an amount such that after payment by the Executive of all taxes imposed upon the Gross-Up
Payment, including any Excise Tax, the Executive retains an amount of the Gross-Up Payment equal to
the Excise Tax imposed on the Total Payments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(b)&nbsp;</B><U><B>Determination by Accountant</B></U>. All mathematical determinations and all
determinations of whether any of the Total Payments are &#147;parachute payments&#148; (within the meaning of
Section&nbsp;280G of the Code) that are required to be made under this Section, including all
determinations of whether a Gross-Up Payment is required, of the amount of such Gross-Up Payment
and of amounts relevant to the last sentence of this Section (collectively, the &#147;<B>Determination</B>&#148;),
shall be made 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 an
accounting firm acceptable to it, and such accounting firms shall together designate an independent
accounting firm, <U>provided</U>, <U>however</U>, that any accounting firm so designated shall
not have been previously retained by either party for a period of a least two (2)&nbsp;years subsequent
to the applicable Termination Date. Any independent accounting firm selected by the Executive and
the Company or designated pursuant to this Paragraph (b)&nbsp;shall be referred to herein as the
&#147;<B>Accounting Firm</B>&#148;. Subject to Section&nbsp;3.6(c) and Section&nbsp;3.7, if a
Gross-Up Payment is determined to be payable, it shall be paid by the Company to the Executive
within five (5)&nbsp;days after such Determination is delivered to the Company. Subject to Section
3.6(c), any Determination by the Accounting Firm shall be binding upon the Company and Executive,
absent manifest error. All of the costs and expenses of the Accounting Firm shall be borne by the
Company.
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(c)&nbsp;</B><U><B>Underpayments and Overpayments</B></U>. As a result of uncertainty in the application of
Section&nbsp;4999 of the Code at the time of the initial determination by the Accounting Firm hereunder,
it is possible that Gross-Up Payments not made by the Company should have been made
(&#147;<B>Underpayments</B>&#148;) or that Gross-Up Payments will have been made by the Company which should not
have been made (&#147;<B>Overpayments</B>&#148;). In either event, the Accounting Firm shall determine the amount
of the Underpayment or Overpayment that has occurred. In the case of an Underpayment, the amount
of such Underpayment shall promptly be paid by the Company to or for the Executive&#146;s benefit. In
the case of an Overpayment, the Executive shall, at the direction and expense of the Company, take
such steps as are reasonably necessary (including the filing of returns and claims for refund),
follow reasonable instructions from, and procedures established by, the Company and otherwise
reasonably cooperate with the Company to correct such Overpayment; <U>provided</U>,
<U>however</U>, that (i)&nbsp;the Executive shall in no event be obligated to return to the Company an
amount greater than the net after-tax portion of the Overpayment that the Executive has retained or
has received as a refund or has received the benefit of from the applicable taxing authorities and
(ii)&nbsp;this provision shall be interpreted in a manner consistent with the intent of this Section,
which is to make the Executive whole, on an after-tax basis, for the application of the Excise Tax,
it being understood that the correction of an Overpayment may result in the Executive&#146;s repaying to
the Company an amount which is less than the Overpayment. Anything herein to the contrary
notwithstanding, in the event of a final determination as to the liability for the Excise Tax
applicable to the Total Payments such determination shall be the basis for determining whether
there have been Underpayments or Overpayments pursuant to this Section&nbsp;3.6. For this purpose, a
final determination shall mean a final agreement reached with the Internal Revenue Service or a
final determination by a court with jurisdiction from which there is no appeal, in either case,
concluded in accordance with the provisions of this Paragraph (c).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(d)&nbsp;<U>Application
of Section&nbsp;409A</U></B>. Notwithstanding anything contained in this Section
3.6, no portion of the Gross-Up Payment shall be paid to the Executive so as to cause the Executive
to be subject to tax under Section&nbsp;409A of the Code. In particular, if necessary to avoid taxation
under Code Section&nbsp;409A, the Gross-Up Payment shall be paid to Executive in a lump sum at the same
date that severance payments are paid to the Executive pursuant to Section&nbsp;3.4(a). If the amount
of the Gross-Up Payment cannot be fully determined pursuant to Section&nbsp;3.6(b) by such date, the
Company shall pay to the Executive on such date an estimate of the Gross-Up Payment, as determined
by the Accounting Firm, and shall pay the remainder (or the Executive shall reimburse the Company
the difference) 30&nbsp;days thereafter.
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>3.7. </B><U><B>Section&nbsp;409A Tax</B></U>. Notwithstanding anything herein to the contrary, to the extent
any payment or provision of benefits under this Agreement upon the Executive&#146;s &#147;separation from
service&#148; is subject to Section&nbsp;409A of the Code, no such payment shall be made, and Executive shall
be responsible for the full cost of such benefits, for six (6)&nbsp;months following the Executive&#146;s
&#147;separation from service&#148; if the Executive is a &#147;specified employee.&#148; On the expiration of such
six (6)&nbsp;month period, any payments delayed, and an amount sufficient to reimburse the Executive for
the cost of benefits met by the Executive, during such period shall be aggregated (the &#147;<B>Make-Up
Amount</B>&#148;) and paid in full to the Executive, and any succeeding payments and benefits shall continue
as scheduled hereunder. The Company shall credit the Make-Up Amount with interest at no less than
the interest rate it pays for short-term borrowed funds, such interest to accrue from the date on
which payments would have been made, or benefits would have been provided, by the Company to the
Executive absent the six month delay. The terms &#147;separation from service&#148; and &#147;specified employee&#148;
shall have the meanings set forth under Section&nbsp;409A and the regulations and rulings issued
thereunder. Furthermore, the Company shall not be required to make, and the Executive shall not be
required to receive, any severance or other payment or benefit under Sections&nbsp;3.3, 3.4 or 3.6
hereof if the making of such payment or the provision of such benefit or the receipt thereof shall
result in a tax to the Executive arising under Section&nbsp;409A of the Code (a &#147;<B>Section&nbsp;409A Tax</B>&#148;). In
the event the Company cannot make a payment or provide a benefit under Sections&nbsp;3.3, 3.4 or 3.6
hereof, or if the Executive cannot receive any such payment or benefit, in accordance with the
terms of such Sections, without the Executive incurring a Section&nbsp;409A Tax, then the Company and
the Executive shall work together in good faith to agree on an alternative payment schedule or an
alternative benefit of comparable economic value acceptable to both parties (and to amend this
Agreement, where necessary or desirable) such that the Executive does not incur a Section&nbsp;409A Tax
or the Executive incurs the least amount of Section&nbsp;409A Tax as is possible under the
circumstances. If a satisfactory alternative payment schedule or benefit cannot be agreed to by
the later to occur of (i)&nbsp;the originally scheduled payment, distribution or benefit date and (ii)
six months following the date of the Executive&#146;s &#147;separation from service,&#148; the Company shall
provide such payment, distribution or benefit to the Executive (&#147;<B>409A Amount</B>&#148;) on the originally
scheduled date for such payment, distribution or benefit together with an additional payment (a
&#147;<B>409A Payment</B>&#148;) in an amount such that after payment by the Executive of all taxes imposed on the
409A Payment (excluding any Excise Tax to which payment to the Executive is made pursuant to
Section&nbsp;3.6(a)), the Executive retains an amount of the 409A Payment equal to any taxes (including
taxes, penalties and interest under Section&nbsp;409A) on the 409A Amount.
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><B>SECTION 4. </B><U><B>RESTRICTIVE COVENANTS</B></U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>4.1. </B><U><B>Confidentiality</B></U>. The Executive agrees that he will not, either during the Term
or at any time after the expiration or termination of the Term, disclose to any other Person any
confidential or proprietary information of the Company, the Company&#146;s Parent, or any of their
subsidiaries, except for (a)&nbsp;disclosures to directors, officers, key employees, independent
accountants and counsel of the Company and its subsidiaries as may be necessary or appropriate in
the performance of the Executive&#146;s duties
hereunder, (b)&nbsp;disclosures which do not have a material adverse effect on the business or
operations of the Company and its subsidiaries, taken as a whole, (c)&nbsp;disclosures which the
Executive is required to make by law or by any court, arbitrator or administrative or legislative
body (including any committee thereof) with apparent jurisdiction to order the Executive to
disclose or make accessible any information, (d)&nbsp;disclosures with respect to any other litigation,
arbitration or mediation involving this Agreement, and (e)&nbsp;disclosures of any such confidential or
proprietary information that is, at the time of such disclosure, generally known to and available
for use by the public otherwise than by the Executive&#146;s wrongful act or omission. The Executive
agrees not to take with him upon leaving the employ of the Company any document or paper relating
to any confidential information or trade secret of the Company and its subsidiaries, except that
Executive shall be entitled to retain (i)&nbsp;papers and other materials of a personal nature,
including but limited to, photographs, correspondence, personal diaries, calendars and Rolodexes
(so long as such Rolodexes do not contain the Company&#146;s only copy of business contact information),
personal files and phone books, (ii)&nbsp;information showing his compensation or relating to his
reimbursement of expenses, (iii)&nbsp;information that he reasonably believes may be needed for tax
purposes, and (iv)&nbsp;copies of plans, programs and agreements relating to his employment, or
termination thereof, with the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>4.2. </B><U><B>Non-Solicitation of Employees</B></U>. The Executive agrees that, except in the course
of performing his duties hereunder, he will not, either during the Term and for a period of two (2)
years after the expiration or termination of the Term, directly or indirectly, solicit or induce or
attempt to solicit or induce or cause any of the employees of the Company, the Company&#146;s Parent, or
any of their subsidiaries to leave the employ of the Company, the Company&#146;s Parent, or of any of
their subsidiaries.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><B>SECTION 5. </B><U><B>MISCELLANEOUS PROVISIONS</B></U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>5.1. </B><U><B>No Mitigation; Offsets</B></U>. The Executive shall not be required to mitigate damages
or the amount of any payment provided for under this Agreement by seeking other employment or
otherwise and no future income earned by the Executive from employment or otherwise shall in any
way reduce or offset any payments due to the Executive hereunder. Assuming a payment or otherwise
is due Executive under this Agreement, the Company may offset against any amount due Executive
under this Agreement only those amounts due Company in respect of any undisputed, liquidated
obligation of Executive to the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>5.2. </B><U><B>Governing Law</B></U>. The provisions of this Agreement will be construed and
interpreted under the laws of the State of New Jersey, without regard to principles of conflicts of
law.
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>5.3. </B><U><B>Injunctive Relief and Additional Remedy</B></U>. The Executive acknowledges that the
injury that would be suffered by the Company as a result of a breach of the provisions of Sections
4.1 and 4.2 hereof would be irreparable and that an award of monetary damages to the Company for
such a breach would be an inadequate remedy. Consequently, the Company will have the right, in
addition to any other rights it may
have, to obtain injunctive relief to restrain any breach or threatened breach or otherwise to
specifically enforce any provision of this Agreement, and the Company will not be obligated to post
bond or other security in seeking such relief. Each of the parties hereby irrevocably submits to
the exclusive jurisdiction of the federal and state courts of the State of New Jersey for the
purpose of injunctive relief.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>5.4. </B><U><B>Representations and Warranties by Executive</B></U>. The Executive represents and
warrants to the best of his knowledge that the execution and delivery by the Executive of this
Agreement do not, and the performance by the Executive of the Executive&#146;s obligations hereunder
will not, with or without the giving of notice or the passage of time, or both: (a)&nbsp;violate any
judgment, writ, injunction, or order of any court, arbitrator or governmental agency applicable to
the Executive or (b)&nbsp;conflict with, result in the breach of any provisions of or the termination
of, or constitute a default under, any agreement to which the Executive is a party or by which the
Executive is or may be bound.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>5.5. </B><U><B>Waiver</B></U>. The rights and remedies of the parties to this Agreement are cumulative
and not alternative. Neither the failure nor any delay by either party in exercising any right,
power, or privilege under this Agreement will operate as a waiver of such right, power, or
privilege, and no single or partial exercise of any such right, power, or privilege will preclude
any other or further exercise of such right, power, or privilege or the exercise of any other
right, power, or privilege. To the maximum extent permitted by applicable law, (a)&nbsp;no waiver that
may be given by a party will be applicable except in the specific instance for which it is given;
and (b)&nbsp;no notice to or demand on one party will be deemed to be a waiver of any obligation of such
party or of the right of the party giving such notice or demand to take further action without
notice or demand as provided in this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>5.6. </B><U><B>Assignment</B></U>. No right or benefit under this Agreement shall be assigned,
transferred, pledged or encumbered (a)&nbsp;by the Executive except by a beneficiary designation made by
will or the laws of descent and distribution or (b)&nbsp;by the Company except that the Company may
assign this Agreement and all of its rights hereunder to any Person with which it may merge or
consolidate or to which it may sell all or substantially all of its assets; <U>provided</U> that
such Person shall, by agreement in form and substance satisfactory to the Executive, 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 merger, consolidation or sale had taken place.
Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the
Company and each of its successors and assigns, and the Executive, his heirs, legal representatives
and any beneficiary or beneficiaries designated hereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>5.7. </B><U><B>Entire Agreement; Amendments</B></U>. This Agreement contains the entire agreement
between the parties with respect to the subject matter hereof and supersedes all prior agreements
and understandings, oral or written, between the parties hereto with respect to the subject matter
hereof. This Agreement may not be amended orally, but only by an agreement in writing signed by
the parties hereto.
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>5.8. </B><U><B>Arbitration</B></U>. Any dispute which may arise between the Executive and the Company
with respect to the construction, interpretation or application of any of the terms, provisions,
covenants or conditions of this Agreement or any claim arising from or relating to this Agreement
will be submitted to final and binding arbitration by three (3)&nbsp;arbitrators in Newark, New Jersey,
under the expedited rules of the American Arbitration Association then obtaining. One such
arbitrator shall be selected by each of the Company and the Executive, and the two arbitrators so
selected shall select the third arbitrator. Selection of all three arbitrators shall be made
within thirty (30)&nbsp;days after the date the dispute arose. The written decision of the arbitrators
shall be rendered within ninety (90)&nbsp;days after selection of the third arbitrator. The decision of
the arbitrators shall be final and binding on the Company and the Executive and may be entered by
either party in any New Jersey federal or state court having jurisdiction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>5.9. </B><U><B>Legal Costs</B></U>. The Company shall pay any reasonable attorney&#146;s fees and costs
incurred by the Executive in connection with any dispute regarding this Agreement so long as
Executive&#146;s claim(s) or defense(s) in such action are asserted in the good faith belief that they
are not frivolous. The Company shall pay any such fees and costs promptly following its receipt of
written requests therefor, which requests shall be made no more frequently than once per calendar
month. The Company shall bear all legal costs and expenses incurred in the event the Company should
contest or dispute the characterization of any amounts paid pursuant to this Agreement as being
nondeductible under Section&nbsp;280G of the Code or subject to imposition of an excise tax under
Section&nbsp;4999 of the Code, including, without limitation, the reasonable costs and expenses of any
counsel selected by the Executive to represent him in connection with such a matter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>5.10. </B><U><B>Severability</B></U>. In the case that any one or more of the provisions contained in
this Agreement shall, for any reason, be held invalid or unenforceable, the other provisions of
this Agreement shall remain in full force and effect. Any provision of this Agreement held invalid
or unenforceable only in part or degree shall remain in full force and effect to the extent not
held invalid or unenforceable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>5.11. </B><U><B>Counterparts; Facsimile</B></U>. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this Agreement and all of
which, when taken together, will be deemed to constitute one and the same agreement. This
Agreement may be executed via facsimile.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>5.12. </B><U><B>Headings; Interpretation</B></U>. The various headings contained herein are for
reference purposes only and do not limit or otherwise affect any of the provisions of this
Agreement. It is the intent of the parties that this Agreement not be construed more strictly with
regard to one party than with regard to any other party.
</DIV>
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<DIV style="font-family: Helvetica,Arial,sans-serif; margin-left: .25in; width: 7.20in">


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>5.13. </B><U><B>Notices</B></U>.
</div>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">
<B>(a) </B>All notices, requests, demands and other communications required
or permitted under this Agreement shall be in writing and sent as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">If to the Company, to:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">Selective Insurance Company of America<BR>
40 Wantage Avenue<BR>
Branchville, New Jersey 07890<BR>
Attn: General Counsel<BR>
Fax: (973)&nbsp;948-0282
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">If to the Executive, to:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">Mary T. Porter<BR>
139 Island View Drive<BR>
Annapolis, MD 21401
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(b)&nbsp;</B>All notices and other communications required or permitted under this Agreement which
are addressed as provided in Paragraph (a)&nbsp;of this Section&nbsp;5.13, (i)&nbsp;if delivered personally
against proper receipt shall be effective upon delivery, (ii)&nbsp;if sent by facsimile transmission
(with evidence supplied by the sender of the facsimile&#146;s receipt at a facsimile number
designated for receipt by the other party hereunder, which other party shall be obligated to
provide such a facsimile number) shall be effective upon dispatch, and (iii)&nbsp;if sent (A)&nbsp;by
certified or registered mail with postage prepaid or (B)&nbsp;by Federal Express or similar courier
service with courier fees paid by the sender, shall be effective upon receipt. The parties
hereto may from time to time change their respective addresses and/or facsimile numbers for the
purpose of notices to that party by a similar notice specifying a new address and/or facsimile
number, but no such change shall be deemed to have been given unless it is sent and received in
accordance with this Section&nbsp;5.13.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>5.14. </B><U><B>Withholding</B></U>. All amounts payable by the Company to the Executive hereunder
(including, but not limited to, the Salary or any amounts payable pursuant to Sections&nbsp;3.3 and/or
3.4 hereof) shall be reduced prior to the delivery of such payment to the Executive by an amount
sufficient to satisfy any applicable federal, state, local or other withholding tax requirements.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 4%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->- 20 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: Helvetica,Arial,sans-serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">IN WITNESS WHEREOF, the Company and Executive have executed this Agreement as of the
Commencement Date.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left" nowrap><B>SELECTIVE INSURANCE COMPANY OF AMERICA</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Victor N. Daley
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Victor N. Daley&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" nowrap>Its Executive Vice President,
Human Resources&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>EXECUTIVE</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">/s/ Mary T. Porter
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Mary T. Porter&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->- 21 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: Helvetica,Arial,sans-serif; margin-left: .25in; width: 7.20in">



<DIV align="right" style="font-size: 10pt; margin-top: 10pt"><B>EXHIBIT
A
</B></div>


<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><U><B>FORM OF RELEASE</B></U>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Reference is hereby made to the Employment Agreement, dated as of
&nbsp;_____, 200___&nbsp;
(the
&#147;<U>Employment</U> <U>Agreement</U>&#148;), by and between
&nbsp;_____&nbsp;

(the &#147;<U>Executive</U>&#148;) and
Selective Insurance Company of America, a New Jersey corporation (the &#147;<U>Company</U>&#148;).
Capitalized terms used but not defined herein shall have the meanings specified in the Employment
Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Pursuant to the terms of the Employment Agreement and in consideration of the payments to be
made to the Executive by the Company, which Executive acknowledges are in excess of what Executive
would otherwise be entitled to receive, the Executive hereby releases and forever discharges and
holds the Company and its parent, affiliates, and subsidiaries (collectively, the &#147;<U>Company</U>
<U>Parties</U>&#148; and each a &#147;<U>Company</U> <U>Party</U>&#148;), and the respective officers,
directors, employees, partners, stockholders, members, agents, affiliates, successors and assigns
and insurers of each Company Party, and any legal and personal representatives of each of the
foregoing, harmless from all claims or suits, of any nature whatsoever (whether known or unknown),
past, present or future, including those arising from the law, being directly or indirectly related
to the Executive&#146;s employment by or the termination of such employment by any Company Party,
including, without limiting the foregoing, any claims for notice, pay in lieu of notice, wrongful
dismissal, severance pay, bonus, overtime pay, incentive compensation, interest or vacation pay for
the Executive&#146;s service as an officer or director to any Company Party through the date hereof.
The Executive also hereby agrees not to file a lawsuit asserting any such claims. This release
(this &#147;<U>Release</U>&#148;) includes, but is not limited to, claims growing out of any legal
restriction on any Company Party&#146;s right to terminate its employees and claims or rights under
federal, state, and local laws prohibiting employment discrimination (including, but not limited
to, claims or rights under Title VII of the Civil Rights Act of 1964, as amended by the Civil
Rights Act of 1991, the Americans with Disabilities Act, the Family and Medical Leave Act, the Fair
Labor Standards Act, the Uniformed Services Employment and Reemployment Rights Act, the Employee
Retirement Income Security Act, the Equal Pay Act, the Age Discrimination in Employment Act of
1967, as amended by the Older Workers Benefit Protection Act of 1990, and the laws of the State of
New Jersey against discrimination, or any other federal or state statutes prohibiting
discrimination on the basis of age, sex, race, color, handicap, religion, national origin, and
sexual orientation, or any other federal, state or local employment law, regulation or other
requirement) which arose before the date this Release is signed, excepting only claims in the
nature of workers&#146; compensation, claims for vested benefits, and claims to enforce this agreement.
The Executive acknowledges that because this Release contains a release of claims and is an
important legal document, he has been advised to consult with counsel before executing it, that he
may take up to &#091;twenty-one (21)&#093;<SUP style="font-size: 85%; vertical-align: text-top">1</SUP> &#091;forty-five (45)&#093;<SUP style="font-size: 85%; vertical-align: text-top">2</SUP>
days to decide whether to execute it, and that he may revoke this Release by delivering or
mailing a signed notice of revocation to the Company at its offices within seven (7)&nbsp;days after
executing it. If Executive executes this Release and does not subsequently revoke the release
within seven (7)&nbsp;days after executing it, then this Release shall take effect as a legally binding
agreement between Executive and the Company.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><DIV align="left"><DIV style="font-size: 10pt; margin-top: 10pt; width: 18%; border-bottom: 1px solid #000000">&nbsp;</DIV></DIV>
</DIV>




<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">1</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>Delete brackets and use text enclosed therewith if 45
days is not otherwise required by Section&nbsp;7(f)(1)(F) of the Age Discrimination
in Employment Act and/or 29 C.F.R. Part&nbsp;1625. If 45&nbsp;days is so required,
delete bracketed text in its entirety.</TD>
</TR>

</TABLE>






<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">2</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>Delete brackets and use text enclosed therewith if 45
days is required by Section&nbsp;7(f)(1)(F) of the Age Discrimination in Employment
Act and/or 29 C.F.R. Part&nbsp;1625. If 45&nbsp;days is not so required, delete
bracketed text in its entirety.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<DIV style="font-family: Helvetica,Arial,sans-serif; margin-left: .25in; width: 7.20in">





<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">If Executive does not deliver to the Company an original signed copy of this Release by

&nbsp;_____, or if Executive signs and revokes this Release within seven (7)&nbsp;days as set forth
above, the Company will assume that Executive rejects the Release and Executive will not receive
the payments referred to herein.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Executive acknowledges that there is a risk that after signing this Release he may
discover losses or claims that are released under this Release, but that are presently unknown to
him. The Executive assumes this risk and understands that this Release shall apply to any such
losses and claims.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Executive understands that this Release includes a full and final release covering all
known and unknown, injuries, debts, claims or damages which have arisen or may have arisen from
Executive&#146;s employment by or the termination of such employment by any Company party. The
Executive acknowledges that by accepting the benefits and payments set forth in the Employment
Agreement, he assumes and waives the risks that the facts and the law may be other than as he
believes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Notwithstanding the foregoing, this Release does not release, and the Executive continues to
be entitled to, (i)&nbsp;any rights to exculpation or indemnification that the Executive has under
contract or law with respect to his service as an officer or director of any Company Party and (ii)
receive the payments to be made to him by the Company pursuant to Section&nbsp;3.3 and/or 3.4 of the
Employment Agreement (including any plan, agreement or other arrangement that is referenced in or
the subject of the applicable Section), subject to the conditions set forth in Section&nbsp;3.5 of the
Employment Agreement, (iii)&nbsp;any right the Executive may have to obtain contribution as permitted by
law in the event of entry of judgment against him as a result of any act or failure to act for
which he and any Company party are jointly liable, and (iv)&nbsp;any claim in respect of any insurance
policy with any Company party entered into outside of the employment relationship.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">This Release constitutes the release referenced in Section&nbsp;3.5 of the Employment Agreement.
</DIV>




<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->- 2 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: Helvetica,Arial,sans-serif; margin-left: .25in; width: 7.20in">





<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The undersigned Executive, having had the time to reflect, freely accepts and agrees to the
above Release. The Executive acknowledges and agrees that no Company representative has made any
representation to or agreement with the Executive relating to this Release which is not contained
in the express terms of this
Release. The Executive acknowledges and agrees that the execution and delivery of this
Release is based upon the Executive&#146;s independent review of this Release, and the Executive hereby
expressly waives any and all claims or defenses by the Executive against the enforcement of this
Release which are based upon allegations or representations, projections, estimates, understandings
or agreements by the Company or any of its representatives or any assumptions by the Executive that
are not contained in the express terms of this Release.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">EXECUTIVE</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Date:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>&#091;Attach disclosures required by the Older Workers Benefit Protection Act, if required&#093;</B>
</DIV>



<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->- 3 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: Helvetica,Arial,sans-serif; margin-left: .25in; width: 7.20in">



<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">This AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT (the &#147;<B>Amendment</B>&#148;) is made effective as of this
15th day of April, 2008 between <B>Selective Insurance Company of America</B>, a New Jersey corporation
with a principal place of business at 40 Wantage Avenue, Branchville, New Jersey 07890 (the
&#147;<B>Company</B>&#148;), and <B>Mary T. Porter</B>, an individual residing at 139 Island View Drive, Annapolis, MD
21401, (the &#147;<B>Executive</B>&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">WHEREAS, on January&nbsp;1, 2007, the parties entered into an Employment Agreement (the &#147;<B>Employment
Agreement</B>&#148;); and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">WHEREAS, the parties wish to amend the Employment Agreement to reflect recent guidance under
Sections&nbsp;409A and 162(m) of the Internal Revenue Code of 1986, as amended, and to reflect certain
changes in the terms of the Executive&#146;s employment as a result of the Executive&#146;s promotion to
Executive Vice President of the Company;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">NOW, THEREFORE, for and in consideration of the mutual promises, terms, provisions and
conditions set forth herein, the parties hereby amend the Employment Agreement, effective as of the
date first above written unless otherwise noted, as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">1.&nbsp;Effective January&nbsp;1, 2009, a new definition shall be added to Section&nbsp;1.1 of the Employment
Agreement (Definitions) as follows:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">&#147;<B>Section&nbsp;409A</B>&#148; means Section&nbsp;409A of the Code and the regulations of the
Treasury and other applicable guidance promulgated thereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">2.&nbsp;Effective January&nbsp;1, 2009, the definition of &#147;Good Reason&#148; in Section&nbsp;1.1 of the Employment
Agreement shall be deleted in its entirety and replaced with the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">&#147;<B>Good Reason</B>&#148; means the occurrence of any one or more of the following
conditions; <U>provided</U>, however, that no such condition shall be deemed
to constitute &#147;Good Reason&#148; unless the Executive provides notice of such
condition to the Company within ninety (90)&nbsp;days of its initial existence, and
the Company shall have failed to remedy the condition within thirty (30)&nbsp;days
of its receipt of such notice:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">(i)&nbsp;any material diminution in the Executive&#146;s Salary below the annualized rate
in effect on the date on which a Change in Control shall have occurred, unless
such reduction is implemented for the senior executive staff generally,
<U>provided</U>, however that such reduction shall constitute Good Reason even
if implemented for senior executive
staff generally if such reduction occurs within two years after a Change in
Control;
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->- 2 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: Helvetica,Arial,sans-serif; margin-left: .25in; width: 7.20in">


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">(ii)&nbsp;any material negative change in the aggregate benefits the Executive
receives, other than as a result of the normal expiration of any Plan as to
other eligible employees in accordance with its terms as in effect on the date
preceding the date on which a Change in Control shall have occurred, or unless
such change affects all participants of such Plan generally;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">(iii)&nbsp;without the Executive&#146;s express prior written consent, a material
diminution of the Executive&#146;s position, duties, responsibilities and status
with the Company immediately prior to a Change in Control, or any material
diminution in the Executive&#146;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 material negative change in the Executive&#146;s
titles or office as in effect immediately prior to a Change in Control, except
in connection with the termination of the Executive&#146;s employment for Cause,
Disability or Retirement or as a result of the Executive&#146;s death, or by his
termination of his employment other than for Good Reason;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">(iv)&nbsp;without the Executive&#146;s express prior written consent, the imposition of a
requirement by the Company that the Executive be based at any location in
excess of fifty (50)&nbsp;miles from the location of the Executive&#146;s office on the
date preceding the date on which a Change in Control shall have occurred;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">(vi)&nbsp;the failure by the Company to obtain from any Person with which it may
merge or consolidate or to which it may sell all or substantially all of its
assets, the agreement of such Person as set forth in the proviso in Section&nbsp;5.6
hereof; <U>provided</U> that such merger, consolidation or sale constitutes a
Change in Control; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">(vii)&nbsp;within two years after a Change in Control shall have occurred, any
action or inaction that constitutes a material breach by the Company of any of
the terms and conditions of this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">3.&nbsp;The first sentence of Section&nbsp;2.3(a) of the Employment Agreement shall be deleted and
replaced with the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">The Executive agrees to serve as Executive Vice President during the Term.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">4 The first sentence of Section&nbsp;2.4(a) of the Employment Agreement shall be deleted and
replaced with the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">For all services rendered by the Executive under this Agreement, the Company
shall pay the Executive a salary during the Term at a rate of not less than
THREE HUNDRED TWENTY-FIVE THOUSAND AND
00/100 DOLLARS ($325,000.00) per year, which may be increased but not decreased
unless decreased for the senior executive staff generally (the &#147;<B>Salary</B>&#148;),
payable in installments in accordance with the Company&#146;s policy from time to
time in effect for payment of salary to its executives.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->- 3 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: Helvetica,Arial,sans-serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">5.&nbsp;Section&nbsp;3.3(b)(i) of the Employment Agreement shall be deleted and replaced with the
following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">If the Executive&#146;s employment is terminated pursuant to Paragraphs (a)&nbsp;or (b)
in Section&nbsp;3.1 hereof, then the Executive (or his legal representative, as
applicable) shall be entitled to receive a severance payment from the Company
in an aggregate amount equal to the product of (A)&nbsp;1.5 <U>times</U> (B)&nbsp;the
Executive&#146;s Salary <U>plus</U> an amount equal to the average of the three
most recent annual cash incentive payments (each an &#147;ACIP&#148;) made to the
Executive; <U>provided</U> that any such severance payment shall be reduced by
the amount of payments the Executive receives under any life or disability
insurance policies with respect to which the premiums were paid by the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">6.&nbsp;Section&nbsp;3.3(b)(ii) of the Employment Agreement shall be deleted and replaced with the
following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">If the Executive&#146;s employment is terminated pursuant to Paragraph (e)&nbsp;or (f)&nbsp;in
Section&nbsp;3.1 hereof, then the Executive shall be entitled to receive a severance
payment from the Company in an aggregate amount equal to the product of (A)&nbsp;1.5
<U>times</U> (B)&nbsp;the Executive&#146;s Salary <U>plus</U> an amount equal to the
average of the three most recent ACIP payments made to the Executive.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">7.&nbsp;The first sentence of Section&nbsp;3.3(c)(ii) of the Employment Agreement shall be amended
by substituting &#147;eighteen (18)&nbsp;months&#148; for &#147;twelve (12)&nbsp;months.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">8.&nbsp;Section&nbsp;3.4(a) of the Employment Agreement shall be deleted and replaced with the
following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">The Executive shall be entitled to receive a severance payment from the Company
in an aggregate amount equal to the product of (i)&nbsp;2; and (ii)&nbsp;the greater of:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%; text-indent: 4%">(1)&nbsp;the sum of the Executive&#146;s Salary <U>plus</U> the Executive&#146;s target
ACIP in effect as of the Termination Date; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%; text-indent: 4%">(2)&nbsp;the sum of the Executive&#146;s Salary as of the Termination Date
<U>plus</U> the Executive&#146;s average ACIP for the three (3)&nbsp;calendar years
prior to the calendar year in which the Termination Date occurs.&#148;
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 4%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->- 4 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: Helvetica,Arial,sans-serif; margin-left: .25in; width: 7.20in">


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">Such payment shall be made, subject to Section&nbsp;3.7, sixty (60)&nbsp;days following
the Executive&#146;s termination of employment; <U>provided, however</U>, that, if
and to the extent any payments under this Section&nbsp;3.4 constitute deferred
compensation subject to Section&nbsp;409A, then, unless the Change in Control
qualifies as a change in the ownership of the Company, a change in effective
control of the Company, or a change in the ownership of a substantial portion
of the assets of the Company, as described in Treasury Regulations Section
1.409A-3(i)(5), such payment shall be made at the times specified in Section
3.3(b)(iii) of the Employment Agreement. The severance payment(s) required to
be made by the Company to the Executive pursuant to this Section&nbsp;3.4(a) shall
be in lieu of, and not in addition to, any other severance payments required to
be paid by the Company to the Executive.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">9.&nbsp;The first sentence of Section&nbsp;3.4(b) of the Employment Agreement shall be amended by
substituting &#147;twenty-four (24)&nbsp;months&#148; for &#147;eighteen (18)&nbsp;months.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">10.&nbsp;Effective January&nbsp;1, 2009, Section&nbsp;3.4(c)(ii) of the Employment Agreement shall be deleted
and replaced with the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">(ii)&nbsp;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 their 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 Plan, be the earliest of (A)&nbsp;the later to occur of
the fifteenth day of the third month following the date on which, or the
December&nbsp;31 of the calendar year in which, any such stock options, stock
appreciation rights, restricted stock grants, stock bonuses, long-term
incentives or similar benefits would otherwise have expired if not extended,
(B)&nbsp;the original expiration date had the Executive&#146;s employment not so
terminated, and (C)&nbsp;with respect only to a stock option or stock appreciation
right, the tenth anniversary of the date of grant of such stock right;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">11.&nbsp;Effective January&nbsp;1, 2009, Section&nbsp;3.5 of the Employment Agreement shall be renumbered as
Section&nbsp;3.5(a) and retitled &#147;Release and Restrictive Covenants,&#148; and the first sentence of Section
3.5(a) of the Employment Agreement shall be deleted and replaced with the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">Within ten (10)&nbsp;days of the Executive&#146;s termination of employment, the Company
shall provide the Executive with a release substantially in the form of
<U>Exhibit&nbsp;A</U> attached hereto (the &#147;<B>Release</B>&#148;). The Executive&#146;s right to
receive the severance payments and benefits pursuant to Sections&nbsp;3.3 and 3.4
hereof is expressly conditioned upon (i)&nbsp;receipt by the Company of the Release
executed by the Executive within forty-five (45)&nbsp;days of receipt by the
Executive of such Release, and the expiration of the revocation period
described therein without such
Release having been revoked, and (ii)&nbsp;the compliance by the Executive with the
covenants, terms and provisions of Sections&nbsp;4.1 and 4.2 hereof (the
&#147;<B>Restrictive Covenants</B>&#148;).
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->- 5 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: Helvetica,Arial,sans-serif; margin-left: .25in; width: 7.20in">


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">12. A new Section&nbsp;3.5(b) of the Employment Agreement shall be added as follows:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">(b) <U><B>Performance-Based Compensation</B></U>. Upon the expiration of the initial
three (3)&nbsp;year period of the Term, during any calendar year in which the
Executive is a &#147;covered employee,&#148; as defined in Section&nbsp;162(m)(3) of the Code,
if any ACIP entitlements or stock-based awards of the Executive are intended to
qualify as &#147;performance based compensation&#148; within the meaning of Section
162(m) of the Code, then the Executive shall not be entitled to any severance
payments based on his ACIP payments or accelerated vesting of his stock-based
awards pursuant to Section&nbsp;3.3 or 3.4 of this Agreement if and to the extent
that such payments or accelerated vesting would cause any portion of such ACIP
entitlements or stock-based awards to fail to be deductible pursuant to Section
162(m) of the Code.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">13.&nbsp;Effective January&nbsp;1, 2009, Section&nbsp;3.6(d) of the Employment Agreement shall be deleted in
its entirety and replaced with the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%"><U><B>Application of Section&nbsp;409A</B></U>. Notwithstanding anything in this Section
3.6 to the contrary, all Gross-Up Payments shall be made by the end of the
Executive&#146;s taxable year next following the taxable year in which he remits the
related taxes to the applicable taxing authorities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">14.&nbsp;Effective January&nbsp;1, 2009, Section&nbsp;3.7 of the Employment Agreement shall be deleted in its
entirety and replaced with the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">(a) <U><B>Specified Employee Provisions</B></U>. &#147;Notwithstanding anything herein to
the contrary, if the Executive is a &#147;specified employee,&#148; as defined under
Section&nbsp;409A, of the Company, as determined by the Board or the Compensation
Committee of the Company or the Company&#146;s parent company from time to time,
upon the date of his &#147;separation from service,&#148; as defined in Section&nbsp;409A,
from the Company (his &#147;<B>Separation from Service</B>&#148;), then, to the extent any
payment or provision of benefits under this Agreement upon the Executive&#146;s
Separation from Service is subject to Section&nbsp;409A of the Code, no such payment
shall be made and the Executive shall be responsible for the full cost of such
benefits for six (6)&nbsp;months following the Executive&#146;s Separation from Service;
<U>provided</U>, however, that such six month delay of payments shall not
apply to any payments or benefits that are not subject to Section&nbsp;409A,
including the following: (a)&nbsp;any severance or other payments that become due
and payable during the period commencing with the date of the Executive&#146;s date
of termination of employment and ending on March&nbsp;15 of the succeeding calendar
year and which qualify as &#147;short term deferral payments&#148; under Section&nbsp;409A,
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

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</DIV>

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<DIV style="font-family: Helvetica,Arial,sans-serif; margin-left: .25in; width: 7.20in">


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">
and (b)&nbsp;any remaining severance or other payments paid after the Executive&#146;s
Separation from Service to the extent (i)&nbsp;that the dollar amount of such
payments does not exceed two (2)&nbsp;times the lesser of (x)&nbsp;the Executive&#146;s
annualized compensation (based on the Executive&#146;s annual rate of pay for the
calendar year preceding the calendar year in which the separation from service
occurred, adjusted to reflect any increase during such calendar year which was
expected to continue indefinitely had the Executive&#146;s separation from service
not occurred) or (y)&nbsp;the maximum amount of compensation that may be taken into
account under a qualified plan pursuant to Section&nbsp;401(a)(17) of the Code for
the calendar year in which the separation from service occurred, and (ii)&nbsp;such
severance or other payments are to be made to the Executive no later than the
last day of the second calendar year following the calendar year in which the
Separation from Service occurs. For purposes of Section&nbsp;409A, the severance
payments and each monthly provision of severance benefits under Sections&nbsp;3.3
and 3.4 of this Agreement shall be treated as a right to a series of
separate payments.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">(b) <U><B>Amendments and Acknowledgements</B></U>. All payments to the Executive
pursuant to this Agreement are intended to comply with, or to be exempt from,
the requirements of Section&nbsp;409A of the Code. The Company and Executive agree
that they will consider in good faith any and all amendments to this Agreement
either may deem necessary to ensure compliance with the provisions of Section
409A of the Code. However, the Executive acknowledges that, notwithstanding
the 409A Payment set forth in Section&nbsp;3.7 of this Agreement, the Executive
bears the entire risk of any adverse Federal and State tax consequences and
penalty taxes in the event any payment pursuant to this Agreement is deemed to
be subject to Section&nbsp;409A of the Code and that no representations have been
made to the Executive relating to the tax treatment of any payment pursuant to
this Agreement under Section&nbsp;409A of the Code and the corresponding provisions
of any applicable State income taxation laws &#091;(including California income
taxation laws)&#093;.&#148;
</DIV>
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<P align="center" style="font-size: 10pt"><!-- Folio -->- 7 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: Helvetica,Arial,sans-serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">15.&nbsp;Effective January&nbsp;1, 2009, the second sentence in Section&nbsp;5.1 of the Employment Agreement
shall be deleted and replaced with the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">Assuming a payment or otherwise is due to the Executive under this Agreement,
the Company may offset against any amount due to the Executive under this
Agreement only those amounts due to the Company in respect of any undisputed,
liquidated obligation of the Executive to the Company; <U>provided,</U>
<U>however</U>, that any amount due to
the Company by the Executive shall first be applied to offset amounts due to
the Executive under this Agreement that are not deferred compensation subject
to Section&nbsp;409A, and then, to the extent applicable, to offset amounts due to
the Executive under this Agreement that are deemed to be deferred compensation
subject to Section&nbsp;409A; and <U>further</U> <U>provided</U> that, if and to
the extent required to satisfy the provisions of Treasury Regulation&nbsp;Section
1.409A-3(j)(xiii), any debt of the Executive to the Company may be offset
against any amount due to the Executive under this Agreement that constitutes
deferred compensation subject to Section&nbsp;409A only if (a)&nbsp;such debt is incurred
in the ordinary course of the service relationship between the Executive and
the Company, (b)&nbsp;the entire amount of the offset is limited to $5,000 in any of
the Company&#146;s taxable years, and (c)&nbsp;the offset is made at the same time and in
the same amount as the debt otherwise would have been due and collected from
the Executive.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">16. All other provisions of the Employment Agreement shall remain in full force and effect.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">IN WITNESS WHEREOF, the Company and the Executive have executed this Amendment effective as of
the date above written.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left" nowrap><B>SELECTIVE INSURANCE COMPANY OF AMERICA</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Victor N. Daley
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Victor N. Daley&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" nowrap>Its Executive Vice President,
Human Resources&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>EXECUTIVE</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">/s/ Mary T. Porter
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Mary T. Porter&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


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<P align="center" style="font-size: 10pt"><!-- Folio -->- 8 -<!-- /Folio -->
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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.18K
<SEQUENCE>4
<FILENAME>c73164exv10w18k.htm
<DESCRIPTION>EXHIBIT 10.18K
<TEXT>
<HTML>
<HEAD>
<TITLE>Filed by Bowne Pure Compliance</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
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<DIV style="font-family: Helvetica,Arial,sans-serif; margin-left: .25in; width: 7.20in">

<DIV align="right" style="font-size: 10pt; margin-top: 10pt"><u><B>Exhibit&nbsp;10-18k</B></u>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><U><B>EMPLOYMENT AGREEMENT</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">This Employment Agreement, (the &#147;<B>Agreement</B>&#148;) is made as of the 1st day of January, 2007, between
<B>Selective Insurance Company of America</B>, a New Jersey corporation with a principal place of business
at 40 Wantage Avenue, Branchville, New Jersey 07890 (the &#147;<B>Company</B>&#148;) and <B>Eduard J. Pulkstenis</B>, an
individual with a mailing address of Post Office. Box 2589, Branchville, NJ 07826 (the
"<B>Executive</B>&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>SECTION 1. </B><U><B>definitions</B></U><B>.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>1.1. </B><U><B>Definitions</B></U><B>. </B>For purposes of this Agreement, the following terms shall have the
meanings set forth below:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Accounting Firm</B>&#148; has the meaning given to such term in Section&nbsp;3.6(b) hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Agreement</B>&#148; has the meaning given to such term in the Preamble hereto.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Board</B>&#148; means the Board of Directors of the Company&#146;s Parent.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Cause</B>&#148; means any one or more of the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(i)&nbsp;the Executive shall have been convicted by a court of competent jurisdiction of, or
pleaded guilty or nolo contendere to, any felony under, or within the meaning of, applicable
United States federal or state law;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(ii)&nbsp;the Executive shall have breached in any respect any one or more of the material
provisions of this Agreement, including, without limitation, any failure to comply with the
Code of Conduct, and, to the extent such breach may be cured, such breach shall have
continued for a period of thirty (30)&nbsp;days after written notice by the Chief Executive
Officer to the Executive specifying such breach; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(iii)&nbsp;the Executive shall have engaged in acts of insubordination, gross negligence or
willful misconduct in the performance of the Executive&#146;s duties and obligations to the
Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">For purposes of clauses (ii)&nbsp;and (iii)&nbsp;of this definition of &#147;Cause&#148;, no act, or failure to act, on
the part of the Executive shall be considered grounds for &#147;Cause&#148; under such clauses if such act,
or such failure to act, was done or omitted to be done based upon authority or express direction
given by the Chief Executive Officer, Senior Executive Vice President of Insurance Operations, or
such other executive as the Chief Executive Officer may designate, or based upon the advice of
counsel for the Company.
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<DIV style="font-family: Helvetica,Arial,sans-serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Change in Control</B>&#148; means the occurrence of an event of a nature that would be required to be
reported by the Company&#146;s Parent in response to Item&nbsp;5.01 of a Current Report on Form 8-K, as in
effect on the date thereof, pursuant to Section&nbsp;13 or 15(d) of the Securities Exchange Act;
<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:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(i)&nbsp;The acquisition by any &#147;person&#148; or &#147;group&#148; (as such terms are used in Sections
13(d)(3) and 14(d)(2) of the Securities Exchange Act or any successor provisions to either
of the foregoing), including, without limitation, any current shareholder or shareholders of
the Company&#146;s Parent, of securities of the Company&#146;s Parent resulting in such person or
group being a &#147;beneficial owner&#148; (as defined in Rule&nbsp;13d-3 under the Securities Exchange
Act) of twenty-five percent (25%) or more of any class of Voting Securities of the Company&#146;s
Parent;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(ii)&nbsp;The acquisition by any &#147;person&#148; or &#147;group&#148; (as such terms are used in Sections
13(d)(3) and 14(d)(2) of the Securities Exchange Act or any successor provisions to either
of the foregoing), including, without limitation, any current shareholder or shareholders of
the Company&#146;s Parent, of securities of the Company&#146;s Parent resulting in such person or
group being a &#147;beneficial owner&#148; (as defined in Rule&nbsp;13d-3 under the Securities Exchange
Act) of twenty percent (20%) or more, but less than twenty-five percent (25%), of any class
of Voting Securities of the Company&#146;s Parent, if the Board adopts a resolution that such
acquisition constitutes a Change in Control;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(iii)&nbsp;The sale or disposition of more than fifty percent (50%) of the Company&#146;s
Parent&#146;s assets on a consolidated basis, as shown in the Company&#146;s Parent&#146;s then most recent
audited consolidated balance sheet;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(iv)&nbsp;The reorganization, recapitalization, merger, consolidation or other business
combination involving the Company&#146;s Parent the result of which is the ownership by the
shareholders of the Company&#146;s Parent of less than eighty percent (80%) of those Voting
Securities of the resulting or acquiring Person having the power to vote in the elections of
the board of directors of such Person; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(v)&nbsp;A change in the membership in the Board which, taken in conjunction with any other
prior or concurrent changes, results in twenty percent (20%) or more of the Board&#146;s
membership being persons not nominated by the Company&#146;s Parent&#146;s management or the Board as
set forth in the Company&#146;s Parent&#146;s then most recent proxy statement, excluding changes
resulting from substitutions by the Board because of retirement or death of a director or
directors, removal of a director or directors by the Board or resignation of a director or
directors due to demonstrated disability or incapacity.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(vi)&nbsp;Anything in this definition of Change in Control to the contrary notwithstanding,
no Change in Control shall be deemed to have occurred for 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 the Company.
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Code</B>&#148; means the Internal Revenue Code of 1986, as amended from time to time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Code of Conduct</B>&#148; has the meaning given to such term in Section&nbsp;2.3(a) hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Commencement Date</B>&#148; has the meaning given to such term in Section&nbsp;2.2 hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Company</B>&#148; has the meaning given to such term in the Preamble hereto and includes any Person
which shall succeed to or assume the obligations of the Company hereunder pursuant to Section&nbsp;5.6
hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Company&#146;s
Parent</B>&#148; means Selective Insurance Group, Inc., a publicly traded New Jersey
corporation with a principal office at 40 Wantage Avenue, Branchville, New Jersey 07890.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Determination</B>&#148; has the meaning given to such term in Section&nbsp;3.6(b) hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Disability</B>&#148; means the Executive&#146;s physical injury or physical or mental illness which causes
him to be absent from his duties with the Company on a full-time basis for a continuous period in
excess of the greater of: (i)&nbsp;the period of disability constituting permanent disability as
specified under the Company&#146;s long-term disability insurance coverage applicable to the Executive
at the time of the determination of the existence of a disability (or, if such determination is
made after the occurrence of a Change in Control, as specified under the long-term disability
insurance coverage applicable to the Executive prior to a Change in Control) or (ii)&nbsp;180&nbsp;days,
unless within thirty (30)&nbsp;days after a Notice of Termination is thereafter given the Executive
shall have returned to the full-time performance of his duties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Early Termination</B>&#148; has the meaning given to such term in Section&nbsp;3.2 hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Excise Tax</B>&#148; has the meaning given to such term in Section&nbsp;3.6(a) hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Executive</B>&#148; has the meaning given to such term in the Preamble hereto.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Extended Benefit Period</B>&#148; has the meaning given to such term in Section&nbsp;3.3(c) hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Good Reason</B>&#148; means the occurrence of any one or more of the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(i)&nbsp;any reduction in the Executive&#146;s Salary below the annualized rate in effect on the
date preceding the date on which a Change in Control shall have occurred unless such
reduction is implemented for the senior executive staff generally, provided, however, that
such reduction shall constitute Good Reason even if implemented for senior executive staff
generally if such reduction occurs within two years after a Change in Control;
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(ii) (A)&nbsp;a failure by the Company to continue in effect benefits that are comparable in
the aggregate to the benefits the Executive receives under the Plans in which the Executive
participates, other than as a result of the normal expiration of any such Plan as to other
eligible employees in accordance with its terms as in effect on the date preceding the date
on which a Change in Control shall have occurred, or (B)&nbsp;the taking of any action, or the
failure to act, by the Company which would adversely affect the Executive&#146;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&#146;s benefits in the future under any such Plans, unless,
in any of the cases described in sub-clauses (A)&nbsp;and (B)&nbsp;of this clause (ii), such failure
to continue in effect, taking of any action or failure to act affects all participants of
such Plan generally;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(iii)&nbsp;without the Executive&#146;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 material diminution in the
Executive&#146;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&#146;s titles or office as in effect immediately prior to a Change in Control, or any
removal of the Executive from, any of such positions, except in connection with the
termination of the Executive&#146;s employment for Cause, Disability or Retirement or as a result
of the Executive&#146;s death, or by his termination of his employment other than for Good
Reason;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(iv)&nbsp;without the Executive&#146;s express prior written consent, the imposition of a
requirement by the Company that the Executive be based at any location in excess of fifty
(50)&nbsp;miles from the location of the Executive&#146;s office on the date preceding the date on
which a Change in Control shall have occurred;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(v)&nbsp;without the Executive&#146;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;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(vi)&nbsp;the failure by the Company to obtain from any Person with which it may merge or
consolidate or to which it may sell all or substantially all of its assets, the agreement of
such Person as set forth in the proviso in Section&nbsp;5.6 hereof; <U>provided</U> that such
merger, consolidation or sale constitutes a Change in Control;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(vii)&nbsp;subsequent to a Change in Control, any purported termination of the Executive&#146;s
employment which is not effected pursuant to a Notice of Termination given in accordance
with Section&nbsp;3.2 hereof; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(viii)&nbsp;within two years after a Change in Control shall have occurred, any material
breach by the Company of any of the terms and conditions of this
Agreement or any Plans referred to in clause (ii)&nbsp;of this definition of &#147;Good Reason&#148;
to which the Executive is entitled to receive benefits thereunder, provided, to the extent
such breach may be cured, such breach shall have continued for a period of thirty (30)&nbsp;days
after written notice of the Company specifying such breach.
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Gross-Up Payment</B>&#148; has the meaning given to such term in Section&nbsp;3.6(a) hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Notice of Termination</B>&#148; means a written notice which shall (i)&nbsp;indicate the specific
termination provision in this Agreement relied upon, (ii)&nbsp;set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive&#146;s employment under
the provision so indicated and, (iii)&nbsp;specify the date of termination in accordance with this
Agreement (other than for a termination for Cause).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Overpayments</B>&#148; has the meaning given to such term in Section&nbsp;3.6(c) hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Person</B>&#148; means an individual, partnership, corporation, association, limited liability
company, trust, joint venture, unincorporated organization, and any government, governmental
department or agency or political subdivision thereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Plans</B>&#148; has the meaning given to such term in Section&nbsp;2.4(b) hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Rabbi Trust</B>&#148; has the meaning given to such term in Section&nbsp;3.4(d) hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Release</B>&#148; has the meaning given to such term in Section&nbsp;3.5 hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Restrictive Covenants</B>&#148; has the meaning given to such term in Section&nbsp;3.5 hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Retirement</B>&#148; means a termination of the Executive&#146;s employment by the Company or the Executive
(i)&nbsp;at such age as shall be established by the Board for mandatory or normal retirement of Company
executives in general (which age shall be, if the determination of Retirement is made after the
occurrence of a Change in Control, the age established by the Board prior to a Change in Control),
which shall not be less than age 65, or (ii)&nbsp;at any other retirement age set by mutual agreement of
the Company and the Executive and approved by the Board.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Salary</B>&#148; has the meaning given to such term in Section&nbsp;2.4(a) hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Section&nbsp;409A Tax</B>&#148; has the meaning given to such term in Section&nbsp;3.7 hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Securities Exchange Act</B>&#148; means the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Term</B>&#148; has the meaning given to such term in Section&nbsp;2.2 hereof.
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Termination Date</B>&#148; means (i)&nbsp;if the Executive&#146;s employment is to be terminated by the Company
for Disability, thirty (30)&nbsp;days after a Notice of Termination is given; <U>provided</U> that the
Executive shall not have returned to the performance of the Executive&#146;s duties on a full-time basis
during such thirty (30)&nbsp;day period; and (ii)&nbsp;if the Executive&#146;s employment is to be terminated by
either the Company or the Executive for any other reason, the date on which a Notice of Termination
is given.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Total Payments</B>&#148; has the meaning given to such term in Section&nbsp;3.6(a) hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Triggering Event</B>&#148; has the meaning given to such term in Section&nbsp;3.4(d) hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Trustee</B>&#148; has the meaning given to such term in Section&nbsp;3.4(d) hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Underpayments</B>&#148; has the meaning given to such term in Section&nbsp;3.6(c) hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">&#147;<B>Voting Securities</B>&#148; means, with respect to a specified Person, any security of such Person
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 such Person would have a right to
vote.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>1.2. </B><U><B>Terms Generally</B></U>. Unless the context of this Agreement requires otherwise, words
importing the singular number shall include the plural and vice versa, and any pronoun shall
include the corresponding masculine, feminine and neuter forms.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>1.3. </B><U><B>Cross-References</B></U>. Unless otherwise specified, references in this Agreement to
any Paragraph or Section are references to such Paragraph or Section of this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>SECTION 2. </B><U><B>Employment and Compensation</B></U>. The following terms and conditions will
govern the Executive&#146;s employment with the Company throughout the Term.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>2.1. </B><U><B>Employment</B></U>. The Company hereby employs the Executive, and the Executive hereby
accepts employment with the Company, on the terms and conditions set forth herein.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>2.2. </B><U><B>Term</B></U>. The term of employment of the Executive under this Agreement shall
commence as of the date hereof (the &#147;<B>Commencement Date</B>&#148;) and, subject to Section&nbsp;3.1 hereof, shall
terminate three (3)&nbsp;year(s) after the Commencement Date, and shall automatically be extended for
additional one (1)&nbsp;year periods thereafter (any such renewal periods, together with the initial
three (3)&nbsp;year period, being referred to as the &#147;<B>Term</B>&#148;) unless terminated by either party by
written notice to the other party.
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>2.3. </B><U><B>Duties</B></U>.
</div>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">
<B>(a) </B>The Executive agrees to serve as Senior Vice President during the
Term. In such capacity, the Executive shall have the responsibilities and duties customary for
such office(s) and such other executive responsibilities and duties as are assigned by the Chief
Executive Officer, Senior Executive Vice President of Insurance Operations, or such other executive
as the Chief Executive Officer may
designate, which are consistent with the Executive&#146;s position(s). The Executive agrees to
devote substantially all his business time, attention and services to the business and affairs of
the Company and its subsidiaries and to perform his duties to the best of his ability. At all
times during the performance of this Agreement, the Executive will adhere to the Code of Conduct of
the Company (the &#147;<B>Code of Conduct</B>&#148;) that has been or may hereafter be established and communicated
by the Company to the Executive for the conduct of the position or positions held by the Executive.
The Executive may not accept directorships on the board of directors of for-profit corporations
without the prior written consent of the Executive Vice President, Human Resources of the Company.
The Executive may accept directorships on the board of directors of not-for-profit corporations
without the prior, written consent of the Executive Vice President, Human Resources so long as
(a)&nbsp;such directorships do not interfere with Executive&#146;s ability to carry out his responsibilities
under this Agreement, and (b)&nbsp;Executive promptly notifies the Executive Vice President, Human
Resources in writing of the fact that he has accepted such a non-profit directorship.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(b)&nbsp;</B>If the Company or the Executive elects not to renew the Term pursuant to Section&nbsp;2.2,
the Executive shall continue to be employed under this Agreement until the expiration of the
then current Term (unless earlier terminated pursuant to Section&nbsp;3.1 hereof), shall cooperate
fully with the Chief Executive Officer, Senior Executive Vice President of Insurance
Operations, or such other executive as the Chief Executive Officer may designate and shall
perform such duties not inconsistent with the provisions hereof as he shall be assigned by the
Chief Executive Officer, Senior Executive Vice President of Insurance Operations, or such other
executive as the Chief Executive Officer may designate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>2.4. </B><U><B>Compensation</B></U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(a)&nbsp;</B><U><B>Salary</B></U>. For all services rendered by the Executive under this Agreement, the
Company shall pay the Executive a salary during the Term at a rate of not less than THREE
HUNDRED THOUSAND AND NO/100 DOLLARS ($300,000.00) per year, which may be increased but not
decreased unless decreased for the senior executive staff generally (the &#147;<B>Salary</B>&#148;), payable in
installments in accordance with the Company&#146;s policy from time to time in effect for payment of
salary to executives. The Salary shall be reviewed no less than annually and nothing contained
herein shall prevent the Company from at any time increasing the Salary or other benefits
herein provided to be paid or provided to the Executive or from providing additional or
contingent benefits to the Executive as it deems appropriate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(b)&nbsp;</B><U><B>Benefits</B></U>. During the Term, the Company shall permit the Executive to
participate in or receive benefits based on eligibility under the Selective Insurance Group,
Inc. 2005 Omnibus Stock Plan, the Selective Insurance Group, Inc. Cash Incentive Plan, the
Selective Insurance Retirement Savings Plan, the Retirement Income Plan For Selective Insurance
Company of America, as amended, the Selective Insurance Company of America Deferred
Compensation Plan, the Selective Insurance Supplemental Pension Plan and any other incentive
compensation, stock option, stock appreciation right, stock bonus, pension, group
insurance, retirement, profit sharing, medical, disability, accident, life insurance plan,
relocation plan or policy, or any other plan, program, policy or arrangement of the Company
intended to benefit the employees of the Company generally, if any, in accordance with the
respective provisions thereof, from time to time in effect (collectively, the &#147;<B>Plans</B>&#148;).
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(c)&nbsp;</B><U><B>Vacations and Reimbursements</B></U>. During the Term, the Executive shall be
entitled to vacation time off and reimbursements for ordinary and necessary business travel and
entertainment expenses in accordance with the Company&#146;s policies on such matters from time to
time in effect.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(d)&nbsp;</B><U><B>Perquisites</B></U>. During the Term, the Company shall provide the Executive with
suitable offices, secretarial and other services, and other perquisites to which other
executives of the Company generally are (or become) entitled, to the extent as are suitable to
the character of the Executive&#146;s position with the Company, subject to such specific limits on
such perquisites as may from time to time be imposed by the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>SECTION 3. </B><U><B>Termination and Severance</B></U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>3.1. </B><U><B>Termination</B></U>. The Executive&#146;s employment hereunder shall commence on the
Commencement Date and continue until the expiration of the Term, except that the employment of the
Executive hereunder shall earlier terminate:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(a)&nbsp;</B><U><B>Death</B></U>. Upon the Executive&#146;s death.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(b)&nbsp;</B><U><B>Disability</B></U>. At the option of the Company, upon the Disability of the
Executive.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(c)&nbsp;</B><U><B>For Cause</B></U>. At the option of the Company, for Cause.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(d)&nbsp;</B><U><B>Resignation</B></U>. At any time at the option of the Executive, by resignation
(other than a resignation for Good Reason).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(e)&nbsp;</B><U><B>Without Cause</B></U>. At any time at the option of the Company, without Cause;
<U>provided</U>, that a termination of the Executive&#146;s employment hereunder by the Company
based on Retirement, death, or Disability shall not be deemed to be a termination without
Cause.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(f)&nbsp;</B><U><B>Relocation</B></U>. At the option of the Executive at any time prior to a Change in
Control, if the Company imposes a requirement without the consent of the Executive that the
Executive be based at a location in excess of fifty (50)&nbsp;miles from the location of the
Executive&#146;s office on the Commencement Date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(g)&nbsp;</B><U><B>For Good Reason</B></U>. At any time at the option of the Executive within two (2)
years following the occurrence of a Change in Control, for Good Reason.
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>3.2. </B><U><B>Procedure For Termination</B></U>. Any termination of the Executive&#146;s employment by the
Company or by the Executive prior to the expiration of the Term (an &#147;<B>Early Termination</B>&#148;) shall be
communicated by delivery of a Notice of Termination to the other party hereto given in accordance
with Section&nbsp;5.13 hereof. Any Early Termination shall become effective as of the applicable
Termination Date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>3.3. </B><U><B>Rights and Remedies on Termination</B></U>. The Executive will be entitled to receive
the payments and benefits specified below if there is an Early Termination.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(a)&nbsp;</B><U><B>Accrued Salary</B></U>. If the Executive&#146;s employment is terminated pursuant to any
of the Paragraphs set forth in Section&nbsp;3.1 hereof, then the Executive (or his legal
representative, as applicable) shall only be entitled to receive his accrued and unpaid Salary
through the Termination Date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(b)&nbsp;</B><U><B>Severance Payments</B></U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(i)&nbsp;If the Executive&#146;s employment is terminated pursuant to Paragraphs (a)&nbsp;or (b)&nbsp;in
Section&nbsp;3.1 hereof, then the Executive (or his legal representative, as applicable) shall be
entitled to receive a severance payment from the Company in an aggregate amount equal to the
product of (A)&nbsp;1 <U>times</U> (B)&nbsp;the Executive&#146;s Salary <U>plus</U> an amount equal to
the average of the three most recent annual cash incentive payments (each an &#147;ACIP&#148;) made
to the Executive; <U>provided</U> that any such severance payment shall be reduced by the
amount of payments the Executive receives under any life or disability insurance policies
with respect to which the premiums were paid by the Company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(ii)&nbsp;If the Executive&#146;s employment is terminated pursuant to Paragraph (e)&nbsp;or (f)&nbsp;in
Section&nbsp;3.1 hereof, then the Executive shall be entitled to receive a severance payment from
the Company in an aggregate amount equal to the product of (A)&nbsp;1.5 <U>times</U> (B)&nbsp;the
Executive&#146;s Salary <U>plus</U> an amount equal to the average of the three most recent ACIP
payments made to the Executive.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(iii)&nbsp;The severance payment required to be paid by the Company to the Executive
pursuant to Paragraph (b)(i) or (b)(ii) above, shall, subject to Section&nbsp;3.7, be paid in
equal monthly installments over the twelve (12)&nbsp;month period following the Termination Date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(c)&nbsp;</B><U><B>Severance Benefits</B></U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(i)&nbsp;If the Executive&#146;s employment is terminated pursuant to any of the Paragraphs set
forth in Section&nbsp;3.1 hereof, then the Executive (or his legal representative, as applicable)
shall be entitled to receive the benefits which the Executive has accrued or earned or which
have become payable under the Plans as of the Termination Date, but which have not yet been
paid to the Executive. Payment of any such benefits shall be made in accordance with the
terms of such Plans.
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(ii)&nbsp;If the Executive&#146;s employment is terminated pursuant to Paragraph (e)&nbsp;or (f)&nbsp;in
Section&nbsp;3.1 hereof, then the Company shall, subject to Section&nbsp;3.7, maintain in full force
and effect for the continued benefit of the Executive and his dependents for a period
terminating on the earlier of (A)&nbsp;twelve (12)&nbsp;months following the applicable Termination
Date, or (B)&nbsp;the commencement date of equivalent benefits from a new employer, (any such
period being referred to as the applicable &#147;<B>Extended Benefit Period</B>&#148;) all insured and
self-insured medical, dental, vision, disability and life insurance employee benefit Plans
in which the Executive was entitled to participate immediately prior to the Termination
Date; <U>provided</U> that the Executive&#146;s continued participation is not barred under the
general terms and provisions of such Plans. Notwithstanding the foregoing, the Executive
shall continue to participate in such Plans during the Extended Benefit Period only to the
extent that such Plans remain in effect for other executives of the Company from time to
time during the Extended Benefit Period and subject to the terms of such Plans, including
any modifications and amendments thereto following the Termination Date. In the event that
the Executive&#146;s participation in any such Plan is barred by its terms, the Company shall
arrange, at its sole cost and expense, to have issued for the benefit of the Executive and
his dependents during the Extended Benefit Period individual policies of insurance providing
benefits substantially similar (on an after-tax basis) to those which the Executive
otherwise would have been entitled to receive under such Plans pursuant to this Paragraph
(c)(ii). Executive shall be responsible for making any required contributions to the cost
of such coverage, on an after-tax basis, at the rate which Executive was obligated to pay
immediately prior to the Termination Date. If, at the end of the applicable Extended
Benefit Period, 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 to enable the Executive to convert his and his dependents&#146; 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. In no event shall the Company&#146;s
obligation to provide disability benefits hereunder be reduced as a result of any individual
disability policy purchased by the Executive.
</DIV>
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<DIV style="font-family: Helvetica,Arial,sans-serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(d)&nbsp;</B><U><B>Rights Under Plans</B></U>. If the Executive&#146;s employment is terminated pursuant to
Paragraphs (a), (b), (e), or (f)&nbsp;in Section&nbsp;3.1 hereof, 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 (i)&nbsp;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 Termination Date, notwithstanding any provision to the contrary or any
provision requiring any act or acts by the Executive in any agreement with the Company or any
Plan; (ii)&nbsp;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, be the earlier of
(A)&nbsp;the later to occur of the fifteenth day of the third month following the date at which, or
the December&nbsp;31 of the calendar year in which, any such stock options, stock appreciation
rights, restricted stock grants, stock bonuses, long-term incentives or similar benefits would
otherwise have expired if not extended, or (B)&nbsp;the original expiration date had the Executive&#146;s
employment not so terminated; and (iii)&nbsp;if the vesting or exercise 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 Securities 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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(e)&nbsp;</B><U><B>No Double Dipping.</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(i)&nbsp;The severance payments and severance benefits the Executive may be entitled to
receive pursuant to this Section&nbsp;3.3 shall be in lieu of any of the payments and benefits
the Executive may be entitled to receive pursuant to any other agreement, plan or
arrangement providing for the payment of severance payments or benefits.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%; text-indent: 4%">(ii)&nbsp;The Executive expressly disclaims any interest he may have in the Selective
Insurance Company of America Severance Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>3.4. </B><U><B>Rights and Remedies on Termination After Change in Control</B></U>. The Executive will
be entitled to receive the severance payments and severance benefits specified below in the event
there shall occur a termination of the Executive&#146;s employment pursuant to Paragraph (e)&nbsp;or (g)&nbsp;of
Section&nbsp;3.1 hereof within two (2)&nbsp;years following the occurrence of a Change in Control. The
severance payments and benefits the Executive may be entitled to receive pursuant to this Section
3.4 shall be in addition to, and not in lieu of, any of the payments and benefits the Executive may
be entitled to receive pursuant to Section&nbsp;3.3 hereof, unless expressly so stated to be in lieu of
such benefits and/or payments.
</DIV>
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<DIV style="font-family: Helvetica,Arial,sans-serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(a)&nbsp;</B><U><B>Severance Payments</B></U>. The Executive shall be entitled to receive a severance
payment from the Company in an aggregate amount equal to the product of (i)&nbsp;1.5; and (ii)&nbsp;the
greater of:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%; text-indent: 4%">(1)&nbsp;the sum of the Executive&#146;s Salary <U>plus</U> the Executive&#146;s
target ACIP in effect as of the Termination Date, or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%; text-indent: 4%">(2)&nbsp;the sum of the Executive&#146;s Salary in effect as of the Termination
Date plus the Executive&#146;s average ACIP for the three calendar years prior to
the calendar year in which the Termination Date occurs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Such payment shall be made, subject to Section&nbsp;3.7, thirty (30)&nbsp;business days following the
Termination Date, provided that the Executive has executed and delivered a Release pursuant to
Section&nbsp;3.5 hereof <U>and</U> such Release has become effective and irrevocable. The severance
payment required to be paid by the Company to the Executive pursuant to this Section&nbsp;3.4(a) shall
be in lieu of, and not in addition to, any other severance payments required to be paid by the
Company to the Executive.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(b)&nbsp;</B><U><B>Severance Benefits</B></U>. Subject to Section&nbsp;3.7, 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 earlier of: (i)&nbsp;eighteen (18)&nbsp;months after the Termination Date or (ii)&nbsp;the
commencement date of equivalent benefits from a new employer (the &#147;<B>CIC Extended Benefit Period</B>&#148;),
all insured and self insured medical, dental, vision, disability and life insurance employee
welfare benefit plans in which the Executive was entitled to participate immediately prior to the
Termination Date; <U>provided</U> that the Executive&#146;s continued participation is not barred under
the general terms and provisions of such Plans. Notwithstanding the foregoing, the Executive shall
continue to participate in such Plans during the CIC Extended Benefit Period only to the extent
that such Plans remain in effect for other executives of the Company from time to time during the
CIC Extended Benefit Period and subject to the terms of such Plans, including any modifications and
amendments thereto following the Termination Date. In the event that the Executive&#146;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-tax basis) to those which the Executive
otherwise would have been entitled to receive under such Plans pursuant to this Paragraph (b).
Executive shall be responsible for making any required contributions to the cost of such coverage,
on an after-tax basis, at the rate which Executive was obligated to pay immediately prior to the
Termination Date. If, at the end of the applicable CIC Extended Benefit Period, 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 to enable the Executive to convert his
and his dependents&#146; 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.
The severance benefits required to be provided by the Company to the Executive pursuant to this
Paragraph (b)&nbsp;shall be in lieu of, and not in addition to, any severance benefits
required to be provided to the Executive pursuant to Section&nbsp;3.3(c)(ii) hereof. In no event
shall the Company&#146;s obligation to provide disability benefits hereunder be reduced as a result of
any individual disability policy purchased by the Executive.
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(c)&nbsp;</B><U><B>Rights Under Plans</B></U>. 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 (i)&nbsp;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 Termination Date, notwithstanding
any provision to the contrary or any provision requiring any act or acts by the Executive in any
agreement with the Company or any Plan; (ii)&nbsp;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, be the earlier of (A)&nbsp;the later to occur of the fifteenth day of the third month following
the date at which, or the December&nbsp;31 of the calendar year in which, any such stock options, stock
appreciation rights, restricted stock grants, stock bonuses, long-term incentives or similar
benefits would otherwise have expired if not extended or (B)&nbsp;the original expiration date had the
Executive&#146;s employment not so terminated; and (iii)&nbsp;if the vesting or exercise 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 Securities 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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(d)&nbsp;</B><U><B>Rabbi Trust</B></U>. The Company shall maintain a trust intended to be a grantor trust
within the meaning of subpart E, Part&nbsp;I, subchapter J, chapter 1, subtitle A of the Code (the
"<B>Rabbi Trust</B>&#148;). Coincident with the occurrence of a Change in Control, the Company shall promptly
deliver to a bank as trustee of the Rabbi Trust (the &#147;<B>Trustee</B>&#148;), an amount of cash or certificates
of deposit, treasury bills or irrevocable letters of credit adequate to fully fund the payment
obligations of the Company under this Section&nbsp;3.4. The Company and Trustee shall enter into a
trust agreement that shall provide that barring the insolvency of the Company, amounts payable to
the Executive under this Section&nbsp;3.4 (subject to Section&nbsp;3.7) shall be paid by the Trustee to the
Executive five (5)&nbsp;days after written demand by the Executive to the Trustee, with a copy to the
Company, certifying that such amounts are due and payable under this Section&nbsp;3.4 because the
Executive&#146;s employment has been terminated pursuant to Paragraph (e)&nbsp;or (g)&nbsp;in Section&nbsp;3.1 hereof
at a time which is within two (2)&nbsp;years following the occurrence of a Change in Control (a
"<B>Triggering Event</B>&#148;). Such trust agreement shall also provide that if the Company shall, prior to
payment by the Trustee, object in writing to the Trustee, with a copy to the Executive, as to the
payment of any amounts demanded by the Executive under this Section&nbsp;3.4, certifying that such
amounts are not due and payable to the Executive because a Triggering Event has not
occurred, such dispute shall be resolved by binding arbitration as set forth in Section&nbsp;5.8
hereof.
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>3.5. </B><U><B>Conditions to Severance Payments and Benefits</B></U>. The Executive&#146;s right to receive
the severance payments and benefits pursuant to Sections&nbsp;3.3 and 3.4 hereof, is expressly
conditioned upon (a)&nbsp;receipt by the Company of a written release (a &#147;<B>Release</B>&#148;) executed by the
Executive in the form of <U>Exhibit</U>&nbsp;<U>A</U> hereto, and the expiration of the revocation period described
therein without such Release having been revoked, and (b)&nbsp;the compliance by the Executive with the
covenants, terms or provisions of Sections&nbsp;4.1 and 4.2 hereof (the &#147;<B>Restrictive Covenants</B>&#148;). If
the Executive shall fail to deliver a Release in accordance with the terms of this Section&nbsp;3.5 or
shall breach any of the Restrictive Covenants, the Company&#146;s obligation to make the severance
payments and to provide the severance benefits pursuant to Sections&nbsp;3.3 and 3.4 hereof shall
immediately and irrevocably terminate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>3.6. </B><U><B>Tax Effect of Payments</B></U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(a)&nbsp;</B><U><B>Gross-Up Payment</B></U>. In the event that it is determined that any payment,
distribution or other benefit of any type to or for the Executive&#146;s benefit made by the Company, by
any of its affiliates, by any Person who acquires ownership or effective control of the Company or
ownership of a substantial portion of the Company&#146;s assets (within the meaning of Section&nbsp;280G of
the Code and the regulations thereunder) or by any affiliate of such Person, whether paid or
payable or distributed or distributable or otherwise made available pursuant to the terms of this
Agreement or otherwise (the &#147;<B>Total Payments</B>&#148;), would be subject to the excise tax imposed by
Section&nbsp;4999 of the Code or any interest or penalties with respect to such excise tax (such excise
tax, together with any such interest or penalties, are collectively referred to as the &#147;<B>Excise
Tax</B>&#148;), then the Executive shall be entitled to receive an additional payment (a &#147;<B>Gross-Up Payment</B>&#148;)
in an amount such that after payment by the Executive of all taxes imposed upon the Gross-Up
Payment, including any Excise Tax, the Executive retains an amount of the Gross-Up Payment equal to
the Excise Tax imposed on the Total Payments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(b)&nbsp;</B><U><B>Determination by Accountant</B></U>. All mathematical determinations and all
determinations of whether any of the Total Payments are &#147;parachute payments&#148; (within the meaning of
Section&nbsp;280G of the Code) that are required to be made under this Section, including all
determinations of whether a Gross-Up Payment is required, of the amount of such Gross-Up Payment
and of amounts relevant to the last sentence of this Section (collectively, the &#147;<B>Determination</B>&#148;),
shall be made 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 an
accounting firm acceptable to it, and such accounting firms shall together designate an independent
accounting firm, <U>provided</U>, <U>however</U>, that any accounting firm so designated shall
not have been previously retained by either party for a period of a least two (2)&nbsp;years subsequent
to the applicable Termination Date. Any independent accounting firm selected by the Executive and
the Company or designated pursuant to this Paragraph (b)&nbsp;shall be referred to herein as the
&#147;<B>Accounting Firm</B>&#148;. Subject to Section&nbsp;3.6(c) and Section&nbsp;3.7, if a
Gross-Up Payment is determined to be payable, it shall be paid by the Company to the Executive
within five (5)&nbsp;days after such Determination is delivered to the Company. Subject to Section
3.6(c), any Determination by the Accounting Firm shall be binding upon the Company and Executive,
absent manifest error. All of the costs and expenses of the Accounting Firm shall be borne by the
Company.
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(c)&nbsp;</B><U><B>Underpayments and Overpayments</B></U>. As a result of uncertainty in the application of
Section&nbsp;4999 of the Code at the time of the initial determination by the Accounting Firm hereunder,
it is possible that Gross-Up Payments not made by the Company should have been made
(&#147;<B>Underpayments</B>&#148;) or that Gross-Up Payments will have been made by the Company which should not
have been made (&#147;<B>Overpayments</B>&#148;). In either event, the Accounting Firm shall determine the amount
of the Underpayment or Overpayment that has occurred. In the case of an Underpayment, the amount
of such Underpayment shall promptly be paid by the Company to or for the Executive&#146;s benefit. In
the case of an Overpayment, the Executive shall, at the direction and expense of the Company, take
such steps as are reasonably necessary (including the filing of returns and claims for refund),
follow reasonable instructions from, and procedures established by, the Company and otherwise
reasonably cooperate with the Company to correct such Overpayment; <U>provided</U>,
<U>however</U>, that (i)&nbsp;the Executive shall in no event be obligated to return to the Company an
amount greater than the net after-tax portion of the Overpayment that the Executive has retained or
has received as a refund or has received the benefit of from the applicable taxing authorities and
(ii)&nbsp;this provision shall be interpreted in a manner consistent with the intent of this Section,
which is to make the Executive whole, on an after-tax basis, for the application of the Excise Tax,
it being understood that the correction of an Overpayment may result in the Executive&#146;s repaying to
the Company an amount which is less than the Overpayment. Anything herein to the contrary
notwithstanding, in the event of a final determination as to the liability for the Excise Tax
applicable to the Total Payments such determination shall be the basis for determining whether
there have been Underpayments or Overpayments pursuant to this Section&nbsp;3.6. For this purpose, a
final determination shall mean a final agreement reached with the Internal Revenue Service or a
final determination by a court with jurisdiction from which there is no appeal, in either case,
concluded in accordance with the provisions of this Paragraph (c).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(d)</B>&nbsp;<U><B>Application of Section&nbsp;409A</B></U><B>. </B>Notwithstanding anything contained in this Section
3.6, no portion of the Gross-Up Payment shall be paid to the Executive so as to cause the Executive
to be subject to tax under Section&nbsp;409A of the Code. In particular, if necessary to avoid taxation
under Code Section&nbsp;409A, the Gross-Up Payment shall be paid to Executive in a lump sum at the same
date that severance payments are paid to the Executive pursuant to Section&nbsp;3.4(a). If the amount
of the Gross-Up Payment cannot be fully determined pursuant to Section&nbsp;3.6(b) by such date, the
Company shall pay to the Executive on such date an estimate of the Gross-Up Payment, as determined
by the Accounting Firm, and shall pay the remainder (or the Executive shall reimburse the Company
the difference) 30&nbsp;days thereafter.
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>3.7. </B><U><B>Section&nbsp;409A Tax</B></U>. Notwithstanding anything herein to the contrary, to the extent
any payment or provision of benefits under this Agreement upon the Executive&#146;s &#147;separation from
service&#148; is subject to Section&nbsp;409A of the Code, no such payment shall be made, and Executive shall
be responsible for the full cost of such benefits, for six (6)&nbsp;months following the Executive&#146;s
&#147;separation from service&#148; if the Executive is a &#147;specified employee.&#148; On the expiration of such
six (6)&nbsp;month period, any payments delayed, and an amount sufficient to reimburse the Executive for
the cost of benefits met by the Executive, during such period shall be aggregated (the &#147;<B>Make-Up
Amount</B>&#148;) and paid in full to the Executive, and any succeeding payments and benefits shall continue
as scheduled hereunder. The<U> </U>Company shall credit the Make-Up Amount with interest at no
less than the interest rate it pays for short-term borrowed funds, such interest to accrue from the
date on which payments would have been made, or benefits would have been provided, by the Company
to the Executive absent the six month delay. The terms &#147;separation from service&#148; and &#147;specified
employee&#148; shall have the meanings set forth under Section&nbsp;409A and the regulations and rulings
issued thereunder. Furthermore, the Company shall not be required to make, and the Executive shall
not be required to receive, any severance or other payment or benefit under Sections&nbsp;3.3, 3.4 or
3.6 hereof if the making of such payment or the provision of such benefit or the receipt thereof
shall result in a tax to the Executive arising under Section&nbsp;409A of the Code (a &#147;<B>Section&nbsp;409A
Tax</B>&#148;). In the event the Company cannot make a payment or provide a benefit under Sections&nbsp;3.3, 3.4
or 3.6 hereof, or if the Executive cannot receive any such payment or benefit, in accordance with
the terms of such Sections, without the Executive incurring a Section&nbsp;409A Tax, then the Company
and the Executive shall work together in good faith to agree on an alternative payment schedule or
an alternative benefit of comparable economic value acceptable to both parties (and to amend this
Agreement, where necessary or desirable) such that the Executive does not incur a Section&nbsp;409A Tax
or the Executive incurs the least amount of Section&nbsp;409A Tax as is possible under the
circumstances. If a satisfactory alternative payment schedule or benefit cannot be agreed to by
the later to occur of (i)&nbsp;the originally scheduled payment, distribution or benefit date and (ii)
six months following the date of the Executive&#146;s &#147;separation from service,&#148; the Company shall
provide such payment, distribution or benefit to the Executive (&#147;<B>409A Amount</B>&#148;) on the originally
scheduled date for such payment, distribution or benefit together with an additional payment (a
&#147;<B>409A Payment</B>&#148;) in an amount such that after payment by the Executive of all taxes imposed on the
409A Payment (excluding any Excise Tax to which payment to the Executive is made pursuant to
Section&nbsp;3.6(a)), the Executive retains an amount of the 409A Payment equal to any taxes (including
taxes, penalties and interest under Section&nbsp;409A) on the 409A Amount.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>SECTION 4. </B><U><B>Restrictive Covenants</B></U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>4.1. </B><U><B>Confidentiality</B></U>. The Executive agrees that he will not, either during the Term
or at any time after the expiration or termination of the Term, disclose to any other Person any
confidential or proprietary information of the Company, the Company&#146;s Parent, or any of their
subsidiaries, except for (a)&nbsp;disclosures to directors, officers, key employees, independent
accountants and counsel of the Company and its subsidiaries as may be necessary or appropriate in
the performance of the Executive&#146;s duties
hereunder,  (b)&nbsp;disclosures which do not have a material adverse effect on the business or
operations of the Company and its subsidiaries, taken as a whole,

</DIV>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->- 16 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: Helvetica,Arial,sans-serif; margin-left: .25in; width: 7.20in">


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">
 (c)&nbsp;disclosures which the
Executive is required to make by law or by any court, arbitrator or administrative or legislative
body (including any committee thereof) with apparent jurisdiction to order the Executive to
disclose or make accessible any information, (d)&nbsp;disclosures with respect to any other litigation,
arbitration or mediation involving this Agreement, and (e)&nbsp;disclosures of any such confidential or
proprietary information that is, at the time of such disclosure, generally known to and available
for use by the public otherwise than by the Executive&#146;s wrongful act or omission. The Executive
agrees not to take with him upon leaving the employ of the Company any document or paper relating
to any confidential information or trade secret of the Company and its subsidiaries, except that
Executive shall be entitled to retain (i)&nbsp;papers and other materials of a personal nature,
including but limited to, photographs, correspondence, personal diaries, calendars and Rolodexes
(so long as such Rolodexes do not contain the Company&#146;s only copy of business contact information),
personal files and phone books, (ii)&nbsp;information showing his compensation or relating to his
reimbursement of expenses, (iii)&nbsp;information that he reasonably believes may be needed for tax
purposes, and (iv)&nbsp;copies of plans, programs and agreements relating to his employment, or
termination thereof, with the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>4.2. </B><U><B>Non-Solicitation of Employees</B></U>. The Executive agrees that, except in the course
of performing his duties hereunder, he will not, either during the Term and for a period of two (2)
years after the expiration or termination of the Term, directly or indirectly, solicit or induce or
attempt to solicit or induce or cause any of the employees of the Company, the Company&#146;s Parent, or
any of their subsidiaries to leave the employ of the Company, the Company&#146;s Parent, or of any of
their subsidiaries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>SECTION 5. </B><U><B>Miscellaneous Provisions</B></U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>5.1. </B><U><B>No Mitigation; Offsets</B></U>. The Executive shall not be required to mitigate damages
or the amount of any payment provided for under this Agreement by seeking other employment or
otherwise and no future income earned by the Executive from employment or otherwise shall in any
way reduce or offset any payments due to the Executive hereunder. Assuming a payment or otherwise
is due Executive under this Agreement, the Company may offset against any amount due Executive
under this Agreement only those amounts due Company in respect of any undisputed, liquidated
obligation of Executive to the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>5.2. </B><U><B>Governing Law</B></U>. The provisions of this Agreement will be construed and
interpreted under the laws of the State of New Jersey, without regard to principles of conflicts of
law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>5.3. </B><U><B>Injunctive Relief and Additional Remedy</B></U>. The Executive acknowledges that the
injury that would be suffered by the Company as a result of a breach of the provisions of Sections
4.1 and 4.2 hereof would be irreparable and that an award of monetary damages to the Company for
such a breach would be an inadequate remedy. Consequently, the Company will have the right, in
addition to any other rights it may
have, to obtain injunctive relief to restrain any breach or threatened breach or otherwise to
specifically enforce any provision of this Agreement, and the Company will not be obligated to post
bond or other security in seeking such relief. Each of the parties hereby irrevocably submits to
the exclusive jurisdiction of the federal and state courts of the State of New Jersey for the
purpose of injunctive relief.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 4%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->- 17 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: Helvetica,Arial,sans-serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>5.4. </B><U><B>Representations and Warranties by Executive</B></U>. The Executive represents and
warrants to the best of his knowledge that the execution and delivery by the Executive of this
Agreement do not, and the performance by the Executive of the Executive&#146;s obligations hereunder
will not, with or without the giving of notice or the passage of time, or both: (a)&nbsp;violate any
judgment, writ, injunction, or order of any court, arbitrator or governmental agency applicable to
the Executive or (b)&nbsp;conflict with, result in the breach of any provisions of or the termination
of, or constitute a default under, any agreement to which the Executive is a party or by which the
Executive is or may be bound.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>5.5. </B><U><B>Waiver</B></U>. The rights and remedies of the parties to this Agreement are cumulative
and not alternative. Neither the failure nor any delay by either party in exercising any right,
power, or privilege under this Agreement will operate as a waiver of such right, power, or
privilege, and no single or partial exercise of any such right, power, or privilege will preclude
any other or further exercise of such right, power, or privilege or the exercise of any other
right, power, or privilege. To the maximum extent permitted by applicable law, (a)&nbsp;no waiver that
may be given by a party will be applicable except in the specific instance for which it is given;
and (b)&nbsp;no notice to or demand on one party will be deemed to be a waiver of any obligation of such
party or of the right of the party giving such notice or demand to take further action without
notice or demand as provided in this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>5.6. </B><U><B>Assignment</B></U>. No right or benefit under this Agreement shall be assigned,
transferred, pledged or encumbered (a)&nbsp;by the Executive except by a beneficiary designation made by
will or the laws of descent and distribution or (b)&nbsp;by the Company except that the Company may
assign this Agreement and all of its rights hereunder to any Person with which it may merge or
consolidate or to which it may sell all or substantially all of its assets; <U>provided</U> that
such Person shall, by agreement in form and substance satisfactory to the Executive, 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 merger, consolidation or sale had taken place.
Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the
Company and each of its successors and assigns, and the Executive, his heirs, legal representatives
and any beneficiary or beneficiaries designated hereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>5.7. </B><U><B>Entire Agreement; Amendments</B></U>. This Agreement contains the entire agreement
between the parties with respect to the subject matter hereof and supersedes all prior agreements
and understandings, oral or written, between the parties hereto with respect to the subject matter
hereof. This Agreement may not be amended orally, but only by an agreement in writing signed by
the parties hereto.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 4%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->- 18 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: Helvetica,Arial,sans-serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>5.8. </B><U><B>Arbitration</B></U>. Any dispute which may arise between the Executive and the Company
with respect to the construction, interpretation or application of any of the terms, provisions,
covenants or conditions of this Agreement or any claim arising from or relating to this Agreement
will be submitted to final and binding arbitration by three (3)&nbsp;arbitrators in Newark, New Jersey,
under the expedited rules of the American Arbitration Association then obtaining. One such
arbitrator shall be selected by each of the Company and the Executive, and the two arbitrators so
selected shall select the third arbitrator. Selection of all three arbitrators shall be made
within thirty (30)&nbsp;days after the date the dispute arose. The written decision of the arbitrators
shall be rendered within ninety (90)&nbsp;days after selection of the third arbitrator. The decision of
the arbitrators shall be final and binding on the Company and the Executive and may be entered by
either party in any New Jersey federal or state court having jurisdiction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>5.9. </B><U><B>Legal Costs</B></U>. The Company shall pay any reasonable attorney&#146;s fees and costs
incurred by the Executive in connection with any dispute regarding this Agreement so long as
Executive&#146;s claim(s) or defense(s) in such action are asserted in the good faith belief that they
are not frivolous. The Company shall pay any such fees and costs promptly following its receipt of
written requests therefor, which requests shall be made no more frequently than once per calendar
month. The Company shall bear all legal costs and expenses incurred in the event the Company should
contest or dispute the characterization of any amounts paid pursuant to this Agreement as being
nondeductible under Section&nbsp;280G of the Code or subject to imposition of an excise tax under
Section&nbsp;4999 of the Code, including, without limitation, the reasonable costs and expenses of any
counsel selected by the Executive to represent him in connection with such a matter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>5.10. </B><U><B>Severability</B></U>. In the case that any one or more of the provisions contained in
this Agreement shall, for any reason, be held invalid or unenforceable, the other provisions of
this Agreement shall remain in full force and effect. Any provision of this Agreement held invalid
or unenforceable only in part or degree shall remain in full force and effect to the extent not
held invalid or unenforceable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>5.11. </B><U><B>Counterparts; Facsimile</B></U>. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this Agreement and all of
which, when taken together, will be deemed to constitute one and the same agreement. This
Agreement may be executed via facsimile.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>5.12. </B><U><B>Headings; Interpretation</B></U>. The various headings contained herein are for
reference purposes only and do not limit or otherwise affect any of the provisions of this
Agreement. It is the intent of the parties that this Agreement not be construed more strictly with
regard to one party than with regard to any other party.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 4%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->- 19 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: Helvetica,Arial,sans-serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>5.13. </B><U><B>Notices</B></U>.
</div>
<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">
<B>(a) </B>All notices, requests, demands and other communications required
or permitted under this Agreement shall be in writing and sent as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">If to the Company, to:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">Selective Insurance Company of America<BR>

40 Wantage Avenue<br>
Branchville, New Jersey 07890<br>
Attn: General Counsel<br>
Fax: (973)&nbsp;948-0282
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">If to the Executive, to:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">Eduard J. Pulkstenis<br>
P.O. Box 2589<br>
Branchville, NJ 07826
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%"><B>(b)&nbsp;</B>All notices and other communications required or permitted under this Agreement which
are addressed as provided in Paragraph (a)&nbsp;of this Section&nbsp;5.13, (i)&nbsp;if delivered personally
against proper receipt shall be effective upon delivery, (ii)&nbsp;if sent by facsimile transmission
(with evidence supplied by the sender of the facsimile&#146;s receipt at a facsimile number
designated for receipt by the other party hereunder, which other party shall be obligated to
provide such a facsimile number) shall be effective upon dispatch, and (iii)&nbsp;if sent (A)&nbsp;by
certified or registered mail with postage prepaid or (B)&nbsp;by Federal Express or similar courier
service with courier fees paid by the sender, shall be effective upon receipt. The parties
hereto may from time to time change their respective addresses and/or facsimile numbers for the
purpose of notices to that party by a similar notice specifying a new address and/or facsimile
number, but no such change shall be deemed to have been given unless it is sent and received in
accordance with this Section&nbsp;5.13.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>5.14. </B><U><B>Withholding</B></U>. All amounts payable by the Company to the Executive hereunder
(including, but not limited to, the Salary or any amounts payable pursuant to Sections&nbsp;3.3 and/or
3.4 hereof) shall be reduced prior to the delivery of such payment to the Executive by an amount
sufficient to satisfy any applicable federal, state, local or other withholding tax requirements.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 4%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->- 20 -<!-- /Folio -->
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">IN WITNESS WHEREOF, the Company and Executive have executed this Agreement as of the
Commencement Date.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><FONT style="white-space: nowrap"><B>SELECTIVE INSURANCE COMPANY OF AMERICA</B></FONT><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Victor N. Daley
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Victor N. Daley&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Its Executive Vice President, Human Resources&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>EXECUTIVE</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">/s/ Eduard J. Pulkstenis
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Eduard J. Pulkstenis&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


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<P align="center" style="font-size: 10pt"><!-- Folio -->- 21 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: Helvetica,Arial,sans-serif; margin-left: .25in; width: 7.20in">



<DIV align="right" style="font-size: 10pt; margin-top: 10pt"><B>EXHIBIT A</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><U><B>FORM OF RELEASE</B></U>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">
Reference is hereby made to the Employment Agreement, dated as of
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>, 200
&nbsp;____&nbsp;
(the
&#147;<U>Employment</U> <U>Agreement</U>&#148;), by and between <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> (the &#147;<U>Executive</U>&#148;) and
Selective Insurance Company of America, a New Jersey corporation (the &#147;<U>Company</U>&#148;).
Capitalized terms used but not defined herein shall have the meanings specified in the Employment
Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Pursuant to the terms of the Employment Agreement and in consideration of the payments to be
made to the Executive by the Company, which Executive acknowledges are in excess of what Executive
would otherwise be entitled to receive, the Executive hereby releases and forever discharges and
holds the Company and its parent, affiliates, and subsidiaries (collectively, the &#147;<U>Company</U>
<U>Parties</U>&#148; and each a &#147;<U>Company</U> <U>Party</U>&#148;), and the respective officers,
directors, employees, partners, stockholders, members, agents, affiliates, successors and assigns
and insurers of each Company Party, and any legal and personal representatives of each of the
foregoing, harmless from all claims or suits, of any nature whatsoever (whether known or unknown),
past, present or future, including those arising from the law, being directly or indirectly related
to the Executive&#146;s employment by or the termination of such employment by any Company Party,
including, without limiting the foregoing, any claims for notice, pay in lieu of notice, wrongful
dismissal, severance pay, bonus, overtime pay, incentive compensation, interest or vacation pay for
the Executive&#146;s service as an officer or director to any Company Party through the date hereof.
The Executive also hereby agrees not to file a lawsuit asserting any such claims. This release
(this &#147;<U>Release</U>&#148;) includes, but is not limited to, claims growing out of any legal
restriction on any Company Party&#146;s right to terminate its employees and claims or rights under
federal, state, and local laws prohibiting employment discrimination (including, but not limited
to, claims or rights under Title VII of the Civil Rights Act of 1964, as amended by the Civil
Rights Act of 1991, the Americans with Disabilities Act, the Family and Medical Leave Act, the Fair
Labor Standards Act, the Uniformed Services Employment and Reemployment Rights Act, the Employee
Retirement Income Security Act, the Equal Pay Act, the Age Discrimination in Employment Act of
1967, as amended by the Older Workers Benefit Protection Act of 1990, and the laws of the State of
New Jersey against discrimination, or any other federal or state statutes prohibiting
discrimination on the basis of age, sex, race, color, handicap, religion, national origin, and
sexual orientation, or any other federal, state or local employment law, regulation or other
requirement) which arose before the date this Release is signed, excepting only claims in the
nature of workers&#146; compensation, claims for vested benefits, and claims to enforce this agreement.
The Executive acknowledges that because this Release contains a release of claims and is an
important legal document, he has been advised to consult with counsel before executing it, that he
may take up to &#091;twenty-one
(21)&#093;<SUP style="font-size: 85%; vertical-align: text-top">1</sup>
&#091;forty-five (45)&#093;<SUP style="font-size: 85%; vertical-align: text-top">2</sup>
days to decide whether to execute it, and that he may revoke this Release by delivering or
mailing a signed notice of revocation to the Company at its offices within seven (7)&nbsp;days after
executing it. If Executive executes this Release and does not subsequently revoke the release
within seven (7)&nbsp;days after executing it, then this Release shall take effect as a legally binding
agreement between Executive and the Company.
</DIV>


<DIV align="left">
<DIV style="font-size: 1pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR style="font-size: 6pt">
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>
<tr style="font-size: 3pt"><td>&nbsp;</td></tr>
<TR valign="top">
    <TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">1</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>Delete brackets and use text enclosed therewith if 45
days is not otherwise required by Section&nbsp;7(f)(1)(F) of the Age Discrimination
in Employment Act and/or 29 C.F.R. Part&nbsp;1625. If 45&nbsp;days is so required,
delete bracketed text in its entirety.</TD>
</TR>
<tr style="font-size: 3pt"><td>&nbsp;</td></tr>
<TR valign="top">
    <TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">2</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>Delete brackets and use text enclosed therewith if 45
days is required by Section&nbsp;7(f)(1)(F) of the Age Discrimination in Employment
Act and/or 29 C.F.R. Part&nbsp;1625. If 45&nbsp;days is not so required, delete
bracketed text in its entirety.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->- 2 -<!-- /Folio -->
</DIV>

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<DIV style="font-family: Helvetica,Arial,sans-serif; margin-left: .25in; width: 7.20in">





<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">If Executive does not deliver to the Company an original signed copy of this Release by
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>, or if Executive signs and revokes this Release within seven (7)&nbsp;days as set forth
above, the Company will assume that Executive rejects the Release and Executive will not receive
the payments referred to herein.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Executive acknowledges that there is a risk that after signing this Release he may
discover losses or claims that are released under this Release, but that are presently unknown to
him. The Executive assumes this risk and understands that this Release shall apply to any such
losses and claims.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Executive understands that this Release includes a full and final release covering all
known and unknown, injuries, debts, claims or damages which have arisen or may have arisen from
Executive&#146;s employment by or the termination of such employment by any Company party. The
Executive acknowledges that by accepting the benefits and payments set forth in the Employment
Agreement, he assumes and waives the risks that the facts and the law may be other than as he
believes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Notwithstanding the foregoing, this Release does not release, and the Executive continues to
be entitled to, (i)&nbsp;any rights to exculpation or indemnification that the Executive has under
contract or law with respect to his service as an officer or director of any Company Party and (ii)
receive the payments to be made to him by the Company pursuant to Section&nbsp;3.3 and/or 3.4 of the
Employment Agreement (including any plan, agreement or other arrangement that is referenced in or
the subject of the applicable Section), subject to the conditions set forth in Section&nbsp;3.5 of the
Employment Agreement, (iii)&nbsp;any right the Executive may have to obtain contribution as permitted by
law in the event of entry of judgment against him as a result of any act or failure to act for
which he and any Company party are jointly liable, and (iv)&nbsp;any claim in respect of any insurance
policy with any Company party entered into outside of the employment relationship.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">This Release constitutes the release referenced in Section&nbsp;3.5 of the Employment Agreement.
</DIV>

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</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The undersigned Executive, having had the time to reflect, freely accepts and agrees to the
above Release. The Executive acknowledges and agrees that no Company representative has made any
representation to or agreement with the Executive relating to this Release which is not contained
in the express terms of this
Release. The Executive acknowledges and agrees that the execution and delivery of this
Release is based upon the Executive&#146;s independent review of this Release, and the Executive hereby
expressly waives any and all claims or defenses by the Executive against the enforcement of this
Release which are based upon allegations or representations, projections, estimates, understandings
or agreements by the Company or any of its representatives or any assumptions by the Executive that
are not contained in the express terms of this Release.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="14%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="5" valign="top" align="left">EXECUTIVE</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Date:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>&#091;Attach disclosures required by the Older Workers Benefit Protection Act, if required&#093;</B>
</DIV>



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</DIV>

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<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">This AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT (the &#147;<B>Amendment</B>&#148;) is made effective as of this
15th day of April, 2008 between <B>Selective Insurance Company of America</B>, a New Jersey corporation
with a principal place of business at 40 Wantage Avenue, Branchville, New Jersey 07890 (the
&#147;<B>Company</B>&#148;), and <B>Eduard J. Pulkstenis</B>, an individual with a mailing address of Post Office. Box
2589, Branchville, NJ 07826, (the &#147;<B>Executive</B>&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">WHEREAS, on January&nbsp;1, 2007, the parties entered into an Employment Agreement (the &#147;<B>Employment
Agreement</B>&#148;); and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">WHEREAS, the parties wish to amend the Employment Agreement to reflect recent guidance under
Sections&nbsp;409A and 162(m) of the Internal Revenue Code of 1986, as amended, and to reflect certain
changes in the terms of the Executive&#146;s employment as a result of the Executive&#146;s promotion to
Executive Vice President of the Company;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">NOW, THEREFORE, for and in consideration of the mutual promises, terms, provisions and
conditions set forth herein, the parties hereby amend the Employment Agreement, effective as of the
date first above written unless otherwise noted, as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">1.&nbsp;Effective January&nbsp;1, 2009, a new definition shall be added to Section&nbsp;1.1 of the Employment
Agreement (Definitions) as follows:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">&#147;<B>Section&nbsp;409A</B>&#148; means Section&nbsp;409A of the Code and the regulations of the
Treasury and other applicable guidance promulgated thereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">2.&nbsp;Effective January&nbsp;1, 2009, the definition of &#147;Good Reason&#148; in Section&nbsp;1.1 of the Employment
Agreement shall be deleted in its entirety and replaced with the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">&#147;<B>Good Reason</B>&#148; means the occurrence of any one or more of the following
conditions; <U>provided</U>, however, that no such condition shall be deemed
to constitute &#147;Good Reason&#148; unless the Executive provides notice of such
condition to the Company within ninety (90)&nbsp;days of its initial existence, and
the Company shall have failed to remedy the condition within thirty (30)&nbsp;days
of its receipt of such notice:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">(i)&nbsp;any material diminution in the Executive&#146;s Salary below the annualized rate
in effect on the date on which a Change in Control shall have occurred, unless
such reduction is implemented for the senior executive staff generally,
<U>provided</U>, however that such reduction shall constitute Good Reason even
if implemented for senior executive
staff generally if such reduction occurs within two years after a Change in
Control;
</DIV>
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</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">(ii)&nbsp;any material negative change in the aggregate benefits the Executive
receives, other than as a result of the normal expiration of any Plan as to
other eligible employees in accordance with its terms as in effect on the date
preceding the date on which a Change in Control shall have occurred, or unless
such change affects all participants of such Plan generally;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">(iii)&nbsp;without the Executive&#146;s express prior written consent, a material
diminution of the Executive&#146;s position, duties, responsibilities and status
with the Company immediately prior to a Change in Control, or any material
diminution in the Executive&#146;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 material negative change in the Executive&#146;s
titles or office as in effect immediately prior to a Change in Control, except
in connection with the termination of the Executive&#146;s employment for Cause,
Disability or Retirement or as a result of the Executive&#146;s death, or by his
termination of his employment other than for Good Reason;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">(iv)&nbsp;without the Executive&#146;s express prior written consent, the imposition of a
requirement by the Company that the Executive be based at any location in
excess of fifty (50)&nbsp;miles from the location of the Executive&#146;s office on the
date preceding the date on which a Change in Control shall have occurred;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">(vi)&nbsp;the failure by the Company to obtain from any Person with which it may
merge or consolidate or to which it may sell all or substantially all of its
assets, the agreement of such Person as set forth in the proviso in Section&nbsp;5.6
hereof; <U>provided</U> that such merger, consolidation or sale constitutes a
Change in Control; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">(vii)&nbsp;within two years after a Change in Control shall have occurred, any
action or inaction that constitutes a material breach by the Company of any of
the terms and conditions of this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">3.&nbsp;The first sentence of Section&nbsp;2.3(a) of the Employment Agreement shall be deleted and
replaced with the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">The Executive agrees to serve as Executive Vice President during the Term.
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">4 The first sentence of Section&nbsp;2.4(a) of the Employment Agreement shall be deleted and
replaced with the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">For all services rendered by the Executive under this Agreement, the Company
shall pay the Executive a salary during the Term at a rate of not less than
THREE HUNDRED SEVENTY-FIVE THOUSAND AND
00/100 DOLLARS ($375,000.00) per year, which may be increased but not decreased
unless decreased for the senior executive staff generally (the &#147;<B>Salary</B>&#148;),
payable in installments in accordance with the Company&#146;s policy from time to
time in effect for payment of salary to its executives.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">5.&nbsp;Section&nbsp;3.3(b)(i) of the Employment Agreement shall be deleted and replaced with the
following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">If the Executive&#146;s employment is terminated pursuant to Paragraphs (a)&nbsp;or (b)
in Section&nbsp;3.1 hereof, then the Executive (or his legal representative, as
applicable) shall be entitled to receive a severance payment from the Company
in an aggregate amount equal to the product of (A)&nbsp;1.5 <U>times</U> (B)&nbsp;the
Executive&#146;s Salary <U>plus</U> an amount equal to the average of the three
most recent annual cash incentive payments (each an &#147;ACIP&#148;) made to the
Executive; <U>provided</U> that any such severance payment shall be reduced by
the amount of payments the Executive receives under any life or disability
insurance policies with respect to which the premiums were paid by the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">6.&nbsp;Section&nbsp;3.3(b)(ii) of the Employment Agreement shall be deleted and replaced with the
following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">If the Executive&#146;s employment is terminated pursuant to Paragraph (e)&nbsp;or (f)&nbsp;in
Section&nbsp;3.1 hereof, then the Executive shall be entitled to receive a severance
payment from the Company in an aggregate amount equal to the product of (A)&nbsp;1.5
<U>times</U> (B)&nbsp;the Executive&#146;s Salary <U>plus</U> an amount equal to the
average of the three most recent ACIP payments made to the Executive.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">7.&nbsp;The first sentence of Section&nbsp;3.3(c)(ii) of the Employment Agreement shall be amended
by substituting &#147;eighteen (18)&nbsp;months&#148; for &#147;twelve (12)&nbsp;months.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">8.&nbsp;Section&nbsp;3.4(a) of the Employment Agreement shall be deleted and replaced with the
following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">The Executive shall be entitled to receive a severance payment from the Company
in an aggregate amount equal to the product of (i)&nbsp;2; and (ii)&nbsp;the greater of:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%; text-indent: 4%">(1)&nbsp;the sum of the Executive&#146;s Salary <U>plus</U> the Executive&#146;s target
ACIP in effect as of the Termination Date; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%; text-indent: 4%">(2)&nbsp;the sum of the Executive&#146;s Salary as of the Termination Date
<U>plus</U> the Executive&#146;s average ACIP for the three (3)&nbsp;calendar years
prior to the calendar year in which the Termination Date occurs.&#148;
</DIV>
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</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">Such payment shall be made, subject to Section&nbsp;3.7, sixty (60)&nbsp;days following
the Executive&#146;s termination of employment; <U>provided, however</U>, that, if
and to the extent any payments under this Section&nbsp;3.4 constitute deferred
compensation subject to Section&nbsp;409A, then, unless the Change in Control
qualifies as a change in the ownership of the Company, a change in effective
control of the Company, or a change in the ownership of a substantial portion
of the assets of the Company, as described in Treasury Regulations Section
1.409A-3(i)(5), such payment shall be made at the times specified in Section
3.3(b)(iii) of the Employment Agreement. The severance payment(s) required to
be made by the Company to the Executive pursuant to this Section&nbsp;3.4(a) shall
be in lieu of, and not in addition to, any other severance payments required to
be paid by the Company to the Executive.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">9.&nbsp;The first sentence of Section&nbsp;3.4(b) of the Employment Agreement shall be amended by
substituting &#147;twenty-four (24)&nbsp;months&#148; for &#147;eighteen (18)&nbsp;months.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">10.&nbsp;Effective January&nbsp;1, 2009, Section&nbsp;3.4(c)(ii) of the Employment Agreement shall be deleted
and replaced with the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">(ii)&nbsp;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 their 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 Plan, be the earliest of (A)&nbsp;the later to occur of
the fifteenth day of the third month following the date on which, or the
December&nbsp;31 of the calendar year in which, any such stock options, stock
appreciation rights, restricted stock grants, stock bonuses, long-term
incentives or similar benefits would otherwise have expired if not extended,
(B)&nbsp;the original expiration date had the Executive&#146;s employment not so
terminated, and (C)&nbsp;with respect only to a stock option or stock appreciation
right, the tenth anniversary of the date of grant of such stock right;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">11.&nbsp;Effective January&nbsp;1, 2009, Section&nbsp;3.5 of the Employment Agreement shall be renumbered as
Section&nbsp;3.5(a) and retitled &#147;Release and Restrictive Covenants,&#148; and the first sentence of Section
3.5(a) of the Employment Agreement shall be deleted and replaced with the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">Within ten (10)&nbsp;days of the Executive&#146;s termination of employment, the Company
shall provide the Executive with a release substantially in the form of
<U>Exhibit&nbsp;A</U> attached hereto (the &#147;<B>Release</B>&#148;). The Executive&#146;s right to
receive the severance payments and benefits pursuant to Sections&nbsp;3.3 and 3.4
hereof is expressly conditioned upon (i)&nbsp;receipt by the Company of the Release
executed by the Executive within forty-five (45)&nbsp;days of receipt by the
Executive of such Release, and the expiration of the revocation period
described therein without such
Release having been revoked, and (ii)&nbsp;the compliance by the Executive with the
covenants, terms and provisions of Sections&nbsp;4.1 and 4.2 hereof (the
&#147;<B>Restrictive Covenants</B>&#148;).
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">12.&nbsp;A new Section&nbsp;3.5(b) of the Employment Agreement shall be added as follows:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">(b) <U><B>Performance-Based Compensation</B></U>. Upon the expiration of the initial
three (3)&nbsp;year period of the Term, during any calendar year in which the
Executive is a &#147;covered employee,&#148; as defined in Section&nbsp;162(m)(3) of the Code,
if any ACIP entitlements or stock-based awards of the Executive are intended to
qualify as &#147;performance based compensation&#148; within the meaning of Section
162(m) of the Code, then the Executive shall not be entitled to any severance
payments based on his ACIP payments or accelerated vesting of his stock-based
awards pursuant to Section&nbsp;3.3 or 3.4 of this Agreement if and to the extent
that such payments or accelerated vesting would cause any portion of such ACIP
entitlements or stock-based awards to fail to be deductible pursuant to Section
162(m) of the Code.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">13.&nbsp;Effective January&nbsp;1, 2009, Section&nbsp;3.6(d) of the Employment Agreement shall be deleted in
its entirety and replaced with the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%"><U><B>Application of Section&nbsp;409A</B></U>. Notwithstanding anything in this Section
3.6 to the contrary, all Gross-Up Payments shall be made by the end of the
Executive&#146;s taxable year next following the taxable year in which he remits the
related taxes to the applicable taxing authorities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">14.&nbsp;Effective January&nbsp;1, 2009, Section&nbsp;3.7 of the Employment Agreement shall be deleted in its
entirety and replaced with the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">(a) <U><B>Specified Employee Provisions</B></U>. &#147;Notwithstanding anything herein to
the contrary, if the Executive is a &#147;specified employee,&#148; as defined under
Section&nbsp;409A, of the Company, as determined by the Board or the Compensation
Committee of the Company or the Company&#146;s parent company from time to time,
upon the date of his &#147;separation from service,&#148; as defined in Section&nbsp;409A,
from the Company (his &#147;<B>Separation from Service</B>&#148;), then, to the extent any
payment or provision of benefits under this Agreement upon the Executive&#146;s
Separation from Service is subject to Section&nbsp;409A of the Code, no such payment
shall be made and the Executive shall be responsible for the full cost of such
benefits for six (6)&nbsp;months following the Executive&#146;s Separation from Service;
<U>provided</U>, however, that such six month delay of payments shall not
apply to any payments or benefits that are not subject to Section&nbsp;409A,
including the following: (a)&nbsp;any severance or other payments that become due
and payable during the period commencing with the date of the Executive&#146;s date
of termination of employment and ending on March&nbsp;15 of the succeeding calendar
year and which qualify as &#147;short term deferral payments&#148; under Section&nbsp;409A,
and

</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">(b)&nbsp;any remaining severance or other payments paid after the Executive&#146;s
Separation from Service to the extent (i)&nbsp;that the dollar amount of such
payments does not exceed two (2)&nbsp;times the lesser of (x)&nbsp;the Executive&#146;s
annualized compensation (based on the Executive&#146;s annual rate of pay for the
calendar year preceding the calendar year in which the separation from service
occurred, adjusted to reflect any increase during such calendar year which was
expected to continue indefinitely had the Executive&#146;s separation from service
not occurred) or (y)&nbsp;the maximum amount of compensation that may be taken into
account under a qualified plan pursuant to Section&nbsp;401(a)(17) of the Code for
the calendar year in which the separation from service occurred, and (ii)&nbsp;such
severance or other payments are to be made to the Executive no later than the
last day of the second calendar year following the calendar year in which the
Separation from Service occurs. For purposes of Section&nbsp;409A, the severance
payments and each monthly provision of severance benefits under Sections&nbsp;3.3
and 3.4 of this Agreement shall be treated as a right to a series of
separate payments.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">(b) <U><B>Amendments and Acknowledgements</B></U>. All payments to the Executive
pursuant to this Agreement are intended to comply with, or to be exempt from,
the requirements of Section&nbsp;409A of the Code. The Company and Executive agree
that they will consider in good faith any and all amendments to this Agreement
either may deem necessary to ensure compliance with the provisions of Section
409A of the Code. However, the Executive acknowledges that, notwithstanding
the 409A Payment set forth in Section&nbsp;3.7 of this Agreement, the Executive
bears the entire risk of any adverse Federal and State tax consequences and
penalty taxes in the event any payment pursuant to this Agreement is deemed to
be subject to Section&nbsp;409A of the Code and that no representations have been
made to the Executive relating to the tax treatment of any payment pursuant to
this Agreement under Section&nbsp;409A of the Code and the corresponding provisions
of any applicable State income taxation laws &#091;(including California income
taxation laws)&#093;.&#148;
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->- 7 -<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: Helvetica,Arial,sans-serif; margin-left: .25in; width: 7.20in">

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">15.&nbsp;Effective January&nbsp;1, 2009, the second sentence in Section&nbsp;5.1 of the Employment Agreement
shall be deleted and replaced with the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 8%">Assuming a payment or otherwise is due to the Executive under this Agreement,
the Company may offset against any amount due to the Executive under this
Agreement only those amounts due to the Company in respect of any undisputed,
liquidated obligation of the Executive to the Company; <U>provided,</U>
<U>however</U>, that any amount due to
the Company by the Executive shall first be applied to offset amounts due to
the Executive under this Agreement that are not deferred compensation subject
to Section&nbsp;409A, and then, to the extent applicable, to offset amounts due to
the Executive under this Agreement that are deemed to be deferred compensation
subject to Section&nbsp;409A; and <U>further</U> <U>provided</U> that, if and to
the extent required to satisfy the provisions of Treasury Regulation&nbsp;Section
1.409A-3(j)(xiii), any debt of the Executive to the Company may be offset
against any amount due to the Executive under this Agreement that constitutes
deferred compensation subject to Section&nbsp;409A only if (a)&nbsp;such debt is incurred
in the ordinary course of the service relationship between the Executive and
the Company, (b)&nbsp;the entire amount of the offset is limited to $5,000 in any of
the Company&#146;s taxable years, and (c)&nbsp;the offset is made at the same time and in
the same amount as the debt otherwise would have been due and collected from
the Executive.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">16.&nbsp;All other provisions of the Employment Agreement shall remain in full force and effect.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">IN WITNESS WHEREOF, the Company and the Executive have executed this Amendment effective as of
the date above written.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left" nowrap><B>SELECTIVE INSURANCE COMPANY OF AMERICA</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Victor N. Daley
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Victor N. Daley&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" nowrap>Its Executive Vice President, Human Resources&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>EXECUTIVE</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">/s/ Eduard J. Pulkstenis
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Eduard J. Pulkstenis&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->- 8 -<!-- /Folio -->
</DIV>



</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-11
<SEQUENCE>5
<FILENAME>c73164exv11.htm
<DESCRIPTION>EXHIBIT 11
<TEXT>
<HTML>
<HEAD>
<TITLE>Filed by Bowne Pure Compliance</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="right" style="font-size: 10pt; margin-top: 10pt"><B>EXHIBIT 11</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>SELECTIVE INSURANCE GROUP, INC. AND CONSOLIDATED SUBSIDIARIES<BR>
COMPUTATION OF EARNINGS PER SHARE<BR>
Three months ended March&nbsp;31, 2008 and 2007</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Income</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Per Share</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">($ in thousands, except per share amounts)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(Numerator)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(Denominator)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Amount</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Basic EPS:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income available to common stockholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">20,503</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,675</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.39</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Effect of dilutive securities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Restricted stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">699</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">322</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">186</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted EPS:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income available to common stockholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">20,503</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53,882</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.38</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Income</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Per Share</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">($ in thousands, except per share amounts)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(Numerator)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(Denominator)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Amount</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Basic EPS:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income available to common stockholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">37,252</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,550</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.68</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Effect of dilutive securities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Restricted stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,104</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Convertible debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">406</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,109</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">431</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">178</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Diluted EPS:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff; padding-top: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income available to common stockholders
and assumed conversions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">37,658</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,372</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.62</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>6
<FILENAME>c73164exv31w1.htm
<DESCRIPTION>EXHIBIT 31.1
<TEXT>
<HTML>
<HEAD>
<TITLE>Filed by Bowne Pure Compliance</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<DIV align="right" style="font-size: 10pt; margin-top: 10pt"><B>Exhibit&nbsp;31.1</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Certification
pursuant to Rule&nbsp;13a &#150; 14(a), as adopted pursuant to<BR>
Section&nbsp;302 of the Sarbanes-Oxley Act of 2002</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">I, GREGORY E. MURPHY, Chairman of the Board, President and Chief Executive Officer of
Selective Insurance Group, Inc. (the &#147;Company&#148;), hereby certify, that:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">1.&nbsp;I have reviewed this quarterly report on Form 10-Q of the Company;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">2.&nbsp;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;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">3.&nbsp;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;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">4.&nbsp;The registrant&#146;s other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules&nbsp;13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rules&nbsp;13a-15(f) and
15d-15(f)) for the registrant and have:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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;</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles;</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Evaluated the effectiveness of the registrant&#146;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</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Disclosed in this report any change in the registrant&#146;s internal
control over financial reporting that occurred during the registrant&#146;s
most recent fiscal quarter (the registrant&#146;s fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonable likely to materially affect, the registrant&#146;s internal
control over financial reporting; and</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">5.&nbsp;The registrant&#146;s other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrant&#146;s auditors and the audit
committee of the registrant&#146;s board of directors (or persons performing the equivalent functions):
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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&#146;s ability to
record, process, summarize and report financial information; and</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant&#146;s internal
control over financial reporting.</TD>
</TR>

</TABLE>
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>

<TR>
    <TD align="left">Date: May 2, 2008&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Gregory E. Murphy
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Gregory E. Murphy&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Chairman of the Board, President and <BR>
Chief Executive Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>7
<FILENAME>c73164exv31w2.htm
<DESCRIPTION>EXHIBIT 31.2
<TEXT>
<HTML>
<HEAD>
<TITLE>Filed by Bowne Pure Compliance</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>

</TABLE>

<DIV align="right" style="font-size: 10pt; margin-top: 10pt"><B>Exhibit&nbsp;31.2</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Certification
pursuant to Rule&nbsp;13a &#150; 14(a), as adopted pursuant to<BR>
Section&nbsp;302 of the Sarbanes-Oxley Act of 2002</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">I, DALE A. THATCHER, Executive Vice President, Chief Financial Officer and Treasurer of
Selective Insurance Group, Inc. (the &#147;Company&#148;), hereby certify, that:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">1. I have reviewed this quarterly report on Form&nbsp;10-Q of the Company;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">2.&nbsp;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;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">3.&nbsp;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;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">4.&nbsp;The registrant&#146;s other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules&nbsp;13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rules&nbsp;13a-15(f) and
15d-15(f)) for the registrant and have:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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;</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles;</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Evaluated the effectiveness of the registrant&#146;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</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Disclosed in this report any change in the registrant&#146;s internal
control over financial reporting that occurred during the registrant&#146;s
most recent fiscal quarter (the registrant&#146;s fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonable likely to materially affect, the registrant&#146;s internal
control over financial reporting; and</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">5.&nbsp;The registrant&#146;s other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrant&#146;s auditors and the audit
committee of the registrant&#146;s board of directors (or persons performing the equivalent functions):
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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&#146;s ability to
record, process, summarize and report financial information; and</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant&#146;s internal
control over financial reporting.</TD>
</TR>

</TABLE>
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD align="left">Date: May 2, 2008&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Dale A. Thatcher
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Dale A. Thatcher&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Executive Vice President,<BR>
 Chief Financial
Officer and Treasurer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>8
<FILENAME>c73164exv32w1.htm
<DESCRIPTION>EXHIBIT 32.1
<TEXT>
<HTML>
<HEAD>
<TITLE>Filed by Bowne Pure Compliance</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>

</TABLE>

<DIV align="right" style="font-size: 10pt; margin-top: 10pt"><B>Exhibit&nbsp;32.1</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Certification pursuant to 18 U.S.C. Section&nbsp;1350, as adopted pursuant to<BR>
Section&nbsp;906 of the Sarbanes-Oxley Act of 2002</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">I, GREGORY E. MURPHY, the Chairman of the Board, President and Chief Executive Officer of
Selective Insurance Group, Inc. (the &#147;Company&#148;), hereby certify, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act of 2002, that the Quarterly
Report on Form 10-Q of the Company for the quarterly period ended March&nbsp;31, 2008 (the &#147;Form&nbsp;10-Q&#148;),
which this certification accompanies, fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)), and the information
contained in the Form 10-Q fairly presents, in all material respects, the financial condition and
results of operations of the Company.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD align="left">Date: May 2, 2008&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Gregory E. Murphy
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Gregory E. Murphy&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Chairman of the Board, President and <BR>
Chief Executive Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.2
<SEQUENCE>9
<FILENAME>c73164exv32w2.htm
<DESCRIPTION>EXHIBIT 32.2
<TEXT>
<HTML>
<HEAD>
<TITLE>Filed by Bowne Pure Compliance</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>



<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.20in">

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>

</TABLE>

<DIV align="right" style="font-size: 10pt; margin-top: 10pt"><B>Exhibit&nbsp;32.2</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>Certification pursuant to 18 U.S.C. Section&nbsp;1350, as adopted pursuant to<BR>
Section&nbsp;906 of the Sarbanes-Oxley Act of 2002</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">I, DALE A. THATCHER, the Executive Vice President, Chief Financial Officer and Treasurer of
Selective Insurance Group, Inc. (the &#147;Company&#148;), hereby certify, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act of 2002, that the Quarterly
Report on Form 10-Q of the Company for the quarterly period ended March&nbsp;31, 2008 (the &#147;Form&nbsp;10-Q&#148;),
which this certification accompanies, fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)), and the information
contained in the Form 10-Q fairly presents, in all material respects, the financial condition and
results of operations of the Company.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD align="left">Date: May 2, 2008&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Dale A. Thatcher
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Dale A. Thatcher&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Executive Vice President of Finance, <BR>
Chief Financial Officer
and Treasurer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>



</BODY>
</HTML>
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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