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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 2022
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from_____________________________to_____________________________
Commission File Number: 001-33067
SELECTIVE INSURANCE GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)

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

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

973 | 948-3000
(Registrant’s Telephone Number, Including Area Code)
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class |  | Trading Symbol (s) |  | Name of each exchange on which registered
Common Stock, par value $2 per share |  | SIGI |  | The Nasdaq Stock Market LLC
Depositary Shares, each representing a 1/1,000th interest in a share of 4.60% Non-Cumulative Preferred Stock, Series B, without par value |  | SIGIP |  | The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer | ☒ | Accelerated filer ☐ |
Non-accelerated filer ☐ | Smaller reporting company | ☐
|  | Emerging growth company | ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
As of April 30, 2022, there were 60,353,399 shares of common stock, par value $2.00 per share, outstanding.

Table of Contents

| SELECTIVE INSURANCE GROUP, INC. |
| Table of Contents |
|  | Page No.
PART I. FINANCIAL INFORMATION |
Item 1. | Financial Statements |
| Consolidated Balance Sheets as of March 31, 2022 (Unaudited) and December 31, 2021 | 1
| Unaudited Consolidated Statements of Income for the Quarter Ended March 31, 2022 and 2021 | 2
| Unaudited Consolidated Statements of Comprehensive Income for the Quarter Ended March 31, 2022 and 2021 | 3
| Unaudited Consolidated Statements of Stockholders' Equity for the Quarter Ended March 31, 2022 and 2021 | 4
| Unaudited Consolidated Statements of Cash Flows for the Quarter Ended March 31, 2022 and 2021 | 5
| Notes to Unaudited Interim Consolidated Financial Statements | 6
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
| Forward-Looking Statements | 21
| Introduction | 21
| Critical Accounting Policies and Estimates | 22
| Financial Highlights of Results for First Quarter 2022 and 2021 | 22
| Results of Operations and Related Information by Segment | 25
| Federal Income Taxes | 33
| Liquidity and Capital Resources | 33
| Ratings | 36
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 36
Item 4. | Controls and Procedures | 36
PART II. OTHER INFORMATION
Item 1. | Legal Proceedings | 37
Item 1A. | Risk Factors | 37
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 37
Item 3. | Defaults Upon Senior Securities | 37
I tem 4. | Mine Safety Disclosures | 38
Item 5. | Other Information | 38
Item 6. | Exhibits | 38
Signatures | 39

Table of Contents

PART I. FINANCIAL INFORMATION |

ITEM 1. FINANCIAL STATEMENTS. |

SELECTIVE INSURANCE GROUP, INC. CONSOLIDATED BALANCE SHEETS |  | Unaudited |  |
($ in thousands, except share amounts) |  | March 31, 2022 |  | December 31, 2021
ASSETS |  |  |  |
Investments: |  |  |  |
Fixed income securities, held-to-maturity – at carrying value (fair value: $32,625 – 2022; $29,460 – 2021) |  | $ | 33,085 |  |  | 28,850 |
Less: allowance for credit losses |  | (50) |  |  | (65) |
Fixed income securities, held-to-maturity, net of allowance for credit losses |  | 33,035 |  |  | 28,785 |
Fixed income securities, available-for-sale – at fair value (allowance for credit losses: $37,599 – 2022 and $9,724 – 2021; amortized cost: $6,717,907 – 2022 and $6,490,753 – 2021) |  | 6,598,822 |  |  | 6,709,976 |
Commercial mortgage loans – at carrying value (fair value: $113,106 – 2022 and $97,598 – 2021) |  | 115,893 |  |  | 95,795 |
Less: allowance for credit losses |  | — |  |  | — |
Commercial mortgage loans, net of allowance for credit losses |  | 115,893 |  |  | 95,795 |
Equity securities – at fair value (cost: $320,040 – 2022; $308,840 – 2021) |  | 344,583 |  |  | 335,537 |
Short-term investments |  | 256,712 |  |  | 447,863 |
Other investments |  | 425,666 |  |  | 409,032 |
Total investments (Note 4 and 5) |  | $ | 7,774,711 |  |  | 8,026,988 |
Cash |  | 410 |  |  | 455 |
Restricted cash |  | 17,474 |  |  | 44,608 |
Accrued investment income |  | 48,427 |  |  | 48,247 |
Premiums receivable |  | 1,025,833 |  |  | 958,787 |
Less: allowance for credit losses (Note 6) |  | (14,300) |  |  | (13,600) |
Premiums receivable, net of allowance for credit losses |  | 1,011,533 |  |  | 945,187 |
Reinsurance recoverable |  | 578,959 |  |  | 601,668 |
Less: allowance for credit losses (Note 7) |  | (1,600) |  |  | (1,600) |
Reinsurance recoverable, net of allowance for credit losses |  | 577,359 |  |  | 600,068 |
Prepaid reinsurance premiums |  | 174,951 |  |  | 183,007 |
Current federal income tax |  | — |  |  | 772 |
Deferred federal income tax |  | 55,274 |  |  | — |
Property and equipment – at cost, net of accumulated depreciation and amortization of: $259,522 – 2022; $253,427 – 2021 |  | 83,180 |  |  | 82,053 |
Deferred policy acquisition costs |  | 341,689 |  |  | 326,915 |
Goodwill |  | 7,849 |  |  | 7,849 |
Other assets |  | 217,690 |  |  | 195,240 |
Total assets |  | $ | 10,310,547 |  |  | 10,461,389 |
LIABILITIES AND STOCKHOLDERS’ EQUITY |  |  |  |
Liabilities: |  |  |  |
Reserve for loss and loss expense (Note 8) |  | $ | 4,644,391 |  |  | 4,580,903 |
Unearned premiums |  | 1,872,666 |  |  | 1,803,207 |
Long-term debt |  | 505,566 |  |  | 506,050 |
Current federal income tax |  | 16,473 |  |  | — |
Deferred federal income tax |  | — |  |  | 13,413 |
Accrued salaries and benefits |  | 90,584 |  |  | 121,057 |
Other liabilities |  | 402,626 |  |  | 453,874 |
Total liabilities |  | $ | 7,532,306 |  |  | 7,478,504 |
Stockholders’ Equity: |  |  |  |
Preferred stock of $0 par value per share: |  | $ | 200,000 |  |  | 200,000 |
Authorized shares 5,000,000; Issued shares: 8,000 with $25,000 liquidation preference per share - 2022 and 2021 |  |  |  |
Common stock of $2 par value per share: |  |  |  |
Authorized shares 360,000,000 |  |  |  |
Issued: 104,674,999 – 2022; 104,450,916 – 2021 |  | 209,336 |  |  | 208,902 |
Additional paid-in capital |  | 472,790 |  |  | 464,347 |
Retained earnings |  | 2,640,437 |  |  | 2,603,472 |
Accumulated other comprehensive (loss) income (Note 11) |  | (129,795) |  |  | 115,099 |
Treasury stock – at cost (shares: 44,339,527 – 2022; 44,266,534 – 2021) |  | (614,527) |  |  | (608,935) |
Total stockholders’ equity |  | $ | 2,778,241 |  |  | 2,982,885 |
Commitments and contingencies |  |  |  |
Total liabilities and stockholders’ equity |  | $ | 10,310,547 |  |  | 10,461,389 |

The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
1

Table of Contents

SELECTIVE INSURANCE GROUP, INC. UNAUDITED CONSOLIDATED STATEMENTS OF INCOME |  | Quarter ended March 31, |  |
($ in thousands, except per share amounts) |  | 2022 |  | 2021 |  |  |  |
Revenues: |  |  |  |  |  |  |  |
Net premiums earned |  | $ | 812,283 |  |  | 724,960 |  |  |  |  |
Net investment income earned |  | 72,602 |  |  | 69,716 |  |  |  |  |
Net realized and unrealized investment (losses) gains |  | (40,352) |  |  | 5,119 |  |  |  |  |
Other income |  | 1,529 |  |  | 4,112 |  |  |  |  |
Total revenues |  | 846,062 |  |  | 803,907 |  |  |  |  |
Expenses: |  |  |  |  |  |  |  |
Loss and loss expense incurred |  | 494,236 |  |  | 413,401 |  |  |  |  |
Amortization of deferred policy acquisition costs |  | 169,757 |  |  | 149,051 |  |  |  |  |
Other insurance expenses |  | 93,990 |  |  | 88,910 |  |  |  |  |
Interest expense |  | 7,168 |  |  | 7,359 |  |  |  |  |
Corporate expenses |  | 11,021 |  |  | 9,554 |  |  |  |  |
Total expenses |  | 776,172 |  |  | 668,275 |  |  |  |  |
Income before federal income tax |  | 69,890 |  |  | 135,632 |  |  |  |  |
Federal income tax expense: |  |  |  |  |  |  |  |
Current |  | 17,178 |  |  | 28,424 |  |  |  |  |
Deferred |  | (3,618) |  |  | (2,062) |  |  |  |  |
Total federal income tax expense |  | 13,560 |  |  | 26,362 |  |  |  |  |
Net income |  | $ | 56,330 |  |  | 109,270 |  |  |  |  |
Preferred stock dividends |  | 2,300 |  |  | 2,453 |  |  |  |  |
Net income available to common stockholders |  | $ | 54,030 |  |  | 106,817 |  |  |  |  |
Earnings per common share: |  |  |  |  |  |  |  |
Net income available to common stockholders - Basic |  | $ | 0.89 |  |  | 1.78 |  |  |  |  |
Net income available to common stockholders - Diluted |  | $ | 0.89 |  |  | 1.77 |  |  |  |  |

The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
2

Table of Contents

SELECTIVE INSURANCE GROUP, INC. UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |  | Quarter ended March 31, |  |
($ in thousands) |  | 2022 |  | 2021 |  |  |  |
Net income |  | $ | 56,330 |  |  | 109,270 |  |  |  |  |
Other comprehensive loss ("OCI"), net of tax: |  |  |  |  |  |  |  |
Unrealized losses on investment securities: |  |  |  |  |  |  |  |
Unrealized holding losses arising during period |  | (206,848) |  |  | (81,613) |  |  |  |  |
Unrealized losses on securities with credit loss recognized in earnings |  | (68,430) |  |  | (8,943) |  |  |  |  |
Amounts reclassified into net income: |  |  |  |  |  |  |  |
Held-to-maturity ("HTM") securities |  | 1 |  |  | (2) |  |  |  |  |
Net realized losses on disposals and intent-to-sell available-for-sale ("AFS") securities |  | 12,633 |  |  | 477 |  |  |  |  |
Credit loss expense |  | 17,421 |  |  | 3,948 |  |  |  |  |
Total unrealized losses on investment securities |  | (245,223) |  |  | (86,133) |  |  |  |  |
Defined benefit pension and post-retirement plans: |  |  |  |  |  |  |  |
Amounts reclassified into net income: |  |  |  |  |  |  |  |
Net actuarial loss |  | 329 |  |  | 547 |  |  |  |  |
Total defined benefit pension and post-retirement plans |  | 329 |  |  | 547 |  |  |  |  |
Other comprehensive loss |  | (244,894) |  |  | (85,586) |  |  |  |  |
Comprehensive (loss) income |  | $ | (188,564) |  |  | 23,684 |  |  |  |  |

The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
3

Table of Contents

SELECTIVE INSURANCE GROUP, INC. UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY |  | Quarter ended March 31, |  |
($ in thousands, except share and per share amounts) |  | 2022 |  | 2021 |  |  |  |
Preferred stock: |  |  |  |  |  |  |  |
Beginning of period |  | $ | 200,000 |  |  | 200,000 |  |  |  |  |
Issuance of preferred stock |  | — |  |  | — |  |  |  |  |
End of period |  | 200,000 |  |  | 200,000 |  |  |  |  |
Common stock: |  |  |  |  |  |  |  |
Beginning of period |  | 208,902 |  |  | 208,066 |  |  |  |  |
Dividend reinvestment plan |  | 11 |  |  | 13 |  |  |  |  |
Stock purchase and compensation plans |  | 423 |  |  | 497 |  |  |  |  |
End of period |  | 209,336 |  |  | 208,576 |  |  |  |  |
Additional paid-in capital: |  |  |  |  |  |  |  |
Beginning of period |  | 464,347 |  |  | 438,985 |  |  |  |  |
Dividend reinvestment plan |  | 443 |  |  | 429 |  |  |  |  |
Stock purchase and compensation plans |  | 8,000 |  |  | 6,996 |  |  |  |  |
End of period |  | 472,790 |  |  | 446,410 |  |  |  |  |
Retained earnings: |  |  |  |  |  |  |  |
Beginning of period |  | 2,603,472 |  |  | 2,271,537 |  |  |  |  |
Net income |  | 56,330 |  |  | 109,270 |  |  |  |  |
Dividends to preferred stockholders |  | (2,300) |  |  | (2,453) |  |  |  |  |
Dividends to common stockholders |  | (17,065) |  |  | (15,165) |  |  |  |  |
End of period |  | 2,640,437 |  |  | 2,363,189 |  |  |  |  |
Accumulated other comprehensive (loss) income ("AOCI"): |  |  |  |  |  |  |  |
Beginning of period |  | 115,099 |  |  | 220,186 |  |  |  |  |
Other comprehensive loss |  | (244,894) |  |  | (85,586) |  |  |  |  |
End of period |  | (129,795) |  |  | 134,600 |  |  |  |  |
Treasury stock: |  |  |  |  |  |  |  |
Beginning of period |  | (608,935) |  |  | (599,885) |  |  |  |  |
Acquisition of treasury stock - share repurchase authorization |  | (76) |  |  | (3,404) |  |  |  |  |
Acquisition of treasury stock - shares acquired related to employee share-based compensation plans |  | (5,516) |  |  | (5,441) |  |  |  |  |
End of period |  | (614,527) |  |  | (608,730) |  |  |  |  |
Total stockholders’ equity |  | $ | 2,778,241 |  |  | 2,744,045 |  |  |  |  |
Dividends declared per preferred share |  | $ | 287.50 |  |  | 306.67 |  |  |  |  |
Dividends declared per common share |  | $ | 0.28 |  |  | 0.25 |  |  |  |  |
Preferred stock, shares outstanding: |  |  |  |  |  |  |  |
Beginning of period |  | 8,000 |  |  | 8,000 |  |  |  |  |
Issuance of preferred stock |  | — |  |  | — |  |  |  |  |
End of period |  | 8,000 |  |  | 8,000 |  |  |  |  |
Common stock, shares outstanding: |  |  |  |  |  |  |  |
Beginning of period |  | 60,184,382 |  |  | 59,905,803 |  |  |  |  |
Dividend reinvestment plan |  | 5,641 |  |  | 6,420 |  |  |  |  |
Stock purchase and compensation plan |  | 218,442 |  |  | 248,459 |  |  |  |  |
Acquisition of treasury stock - share repurchase authorization |  | (1,000) |  |  | (52,781) |  |  |  |  |
Acquisition of treasury stock - shares acquired related to employee share-based compensation plans |  | (71,993) |  |  | (84,018) |  |  |  |  |
End of period |  | 60,335,472 |  |  | 60,023,883 |  |  |  |  |

The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
4

Table of Contents

SELECTIVE INSURANCE GROUP, INC. UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS |  | Quarter ended March 31,
($ in thousands) |  | 2022 |  | 2021
Operating Activities |  |  |  |
Net income |  | $ | 56,330 |  |  | 109,270 |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |  |  |  |
Depreciation and amortization |  | 12,807 |  |  | 13,703 |
Stock-based compensation expense |  | 7,031 |  |  | 6,493 |
Undistributed gains of equity method investments |  | (9,406) |  |  | (13,905) |
Distributions in excess of current year income of equity method investments |  | 11,626 |  |  | 2,309 |
Net realized and unrealized losses (gains) |  | 40,352 |  |  | (5,119) |
Loss on disposal of fixed assets |  | 2 |  |  | 3 |
Changes in assets and liabilities: |  |  |  |
Increase in reserve for loss and loss expense, net of reinsurance recoverable |  | 86,197 |  |  | 106,468 |
Increase in unearned premiums, net of prepaid reinsurance |  | 77,515 |  |  | 73,218 |
Increase in net federal income taxes |  | 13,656 |  |  | 25,927 |
Increase in premiums receivable |  | (66,346) |  |  | (59,182) |
Increase in deferred policy acquisition costs |  | (14,774) |  |  | (14,074) |
Increase in accrued investment income |  | (185) |  |  | (1,101) |
Decrease in accrued salaries and benefits |  | (30,473) |  |  | (31,216) |
Increase in other assets |  | (10,789) |  |  | (14,302) |
Decrease in other liabilities |  | (80,864) |  |  | (68,236) |
Net cash provided by operating activities |  | 92,679 |  |  | 130,256 |
Investing Activities |  |  |  |
Purchase of fixed income securities, HTM |  | (5,000) |  |  | (9,000) |
Purchase of fixed income securities, AFS |  | (874,665) |  |  | (671,909) |
Purchase of commercial mortgage loans |  | (20,399) |  |  | (14,860) |
Purchase of equity securities |  | (13,952) |  |  | (48,910) |
Purchase of other investments |  | (15,555) |  |  | (18,589) |
Purchase of short-term investments |  | (910,191) |  |  | (1,723,212) |
Sale of fixed income securities, AFS |  | 425,234 |  |  | 212,891 |
Proceeds from commercial mortgage loans |  | 301 |  |  | 99 |
Sale of short-term investments |  | 1,101,725 |  |  | 1,795,239 |
Redemption and maturities of fixed income securities, HTM |  | 756 |  |  | 1,461 |
Redemption and maturities of fixed income securities, AFS |  | 216,024 |  |  | 319,469 |
Sale of equity securities |  | 2,626 |  |  | 42,782 |
Sale of other investments |  | 525 |  |  | 3,004 |
Distributions from other investments |  | 4,342 |  |  | 5,162 |
Purchase of property and equipment |  | (7,677) |  |  | (4,561) |
Net cash used in investing activities |  | (95,906) |  |  | (110,934) |
Financing Activities |  |  |  |
Dividends to preferred stockholders |  | (2,300) |  |  | (2,453) |
Dividends to common stockholders |  | (16,447) |  |  | (14,569) |
Acquisition of treasury stock |  | (5,592) |  |  | (8,845) |
Net proceeds from stock purchase and compensation plans |  | 999 |  |  | 824 |
Preferred stock issued, net of issuance costs |  | — |  |  | (479) |
Repayments of finance lease obligations |  | (612) |  |  | (115) |
Net cash used in financing activities |  | (23,952) |  |  | (25,637) |
Net decrease in cash and restricted cash |  | (27,179) |  |  | (6,315) |
Cash and restricted cash, beginning of year |  | 45,063 |  |  | 15,231 |
Cash and restricted cash, end of period |  | $ | 17,884 |  |  | 8,916 |

The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
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NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. Basis of Presentation
The words "Company,” “we,” “us,” or “our” refer to Selective Insurance Group, Inc. (the "Parent") and its subsidiaries, except as expressly indicated or the context requires otherwise. We have prepared our interim unaudited consolidated financial statements (“Financial Statements”) in conformity with (i) United States ("U.S.") generally accepted accounting principles (“GAAP”), and (ii) the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. These require management to make estimates and assumptions that affect the reported financial statement balances, as well as the disclosure of contingent assets and liabilities. Actual results could differ from those estimates. All significant intercompany accounts and transactions are eliminated in consolidation.
Our 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. Our Financial Statements cover the first quarters ended March 31, 2022 (“First Quarter 2022”) and March 31, 2021 (“First Quarter 2021”). Our Financial Statements do not include all information and disclosures required by GAAP and the SEC for audited annual financial statements. Because results of operations for any interim period are not necessarily indicative of results for a full year, our 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 31, 2021 (“2021 Annual Report”) filed with the SEC.
NOTE 2. Adoption of Accounting Pronouncements
There was no adoption of accounting pronouncements in First Quarter 2022.
Pronouncements to be effective in the future
In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). ASU 2020-04 provides optional expedients and exceptions to the guidance in GAAP on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition away from the London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates. Companies can elect to adopt ASU 2020-04 as of the beginning of the interim period that includes March 2020, or any date thereafter through December 31, 2022. We are currently evaluating the impact of this guidance on our financial condition and results of operations.
NOTE 3. Statements of Cash Flows
Supplemental cash flow information was as follows:

|  | Quarter ended March 31,
($ in thousands) |  | 2022 |  | 2021
Cash paid (received) during the period for: |  |  |  |
Interest |  | $ | 8,523 |  |  | 8,722 |
Federal income tax |  | (800) |  |  | — |
Cash paid for amounts included in the measurement of lease liabilities: |  |  |  |
Operating cash flows from operating leases |  | 2,058 |  |  | 2,226 |
Operating cash flows from financing leases |  | 11 |  |  | 2 |
Financing cash flows from finance leases |  | 612 |  |  | 115 |
Non-cash items: |  |  |  |
Corporate actions related to fixed income securities, AFS 1 |  | 1,244 |  |  | 26,085 |
Assets acquired under finance lease arrangements |  | 38 |  |  | 183 |
Assets acquired under operating lease arrangements |  | 5,760 |  |  | 16 |
Non-cash purchase of property and equipment |  | — |  |  | 3 |

1 Examples of corporate actions include like-kind exchanges, non-cash acquisitions, and stock splits.
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The following table provides a reconciliation of cash and restricted cash reported within the Consolidated Balance Sheets that equate to the amount reported in the Consolidated Statements of Cash Flows:

($ in thousands) |  | March 31, 2022 |  | December 31, 2021
Cash |  | $ | 410 |  |  | 455 |
Restricted cash |  | 17,474 |  |  | 44,608 |
Total cash and restricted cash shown in the Consolidated Statements of Cash Flows |  | $ | 17,884 |  |  | 45,063 |

Amounts included in restricted cash represent cash received from the National Flood Insurance Program ("NFIP"), which is restricted to pay flood claims under the Write Your Own program.
NOTE 4. Investments
(a) Information regarding our AFS securities as of March 31, 2022 and December 31, 2021 were as follows:

March 31, 2022 |  |  |  |  |  |  |  |  |  |
($ in thousands) |  | Cost/ Amortized Cost |  | Allowance for Credit Losses |  | Unrealized Gains |  | Unrealized Losses |  | Fair Value
AFS fixed income securities: |  |  |  |  |  |  |  |  |  |
U.S. government and government agencies |  | $ | 131,986 |  |  | — |  |  | 490 |  |  | (5,383) |  |  | 127,093 |
Foreign government |  | 17,160 |  |  | (150) |  |  | 145 |  |  | (452) |  |  | 16,703 |
Obligations of states and political subdivisions |  | 1,122,132 |  |  | (1,991) |  |  | 15,329 |  |  | (10,039) |  |  | 1,125,431 |
Corporate securities |  | 2,445,468 |  |  | (23,066) |  |  | 25,658 |  |  | (60,320) |  |  | 2,387,740 |
Collateralized loan obligations ("CLO") and other asset-backed securities ("ABS") |  | 1,444,224 |  |  | (2,283) |  |  | 7,974 |  |  | (32,701) |  |  | 1,417,214 |
Residential mortgage-backed securities ("RMBS") |  | 903,800 |  |  | (10,029) |  |  | 6,779 |  |  | (22,591) |  |  | 877,959 |
Commercial mortgage-backed securities ("CMBS") |  | 653,137 |  |  | (80) |  |  | 5,618 |  |  | (11,993) |  |  | 646,682 |
Total AFS fixed income securities |  | $ | 6,717,907 |  |  | (37,599) |  |  | 61,993 |  |  | (143,479) |  |  | 6,598,822 |

December 31, 2021 |  |  |  |  |  |  |  |  |  |
($ in thousands) |  | Cost/ Amortized Cost |  | Allowance for Credit Losses |  | Unrealized Gains |  | Unrealized Losses |  | Fair Value
AFS fixed income securities: |  |  |  |  |  |  |  |  |  |
U.S. government and government agencies |  | $ | 127,974 |  |  | — |  |  | 3,629 |  |  | (1,145) |  |  | 130,458 |
Foreign government |  | 15,420 |  |  | (46) |  |  | 609 |  |  | (123) |  |  | 15,860 |
Obligations of states and political subdivisions |  | 1,121,422 |  |  | (137) |  |  | 68,258 |  |  | (235) |  |  | 1,189,308 |
Corporate securities |  | 2,478,348 |  |  | (6,682) |  |  | 106,890 |  |  | (4,953) |  |  | 2,573,603 |
CLO and other ABS |  | 1,343,687 |  |  | (939) |  |  | 14,350 |  |  | (6,284) |  |  | 1,350,814 |
RMBS |  | 756,280 |  |  | (1,909) |  |  | 24,813 |  |  | (2,932) |  |  | 776,252 |
CMBS |  | 647,622 |  |  | (11) |  |  | 27,752 |  |  | (1,682) |  |  | 673,681 |
Total AFS fixed income securities |  | $ | 6,490,753 |  |  | (9,724) |  |  | 246,301 |  |  | (17,354) |  |  | 6,709,976 |

The following tables provide a roll forward of the allowance for credit losses on our AFS fixed income securities for the periods indicated:

Quarter ended March 31, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |  |
($ in thousands) |  | Beginning Balance |  | Current Provision for Securities without Prior Allowance |  | Initial Allowance for Purchased Credit Deteriorated Assets with Credit Deterioration |  | Increase (Decrease) on Securities with Prior Allowance, excluding intent (or Requirement) to Sell Securities |  | Reductions for Securities Sold |  | Reductions for Securities Identified as Intent (or Requirement) to Sell during the Period |  | Ending Balance
Foreign government |  | $ | 46 |  |  | 103 |  |  | — |  |  | 1 |  |  | — |  |  | — |  |  | 150 |
Obligations of states and political subdivisions |  | 137 |  |  | 1,732 |  |  | — |  |  | 132 |  |  | (10) |  |  | — |  |  | 1,991 |
Corporate securities |  | 6,682 |  |  | 15,393 |  |  | — |  |  | 3,337 |  |  | (1,247) |  |  | (1,099) |  |  | 23,066 |
CLO and other ABS |  | 939 |  |  | 1,288 |  |  | — |  |  | 59 |  |  | (3) |  |  | — |  |  | 2,283 |
RMBS |  | 1,909 |  |  | — |  |  | 8,318 |  |  | (63) |  |  | (135) |  |  | — |  |  | 10,029 |
CMBS |  | 11 |  |  | 72 |  |  | — |  |  | (3) |  |  | — |  |  | — |  |  | 80 |
Total AFS fixed income securities |  | $ | 9,724 |  |  | 18,588 |  |  | 8,318 |  |  | 3,463 |  |  | (1,395) |  |  | (1,099) |  |  | 37,599 |

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Quarter ended March 31, 2021 |  |  |  |  |  |  |  |  |  |  |  |
($ in thousands) |  | Beginning Balance |  | Current Provision for Securities without Prior Allowance |  | Increase (Decrease) on Securities with Prior Allowance, excluding intent (or Requirement) to Sell Securities |  | Reductions for Securities Sold |  | Reductions for Securities Identified as Intent (or Requirement) to Sell during the Period |  | Ending Balance
Foreign government |  | $ | 1 |  |  | 56 |  |  | (1) |  |  | — |  |  | — |  |  | 56 |
Obligations of states and political subdivisions |  | 4 |  |  | 186 |  |  | 11 |  |  | — |  |  | — |  |  | 201 |
Corporate securities |  | 2,782 |  |  | 4,058 |  |  | (527) |  |  | (147) |  |  | — |  |  | 6,166 |
CLO and other ABS |  | 592 |  |  | 1,001 |  |  | (106) |  |  | (17) |  |  | — |  |  | 1,470 |
RMBS |  | 561 |  |  | 356 |  |  | (39) |  |  | (14) |  |  | — |  |  | 864 |
CMBS |  | 29 |  |  | 10 |  |  | (15) |  |  | — |  |  | — |  |  | 24 |
Total AFS fixed income securities |  | $ | 3,969 |  |  | 5,667 |  |  | (677) |  |  | (178) |  |  | — |  |  | 8,781 |

During First Quarter 2022 and First Quarter 2021, we did not have any write-offs or recoveries of our AFS fixed income securities, so these items are not included in the tables above.
For information on our methodology and significant inputs used to measure expected credit losses, our accounting policy for recognizing write-offs of uncollectible amounts, and our treatment of accrued interest, refer to Note 2. "Summary of Significant Accounting Policies" in Item 8. "Financial Statements and Supplementary Data." of our 2021 Annual Report. Accrued interest on AFS securities was $46.8 million as of March 31, 2022, and $46.3 million as of December 31, 2021. We did not record any material write-offs of accrued interest during 2022 and 2021.
(b) Quantitative information about unrealized losses on our AFS portfolio is provided below.

March 31, 2022 |  | Less than 12 months |  | 12 months or longer |  | Total
($ in thousands) |  | Fair Value |  | Unrealized Losses |  | Fair Value |  | Unrealized Losses |  | Fair Value |  | Unrealized Losses
AFS fixed income securities: |  |  |  |  |  |  |  |  |  |  |  |
U.S. government and government agencies |  | $ | 89,044 |  |  | (4,410) |  |  | 5,252 |  |  | (973) |  |  | 94,296 |  |  | (5,383) |
Foreign government |  | 5,394 |  |  | (268) |  |  | 1,996 |  |  | (184) |  |  | 7,390 |  |  | (452) |
Obligations of states and political subdivisions |  | 223,497 |  |  | (9,846) |  |  | 2,834 |  |  | (193) |  |  | 226,331 |  |  | (10,039) |
Corporate securities |  | 1,002,980 |  |  | (59,605) |  |  | 6,823 |  |  | (715) |  |  | 1,009,803 |  |  | (60,320) |
CLO and other ABS |  | 937,362 |  |  | (28,658) |  |  | 101,722 |  |  | (4,043) |  |  | 1,039,084 |  |  | (32,701) |
RMBS |  | 545,934 |  |  | (21,444) |  |  | 13,731 |  |  | (1,147) |  |  | 559,665 |  |  | (22,591) |
CMBS |  | 337,995 |  |  | (9,807) |  |  | 23,123 |  |  | (2,186) |  |  | 361,118 |  |  | (11,993) |
Total AFS fixed income securities |  | $ | 3,142,206 |  |  | (134,038) |  |  | 155,481 |  |  | (9,441) |  |  | 3,297,687 |  |  | (143,479) |

December 31, 2021 |  | Less than 12 months |  | 12 months or longer |  | Total
($ in thousands) |  | Fair Value |  | Unrealized Losses |  | Fair Value |  | Unrealized Losses |  | Fair Value |  | Unrealized Losses
AFS fixed income securities: |  |  |  |  |  |  |  |  |  |  |  |
U.S. government and government agencies |  | $ | 34,857 |  |  | (746) |  |  | 7,827 |  |  | (399) |  |  | 42,684 |  |  | (1,145) |
Foreign government |  | 2,000 |  |  | (84) |  |  | 1,061 |  |  | (39) |  |  | 3,061 |  |  | (123) |
Obligations of states and political subdivisions |  | 25,837 |  |  | (235) |  |  | — |  |  | — |  |  | 25,837 |  |  | (235) |
Corporate securities |  | 300,549 |  |  | (4,903) |  |  | 2,520 |  |  | (50) |  |  | 303,069 |  |  | (4,953) |
CLO and other ABS |  | 663,976 |  |  | (4,934) |  |  | 53,368 |  |  | (1,350) |  |  | 717,344 |  |  | (6,284) |
RMBS |  | 236,010 |  |  | (2,931) |  |  | 20 |  |  | (1) |  |  | 236,030 |  |  | (2,932) |
CMBS |  | 112,899 |  |  | (1,016) |  |  | 20,326 |  |  | (666) |  |  | 133,225 |  |  | (1,682) |
Total AFS fixed income securities |  | $ | 1,376,128 |  |  | (14,849) |  |  | 85,122 |  |  | (2,505) |  |  | 1,461,250 |  |  | (17,354) |

We do not currently intend to sell any of the securities in the tables above, nor will we be required to sell any of these securities. The increase in gross unrealized losses at March 31, 2022 compared to December 31, 2021 was driven by an increase in benchmark U.S. Treasury rates and a widening of credit spreads. Considering these factors and our review of these securities under our credit loss policy as described in Note 2. "Summary of Significant Accounting Policies" in Item 8. "Financial Statements and Supplementary Data." of our 2021 Annual Report, we have concluded that no allowance for credit loss is required on these balances. This conclusion reflects our current judgment about the financial position and future prospects of the entity that issued the investment security and underlying collateral.
(c) Fixed income securities at March 31, 2022 by contractual maturity are shown below. Mortgage-backed securities are included in the maturity tables using the estimated average life of each security. Expected maturities may differ from
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contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.
Listed below are the contractual maturities of fixed income securities at March 31, 2022:

|  | AFS |  | HTM
($ in thousands) |  | Fair Value |  | Carrying Value |  | Fair Value
Due in one year or less |  | $ | 396,074 |  |  | 6,727 |  |  | 6,899 |
Due after one year through five years |  | 2,915,421 |  |  | 5,977 |  |  | 6,012 |
Due after five years through 10 years |  | 2,425,811 |  |  | 20,331 |  |  | 19,714 |
Due after 10 years |  | 861,516 |  |  | — |  |  | — |
Total fixed income securities |  | $ | 6,598,822 |  |  | 33,035 |  |  | 32,625 |

(d) The following table summarizes our other investment portfolio by strategy:

Other Investments |  | March 31, 2022 |  | December 31, 2021
($ in thousands) |  | Carrying Value |  | Remaining Commitment |  | Maximum Exposure to Loss 1 |  | Carrying Value |  | Remaining Commitment |  | Maximum Exposure to Loss 1
Alternative Investments |  |  |  |  |  |  |  |  |  |  |  |
Private equity |  | $ | 281,352 |  |  | 124,761 |  |  | 406,113 |  |  | 273,070 |  |  | 99,734 |  |  | 372,804 |
Private credit |  | 60,476 |  |  | 92,279 |  |  | 152,755 |  |  | 63,138 |  |  | 92,674 |  |  | 155,812 |
Real assets |  | 26,159 |  |  | 20,914 |  |  | 47,073 |  |  | 23,524 |  |  | 22,579 |  |  | 46,103 |
Total alternative investments |  | 367,987 |  |  | 237,954 |  |  | 605,941 |  |  | 359,732 |  |  | 214,987 |  |  | 574,719 |
Other securities |  | 57,679 |  |  | — |  |  | 57,679 |  |  | 49,300 |  |  | — |  |  | 49,300 |
Total other investments |  | $ | 425,666 |  |  | 237,954 |  |  | 663,620 |  |  | 409,032 |  |  | 214,987 |  |  | 624,019 |

1 In addition to the amounts in this table, previously recognized tax credits are subject to the risk of recapture. We do not consider the risk of recapture to be significant and therefore do not include in this table.
We are contractually committed to make additional investments up to the remaining commitments stated above. We did not provide any non-contractual financial support at any time during 2022 or 2021.
The following table shows gross summarized financial information for our other investments portfolio, including the portion we do not own. As the majority of these investments are carried under the equity method of accounting and report results to us on a one-quarter lag, the summarized financial statement information is for the three-month period ended, December 31:

Income Statement Information |  | Quarter ended March 31, |  |
($ in millions) |  | 2022 |  | 2021 |  |  |  |
Net investment income |  | $ | 135.5 |  |  | 481.6 |  |  |  |  |
Realized gains |  | 2,748.0 |  |  | 776.0 |  |  |  |  |
Net change in unrealized appreciation |  | 5,178.2 |  |  | 4,630.8 |  |  |  |  |
Net income |  | $ | 8,061.7 |  |  | 5,888.4 |  |  |  |  |
Alternative investment income included in "Net investment income earned" on our Consolidated Statements of Income |  | $ | 19.1 |  |  | 20.2 |  |  |  |  |

(e) We have pledged certain AFS fixed income securities as collateral related to our borrowing relationships with the Federal Home Loan Bank of Indianapolis ("FHLBI") and the Federal Home Loan Bank of New York ("FHLBNY"). In addition, certain securities were on deposit with various state and regulatory agencies at March 31, 2022 to comply with insurance laws. We retain all rights regarding all securities pledged as collateral.
The following table summarizes the market value of these securities at March 31, 2022:

($ in millions) |  | FHLBI Collateral |  | FHLBNY Collateral |  |  |  | State and Regulatory Deposits |  | Total
U.S. government and government agencies |  | $ | — |  |  | — |  |  |  |  | 20.3 |  |  | 20.3 |
Obligations of states and political subdivisions |  | — |  |  | — |  |  |  |  | 3.8 |  |  | 3.8 |
RMBS |  | 63.1 |  |  | 35.9 |  |  |  |  | — |  |  | 99.0 |
CMBS |  | 5.8 |  |  | 12.8 |  |  |  |  | — |  |  | 18.6 |
Total pledged as collateral |  | $ | 68.9 |  |  | 48.7 |  |  |  |  | 24.1 |  |  | 141.7 |

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(f) We did not have exposure to any credit concentration risk of a single issuer greater than 10% of our stockholders' equity, other than certain U.S. government agencies, as of March 31, 2022, or December 31, 2021.
(g) The components of pre-tax net investment income earned were as follows:

|  | Quarter ended March 31, |  |
($ in thousands) |  | 2022 |  | 2021 |  |  |  |
Fixed income securities |  | $ | 53,925 |  |  | 52,823 |  |  |  |  |
Commercial mortgage loans ("CMLs") |  | 970 |  |  | 514 |  |  |  |  |
Equity securities |  | 2,418 |  |  | 2,488 |  |  |  |  |
Short-term investments |  | 101 |  |  | 85 |  |  |  |  |
Other investments |  | 19,305 |  |  | 17,433 |  |  |  |  |
Investment expenses |  | (4,117) |  |  | (3,627) |  |  |  |  |
Net investment income earned |  | $ | 72,602 |  |  | 69,716 |  |  |  |  |

(h) The following table summarizes net realized and unrealized gains and losses for the periods indicated:

|  | Quarter ended March 31, |  |
($ in thousands) |  | 2022 |  | 2021 |  |  |  |
Gross gains on sales |  | $ | 2,197 |  |  | 3,676 |  |  |  |  |
Gross losses on sales |  | (13,560) |  |  | (4,471) |  |  |  |  |
Net realized losses on disposals |  | (11,363) |  |  | (795) |  |  |  |  |
Net unrealized (losses) gains on equity securities |  | (2,154) |  |  | 11,280 |  |  |  |  |
Net credit loss expense on fixed income securities, AFS |  | (22,052) |  |  | (4,997) |  |  |  |  |
Net credit loss benefit (expense) on fixed income securities, HTM |  | 14 |  |  | (7) |  |  |  |  |
Losses on securities for which we have the intent to sell |  | (4,797) |  |  | (362) |  |  |  |  |
Net realized and unrealized (losses) gains |  | $ | (40,352) |  |  | 5,119 |  |  |  |  |

Net realized and unrealized investment gains decreased $45.5 million in First Quarter 2022 compared to First Quarter 2021 primarily driven by (i) active trading of our fixed income securities in an effort to opportunistically increase yield given the rising interest rate environment, and (ii) higher credit loss expense on our AFS fixed income securities portfolio.
Net unrealized losses and gains recognized in income on equity securities, as reflected in the table above, included the following:

|  | Quarter ended March 31, |  |
($ in thousands) |  | 2022 |  | 2021 |  |  |  |
Unrealized (losses) gains recognized in income on equity securities: |  |  |  |  |  |  |  |
On securities remaining in our portfolio at end of period |  | $ | (2,220) |  |  | 10,097 |  |  |  |  |
On securities sold in period |  | 66 |  |  | 1,183 |  |  |  |  |
Total unrealized (losses) gains recognized in income on equity securities |  | $ | (2,154) |  |  | 11,280 |  |  |  |  |

NOTE 5. Fair Value Measurements
The financial assets in our investment portfolio are primarily measured at fair value as disclosed on the Consolidated Balance Sheets. The following table presents the carrying amounts and estimated fair values of our financial liabilities as of March 31, 2022, and December 31, 2021:

|  | March 31, 2022 |  | December 31, 2021
($ in thousands) |  | Carrying Amount |  | Fair Value |  | Carrying Amount |  | Fair Value
Financial Liabilities |  |  |  |  |  |  |  |
Long-term debt: |  |  |  |  |  |  |  |
7.25% Senior Notes |  | $ | 49,919 |  |  | 59,828 |  |  | 49,917 |  |  | 63,719 |
6.70% Senior Notes |  | 99,525 |  |  | 116,980 |  |  | 99,520 |  |  | 127,574 |
5.375% Senior Notes |  | 294,353 |  |  | 332,644 |  |  | 294,330 |  |  | 395,652 |
3.03% borrowings from FHLBI |  | 60,000 |  |  | 60,747 |  |  | 60,000 |  |  | 64,126 |
Subtotal long-term debt |  | 503,797 |  |  | 570,199 |  |  | 503,767 |  |  | 651,071 |
Unamortized debt issuance costs |  | (3,106) |  |  |  |  | (3,167) |  |  |
Finance lease obligations |  | 4,875 |  |  |  |  | 5,450 |  |  |
Total long-term debt |  | $ | 505,566 |  |  |  |  | 506,050 |  |  |

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For discussion regarding the fair value techniques of our financial instruments, refer to Note 2. "Summary of Significant Accounting Policies" in Item 8. "Financial Statements and Supplementary Data." of our 2021 Annual Report.
The following tables provide quantitative disclosures of our financial assets that were measured and recorded at fair value at March 31, 2022, and December 31, 2021:

March 31, 2022 |  |  |  | Fair Value Measurements Using
($ in thousands) |  | Assets Measured at Fair Value |  | Quoted Prices in Active Markets for Identical Assets/ Liabilities (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3)
Description |  |  |  |  |  |  |  |
Measured on a recurring basis: |  |  |  |  |  |  |  |
AFS fixed income securities: |  |  |  |  |  |  |  |
U.S. government and government agencies |  | $ | 127,093 |  |  | 31,671 |  |  | 95,422 |  |  | — |
Foreign government |  | 16,703 |  |  | — |  |  | 16,703 |  |  | — |
Obligations of states and political subdivisions |  | 1,125,431 |  |  | — |  |  | 1,118,186 |  |  | 7,245 |
Corporate securities |  | 2,387,740 |  |  | — |  |  | 2,264,938 |  |  | 122,802 |
CLO and other ABS |  | 1,417,214 |  |  | — |  |  | 1,286,296 |  |  | 130,918 |
RMBS |  | 877,959 |  |  | — |  |  | 877,959 |  |  | — |
CMBS |  | 646,682 |  |  | — |  |  | 646,243 |  |  | 439 |
Total AFS fixed income securities |  | 6,598,822 |  |  | 31,671 |  |  | 6,305,747 |  |  | 261,404 |
Equity securities: |  |  |  |  |  |  |  |
Common stock 1 |  | 342,572 |  |  | 246,178 |  |  | — |  |  | — |
Preferred stock |  | 2,011 |  |  | 2,011 |  |  | — |  |  | — |
Total equity securities |  | 344,583 |  |  | 248,189 |  |  | — |  |  | — |
Short-term investments |  | 256,712 |  |  | 250,938 |  |  | 5,774 |  |  | — |
Total assets measured at fair value |  | $ | 7,200,117 |  |  | 530,798 |  |  | 6,311,521 |  |  | 261,404 |

December 31, 2021 |  |  |  | Fair Value Measurements Using
($ in thousands) |  | Assets Measured at Fair Value |  | Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3)
Description |  |  |  |  |  |  |  |
Measured on a recurring basis: |  |  |  |  |  |  |  |
AFS fixed income securities: |  |  |  |  |  |  |  |
U.S. government and government agencies |  | $ | 130,458 |  |  | 60,615 |  |  | 69,843 |  |  | — |
Foreign government |  | 15,860 |  |  | — |  |  | 15,860 |  |  | — |
Obligations of states and political subdivisions |  | 1,189,308 |  |  | — |  |  | 1,181,563 |  |  | 7,745 |
Corporate securities |  | 2,573,603 |  |  | — |  |  | 2,459,476 |  |  | 114,127 |
CLO and other ABS |  | 1,350,814 |  |  | — |  |  | 1,225,905 |  |  | 124,909 |
RMBS |  | 776,252 |  |  | — |  |  | 776,007 |  |  | 245 |
CMBS |  | 673,681 |  |  | — |  |  | 669,425 |  |  | 4,256 |
Total AFS fixed income securities |  | 6,709,976 |  |  | 60,615 |  |  | 6,398,079 |  |  | 251,282 |
Equity securities: |  |  |  |  |  |  |  |
Common stock 1 |  | 333,449 |  |  | 249,846 |  |  | — |  |  | — |
Preferred stock |  | 2,088 |  |  | 2,088 |  |  | — |  |  | — |
Total equity securities |  | 335,537 |  |  | 251,934 |  |  | — |  |  | — |
Short-term investments |  | 447,863 |  |  | 442,723 |  |  | 5,140 |  |  | — |
Total assets measured at fair value |  | $ | 7,493,376 |  |  | 755,272 |  |  | 6,403,219 |  |  | 251,282 |

1 Investments amounting to $96.4 million at March 31, 2022, and $83.6 million at December 31, 2021, were measured at fair value using the net asset value per share (or its practical expedient) and have not been classified in the fair value hierarchy. These investments are not redeemable and the timing of liquidations of the underlying assets is unknown at each reporting period. The fair value amounts in this table are intended to permit reconciliation of the fair value hierarchy to total assets measured at fair value.
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The following tables provide a summary of the changes in the fair value of securities measured using Level 3 inputs and related quantitative information for the periods indicated:

Quarter ended March 31, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |
($ in thousands) |  |  | Obligations of States and Political Subdivisions |  | Corporate Securities |  | CLO and Other ABS |  | RMBS |  | CMBS |  | Total
Fair value, December 31, 2021 |  |  | $ | 7,745 |  |  | 114,127 |  |  | 124,909 |  |  | 245 |  |  | 4,256 |  |  | 251,282 |
Total net (losses) gains for the period included in: |  |  |  |  |  |  |  |  |  |  |  |  |
OCI |  |  | (343) |  |  | (6,529) |  |  | (4,335) |  |  | (17) |  |  | (415) |  |  | (11,639) |
Net realized and unrealized (losses) gains |  |  | (157) |  |  | (1,809) |  |  | (472) |  |  | — |  |  | (7) |  |  | (2,445) |
Net investment income earned |  |  | — |  |  | 4 |  |  | 15 |  |  | — |  |  | 47 |  |  | 66 |
Purchases |  |  | — |  |  | 2,964 |  |  | 27,033 |  |  | — |  |  | — |  |  | 29,997 |
Sales |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Issuances |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Settlements |  |  | — |  |  | (69) |  |  | (136) |  |  | (11) |  |  | (11) |  |  | (227) |
Transfers into Level 3 |  |  | — |  |  | 17,055 |  |  | — |  |  | — |  |  | — |  |  | 17,055 |
Transfers out of Level 3 |  |  | — |  |  | (2,941) |  |  | (16,096) |  |  | (217) |  |  | (3,431) |  |  | (22,685) |
Fair value, March 31, 2022 |  |  | $ | 7,245 |  |  | 122,802 |  |  | 130,918 |  |  | — |  |  | 439 |  |  | 261,404 |
Change in unrealized losses for the period included in earnings for assets held at period end |  |  | (157) |  |  | (1,809) |  |  | (472) |  |  | — |  |  | (7) |  |  | (2,445) |
Change in unrealized gains for the period included in OCI for assets held at period end |  |  | (343) |  |  | (6,529) |  |  | (4,335) |  |  | (17) |  |  | (415) |  |  | (11,639) |

Quarter ended March 31, 2021 |  |  |  |  |  |  |  |  |  |  |
($ in thousands) | Obligation of state and Political Subdivisions |  | Corporate Securities |  | CLO and Other ABS |  |  |  |  |  | Total
Fair value, December 31, 2020 | $ | 2,894 |  |  | 70,700 |  |  | 56,375 |  |  |  |  |  |  | 129,969 |
Total net (losses) gains for the period included in: |  |  |  |  |  |  |  |  |  |  |
OCI | (99) |  |  | (2,388) |  |  | (1,116) |  |  |  |  |  |  | (3,603) |
Net realized and unrealized (losses) gains | — |  |  | (91) |  |  | (143) |  |  |  |  |  |  | (234) |
Net investment income earned | — |  |  | 1 |  |  | 3 |  |  |  |  |  |  | 4 |
Purchases | — |  |  | 21,100 |  |  | 10,672 |  |  |  |  |  |  | 31,772 |
Sales | — |  |  | — |  |  | — |  |  |  |  |  |  | — |
Issuances | — |  |  | — |  |  | — |  |  |  |  |  |  | — |
Settlements | — |  |  | — |  |  | (412) |  |  |  |  |  |  | (412) |
Transfers into Level 3 | 5,101 |  |  | — |  |  | — |  |  |  |  |  |  | 5,101 |
Transfers out of Level 3 | — |  |  | — |  |  | (490) |  |  |  |  |  |  | (490) |
Fair value, March 31, 2021 | $ | 7,896 |  |  | 89,322 |  |  | 64,889 |  |  |  |  |  |  | 162,107 |
Change in unrealized (losses) gains for the period included in earnings for assets held at period end | — |  |  | (91) |  |  | (143) |  |  |  |  |  |  | (234) |
Change in unrealized gains (losses) for the period included in OCI for assets held at period end | (99) |  |  | (2,388) |  |  | (1,116) |  |  |  |  |  |  | (3,603) |

The following tables present quantitative information about the significant unobservable inputs utilized in the fair value measurements of Level 3 assets at March 31, 2022 and December 31, 2021:

March 31, 2022 |  |  |  |  |  |  |  |
($ in thousands) |  | Assets Measured at Fair Value |  | Valuation Techniques |  | Unobservable Inputs |  | Range (Weighted Average)
Internal valuations: |  |  |  |  |  |  |  |
Corporate securities |  | $ | 56,510 |  |  | Discounted Cash Flow |  | Illiquidity Spread |  | (4.4)% - 5.3% (1.1)%
CLO and other ABS |  | 46,816 |  |  | Discounted Cash Flow |  | Illiquidity Spread |  | 0.01% - 8.0% (1.9)%
Total internal valuations |  | 103,326 |  |  |  |  |  |  |
Other 1 |  | 158,078 |  |  |  |  |  |  |
Total Level 3 securities |  | $ | 261,404 |  |  |  |  |  |  |

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December 31, 2021 |  |  |  |  |  |  |  |
($ in thousands) |  | Assets Measured at Fair Value |  | Valuation Techniques |  | Unobservable Inputs |  | Range (Weighted Average)
Internal valuations: |  |  |  |  |  |  |  |
Corporate securities |  | $ | 54,135 |  |  | Discounted Cash Flow |  | Illiquidity Spread |  | 0.3% - 3.0% (1.2)%
CLO and other ABS |  | 34,903 |  |  | Discounted Cash Flow |  | Illiquidity Spread |  | 0.7% - 8.0% (2.1)%
Total internal valuations |  | 89,038 |  |  |  |  |  |  |
Other 1 |  | 162,244 |  |  |  |  |  |  |
Total Level 3 securities |  | $ | 251,282 |  |  |  |  |  |  |

1 Other is comprised of broker quotes or other third-party pricing for which there is a lack of transparency as to the inputs used to develop the valuations. The quantitative details of these unobservable inputs is neither provided to us, nor reasonably available to us, and therefore are not included in the tables above.
For the securities in the tables above valued using a discounted cash flow analysis, we apply an illiquidity spread in our determination of fair value. An increase in this assumption would result in a lower fair value measurement.
The following tables provide quantitative information regarding our financial assets and liabilities that were not measured, but were disclosed at fair value at March 31, 2022, and December 31, 2021:

March 31, 2022 |  |  |  | Fair Value Measurements Using
($ in thousands) |  | Assets/ Liabilities Disclosed at Fair Value |  | Quoted Prices in Active Markets for Identical Assets/ Liabilities (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3)
Financial Assets |  |  |  |  |  |  |  |
HTM: |  |  |  |  |  |  |  |
Obligations of states and political subdivisions |  | $ | 3,502 |  |  | — |  |  | 3,502 |  |  | — |
Corporate securities |  | 29,123 |  |  | — |  |  | 29,123 |  |  | — |
Total HTM fixed income securities |  | $ | 32,625 |  |  | — |  |  | 32,625 |  |  | — |
CMLs |  | $ | 113,106 |  |  | — |  |  | — |  |  | 113,106 |
Financial Liabilities |  |  |  |  |  |  |  |
Long-term debt: |  |  |  |  |  |  |  |
7.25% Senior Notes |  | $ | 59,828 |  |  | — |  |  | 59,828 |  |  | — |
6.70% Senior Notes |  | 116,980 |  |  | — |  |  | 116,980 |  |  | — |
5.375% Senior Notes |  | 332,644 |  |  | — |  |  | 332,644 |  |  | — |
3.03% borrowings from FHLBI |  | 60,747 |  |  | — |  |  | 60,747 |  |  | — |
Total long-term debt |  | $ | 570,199 |  |  | — |  |  | 570,199 |  |  | — |

December 31, 2021 |  |  |  | Fair Value Measurements Using
($ in thousands) |  | Assets/ Liabilities Disclosed at Fair Value |  | Quoted Prices in Active Markets for Identical Assets/ Liabilities (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3)
Financial Assets |  |  |  |  |  |  |  |
HTM: |  |  |  |  |  |  |  |
Obligations of states and political subdivisions |  | $ | 3,576 |  |  | — |  |  | 3,576 |  |  | — |
Corporate securities |  | 25,884 |  |  | — |  |  | 25,884 |  |  | — |
Total HTM fixed income securities |  | $ | 29,460 |  |  | — |  |  | 29,460 |  |  | — |
CMLs |  | $ | 97,598 |  |  | — |  |  | — |  |  | 97,598 |
Financial Liabilities |  |  |  |  |  |  |  |
Long-term debt: |  |  |  |  |  |  |  |
7.25% Senior Notes |  | $ | 63,719 |  |  | — |  |  | 63,719 |  |  | — |
6.70% Senior Notes |  | 127,574 |  |  | — |  |  | 127,574 |  |  | — |
5.375% Senior Notes |  | 395,652 |  |  | — |  |  | 395,652 |  |  | — |
3.03% borrowings from FHLBI |  | 64,126 |  |  | — |  |  | 64,126 |  |  | — |
Total long-term debt |  | $ | 651,071 |  |  | — |  |  | 651,071 |  |  | — |

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NOTE 6. Allowance for Credit Losses on Premiums Receivable
The following table provides a roll forward of the allowance for credit losses on our premiums receivable balance for the periods indicated:

|  | Quarter ended March 31, |  |
($ in thousands) |  | 2022 |  | 2021 |  |  |  |
Balance at beginning of period |  | $ | 13,600 |  |  | $ | 21,000 |  |  |  |  |
Current period change for expected credit losses |  | 916 |  |  | 808 |  |  |  |  |
Write-offs charged against the allowance for credit losses |  | (520) |  |  | (874) |  |  |  |  |
Recoveries |  | 304 |  |  | 66 |  |  |  |  |
Allowance for credit losses, end of period |  | $ | 14,300 |  |  | $ | 21,000 |  |  |  |  |

In First Quarter 2022, we recognized an additional allowance for credit losses of $0.7 million, net of write-offs and recoveries. Included in this was a reserve of $2.3 million on 2022 policies based on our historical write-off percentages and assumptions, partially offset by a $1.1 million allowance reduction on older policies, primarily impacted by the COVID-19 pandemic, for which the credit loss did not fully materialize.
The heightened credit risk experienced in 2020 as a result of COVID-19 resulted in the allowance for credit losses being increased to $21.0 million, where it remained as of March 31, 2021. During First Quarter 2021, we recognized expected credit losses, net of recoveries, of $2.1 million on 2021 policies based on our historical write-off percentages and assumptions, partially offset by a $1.2 million allowance reduction on older policies.
For a discussion of the methodology used to evaluate our estimate of expected credit losses, refer to Note 2. "Summary of Significant Accounting Policies" in Item 8. "Financial Statements and Supplementary Data." of our 2021 Annual Report.
NOTE 7. Reinsurance
We evaluate and monitor the financial condition of our reinsurers under voluntary reinsurance arrangements to minimize our exposure to significant losses from reinsurer insolvencies. The following tables provide (i) a disaggregation of our reinsurance recoverable balance by financial strength rating and (ii) an aging analysis of our past due reinsurance recoverable balances as of March 31, 2022, and December 31, 2021:

|  | March 31, 2022
($ in thousands) |  | Current |  | Past Due |  | Total Reinsurance Recoverables
Financial strength rating of rated reinsurers |  |  |  |  |  |
A++ |  | $ | 42,025 |  |  | $ | (3) |  |  | $ | 42,022 |
A+ |  | 349,963 |  |  | 735 |  |  | 350,698 |
A |  | 97,115 |  |  | 926 |  |  | 98,041 |
A- |  | 3,230 |  |  | 79 |  |  | 3,309 |
B++ |  | — |  |  | — |  |  | — |
B+ |  | — |  |  | — |  |  | — |
Total rated reinsurers |  | $ | 492,333 |  |  | $ | 1,737 |  |  | $ | 494,070 |
Non-rated reinsurers |  |  |  |  |  |
Federal and state pools |  | $ | 79,980 |  |  | $ | — |  |  | $ | 79,980 |
Other than federal and state pools |  | 4,744 |  |  | 165 |  |  | 4,909 |
Total non-rated reinsurers |  | $ | 84,724 |  |  | $ | 165 |  |  | $ | 84,889 |
Total reinsurance recoverable, gross |  | $ | 577,057 |  |  | $ | 1,902 |  |  | $ | 578,959 |
Less: allowance for credit losses |  |  |  |  |  | (1,600) |
Total reinsurance recoverable, net |  |  |  |  |  | $ | 577,359 |

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|  | December 31, 2021
($ in thousands) |  | Current |  | Past Due |  | Total Reinsurance Recoverables
Financial strength rating of rated reinsurers |  |  |  |  |  |
A++ |  | $ | 38,601 |  |  | $ | 9 |  |  | $ | 38,610 |
A+ |  | 339,857 |  |  | 1,520 |  |  | 341,377 |
A |  | 95,675 |  |  | 1,227 |  |  | 96,902 |
A- |  | 3,209 |  |  | 145 |  |  | 3,354 |
B++ |  | — |  |  | — |  |  | — |
B+ |  | — |  |  | — |  |  | — |
Total rated reinsurers |  | $ | 477,342 |  |  | $ | 2,901 |  |  | $ | 480,243 |
Non-rated reinsurers |  |  |  |  |  |
Federal and state pools |  | $ | 116,378 |  |  | $ | — |  |  | $ | 116,378 |
Other than federal and state pools |  | 4,597 |  |  | 450 |  |  | 5,047 |
Total non-rated reinsurers |  | $ | 120,975 |  |  | $ | 450 |  |  | $ | 121,425 |
Total reinsurance recoverable, gross |  | $ | 598,317 |  |  | $ | 3,351 |  |  | $ | 601,668 |
Less: allowance for credit losses |  |  |  |  |  | (1,600) |
Total reinsurance recoverable, net |  |  |  |  |  | $ | 600,068 |

The following table provides a rollforward of the allowance for credit losses on our reinsurance recoverable balance for the periods indicated:

($ in thousands) |  | Quarter ended March 31, |  |
|  | 2022 |  | 2021 |  |  |  |
Balance at beginning of period |  | $ | 1,600 |  |  | 1,777 |  |  |  |  |
Current period change for expected credit losses |  | — |  |  | 63 |  |  |  |  |
Write-offs charged against the allowance for credit losses |  | — |  |  | — |  |  |  |  |
Recoveries |  | — |  |  | — |  |  |  |  |
Allowance for credit losses, end of period |  | $ | 1,600 |  |  | 1,840 |  |  |  |  |

For a discussion of the methodology used to evaluate our estimate of expected credit losses, refer to Note 2. "Summary of Significant Accounting Policies" in Item 8. "Financial Statements and Supplementary Data." of our 2021 Annual Report.
The following table contains a listing of direct, assumed, and ceded reinsurance amounts for premiums written, premiums earned, and loss and loss expenses incurred for the periods indicated. For more information about reinsurance, refer to Note 9. “Reinsurance” in Item 8. “Financial Statements and Supplementary Data.” of our 2021 Annual Report.

|  | Quarter ended March 31, |  |
($ in thousands) |  | 2022 |  | 2021 |  |  |  |
Premiums written: |  |  |  |  |  |  |  |
Direct |  | $ | 1,001,049 |  |  | 908,774 |  |  |  |  |
Assumed |  | 5,314 |  |  | 5,533 |  |  |  |  |
Ceded |  | (116,565) |  |  | (116,129) |  |  |  |  |
Net |  | $ | 889,798 |  |  | 798,178 |  |  |  |  |
Premiums earned: |  |  |  |  |  |  |  |
Direct |  | $ | 931,376 |  |  | 837,369 |  |  |  |  |
Assumed |  | 5,528 |  |  | 5,676 |  |  |  |  |
Ceded |  | (124,621) |  |  | (118,085) |  |  |  |  |
Net |  | $ | 812,283 |  |  | 724,960 |  |  |  |  |
Loss and loss expenses incurred: |  |  |  |  |  |  |  |
Direct |  | $ | 528,588 |  |  | 441,507 |  |  |  |  |
Assumed |  | 4,278 |  |  | 3,447 |  |  |  |  |
Ceded |  | (38,630) |  |  | (31,553) |  |  |  |  |
Net |  | $ | 494,236 |  |  | 413,401 |  |  |  |  |

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Ceded premiums written, ceded premiums earned, and ceded loss and loss expenses incurred related to our participation in the NFIP, to which we cede 100% of our NFIP flood premiums, losses, and loss expenses, were as follows:

Ceded to NFIP |  | Quarter ended March 31, |  |
($ in thousands) |  | 2022 |  | 2021 |  |  |  |
Ceded premiums written |  | $ | (60,889) |  |  | (65,742) |  |  |  |  |
Ceded premiums earned |  | (69,268) |  |  | (67,519) |  |  |  |  |
Ceded loss and loss expenses incurred |  | (2,417) |  |  | (2,207) |  |  |  |  |

NOTE 8. Reserve for Loss and Loss Expense
The table below provides a roll forward of reserve for loss and loss expense for beginning and ending reserve balances:

|  | Quarter ended March 31,
($ in thousands) |  | 2022 |  | 2021
Gross reserve for loss and loss expense, at beginning of period |  | $ | 4,580,903 |  |  | 4,260,355 |
Less: reinsurance recoverable on unpaid loss and loss expense, at beginning of period |  | 578,641 |  |  | 554,269 |
Net reserve for loss and loss expense, at beginning of period |  | 4,002,262 |  |  | 3,706,086 |
Incurred loss and loss expense for claims occurring in the: |  |  |  |
Current year |  | 508,299 |  |  | 447,170 |
Prior years |  | (14,063) |  |  | (33,769) |
Total incurred loss and loss expense |  | 494,236 |  |  | 413,401 |
Paid loss and loss expense for claims occurring in the: |  |  |  |
Current year |  | 91,292 |  |  | 80,158 |
Prior years |  | 312,926 |  |  | 243,687 |
Total paid loss and loss expense |  | 404,218 |  |  | 323,845 |
Net reserve for loss and loss expense, at end of period |  | 4,092,280 |  |  | 3,795,642 |
Add: Reinsurance recoverable on unpaid loss and loss expense, at end of period |  | 552,111 |  |  | 564,546 |
Gross reserve for loss and loss expense at end of period |  | $ | 4,644,391 |  |  | 4,360,188 |

Prior year reserve development in First Quarter 2022 was favorable by $14.1 million, consisting of $20.0 million of favorable casualty reserve development, partially offset by $5.9 million of unfavorable property reserve development. The favorable casualty reserve development included $10.0 million in our workers compensation line of business, $5.0 million in our general liability line of business, and $5.0 million in our bonds line of business.
Prior year reserve development in First Quarter 2021 was favorable by $33.8 million, consisting of $35.0 million of favorable casualty reserve development, partially offset by $1.2 million of unfavorable property reserve development. The favorable casualty reserve development included $15.0 million in our workers compensation line of business, $15.0 million in our general liability line of business, and $5.0 million in our Excess and Surplus (E&S") casualty lines of business.
NOTE 9. Segment Information
We evaluate the results of our four reportable segments as follows:
•Our Standard Commercial Lines, Standard Personal Lines, and E&S Lines are evaluated based on before and after-tax underwriting results (net premiums earned, incurred loss and loss expense, policyholder dividends, policy acquisition costs, and other underwriting expenses), return on equity ("ROE") contribution, and combined ratios.
•Our Investments segment is primarily evaluated on after-tax net investment income and its ROE contribution. After-tax net realized and unrealized gains and losses, which are not included in non-GAAP operating income, are also included in our Investments segment results.
In computing each segment's results, we do not make adjustments for interest expense or corporate expenses. No segment has a separate investment portfolio or allocated assets.
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The following summaries present revenues (net investment income and net realized and unrealized gains and losses on investments in the case of the Investments segment) and pre-tax income for the individual segments:

Revenue by Segment |  | Quarter ended March 31, |  |
($ in thousands) |  | 2022 |  | 2021 |  |  |  |
Standard Commercial Lines: |  |  |  |  |  |  |  |
Net premiums earned: |  |  |  |  |  |  |  |
General liability |  | $ | 216,325 |  |  | 193,520 |  |  |  |  |
Commercial automobile |  | 193,830 |  |  | 171,881 |  |  |  |  |
Commercial property |  | 120,062 |  |  | 102,810 |  |  |  |  |
Workers compensation |  | 84,680 |  |  | 78,190 |  |  |  |  |
Businessowners' policies |  | 30,044 |  |  | 28,627 |  |  |  |  |
Bonds |  | 10,360 |  |  | 8,593 |  |  |  |  |
Other |  | 6,168 |  |  | 5,520 |  |  |  |  |
Miscellaneous income |  | 1,101 |  |  | 3,707 |  |  |  |  |
Total Standard Commercial Lines revenue |  | 662,570 |  |  | 592,848 |  |  |  |  |
Standard Personal Lines: |  |  |  |  |  |  |  |
Net premiums earned: |  |  |  |  |  |  |  |
Personal automobile |  | 39,716 |  |  | 41,393 |  |  |  |  |
Homeowners |  | 31,187 |  |  | 30,598 |  |  |  |  |
Other |  | 1,739 |  |  | 1,830 |  |  |  |  |
Miscellaneous income |  | 428 |  |  | 405 |  |  |  |  |
Total Standard Personal Lines revenue |  | 73,070 |  |  | 74,226 |  |  |  |  |
E&S Lines: |  |  |  |  |  |  |  |
Net premiums earned: |  |  |  |  |  |  |  |
Casualty lines |  | 54,624 |  |  | 43,833 |  |  |  |  |
Property lines |  | 23,548 |  |  | 18,165 |  |  |  |  |
Total E&S Lines revenue |  | 78,172 |  |  | 61,998 |  |  |  |  |
Investments: |  |  |  |  |  |  |  |
Net investment income |  | 72,602 |  |  | 69,716 |  |  |  |  |
Net realized and unrealized investment (losses) gains |  | (40,352) |  |  | 5,119 |  |  |  |  |
Total Investments revenue |  | 32,250 |  |  | 74,835 |  |  |  |  |
Total revenues |  | $ | 846,062 |  |  | 803,907 |  |  |  |  |

Income Before and After Federal Income Tax |  | Quarter ended March 31, |  |
($ in thousands) |  | 2022 |  | 2021 |  |  |  |
Standard Commercial Lines: |  |  |  |  |  |  |  |
Underwriting income, before federal income tax |  | $ | 42,384 |  |  | 69,499 |  |  |  |  |
Underwriting income, after federal income tax |  | 33,483 |  |  | 54,904 |  |  |  |  |
Combined ratio |  | 93.6 | % |  | 88.2 |  |  |  |  |
ROE contribution |  | 5.0 |  |  | 8.6 |  |  |  |  |
Standard Personal Lines: |  |  |  |  |  |  |  |
Underwriting income, before federal income tax |  | $ | 6,520 |  |  | 7,695 |  |  |  |  |
Underwriting income, after federal income tax |  | 5,151 |  |  | 6,079 |  |  |  |  |
Combined ratio |  | 91.0 | % |  | 89.6 |  |  |  |  |
ROE contribution |  | 0.8 |  |  | 1.0 |  |  |  |  |
E&S Lines: |  |  |  |  |  |  |  |
Underwriting income, before federal income tax |  | $ | 6,925 |  |  | 516 |  |  |  |  |
Underwriting income, after federal income tax |  | 5,471 |  |  | 408 |  |  |  |  |
Combined ratio |  | 91.1 | % |  | 99.2 |  |  |  |  |
ROE contribution |  | 0.8 |  |  | 0.1 |  |  |  |  |
Investments: |  |  |  |  |  |  |  |
Net investment income |  | $ | 72,602 |  |  | 69,716 |  |  |  |  |
Net realized and unrealized investment (losses) gains |  | (40,352) |  |  | 5,119 |  |  |  |  |
Total investments segment income, before federal income tax |  | 32,250 |  |  | 74,835 |  |  |  |  |
Tax on investments segment income |  | 5,613 |  |  | 14,448 |  |  |  |  |
Total investments segment income, after federal income tax |  | $ | 26,637 |  |  | 60,387 |  |  |  |  |
ROE contribution of after-tax net investment income earned |  | 8.7 |  |  | 8.9 |  |  |  |  |

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Reconciliation of Segment Results to Income Before Federal Income Tax |  | Quarter ended March 31, |  |
($ in thousands) |  | 2022 |  | 2021 |  |  |  |
Underwriting income |  |  |  |  |  |  |  |
Standard Commercial Lines |  | $ | 42,384 |  |  | 69,499 |  |  |  |  |
Standard Personal Lines |  | 6,520 |  |  | 7,695 |  |  |  |  |
E&S Lines |  | 6,925 |  |  | 516 |  |  |  |  |
Investment income |  | 32,250 |  |  | 74,835 |  |  |  |  |
Total all segments |  | 88,079 |  |  | 152,545 |  |  |  |  |
Interest expense |  | (7,168) |  |  | (7,359) |  |  |  |  |
Corporate expenses |  | (11,021) |  |  | (9,554) |  |  |  |  |
Income, before federal income tax |  | $ | 69,890 |  |  | 135,632 |  |  |  |  |
Preferred stock dividends |  | (2,300) |  |  | (2,453) |  |  |  |  |
Income available to common stockholders, before federal income tax |  | $ | 67,590 |  |  | 133,179 |  |  |  |  |

NOTE 10. Retirement Plans
The primary pension plan for our employees is the Retirement Income Plan for Selective Insurance Company of America (the “Pension Plan”). Selective Insurance Company of America (“SICA”) also sponsors the Supplemental Excess Retirement Plan (the “Excess Plan”) and a life insurance benefit plan. All plans are closed to new entrants, and benefits ceased accruing under the Pension Plan and the Excess Plan after March 31, 2016. For more information about SICA's retirement plans, see Note 15. “Retirement Plans” in Item 8. “Financial Statements and Supplementary Data.” of our 2021 Annual Report.
The following tables provide information about the Pension Plan:

|  | Pension Plan |  |
|  | Quarter ended March 31, |  |
($ in thousands) |  | 2022 |  | 2021 |  |  |  |
Net Periodic Pension Cost (Benefit): |  |  |  |  |  |  |  |
Interest cost |  | $ | 2,486 |  |  | 2,148 |  |  |  |  |
Expected return on plan assets |  | (5,537) |  |  | (5,744) |  |  |  |  |
Amortization of unrecognized net actuarial loss |  | 366 |  |  | 625 |  |  |  |  |
Total net periodic pension cost (benefit)1 |  | $ | (2,685) |  |  | (2,971) |  |  |  |  |

1 The components of net periodic pension cost (benefit) are included within "Loss and loss expense incurred" and "Other insurance expenses" on the Consolidated Statements of Income.

|  | Pension Plan
|  | Quarter ended March 31,
|  | 2022 |  | 2021
Weighted-Average Expense Assumptions: |  |  |  |
Discount rate |  | 2.98 | % |  | 2.68 | %
Effective interest rate for calculation of interest cost |  | 2.48 |  |  | 2.06 |
Expected return on plan assets |  | 5.00 |  |  | 5.40 |

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NOTE 11. Comprehensive Income
The components of comprehensive income, both gross and net of tax, for First Quarter 2022 and First Quarter 2021 were as follows:

First Quarter 2022 |  |  |  |  |  |
($ in thousands) |  | Gross |  | Tax |  | Net
Net income |  | $ | 69,890 |  |  | 13,560 |  |  | 56,330 |
Components of OCI: |  |  |  |  |  |
Unrealized losses on investment securities: |  |  |  |  |  |
Unrealized holding losses during the period |  | (261,832) |  |  | (54,984) |  |  | (206,848) |
Unrealized losses on securities with credit loss recognized in earnings |  | (86,621) |  |  | (18,191) |  |  | (68,430) |
Amounts reclassified into net income: |  |  |  |  |  |
HTM securities |  | 1 |  |  | — |  |  | 1 |
Net realized losses on disposals and intent-to-sell AFS securities |  | 15,991 |  |  | 3,358 |  |  | 12,633 |
Credit loss expense |  | 22,052 |  |  | 4,631 |  |  | 17,421 |
Total unrealized losses on investment securities |  | (310,409) |  |  | (65,186) |  |  | (245,223) |
Defined benefit pension and post-retirement plans: |  |  |  |  |  |
Amounts reclassified into net income: |  |  |  |  |  |
Net actuarial loss |  | 417 |  |  | 88 |  |  | 329 |
Total defined benefit pension and post-retirement plans |  | 417 |  |  | 88 |  |  | 329 |
Other comprehensive loss |  | (309,992) |  |  | (65,098) |  |  | (244,894) |
Comprehensive loss |  | $ | (240,102) |  |  | (51,538) |  |  | (188,564) |
First Quarter 2021 |  |  |  |  |  |
($ in thousands) |  | Gross |  | Tax |  | Net
Net income |  | $ | 135,632 |  |  | 26,362 |  |  | 109,270 |
Components of OCI: |  |  |  |  |  |
Unrealized losses on investment securities: |  |  |  |  |  |
Unrealized holding losses during the period |  | (103,308) |  |  | (21,695) |  |  | (81,613) |
Unrealized losses on securities with credit loss recognized in earnings |  | (11,320) |  |  | (2,377) |  |  | (8,943) |
Amounts reclassified into net income: |  |  |  |  |  |
HTM securities |  | (2) |  |  | — |  |  | (2) |
Net realized losses on disposals and intent-to-sell AFS securities |  | 604 |  |  | 127 |  |  | 477 |
Credit loss expense |  | 4,997 |  |  | 1,049 |  |  | 3,948 |
Total unrealized losses on investment securities |  | (109,029) |  |  | (22,896) |  |  | (86,133) |
Defined benefit pension and post-retirement plans: |  |  |  |  |  |
Amounts reclassified into net income: |  |  |  |  |  |
Net actuarial loss |  | 693 |  |  | 146 |  |  | 547 |
Total defined benefit pension and post-retirement plans |  | 693 |  |  | 146 |  |  | 547 |
Other comprehensive loss |  | (108,336) |  |  | (22,750) |  |  | (85,586) |
Comprehensive income |  | $ | 27,296 |  |  | 3,612 |  |  | 23,684 |

The balances of, and changes in, each component of AOCI (net of taxes) as of March 31, 2022 were as follows:

|  | Net Unrealized (Losses) Gains on Investment Securities |  | Defined Benefit Pension and Post-Retirement Plans |  | Total AOCI
($ in thousands) |  | Credit Loss Related 1 |  | HTM Related |  | All Other |  | Investments Subtotal |  |
Balance, December 31, 2021 |  | $ | (4,287) |  |  | (3) |  |  | 185,170 |  |  | 180,880 |  |  | (65,781) |  |  | 115,099 |
OCI before reclassifications |  | (68,430) |  |  | — |  |  | (206,848) |  |  | (275,278) |  |  | — |  |  | (275,278) |
Amounts reclassified from AOCI |  | 17,421 |  |  | 1 |  |  | 12,633 |  |  | 30,055 |  |  | 329 |  |  | 30,384 |
Net current period OCI |  | (51,009) |  |  | 1 |  |  | (194,215) |  |  | (245,223) |  |  | 329 |  |  | (244,894) |
Balance, March 31, 2022 |  | $ | (55,296) |  |  | (2) |  |  | (9,045) |  |  | (64,343) |  |  | (65,452) |  |  | (129,795) |

1 Represents change in unrealized loss on securities with credit loss recognized in earnings.
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The reclassifications out of AOCI were as follows:

|  | Quarter ended March 31, |  |  | Affected Line Item in the Unaudited Consolidated Statements of Income
($ in thousands) |  | 2022 |  | 2021 |  |  |  |
HTM related |  |  |  |  |  |  |  |  |
Unrealized (gains) losses on HTM disposals |  | $ | — |  |  | — |  |  |  |  |  | Net realized and unrealized investment (losses) gains
Amortization of net unrealized losses (gains) on HTM securities |  | 1 |  |  | (2) |  |  |  |  |  | Net investment income earned
|  | 1 |  |  | (2) |  |  |  |  |  | Income before federal income tax
|  | — |  |  | — |  |  |  |  |  | Total federal income tax expense
|  | 1 |  |  | (2) |  |  |  |  |  | Net income
Net realized losses on disposals and intent-to-sell AFS securities |  |  |  |  |  |  |  |  |
Net realized losses on disposals and intent-to-sell AFS securities |  | 15,991 |  |  | 604 |  |  |  |  |  | Net realized and unrealized investment (losses) gains
|  | 15,991 |  |  | 604 |  |  |  |  |  | Income before federal income tax
|  | (3,358) |  |  | (127) |  |  |  |  |  | Total federal income tax expense
|  | 12,633 |  |  | 477 |  |  |  |  |  | Net income
Credit loss related |  |  |  |  |  |  |  |  |
Credit loss expense |  | 22,052 |  |  | 4,997 |  |  |  |  |  | Net realized and unrealized investment (losses) gains
|  | 22,052 |  |  | 4,997 |  |  |  |  |  | Income before federal income tax
|  | (4,631) |  |  | (1,049) |  |  |  |  |  | Total federal income tax expense
|  | 17,421 |  |  | 3,948 |  |  |  |  |  | Net income
Defined benefit pension and post-retirement life plans |  |  |  |  |  |  |  |  |
Net actuarial loss |  | 96 |  |  | 159 |  |  |  |  |  | Loss and loss expense incurred
|  | 321 |  |  | 534 |  |  |  |  |  | Other insurance expenses
Total defined benefit pension and post-retirement life |  | 417 |  |  | 693 |  |  |  |  |  | Income before federal income tax
|  | (88) |  |  | (146) |  |  |  |  |  | Total federal income tax expense
|  | 329 |  |  | 547 |  |  |  |  |  | Net income
Total reclassifications for the period |  | $ | 30,384 |  |  | 4,970 |  |  |  |  |  | Net income

NOTE 12. Litigation
As of March 31, 2022, we do not believe we are involved in any legal action that could have a material adverse effect on our consolidated financial condition, results of operations, or cash flows.
In the ordinary course of conducting business, we are parties in various legal actions. Most are claims litigation involving our Insurance Subsidiaries as (i) liability insurers defending or providing indemnity for third-party claims brought against our customers, (ii) insurers defending first-party coverage claims brought against them, or (iii) liability insurers seeking declaratory judgment on our insurance coverage obligations. We account for such activity by establishing unpaid loss and loss expense reserves. Considering potential losses and defense costs reserves, we expect that any potential ultimate liability for ordinary course claims litigation will not be material to our consolidated financial condition, results of operations, or cash flows.
All our commercial property and businessowners' policies require direct physical loss of or damage to property by a covered cause of loss. All our standard lines commercial property and businessowners' policies also include or attach an exclusion that states that all loss or property damage caused by or resulting from any virus, bacterium, or other microorganism that induces or is capable of inducing physical distress, illness, or disease is not a covered cause of loss ("Virus Exclusion"). Whether COVID-19-related contamination, the existence of the COVID-19 pandemic, and the resulting COVID-19-related government shutdown orders cause physical loss of or damage to property is the subject of much public debate and first-party coverage litigation against some insurers, including us. The Virus Exclusion also is the subject of first-party coverage litigation against some insurers, including us. We cannot predict the outcome of litigation over these two coverage issues, including the interpretation of provisions similar or identical to those in our insurance policies.
From time to time, our Insurance Subsidiaries also are named as defendants in other legal actions, some asserting claims for substantial amounts. Plaintiffs may style these actions putatively as class actions and seek judicial certification of a state or national class for allegations involving our business practices, such as improper medical provider reimbursement under workers compensation and personal and commercial automobile insurance policies or improper reimbursement for automobile parts. Similarly, our Insurance Subsidiaries can be defendants in individual actions seeking extra-contractual damages, punitive damages, or penalties, often alleging bad faith claims handling. We believe that we have valid defenses to these allegations, and we account for such activity by establishing unpaid loss and loss expense reserves. Considering estimated losses and defense costs reserves, we expect that any potential ultimate liability for these other legal actions will not be material to our consolidated financial condition. As litigation outcomes are inherently unpredictable and the amounts sought in certain of these
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actions are large or indeterminate, it is possible that adverse outcomes could have a material adverse effect on our consolidated results of operations or cash flows in particular quarterly or annual periods.
NOTE 13. Subsequent Events
On April 1, 2022, SICA borrowed $35 million from the FHLBNY at an interest rate of 0.70%. This borrowing was refinanced upon its maturity on May 2, 2022, at an interest rate of 1.10%. This borrowing matures on June 27, 2022. These funds were used for general corporate purposes.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Forward-Looking Statements
The terms "Company," "we," "us," and "our" refer to Selective Insurance Group, Inc. (the "Parent"), and its subsidiaries, except as expressly indicated or the context otherwise requires. Certain statements in this Quarterly Report on Form 10-Q, including information incorporated by reference, are “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995 (“PSLRA”). The PSLRA provides a safe harbor under the Securities Act of 1933 and the Securities Exchange Act of 1934 for forward-looking statements. These statements relate to our intentions, beliefs, projections, estimations, or forecasts of future events and financial performance. They involve known and unknown risks, uncertainties, and other factors that may cause our or industry actual results, activity levels, or performance to materially differ from those expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking statements by words such as “may,” “will,” “could,” “would,” “should,” “expect,” “plan,” “anticipate,” “target,” “project,” “intend,” “believe,” “estimate,” “predict,” “potential,” “pro forma,” “seek,” “likely,” “continue,” or comparable terms. Our forward-looking statements are only predictions, and we can give no assurance that such expectations will prove correct. We undertake no obligation, other than as federal securities laws may require, to publicly update or revise any forward-looking statements for any reason.
Factors that could cause our actual results to differ materially from what we project, forecast, or estimate in forward-looking statements are discussed in further detail in Item 1A. “Risk Factors.” in Part II. “Other Information” of this Form 10-Q. These risk factors may not be exhaustive. We operate in a constantly changing business environment, and new risk factors may emerge at any time. We can neither predict these new risk factors nor assess their impact, if any, on our businesses or the extent any factor or combination of factors may cause actual results to differ materially from any forward-looking statements. Given these risks, uncertainties, and assumptions, the forward-looking events we discuss in this report might not occur.
Introduction
We classify our business into four reportable segments:
•Standard Commercial Lines;
•Standard Personal Lines;
•Excess and Surplus Lines ("E&S Lines"); and
•Investments.
For more details about these segments, refer to Note 9. "Segment Information" in Item 1. "Financial Statements." of this Form 10-Q and Note 12. "Segment Information" in Item 8. "Financial Statements and Supplementary Data." of our Annual Report on Form 10-K for the year ended December 31, 2021 ("2021 Annual Report").
We write our Standard Commercial and Standard Personal Lines products and services through nine of our insurance subsidiaries, some of which participate in the federal government's National Flood Insurance Program's ("NFIP") Write Your Own Program. We write our E&S products through another subsidiary, Mesa Underwriters Specialty Insurance Company, a nationally-authorized non-admitted platform for customers who generally cannot obtain coverage in the standard marketplace. Collectively, we refer to our ten insurance subsidiaries as the "Insurance Subsidiaries."
The following is Management’s Discussion and Analysis (“MD&A”) of the consolidated results of operations and financial condition, as well as known trends and uncertainties, that may have a material impact in future periods. Investors should read the MD&A in conjunction with Item 1. "Financial Statements." of this Form 10-Q and the consolidated financial statements in our 2021 Annual Report filed with the United States ("U.S.") Securities and Exchange Commission.
In the MD&A, we will discuss and analyze the following:
•Critical Accounting Policies and Estimates;
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•Financial Highlights of Results for the first quarters ended March 31, 2022 (“First Quarter 2022”) and March 31, 2021 (“First Quarter 2021”);
•Results of Operations and Related Information by Segment;
•Federal Income Taxes;
•Liquidity and Capital Resources; and
•Ratings.
Critical Accounting Policies and Estimates
Our unaudited interim consolidated financial statements include amounts for which we have made informed estimates and judgments for transactions not yet completed. Such estimates and judgments affect the reported amounts in the consolidated financial statements. As outlined in our 2021 Annual Report, those estimates and judgments most critical to the preparation of the consolidated financial statements involved the following: (i) reserves for loss and loss expense; (ii) investment valuation and the allowance for credit losses on available-for-sale ("AFS") fixed income securities; and (iii) 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. For additional information regarding our critical accounting policies and estimates, refer to pages 35 through 43 of our 2021 Annual Report.
Financial Highlights of Results for First Quarter 2022 and First Quarter 2021 1

($ and shares in thousands, except per share amounts) |  | Quarter ended March 31, |  | Change % or Points |  |  |  |  |  |
| 2022 |  | 2021 |  |  |  |  |  |  |  |
Financial Data: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Revenues |  | $ | 846,062 |  |  | 803,907 |  |  | 5 |  | % |  |  |  |  |  |  |
After-tax net investment income |  | 58,515 |  |  | 56,343 |  |  | 4 |  |  |  |  |  |  |  |  |
After-tax underwriting income |  | 44,105 |  |  | 61,391 |  |  | (28) |  |  |  |  |  |  |  |  |
Net income before federal income tax |  | 69,890 |  |  | 135,632 |  |  | (48) |  |  |  |  |  |  |  |  |
Net income |  | 56,330 |  |  | 109,270 |  |  | (48) |  |  |  |  |  |  |  |  |
Net income available to common stockholders |  | 54,030 |  |  | 106,817 |  |  | (49) |  |  |  |  |  |  |  |  |
Key Metrics: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Combined ratio |  | 93.1 |  | % | 89.3 |  |  | 3.8 |  | pts |  |  |  |  |  |  |
Invested assets per dollar of common stockholders' equity |  | $ | 3.02 |  |  | 2.97 |  |  | 2 |  | % |  |  |  |  |  |  |
Annualized return on common equity ("ROE") |  | 8.1 |  |  | 16.8 |  |  | (8.7) |  | pts |  |  |  |  |  |  |
Net premiums written to statutory surplus ratio |  | 1.36 |  | x | 1.33 |  |  | 0.03 |  |  |  |  |  |  |  |  |
Per Common Share Amounts: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Diluted net income per share |  | $ | 0.89 |  |  | 1.77 |  |  | (50) |  | % |  |  |  |  |  |  |
Book value per share |  | 42.73 |  |  | 42.38 |  |  | 1 |  |  |  |  |  |  |  |  |
Dividends declared per share to common stockholders |  | 0.28 |  |  | 0.25 |  |  | 12 |  |  |  |  |  |  |  |  |
Non-GAAP Information: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-GAAP operating income 2 |  | $ | 85,908 |  |  | 102,773 |  |  | (16) |  | % |  |  |  |  |  |  |
Diluted non-GAAP operating income per common share 2 |  | 1.41 |  |  | 1.70 |  |  | (17) |  |  |  |  |  |  |  |  |
Annualized non-GAAP operating ROE 2 |  | 12.8 |  | % | 16.2 |  |  | (3.4) |  | pts |  |  |  |  |  |  |
Adjusted book value per common share 2 |  | $ | 43.80 |  |  | 38.73 |  |  | 13 |  | % |  |  |  |  |  |  |

1 Refer to the Glossary of Terms attached to our 2021 Annual Report as Exhibit 99.1 for definitions of terms used of this Form 10-Q.
2 Non-GAAP operating income, non-GAAP operating income per diluted common share, and non-GAAP operating ROE are measures comparable to net income available to common stockholders, net income available to common stockholders per diluted common share, and ROE, respectively, but exclude after- tax net realized and unrealized gains and losses on investments included in net income. Adjusted book value per common share is a measure comparable to book value per common share, but excludes total after-tax unrealized gains and losses on investments included in accumulated other comprehensive (loss) income. They are used as important financial measures by us, analysts, and investors because the timing of realized and unrealized investment gains and losses on securities in any given period is largely discretionary. In addition, net realized and unrealized investment gains and losses on investments could distort the analysis of trends.
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Reconciliations of net income available to common stockholders, net income available to common stockholders per diluted common share, annualized ROE, and book value per common share to non-GAAP operating income, non-GAAP operating income per diluted common share, annualized non-GAAP operating ROE, and adjusted book value per common share, respectively, are provided in the tables below:

Reconciliation of net income available to common stockholders to non-GAAP operating income |  | Quarter ended March 31, |  |
($ in thousands) |  | 2022 |  | 2021 |  |  |  |
Net income available to common stockholders |  | $ | 54,030 |  |  | 106,817 |  |  |  |  |
Net realized and unrealized investment losses (gains) included in net income, before tax |  | 40,352 |  |  | (5,119) |  |  |  |  |
Tax on reconciling items |  | (8,474) |  |  | 1,075 |  |  |  |  |
Non-GAAP operating income |  | $ | 85,908 |  |  | 102,773 |  |  |  |  |

Reconciliation of net income available to common stockholders per diluted common share to non-GAAP operating income per diluted common share |  | Quarter ended March 31, |  |
| 2022 |  | 2021 |  |  |  |
Net income available to common stockholders per diluted common share |  | $ | 0.89 |  |  | 1.77 |  |  |  |  |
Net realized and unrealized investment losses (gains) included in net income, before tax |  | 0.66 |  |  | (0.08) |  |  |  |  |
Tax on reconciling items |  | (0.14) |  |  | 0.01 |  |  |  |  |
Non-GAAP operating income per diluted common share |  | $ | 1.41 |  |  | 1.70 |  |  |  |  |

Reconciliation of annualized ROE to annualized non-GAAP operating ROE |  | Quarter ended March 31, |  |
|  | 2022 |  | 2021 |  |  |  |
Annualized ROE |  | 8.1 | % |  | 16.8 |  |  |  |  |
Net realized and unrealized investment losses (gains) included in net income, before tax |  | 6.0 |  |  | (0.8) |  |  |  |  |
Tax on reconciling items |  | (1.3) |  |  | 0.2 |  |  |  |  |
Annualized non-GAAP operating ROE |  | 12.8 | % |  | 16.2 |  |  |  |  |

Reconciliation of book value per common share to adjusted book value per common share |  | Quarter ended March 31, |  |  |  |  |  |
|  | 2022 |  | 2021 |  |  |  |  |  |  |  |
Book value per common share |  | $ | 42.73 |  |  | 42.38 |  |  |  |  |  |  |  |  |
Total unrealized investment losses (gains) included in accumulated other comprehensive (loss) income, before tax |  | 1.35 |  |  | (4.62) |  |  |  |  |  |  |  |  |
Tax on reconciling items |  | (0.28) |  |  | 0.97 |  |  |  |  |  |  |  |  |
Adjusted book value per common share |  | $ | 43.80 |  |  | 38.73 |  |  |  |  |  |  |  |  |

The components of our annualized ROE and non-GAAP operating ROE are as follows:

Annualized ROE and non-GAAP operating ROE Components |  | Quarter ended March 31, |  | Change Points |  |  |  |
|  | 2022 |  | 2021 |  |  |  |  |  |
Standard Commercial Lines Segment |  | 5.0 | % |  | 8.6 |  |  | (3.6) |  |  |  |  |  |  |
Standard Personal Lines Segment |  | 0.8 |  |  | 1.0 |  |  | (0.2) |  |  |  |  |  |  |
E&S Lines Segment |  | 0.8 |  |  | 0.1 |  |  | 0.7 |  |  |  |  |  |  |
Total insurance operations |  | 6.6 |  |  | 9.7 |  |  | (3.1) |  |  |  |  |  |  |
Investment income |  | 8.7 |  |  | 8.9 |  |  | (0.2) |  |  |  |  |  |  |
Net realized and unrealized investment (losses) gains |  | (4.7) |  |  | 0.6 |  |  | (5.3) |  |  |  |  |  |  |
Total investments segment |  | 4.0 |  |  | 9.5 |  |  | (5.5) |  |  |  |  |  |  |
Other |  | (2.5) |  |  | (2.4) |  |  | (0.1) |  |  |  |  |  |  |
Annualized ROE |  | 8.1 | % |  | 16.8 |  |  | (8.7) |  |  |  |  |  |  |
Net realized and unrealized investment losses (gains), after tax |  | 4.7 |  |  | (0.6) |  |  | 5.3 |  |  |  |  |  |  |
Annualized Non-GAAP Operating ROE |  | 12.8 | % |  | 16.2 |  |  | (3.4) |  |  |  |  |  |  |

Our First Quarter 2022 annualized non-GAAP operating ROE of 12.8% was above our full-year 2022 targeted non-GAAP operating ROE of 11%, but below our First Quarter 2021 annualized non-GAAP operating ROE of 16.2%. The decrease compared to First Quarter 2021 was primarily driven by a $17.3 million, or 3.1-point, reduction in after-tax underwriting income, resulting from (i) an increase in non-catastrophe property loss and loss expenses in First Quarter 2022, and (ii) lower favorable prior year casualty reserve development in First Quarter 2022; partially offset by a decrease in net catastrophe losses in First Quarter 2022.
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Our First Quarter 2022 results included $245 million of after-tax net unrealized investment losses recorded in stockholders' equity. These investment losses reduced our March 31, 2022 stockholders' equity position, which resulted in an approximate 50 basis point benefit to our First Quarter 2022 annualized ROE and non-GAAP operating ROE.
In addition to the above drivers of the year-over-year change in our annualized non-GAAP operating ROE, the 8.7-point reduction in the annualized ROE was due to a decrease of 5.3 points in net realized and unrealized investment gains in First Quarter 2022 compared to First Quarter 2021. The decrease was primarily driven by (i) active trading of our fixed income securities to opportunistically increase yield in the rising interest rate environment, and (ii) higher credit loss expense on our AFS fixed income securities portfolio.
Outlook
We entered 2022 in the strongest financial position in our 95-year history, with a record level of GAAP equity, statutory capital and surplus, and holding company cash and investments. We were well positioned to continue executing on our strategic objectives and delivering growth and profitability. Although First Quarter 2022 financial results were not as favorable as First Quarter 2021, our overall First Quarter 2022 financial results were strong with 11% growth in NPW and a 12.8% annualized non-GAAP operating ROE, which was above our full-year target of 11%.
While we recorded strong financial results in First Quarter 2022, this quarter included elevated economic inflation, which resulted in a significant increase in interest rates, a widening of credit spreads, lower public equity valuations, and significant financial market volatility. The higher interest rates and widening of credit spreads reduced the value of our fixed income securities, which lowered our stockholders' equity by 8% during First Quarter 2022. The higher economic inflation impacted our non-catastrophe property loss and loss expenses with increased severities in our property lines, particularly commercial and personal automobile physical damage results. Should these trends continue in the near-term, it could negatively impact our profitability. We will continue to focus on achieving written renewal pure price increases, along with underwriting improvements, that meet or exceed expected loss trend. We achieved Standard Commercial Lines renewal pure price increases of 4.8% in First Quarter 2022. Renewal pure price increased throughout the quarter, with both February and March rate at 5.1%. This trend continued into April 2022 with renewal pure rate increases of 5.2%.
In addition, the higher interest rates and the widening of credit spreads provide an opportunity to invest our cash flows in new fixed income securities with higher yields, which over time will likely increase the overall book yield on our fixed income securities investment portfolio.
We continue to focus on several other foundational areas to position us for ongoing success:
•Delivering on our strategy for continued disciplined and profitable growth by:
◦Continuing to expand our Standard Commercial Lines market share by (i) increasing our share towards our 12% target of our agents' premiums, (ii) strategically appointing new agents, and (iii) maximizing new business growth in the small business market through utilization of our enhanced small business platform;
◦Expanding our geographic footprint, with a plan to commence writing Standard Commercial Lines business in the states of Vermont, Alabama, and Idaho in the near-term, and other states over time;
◦Increasing customer retention by delivering a superior omnichannel experience and offering value-added technologies and services;
◦Shifting our focus towards targeting new and renewal customers in the mass affluent market within our Standard Personal Lines segment, where we believe we can be more competitive with the strong coverage and servicing capabilities that we offer; and
◦Deploying our new underwriting platform in our E&S segment that will improve agents' ease of interactions with us.
•Continuing to build on a culture centered on the values of diversity, equity, and inclusion that fosters innovation, idea generation, and developing a group of specially trained leaders who can guide us successfully into the future.
Our full-year expectations are as follows:
•A GAAP combined ratio, excluding net catastrophe losses, of 91.0%. Our combined ratio estimate assumes no additional prior-year casualty reserve development;
•Net catastrophe losses of 4.0 points on the combined ratio;
•After-tax net investment income of $205 million (prior guidance $200 million) that includes $15 million (prior guidance $20 million) in after-tax net investment income from our alternative investments;
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•An overall effective tax rate of approximately 20.5% that assumes an effective tax rate of 19.5% for net investment income and 21.0% for all other items; and
•Weighted average shares of 61 million on a fully diluted basis.
Results of Operations and Related Information by Segment
Insurance Operations
The following table provides quantitative information for analyzing the combined ratio:

All Lines |  | Quarter ended March 31, |  | Change % or Points |  |  |  |  |  |
($ in thousands) |  | 2022 |  | 2021 |  |  |  |  |  |  |  |
Insurance Operations Results: |  |  |  |  |  |  |  |  |  |  |  |
Net premiums written ("NPW") |  | $ | 889,798 |  |  | 798,178 |  |  | 11 |  | % |  |  |  |  |  |  |
Net premiums earned (“NPE”) |  | 812,283 |  |  | 724,960 |  |  | 12 |  |  |  |  |  |  |  |  |
Less: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loss and loss expense incurred |  | 494,236 |  |  | 413,401 |  |  | 20 |  |  |  |  |  |  |  |  |
Net underwriting expenses incurred |  | 260,639 |  |  | 232,626 |  |  | 12 |  |  |  |  |  |  |  |  |
Dividends to policyholders |  | 1,579 |  |  | 1,223 |  |  | 29 |  |  |  |  |  |  |  |  |
Underwriting income |  | $ | 55,829 |  |  | 77,710 |  |  | (28) |  | % |  |  |  |  |  |  |
Combined Ratios: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loss and loss expense ratio |  | 60.8 |  | % | 57.0 |  |  | 3.8 |  | pts |  |  |  |  |  |  |
Underwriting expense ratio |  | 32.1 |  |  | 32.1 |  |  | — |  |  |  |  |  |  |  |  |
Dividends to policyholders ratio |  | 0.2 |  |  | 0.2 |  |  | — |  |  |  |  |  |  |  |  |
Combined ratio |  | 93.1 |  |  | 89.3 |  |  | 3.8 |  |  |  |  |  |  |  |  |

The 11% NPW growth in First Quarter 2022 compared to First Quarter 2021 reflected (i) overall renewal pure price increases, and (ii) higher direct new business, as shown in the following table:

|  | Quarter ended March 31, |  |  |  |  |  |  |  |
($ in millions) |  | 2022 |  | 2021 |  |  |  |  |  |  |
Direct new business premiums |  | $ | 177.2 |  |  | 155.6 |  |  |  |  |  |  |  |  |  |  |
Renewal pure price increases on NPW |  | 4.6 | % |  | 5.2 |  |  |  |  |  |  |  |  |  |  |

In addition, our NPW growth in First Quarter 2022 benefited from strong retention and exposure growth driven by increased economic activity in the U.S., which resulted in our customers increasing their sales, payrolls, and exposure units, all of which favorably impacted our NPW.
The increase in NPE in First Quarter 2022 compared to First Quarter 2021 resulted from the same impacts to the NPW increase described above.
Loss and Loss Expenses
The loss and loss expense ratio increased 3.8 points in First Quarter 2022 compared to First Quarter 2021, primarily due to the following:

| First Quarter 2022 |  | First Quarter 2021 |  |  |
($ in millions) | Loss and Loss Expense Incurred |  | Impact on Loss and Loss Expense Ratio |  |  | Loss and Loss Expense Incurred |  | Impact on Loss and Loss Expense Ratio |  |  | Change in Ratio |
Net catastrophe losses | $ | 20.6 |  |  | 2.5 |  | pts |  | $ | 29.9 |  |  | 4.1 |  | pts |  | (1.6) |  | pts
(Favorable) prior year casualty reserve development | (20.0) |  |  | (2.5) |  |  |  | (35.0) |  |  | (4.8) |  |  |  | 2.3 |  |
Non-catastrophe property loss and loss expenses | 150.4 |  |  | 18.5 |  |  |  | 115.6 |  |  | 15.9 |  |  |  | 2.6 |  |
Total | $ | 151.0 |  |  | 18.5 |  |  |  | $ | 110.5 |  |  | 15.2 |  |  |  | 3.3 |  |

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Details of the prior year casualty reserve development were as follows:

(Favorable)/Unfavorable Prior Year Casualty Reserve Development | Quarter ended March 31, |  |  |
($ in millions) | 2022 |  |  | 2021 |  |  |  |  |
General liability | $ | (5.0) |  |  |  | (15.0) |  |  |  |  |  |
Workers compensation | (10.0) |  |  |  | (15.0) |  |  |  |  |  |
Bonds | (5.0) |  |  |  | — |  |  |  |  |  |
Total Standard Commercial Lines | (20.0) |  |  |  | (30.0) |  |  |  |  |  |
Homeowners | — |  |  |  | — |  |  |  |  |  |
Personal automobile | — |  |  |  | — |  |  |  |  |  |
Total Standard Personal Lines | — |  |  |  | — |  |  |  |  |  |
E&S | — |  |  |  | (5.0) |  |  |  |  |  |
Total (favorable) prior year casualty reserve development | $ | (20.0) |  |  |  | (35.0) |  |  |  |  |  |
(Favorable) impact on loss ratio | (2.5) |  | pts |  | (4.8) |  |  |  |  |  |

For additional qualitative discussion on reserve development and non-catastrophe property loss and loss expenses, refer to the insurance segment sections below in "Results of Operations and Related Information by Segment."
Standard Commercial Lines Segment

|  | Quarter ended March 31, |  | Change % or Points |  |  |  |  |  |
($ in thousands) |  | 2022 |  | 2021 |  |  |  |  |  |  |  |
Insurance Segments Results: |  |  |  |  |  |  |  |  |  |  |  |  |  |
NPW |  | $ | 737,639 |  |  | 665,565 |  |  | 11 |  | % |  |  |  |  |  |  |
NPE |  | 661,469 |  |  | 589,141 |  |  | 12 |  |  |  |  |  |  |  |  |
Less: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loss and loss expense incurred |  | 399,474 |  |  | 324,850 |  |  | 23 |  |  |  |  |  |  |  |  |
Net underwriting expenses incurred |  | 218,032 |  |  | 193,569 |  |  | 13 |  |  |  |  |  |  |  |  |
Dividends to policyholders |  | 1,579 |  |  | 1,223 |  |  | 29 |  |  |  |  |  |  |  |  |
Underwriting income |  | 42,384 |  |  | 69,499 |  |  | (39) |  |  |  |  |  |  |  |  |
Combined Ratios: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loss and loss expense ratio |  | 60.4 |  | % | 55.1 |  |  | 5.3 |  | pts |  |  |  |  |  |  |
Underwriting expense ratio |  | 33.0 |  |  | 32.9 |  |  | 0.1 |  |  |  |  |  |  |  |  |
Dividends to policyholders ratio |  | 0.2 |  |  | 0.2 |  |  | — |  |  |  |  |  |  |  |  |
Combined ratio |  | 93.6 |  |  | 88.2 |  |  | 5.4 |  |  |  |  |  |  |  |  |

NPW growth of 11% in First Quarter 2022 compared to First Quarter 2021 reflected (i) renewal pure price increases, (ii) higher direct new business, and (iii) stronger retention as shown in the table below. In addition, NPW growth in First Quarter 2022 benefited from exposure growth.

|  | Quarter ended March 31, |  |  |  |  |  |  |
($ in millions) |  | 2022 |  |  | 2021 |  |  |  |  |  |
Direct new business premiums |  | $ | 128.4 |  |  |  | 114.5 |  |  |  |  |  |  |  |  |  |
Retention |  | 87 |  | % |  | 86 |  |  |  |  |  |  |  |  |  |
Renewal pure price increases on NPW |  | 4.8 |  |  |  | 5.5 |  |  |  |  |  |  |  |  |  |

The increase in NPE in First Quarter 2022 compared to First Quarter 2021 resulted from the same impacts to the NPW increase described above.
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The 5.3-point increase in the loss and loss expense ratio in First Quarter 2022 compared to First Quarter 2021 was primarily driven by the following:

| First Quarter 2022 |  | First Quarter 2021 |  |  |
($ in millions) | Loss and Loss Expense Incurred |  | Impact on Loss and Loss Expense Ratio |  |  | Loss and Loss Expense Incurred |  | Impact on Loss and Loss Expense Ratio |  | Change in Ratio |
Net catastrophe losses | $ | 14.9 |  |  | 2.3 |  | pts |  | $ | 16.1 |  |  | 2.7 |  |  | (0.4) |  | pts
Non-catastrophe property loss and loss expenses | 115.7 |  |  | 17.5 |  |  |  | 83.6 |  |  | 14.2 |  |  | 3.3 |  |
(Favorable) prior year casualty reserve development | (20.0) |  |  | (3.0) |  |  |  | (30.0) |  |  | (5.1) |  |  | 2.1 |  |
Total | 110.6 |  |  | 16.8 |  |  |  | 69.7 |  |  | 11.8 |  |  | 5.0 |  |

For quantitative information on the favorable prior-year casualty reserve development by line of business, see the "Insurance Operations" section above, and for qualitative information about the significant drivers of this development, see the line of business discussions below.
The following is a discussion of our most significant Standard Commercial Lines of business:

General Liability |  |  |  |  |  |  |
|  | Quarter ended March 31, |  | Change % or Points 1 |  |  |  |  |  |
($ in thousands) |  | 2022 |  |  | 2021 |  |  |  |  |  |  |  |
NPW |  | $ | 244,118 |  |  |  | 222,062 |  |  | 10 |  | % |  |  |  |  |  |  |
Direct new business |  | 37,883 |  |  |  | 34,253 |  |  | n/a |  |  |  |  |  |  |  |
Retention |  | 87 |  | % |  | 86 |  |  | n/a |  |  |  |  |  |  |  |
Renewal pure price increases |  | 4.0 |  |  |  | 4.4 |  |  | n/a |  |  |  |  |  |  |  |
NPE |  | $ | 216,325 |  |  |  | 193,520 |  |  | 12 |  | % |  |  |  |  |  |  |
Underwriting income |  | 28,817 |  |  |  | 36,573 |  |  | (21) |  |  |  |  |  |  |  |  |
Combined ratio |  | 86.7 |  | % |  | 81.1 |  |  | 5.6 |  | pts |  |  |  |  |  |  |
% of total Standard Commercial Lines NPW |  | 33 |  |  |  | 33 |  |  |  |  |  |  |  |  |  |  |

1 n/a: not applicable.
NPW growth of 10% in First Quarter 2022 compared to First Quarter 2021 benefited from renewal pure price increases, exposure growth, and higher direct new business.
The 5.6-point increase in the combined ratio in First Quarter 2022 compared to First Quarter 2021 was primarily driven by less favorable prior year casualty reserve development, as follows:

|  | First Quarter 2022 |  | First Quarter 2021 |  |  |
($ in millions) |  | Loss and Loss Expense Incurred |  | Impact on Combined Ratio |  |  | Loss and Loss Expense Incurred |  | Impact on Combined Ratio |  | Change in Ratio |
(Favorable) prior year casualty reserve development |  | $ | (5.0) |  |  | (2.3) |  | pts |  | $ | (15.0) |  |  | (7.8) |  |  | 5.5 |  | pts

The prior year favorable casualty reserve development in First Quarter 2022 was primarily attributable to lower loss severities in accident years 2019 and prior. The First Quarter 2021 prior year favorable casualty reserve development was primarily attributable to improved loss severities in accident years 2018 and prior.

Commercial Automobile |  |  |  |  |  |  |
|  | Quarter ended March 31, |  | Change % or Points 1 |  |  |  |  |  |
($ in thousands) |  | 2022 |  |  | 2021 |  |  |  |  |  |  |  |
NPW |  | $ | 212,595 |  |  |  | 190,646 |  |  | 12 |  | % |  |  |  |  |  |  |
Direct new business |  | 31,413 |  |  |  | 28,746 |  |  | n/a |  |  |  |  |  |  |  |
Retention |  | 87 |  | % |  | 87 |  |  | n/a |  |  |  |  |  |  |  |
Renewal pure price increases |  | 7.4 |  |  |  | 9.0 |  |  | n/a |  |  |  |  |  |  |  |
NPE |  | $ | 193,830 |  |  |  | 171,881 |  |  | 13 |  | % |  |  |  |  |  |  |
Underwriting (loss) income |  | (10,918) |  |  |  | 2,792 |  |  | (491) |  |  |  |  |  |  |  |  |
Combined ratio |  | 105.6 |  | % |  | 98.4 |  |  | 7.2 |  | pts |  |  |  |  |  |  |
% of total Standard Commercial Lines NPW |  | 29 |  |  |  | 29 |  |  |  |  |  |  |  |  |  |  |

1 n/a: not applicable.
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NPW growth of 12% in First Quarter 2022 compared to First Quarter 2021 benefited from renewal pure price increases, higher direct new business, and exposure growth that reflects 7% growth of in-force vehicle counts as of March 31, 2022 compared to March 31, 2021.
The 7.2-point increase in the combined ratio in First Quarter 2022 compared to First Quarter 2021 was primarily driven by the following:

|  | First Quarter 2022 |  | First Quarter 2021 |  |  |
($ in millions) |  | Loss and Loss Expense Incurred |  | Impact on Combined Ratio |  |  | Loss and Loss Expense Incurred |  | Impact on Combined Ratio |  | Change in Ratio |
Net catastrophe losses |  | $ | 0.3 |  |  | 0.2 |  | pts |  | $ | 0.2 |  |  | 0.1 |  |  | 0.1 |  | pts
Non-catastrophe property loss and loss expenses |  | 43.0 |  |  | 22.2 |  |  |  | 29.4 |  |  | 17.1 |  |  | 5.1 |  |
Total |  | $ | 43.3 |  |  | 22.4 |  |  |  | $ | 29.6 |  |  | 17.2 |  |  | 5.2 |  |

First Quarter 2022 experienced elevated non-catastrophe property loss and loss expenses, due primarily to higher severities from recent inflationary and supply chain impacts that have caused increases to labor and the cost of materials.
In addition, the combined ratio was impacted by a 1.6-point increase in current year casualty loss costs in First Quarter 2022 compared to First Quarter 2021, primarily due to an expected increase in claim frequencies resulting from a more normalized amount of miles driven as the COVID-19-related restrictions continue to lessen.

Commercial Property |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Quarter ended March 31, |  | Change % or Points 1 |  |  |  |  |  |
($ in thousands) |  | 2022 |  |  | 2021 |  |  |  |  |  |  |  |
NPW |  | $ | 130,905 |  |  |  | 113,382 |  |  | 15 |  | % |  |  |  |  |  |  |
Direct new business |  | 27,817 |  |  |  | 24,270 |  |  | n/a |  |  |  |  |  |  |  |
Retention |  | 86 |  | % |  | 85 |  |  | n/a |  |  |  |  |  |  |  |
Renewal pure price increases |  | 6.2 |  |  |  | 6.0 |  |  | n/a |  |  |  |  |  |  |  |
NPE |  | $ | 120,062 |  |  |  | 102,810 |  |  | 17 |  | % |  |  |  |  |  |  |
Underwriting income |  | 176 |  |  |  | 6,766 |  |  | 97 |  |  |  |  |  |  |  |  |
Combined ratio |  | 99.9 |  | % |  | 93.4 |  |  | 6.5 |  | pts |  |  |  |  |  |  |
% of total Standard Commercial Lines NPW |  | 18 |  |  |  | 17 |  |  |  |  |  |  |  |  |  |  |

1 n/a: not applicable.
NPW growth of 15% in First Quarter 2022 compared to First Quarter 2021 benefited from renewal pure price increases, exposure growth, stronger retention, and higher direct new business.
The 6.5-point increase in the combined ratio in First Quarter 2022 compared to First Quarter 2021 was primarily driven by the items in the table shown below.

|  | First Quarter 2022 |  | First Quarter 2021 |  |  |
($ in millions) |  | Loss and Loss Expense Incurred |  | Impact on Combined Ratio |  |  | Loss and Loss Expense Incurred |  | Impact on Combined Ratio |  | Change in Ratio |
Net catastrophe losses |  | $ | 12.9 |  |  | 10.8 |  | pts |  | 13.7 |  |  | 13.3 |  |  | (2.5) |  | pts
Non-catastrophe property loss and loss expenses |  | 63.1 |  |  | 52.5 |  |  |  | 44.6 |  |  | 43.4 |  |  | 9.1 |  |
Total |  | $ | 76.0 |  |  | 63.3 |  |  |  | 58.3 |  |  | 56.7 |  |  | 6.6 |  |

First Quarter 2022 experienced elevated non-catastrophe property loss and loss expenses, primarily due to increased severity compared to First Quarter 2021 that reflects the volatility from period to period that is normally associated with our commercial property line of business.
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Workers Compensation |  |  |  |  |  |  |
|  | Quarter ended March 31, |  | Change % or Points 1 |  |  |  |  |  |
($ in thousands) |  | 2022 |  |  | 2021 |  |  |  |  |  |  |  |
NPW |  | $ | 97,459 |  |  |  | 92,291 |  |  | 6 |  | % |  |  |  |  |  |  |
Direct new business |  | 16,946 |  |  |  | 15,946 |  |  | n/a |  |  |  |  |  |  |  |
Retention |  | 87 |  | % |  | 86 |  |  | n/a |  |  |  |  |  |  |  |
Renewal pure price increases |  | (1.1) |  |  |  | 0.2 |  |  | n/a |  |  |  |  |  |  |  |
NPE |  | $ | 84,680 |  |  |  | 78,190 |  |  | 8 |  | % |  |  |  |  |  |  |
Underwriting income |  | 15,905 |  |  |  | 20,418 |  |  | (22) |  |  |  |  |  |  |  |  |
Combined ratio |  | 81.2 |  | % |  | 73.9 |  |  | 7.3 |  | pts |  |  |  |  |  |  |
% of total Standard Commercial Lines NPW |  | 13 |  |  |  | 14 |  |  |  |  |  |  |  |  |  |  |

1 n/a: not applicable.
NPW growth of 6% in First Quarter 2022 compared to First Quarter 2021 benefited from higher direct new business, exposure growth, and stronger retention.
The 7.3-point increase in the combined ratio in First Quarter 2022 compared to First Quarter 2021 was the result of less favorable prior year casualty reserve development, as follows:

|  | First Quarter 2022 |  | First Quarter 2021 |  |  |
($ in millions) |  | Loss and Loss Expense Incurred |  | Impact on Combined Ratio |  |  | Loss and Loss Expense Incurred |  | Impact on Combined Ratio |  | Change in Ratio |
(Favorable) prior year casualty reserve development |  | $ | (10.0) |  |  | (11.8) |  | pts |  | $ | (15.0) |  |  | (19.2) |  |  | 7.4 |  | pts

The favorable prior year casualty reserve development in First Quarter 2022 was primarily due to improved loss severities in accident years 2019 and prior. The favorable prior year casualty reserve development in First Quarter 2021 was primarily due to improved loss severities in accident years 2018 and prior.
Standard Personal Lines Segment

|  | Quarter ended March 31, |  | Change % or Points |  |  |  |  |  |
($ in thousands) |  | 2022 |  |  | 2021 |  |  |  |  |  |  |  |
Insurance Segments Results: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
NPW |  | $ | 65,057 |  |  |  | 65,077 |  |  | — |  | % |  |  |  |  |  |  |
NPE |  | 72,642 |  |  |  | 73,821 |  |  | (2) |  |  |  |  |  |  |  |  |
Less: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loss and loss expense incurred |  | 48,547 |  |  |  | 47,166 |  |  | 3 |  |  |  |  |  |  |  |  |
Net underwriting expenses incurred |  | 17,575 |  |  |  | 18,960 |  |  | (7) |  |  |  |  |  |  |  |  |
Underwriting income |  | 6,520 |  |  |  | 7,695 |  |  | (15) |  |  |  |  |  |  |  |  |
Combined Ratios: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loss and loss expense ratio |  | 66.8 |  | % |  | 63.9 |  |  | 2.9 |  | pts |  |  |  |  |  |  |
Underwriting expense ratio |  | 24.2 |  |  |  | 25.7 |  |  | (1.5) |  |  |  |  |  |  |  |  |
Combined ratio |  | 91.0 |  |  |  | 89.6 |  |  | 1.4 |  |  |  |  |  |  |  |  |

NPW was flat in First Quarter 2022 compared to First Quarter 2021, continuing to be impacted by the challenging personal automobile competitive environment. In the third quarter of 2021, we transitioned our personal lines strategy to targeting customers in the mass affluent market where we believe our strong coverage and servicing capabilities can be more competitive.

|  | Quarter ended March 31, |  |  |  |  |  |  |
($ in millions) |  | 2022 |  |  | 2021 |  |  |  |  |  |  |
Direct new business premiums 1 |  | $ | 9.6 |  |  |  | 9.8 |  |  |  |  |  |  |  |  |  |
Retention |  | 84 |  | % |  | 83 |  |  |  |  |  |  |  |  |  |
Renewal pure price increases on NPW |  | 0.6 |  |  |  | 0.8 |  |  |  |  |  |  |  |  |  |

1 Excludes our Flood direct premiums written, which is 100% ceded to the NFIP and therefore, has no impact on our NPW.
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The 2.9-point increase in the loss and loss expense ratio in First Quarter 2022 compared to First Quarter 2021 was driven by the following:

|  | First Quarter 2022 |  | First Quarter 2021 |  |  |
($ in millions) |  | Loss and Loss Expense Incurred |  | Impact on Loss and Loss Expense Ratio |  |  | Loss and Loss Expense Incurred |  | Impact on Loss and Loss Expense Ratio |  | Change in Ratio |
Net catastrophe losses |  | $ | 4.3 |  |  | 6.0 |  | pts |  | 5.6 |  |  | 7.6 |  |  | (1.6) |  | pts
Non-catastrophe property loss and loss expenses |  | 25.6 |  |  | 35.2 |  |  |  | 23.1 |  |  | 31.3 |  |  | 3.9 |  |
Total |  | $ | 29.9 |  |  | 41.2 |  |  |  | 28.7 |  |  | 38.9 |  |  | 2.3 |  |

First Quarter 2022 experienced elevated non-catastrophe property loss and loss expenses associated with physical damage losses on our personal automobile line of business due to higher frequencies and severities from recent inflationary and supply chain impacts that have caused increases to labor and the cost of materials. The likely continuation of this trend, coupled with renewal pure price increases below trend, may put pressure on this segment's profitability in the near-term.
In addition, the loss and loss expense ratio was impacted by a 0.7-point increase in current year casualty loss costs in First Quarter 2022 compared to First Quarter 2021, primarily due to an expected increase in claim frequencies resulting from a more normalized amount of miles driven as the COVID-19-related restrictions continue to lessen.
The 1.5-point decrease in the underwriting expense ratio in First Quarter 2022 compared to First Quarter 2021 was primarily driven by (i) a 0.8-point reduction in commissions, and (ii) a 0.5-point decrease in employee-related expenses.
E&S Lines Segment

|  | Quarter ended March 31, |  | Change % or Points |  |  |  |  |  |
($ in thousands) |  | 2022 |  |  | 2021 |  |  |  |  |  |  |  |
Insurance Segments Results: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
NPW |  | $ | 87,102 |  |  |  | 67,536 |  |  | 29 |  | % |  |  |  |  |  |  |
NPE |  | 78,172 |  |  |  | 61,998 |  |  | 26 |  |  |  |  |  |  |  |  |
Less: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loss and loss expense incurred |  | 46,215 |  |  |  | 41,385 |  |  | 12 |  |  |  |  |  |  |  |  |
Net underwriting expenses incurred |  | 25,032 |  |  |  | 20,097 |  |  | 25 |  |  |  |  |  |  |  |  |
Underwriting income (loss) |  | 6,925 |  |  |  | 516 |  |  | 1,242 |  |  |  |  |  |  |  |  |
Combined Ratios: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loss and loss expense ratio |  | 59.1 |  | % |  | 66.8 |  |  | (7.7) |  | pts |  |  |  |  |  |  |
Underwriting expense ratio |  | 32.0 |  |  |  | 32.4 |  |  | (0.4) |  |  |  |  |  |  |  |  |
Combined ratio |  | 91.1 |  |  |  | 99.2 |  |  | (8.1) |  |  |  |  |  |  |  |  |

The strong NPW growth of 29% in First Quarter 2022 compared to First Quarter 2021 reflected renewal pure price increases and higher direct new business as shown in the table below. In addition, NPW growth in First Quarter 2022 benefited from exposure growth driven by favorable economic conditions in E&S lines in the U.S.

|  | Quarter ended March 31, |  |  |  |  |  |  |
($ in millions) |  | 2022 |  | 2021 |  |  |  |  |  |  |
Direct new business premiums |  | $ | 39.2 |  |  | 31.3 |  |  |  |  |  |  |  |  |  |
Overall renewal price increases on NPW |  | 7.7 |  |  | 7.3 |  |  |  |  |  |  |  |  |  |

The increase in NPE in First Quarter 2022 compared to First Quarter 2021 resulted from the same impacts to the NPW increase described above.
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The 7.7-point decrease in the loss and loss expense ratio in First Quarter 2022 compared to First Quarter 2021 was primarily driven by the items in the table shown below.

|  | First Quarter 2022 |  |  | First Quarter 2021 |  |  |
($ in millions) |  | Loss and Loss Expense Incurred |  | Impact on Loss and Loss Expense Ratio |  |  | Loss and Loss Expense Incurred |  | Impact on Loss and Loss Expense Ratio |  | Change in Ratio |
Net catastrophe losses |  | $ | 1.3 |  |  | 1.7 |  | pts |  | $ | 8.3 |  |  | 13.3 |  |  | (11.6) |  | pts
Non-catastrophe property loss and loss expenses |  | 9.1 |  |  | 11.6 |  |  |  | 8.9 |  |  | 14.3 |  |  | (2.7) |  |
(Favorable) prior year casualty reserve development |  | — |  |  | — |  |  |  | (5.0) |  |  | (8.1) |  |  | 8.1 |  |
Total |  | $ | 10.4 |  |  | 13.3 |  |  |  | $ | 12.2 |  |  | 19.5 |  |  | (6.2) |  |

The decrease in net catastrophe losses in First Quarter 2022 compared to First Quarter 2021 was primarily due to a series of large storms in First Quarter 2021 that significantly impacted Texas and other Southern and Midwestern states, that did not reoccur in First Quarter 2022.
There was no prior year casualty reserve development in First Quarter 2022. The favorable prior year casualty reserve development in First Quarter 2021 was primarily due to improved loss severities in accident years 2016 through 2018.
In addition, the loss and loss expense ratio was impacted by a 1.4-point decrease in current year casualty loss costs in First Quarter 2022 compared to First Quarter 2021. Our E&S casualty lines results have improved over recent years, following a number of underwriting and claims initiatives, strong rate increases, and the decrease in current year casualty loss costs reflects the impacts of these actions.
Investments
The primary objectives of the investment portfolio are to maximize after-tax net investment income and generate long-term growth in book value by maximizing the overall total return of the portfolio. Each objective is balanced against prevailing market conditions, capital preservation considerations, and our enterprise risk-taking appetite. We maintain (i) a well-diversified portfolio across issuers, sectors, and asset classes, and (ii) a high credit quality core fixed income securities portfolio with a duration and maturity profile at an acceptable risk level that provides ample liquidity. The effective duration of the fixed income securities portfolio, including short-term investments, was 4.1 years as of March 31, 2022, compared to the Insurance Subsidiaries' net loss and loss expense reserves duration of 3.5 years at December 31, 2021.
Our fixed income and short-term investments represented 90% of our invested assets at March 31, 2022, and 91% at December 31, 2021. Additionally, as of both dates, our fixed income securities and short-term investments portfolio had a weighted average credit rating of "A+" with investment grade holdings representing 96% of the total portfolio.
For further details on the composition, credit quality, and the various risks to which our portfolio is subject, see Item 7A. “Quantitative and Qualitative Disclosures About Market Risk.” of our 2021 Annual Report.

Total Invested Assets |  |  |  |  |  |  |
($ in thousands) |  | March 31, 2022 |  | December 31, 2021 |  | Change |
Total invested assets |  | $ | 7,774,711 |  |  | 8,026,988 |  |  | (3) |  | %
Invested assets per dollar of common stockholders' equity |  | 3.02 |  |  | 2.88 |  |  | 5 |  |
Unrealized (loss) gain – before tax 1 |  | (56,904) |  |  | 255,658 |  |  | (122) |  |
Unrealized (loss) gain – after tax 1 |  | (44,954) |  |  | 201,970 |  |  | (122) |  |

1 Includes unrealized losses on fixed income securities of $81.5 million and unrealized gains on equity securities of $24.5 million at March 31, 2022.
Invested assets decreased $252.3 million at March 31, 2022, compared to December 31, 2021, reflecting an increase in pre-tax unrealized losses of $312.6 million, due to an increase in benchmark U.S. Treasury rates and the widening of credit spreads, partially offset by operating cash flows during First Quarter 2022 that were 10% of NPW.
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Net Investment Income
The components of net investment income earned were as follows:

|  | Quarter ended March 31, |  | Change % or Points |  |  |  |  |
($ in thousands) |  | 2022 |  | 2021 |  |  |  |  |
Fixed income securities |  | $ | 53,925 |  |  | 52,823 |  |  | 2 | % |  |  |  |  |  |  |
Commercial mortgage loans ("CMLs") |  | 970 |  |  | 514 |  |  | 89 |  |  |  |  |  |  |  |
Equity securities |  | 2,418 |  |  | 2,488 |  |  | (3) |  |  |  |  |  |  |  |
Short-term investments |  | 101 |  |  | 85 |  |  | 19 |  |  |  |  |  |  |  |
Other investments |  | 19,305 |  |  | 17,433 |  |  | 11 |  |  |  |  |  |  |  |
Investment expenses |  | (4,117) |  |  | (3,627) |  |  | 14 |  |  |  |  |  |  |  |
Net investment income earned – before tax |  | 72,602 |  |  | 69,716 |  |  | 4 |  |  |  |  |  |  |  |
Net investment income tax expense |  | (14,087) |  |  | (13,373) |  |  | 5 |  |  |  |  |  |  |  |
Net investment income earned – after tax |  | $ | 58,515 |  |  | 56,343 |  |  | 4 |  |  |  |  |  |  |  |
Effective tax rate |  | 19.4 | % |  | 19.2 |  |  | 0.2 |  | pts |  |  |  |  |  |
Annualized after-tax yield on fixed income investments |  | 2.6 |  |  | 2.6 |  |  | — |  |  |  |  |  |  |  |
Annualized after-tax yield on investment portfolio |  | 3.0 |  |  | 3.0 |  |  | — |  |  |  |  |  |  |  |

Net investment income earned increased 4% in First Quarter 2022 compared to First Quarter 2021, driven by income earned on fixed income securities and other investments. During First Quarter 2022, w e actively traded our fixed income securities portfolio to opportunistically increase yield in the rising interest rate environment. The average after-tax new purchase yield on fixed income security purchases in First Quarter 2022 was 2.6%, which was up sequentially from 2.1% in the fourth quarter of 2021 and 1.7% in First Quarter 2021. In addition, a s of March 31, 2022, 14% of our fixed income securities portfolio was invested in floating rate securities, which reset principally to 90-day U.S. dollar-denominated London Interbank Offered Rate.
As the returns on our alternative investments generally follow capital market performance, which was down during First Quarter 2022, we expect losses on these investments in the second quarter of 2022, which will impact net investment income. Over the remainder of 2022, we expect higher reinvestment yields within our fixed income securities portfolio, which will likely result in higher net investment income from these securities.
Realized and Unrealized Gains and Losses
When evaluating securities for sale, our general philosophy is to reduce our exposure to securities and sectors based on economic evaluations of whether the fundamentals for that security or sector have deteriorated or the timing is appropriate to opportunistically trade for other securities with better economic-return characteristics.
Net realized and unrealized gains and losses for the indicated periods were as follows:

|  | Quarter ended March 31, |  | Change % |  |  |  |
($ in thousands) |  | 2022 |  | 2021 |  |  |  |
Net realized losses on disposals |  | $ | (11,363) |  |  | (795) |  |  | 1,329 | % |  |  |  |  |  |
Net unrealized (losses) gains on equity securities |  | (2,154) |  |  | 11,280 |  |  | (119) |  |  |  |  |  |  |
Net credit loss expense on fixed income securities, AFS |  | (22,052) |  |  | (4,997) |  |  | 341 |  |  |  |  |  |  |
Net credit loss expense on fixed income securities, held-to-maturity |  | 14 |  |  | (7) |  |  | (300) |  |  |  |  |  |  |
Losses on securities for which we have the intent to sell |  | (4,797) |  |  | (362) |  |  | 1,225 |  |  |  |  |  |  |
Total net realized and unrealized investment (losses) gains |  | $ | (40,352) |  |  | 5,119 |  |  | (888) |  |  |  |  |  |  |

Net realized and unrealized investment gains decreased $45.5 million in First Quarter 2022 compared to First Quarter 2021, primarily driven by (i) active trading of our fixed income securities in First Quarter 2022 to opportunistically increase yield in the rising interest rate environment, and (ii) higher credit loss expense on our AFS fixed income securities portfolio.
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Federal Income Taxes
The following table provides information regarding federal income taxes and reconciles federal income tax at the corporate rate to the effective tax rate:

|  | Quarter ended March 31, |  |
($ in thousands) |  | 2022 |  | 2021 |  |  |  |
Tax at statutory rate |  | $ | 14,677 |  |  | 28,483 |  |  |  |  |
Tax-advantaged interest |  | (1,074) |  |  | (1,178) |  |  |  |  |
Dividends received deduction |  | (106) |  |  | (109) |  |  |  |  |
Executive compensation |  | 258 |  |  | 207 |  |  |  |  |
Stock-based compensation |  | (731) |  |  | (464) |  |  |  |  |
Other |  | 536 |  |  | (577) |  |  |  |  |
Federal income tax expense |  | 13,560 |  |  | 26,362 |  |  |  |  |
Income before federal income tax, less preferred stock dividends |  | 67,590 |  |  | 133,179 |  |  |  |  |
Effective tax rate |  | 20.1 | % |  | 19.8 |  |  |  |  |

Liquidity and Capital Resources
Capital resources and liquidity reflect our ability to generate cash flows from business operations, borrow funds at competitive rates, and raise new capital to meet our operating and growth needs.
Liquidity
We manage liquidity by focusing on generating sufficient cash flows to meet the short-term and long-term cash requirements of our business operations. We also adjust our liquidity in light of economic or market conditions, as discussed further below.
Sources of Liquidity
Sources of cash for the Parent historically have consisted of dividends from the Insurance Subsidiaries, the investment portfolio held at the Parent, borrowings under third-party lines of credit, loan agreements with certain Insurance Subsidiaries, and the issuance of equity (common or preferred) and debt securities. We continue to monitor these sources, considering both our short-term and long-term liquidity and capital preservation strategies.
The Parent's investment portfolio includes (i) short-term investments that are generally maintained in “AAA” rated money market funds approved by the National Association of Insurance Commissioners, (ii) high-quality, highly liquid government and corporate fixed income securities; (iii) equity securities; (iv) other investments, and (v) a cash balance. In the aggregate, Parent cash and total investments amounted to $518 million at March 31, 2022, and $527 million at December 31, 2021.
The composition of the Parent's investment portfolio may change over time based on various factors, including the amount and availability of dividends from our Insurance Subsidiaries, investment income, expenses, other Parent cash needs, such as dividends payable to stockholders, asset allocation investment decisions, inorganic growth opportunities, debt retirement, and share repurchases. Our target is for the Parent to maintain highly liquid investments of at least twice its expected annual net cash outflow needs, or $180 million.
Insurance Subsidiary Dividends
The Insurance Subsidiaries generate liquidity through insurance float, which is created by collecting premiums and earning investment income before paying claims. The period of float can extend over many years. Our investment portfolio consists of maturity dates that continually provide a source of cash flow for claims payments in the ordinary course of business. To protect our Insurance Subsidiaries' capital, we purchase reinsurance coverage for significantly large claims or catastrophes that may occur.
The Insurance Subsidiaries paid $40 million in total dividends to the Parent during First Quarter 2022. As of December 31, 2021, our allowable ordinary maximum dividend is $322 million for 2022. All Insurance Subsidiary dividends to the Parent are (i) subject to the approval and/or review of its domiciliary state insurance regulator, and (ii) generally payable only from earned statutory surplus reported in its annual statements as of the preceding December 31. Although domiciliary state insurance regulators historically have approved dividends, there is no assurance they will approve future Insurance Subsidiary dividends.
New Jersey corporate law also limits the maximum amount of dividends the Parent can pay our stockholders if either (i) the Parent would be unable to pay its debts as they became due in the usual course of business, or (ii) the Parent’s total assets would be less than its total liabilities. The Parent’s ability to pay dividends to stockholders is also impacted by (i) covenants in its credit agreement that obligate it, among other things, to maintain a minimum consolidated net worth and a maximum ratio of consolidated debt to total capitalization, and (ii) the terms of our preferred stock that prohibit dividends to be declared or paid
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on our common stock if dividends are not declared and paid, or made payable, on all outstanding preferred stock for the latest completed dividend period.
For additional information regarding dividend restrictions and financial covenants, where applicable, see Note 11. "Indebtedness", Note 17. "Equity", and Note 22. “Statutory Financial Information, Capital Requirements, and Restrictions on Dividends and Transfers of Funds” in Item 8. “Financial Statements and Supplementary Data.” of our 2021 Annual Report.
Line of Credit
On December 20, 2019, the Parent entered into a Credit Agreement with the lenders named therein (the “Lenders”) and the Bank of Montreal, Chicago Branch, as Administrative Agent ("Line of Credit"). Under the Line of Credit, the Lenders have agreed to provide the Parent with a $50 million revolving credit facility that can be increased to $125 million with the Lenders' consent. No borrowings were made under the Line of Credit in First Quarter 2022. The Line of Credit will mature on December 20, 2022, and has a variable interest rate based on, among other factors, the Parent’s debt ratings. For additional information regarding the Line of Credit and corresponding representations, warranties, and covenants, refer to Note 11. "Indebtedness" in Item 8. "Financial Statements and Supplementary Data." of our 2021 Annual Report. We met all covenants under our Line of Credit as of March 31, 2022.
Four of the Insurance Subsidiaries are members of Federal Home Loan Bank ("FHLB") branches, as shown in the following table. Membership requires the ownership of branch stock and includes the right to access liquidity. All Federal Home Loan Bank of Indianapolis ("FHLBI") and Federal Home Loan Bank of New York ("FHLBNY") borrowings are required to be secured by investments pledged as collateral. For additional information regarding collateral outstanding, refer to Note 4. "Investments" in Item 1. "Financial Statements." of this Form 10-Q:

Branch | Insurance Subsidiary Member
FHLBI | Selective Insurance Company of South Carolina ("SICSC")1 Selective Insurance Company of the Southeast ("SICSE")1
FHLBNY | Selective Insurance Company of America ("SICA") Selective Insurance Company of New York ("SICNY")

1 These subsidiaries are jointly referred to as the "Indiana Subsidiaries" as they are domiciled in Indiana.
The Line of Credit permits aggregate borrowings from the FHLBI and the FHLBNY up to 10% of the respective member company’s admitted assets for the previous year. As SICNY is domiciled in New York, its FHLBNY borrowings are limited by New York insurance regulations to the lower of 5% of admitted assets for the most recently completed fiscal quarter, or 10% of admitted assets for the previous year-end. As of March 31, 2022, we had remaining capacity of $435.2 million for FHLB borrowings, with a $17.1 million additional stock purchase requirement to allow the member companies to borrow their remaining capacity amounts.
Short-term Borrowings
We did not make any short-term borrowings from FHLB branches during First Quarter 2022. However, on April 1, 2022, SICA borrowed $35 million from the FHLBNY at an interest rate of 0.70% with repayment due on May 2, 2022. This borrowing was refinanced upon its maturity on May 2, 2022, at an interest rate of 1.10%. This borrowing now matures on June 27, 2022. These funds were used for general corporate purposes.
Intercompany Loan Agreements
The Parent has lending agreements with the Indiana Subsidiaries approved by the Indiana Department of Insurance that provide additional liquidity. Similar to the Line of Credit, these lending agreements limit the Parent's borrowings from the Indiana Subsidiaries to 10% of the admitted assets of the respective Indiana Subsidiary. The outstanding balance on these intercompany loans was $40.0 million as of both March 31, 2022, and December 31, 2021. The remaining capacity under these intercompany loan agreements was $109.9 million as of both March 31, 2022, and December 31, 2021.
Capital Market Activities
The Parent had no private or public issuances of stock during First Quarter 2022. In the fourth quarter of 2020, we enhanced our capital structure flexibility at the Parent by issuing $200 million of 4.60% non-cumulative perpetual preferred stock. Net proceeds after issuance costs were $195 million. The Parent is using these proceeds for general corporate purposes, which may include the repurchase of common stock under a $100 million share repurchase program authorized by our Board of Directors (the "Board") in conjunction with the preferred stock offering. During First Quarter 2022, we repurchased 1,000 shares of our common stock under this authorization at a cost of $75,488, with a $75.49 average price per share, excluding commission costs paid. We have $96.5 million of remaining capacity under our share repurchase program. For additional information on the
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preferred stock transaction and share repurchase program, refer to Note 17. “Equity” in Item 8. "Financial Statements and Supplementary Data." of our 2021 Annual Report.
Uses of Liquidity
The Parent's liquidity generated from the sources discussed above is used, among other things, to pay dividends to our stockholders. Dividends on shares of the Parent's common and preferred stock are declared and paid at the discretion of the Board based on our operating results, financial condition, capital requirements, contractual restrictions, and other relevant factors. On May 4, 2022, our Board declared:
•A quarterly cash dividend on common stock of $0.28 per common share, that is payable June 1, 2022, to holders of record on May 16, 2022; and
•A cash dividend of $287.50 per share on our 4.60% Non-Cumulative Preferred Stock, Series B (equivalent to $0.28750 per depository share) payable on June 15, 2022, to holders of record as of May 31, 2022.
Our ability to meet our interest and principal repayment obligations on our debt, as well as our ability to continue to pay dividends to our stockholders, is dependent on (i) liquidity at the Parent, (ii) the ability of the Insurance Subsidiaries to pay dividends, if necessary, and/or (iii) the availability of other sources of liquidity to the Parent. Excluding the short-term borrowing described above, our next FHLB borrowing principal repayment is $60 million to FHLBI due on December 16, 2026.
Restrictions on the ability of the Insurance Subsidiaries to declare and pay dividends, without alternative liquidity options, could materially affect our ability to service debt and pay dividends on common and preferred stock.
Capital Resources
Capital resources ensure we can pay policyholder claims, furnish the financial strength to support the business of underwriting insurance risks, and facilitate continued business growth. At March 31, 2022, we had GAAP stockholders' equity of $2.8 billion and statutory surplus of $2.4 billion. With total debt of $505.6 million at March 31, 2022, our debt-to-capital ratio was 15.4%. For additional information on our statutory surplus, see Note 22. "Statutory Financial Information, Capital Requirements, and Restrictions on Dividends and Transfers of Funds" in Item 8. "Financial Statements and Supplementary Data." of our 2021 Annual Report.
The following table summarizes certain contractual obligations we had at March 31, 2022 that may require us to invest additional amounts into our investment portfolio, which we would fund primarily with operating cash flows.

($ in millions) |  | Amount of Obligation | Year of Expiration of Obligation
Alternative and other investments |  | $ | 238.0 |  | 2036
Non-publicly traded collateralized loan obligations in our fixed income securities portfolio |  | 60.0 |  | 2037
Non-publicly traded common stock within our equity portfolio |  | 16.4 |  | 2027
CMLs |  | 6.3 |  | 2024
Privately-placed corporate securities |  | 65.1 |  | 2026
Total |  | $ | 385.8 |  |

There is no certainty that any such additional investment will be required. We expect to have the capacity to repay and/or refinance these obligations as they come due.
Our current and long-term material cash requirements associated with (i) loss and loss expense reserves, (ii) contractual obligations pursuant to operating and financing leases for office space and equipment, and (iii) notes payable, funded primarily with operating cash flows, have not materially changed since December 31, 2021.
Our other cash requirements include, without limitation, dividends to stockholders, capital expenditures, and other operating expenses, including commissions to our distribution partners, labor costs, premium taxes, general and administrative expenses, and income taxes.
As of March 31, 2022 and December 31, 2021, we had no (i) material guarantees on behalf of others and trading activities involving non-exchange traded contracts accounted for at fair value, (ii) material transactions with related parties other than those disclosed in Note 18. “Related Party Transactions” in Item 8. “Financial Statements and Supplementary Data.” of our 2021 Annual Report, and (iii) material relationships with unconsolidated entities or financial partnerships, such as structured finance or special purpose entities, established to facilitate off-balance sheet arrangements or other contractually narrow or
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limited purposes. Consequently, we are not exposed to any material financing, liquidity, market, or credit risk related to off-balance sheet arrangements.
We continually monitor our cash requirements and the amount of capital resources we maintain at the holding company and operating subsidiary levels. As part of our long-term capital strategy, we strive to maintain capital metrics that support our targeted financial strength relative to the macroeconomic environment. Based on our analysis and market conditions, we may take a variety of actions, including, without limitation, contributing capital to the Insurance Subsidiaries, issuing additional debt and/or equity securities, repurchasing existing debt, repurchasing shares of the Parent’s common stock, and increasing common stockholders’ dividends.
Our capital management strategy is intended to protect the interests of the policyholders of the Insurance Subsidiaries and our stockholders, while enhancing our financial strength and underwriting capacity. We have a profitable book of business and solid capital base, positioning us well to take advantage of market opportunities that may arise.
Book value per common share decreased 8% to $42.73 as of March 31, 2022, from $46.24 as of December 31, 2021, driven by a $4.07 change in net unrealized losses on our fixed income securities portfolio and $0.28 in dividends to our common stockholders, partially offset by $0.89 in net income per diluted common share. The increase in net unrealized losses on our fixed income securities was primarily driven by an increase in benchmark U.S. Treasury rates and the widening of credit spreads. Our adjusted book value per share, which is book value per share excluding total after-tax unrealized gains or losses on investments included in accumulated other comprehensive (loss) income, increased slightly to $43.80 as of March 31, 2022, from $43.23 as of December 31, 2021.
Cash Flows
Net cash provided by operating activities was $93 million in First Quarter 2022 compared to $130 million in First Quarter 2021. Cash flows from operations decreased in First Quarter 2022 primarily driven by reduced underwriting results in our insurance operations. For more information on our underwriting results, refer to "Insurance Operations" above in this MD&A.
Net cash used in investing activities was $96 million in First Quarter 2022 compared to $111 million in First Quarter 2021. Investing activity was less in First Quarter 2022 as a result of reduced cash flows from our insurance operations.
Net cash used in financing activities remained relatively flat with $24 million in First Quarter 2022 compared to $26 million in First Quarter 2021.
Ratings
Our ratings remain the same as reported in our "Overview" section of Item 1. "Business." of our 2021 Annual Report and are as follows:

NRSRO |  | Financial Strength Rating |  | Outlook
AM Best Company |  | A+ |  | Stable
Moody's Investors Services |  | A2 |  | Stable
Fitch Ratings ("Fitch") |  | A+ |  | Stable
Standard & Poor's Global Ratings |  | A |  | Stable

On March 24, 2022, Fitch reaffirmed our "A+" rating with a "stable" outlook. In taking this rating action, Fitch cited our (i) business profile as a regional commercial lines writer with strong independent agency relationships, (ii) strong capitalization, and (iii) strong financial performance with stable underwriting results and return metrics that have remained favorable compared to peers.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
There have been no material changes in the information about market risk set forth in our 2021 Annual Report.
ITEM 4. CONTROLS AND PROCEDURES.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this report. In performing this evaluation, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework ("COSO Framework") in 2013. Based on this evaluation,
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our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures as of the end of such period are (i) effective in recording, processing, summarizing, and reporting information on a timely basis that we are required to disclose in the reports that we file or submit under the Exchange Act, and (ii) effective in ensuring that information that we are required to disclose in the reports that we file or submit under the Exchange Act is appropriately accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions about required disclosure. No changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) of the Exchange Act) occurred during First Quarter 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Incidental to our insurance operations, we are routinely engaged in legal proceedings with inherently unpredictable outcomes that could have a material adverse effect on our consolidated results of operations or cash flows in particular quarterly or annual periods. For additional information regarding our legal risks, refer to Note 12. "Litigation" in Item 1. "Financial Statements." of this Form 10-Q and Item 1A. “Risk Factors.” below in Part II. “Other Information.” As of March 31, 2022, we have no material pending legal proceedings that could have a material adverse effect on our consolidated financial condition, results of operations, or cash flows.
ITEM 1A. RISK FACTORS.
Certain risk factors can significantly impact our business, liquidity, capital resources, results of operations, financial condition, and debt ratings. These risk factors might affect, alter, or change actions we might take executing our long-term capital strategy. Examples include, without limitation, contributing capital to any or all of the Insurance Subsidiaries, issuing additional debt and/or equity securities, repurchasing our existing debt and/or equity securities, or increasing or decreasing common stockholders' dividends. We operate in a continually changing business environment, and new risk factors that we cannot predict or assess may emerge. Consequently, we can neither predict such new risk factors nor assess the potential future impact, if any, they might have on our business. Except as discussed below, there have been no material changes from the risk factors disclosed in Item 1A. “Risk Factors.” in our 2021 Annual Report.
We write business domestically in the United States and we do not have direct exposure within our insurance operations to businesses or individuals in Russia or the Ukraine. We do not have material exposure to investments subject to embargos or Russian reinsurance counterparties. However, the ongoing Russian war against Ukraine is impacting global economic, banking, commodity, and financial markets, exacerbating ongoing economic challenges, including inflation and supply chain disruption, which influences insurance loss costs, premiums and investment valuation.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
The following table provides information regarding our purchases of our common stock in First Quarter 2022:

Period |  | Total Number of Shares Purchased 1 |  | Average Price Paid per Share |  | Total Number of Shares Purchased as Part of Publicly Announced Programs 2 |  | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Announced Programs (in millions)2
January 1 – 31, 2022 |  | 846 |  |  | $ | 80.04 |  |  | — |  |  | $ | 96.6 |
February 1 – 28, 2022 |  | 70,816 |  |  | 76.56 |  |  | 1,000 |  |  | 96.5 |
March 1 – 31, 2022 |  | 331 |  |  | 83.26 |  |  | — |  |  | 96.5 |
Total |  | 71,993 |  |  | $ | 76.63 |  |  | 1,000 |  |  | $ | 96.5 |

1 We purchased these shares from employees to satisfy tax withholding obligations associated with the vesting of their restricted stock units.
2 On December 2, 2020, we announced our Board of Directors authorized a $100 million share repurchase program with no set expiration or termination date. Our repurchase program does not obligate us to acquire any particular amount of our common stock. Management will determine the timing and amount of any share repurchases under the authorization at its discretion based on market conditions and other considerations.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
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ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS.

Exhibit No. |  |
*11 |  | Statement Re: Computation of Per Share Earnings
*31.1 |  | Certification of Chief Executive Officer in accordance with Section 302 of the Sarbanes-Oxley Act of 2002.
*31.2 |  | Certification of Chief Financial Officer in accordance with Section 302 of the Sarbanes-Oxley Act of 2002.
**32.1 |  | Certification of Chief Executive Officer in accordance with Section 906 of the Sarbanes-Oxley Act of 2002.
**32.2 |  | Certification of Chief Financial Officer in accordance with Section 906 of the Sarbanes-Oxley Act of 2002.
**101 |  | The following financial statements from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Stockholders' Equity, (v) Consolidated Statements of Cash Flows and (vi) Notes to Consolidated Financial Statements.
**104 |  | The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, formatted in iXBRL.

* Filed herewith.
** Furnished and not filed herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
SELECTIVE INSURANCE GROUP, INC.
Registrant

Date: | May 5, 2022 |  | By: /s/ John J. Marchioni
|  |  | John J. Marchioni
|  |  | Chairperson of the Board, President and Chief Executive Officer
|  |  | (principal executive officer)
Date: | May 5, 2022 |  | By: /s/ Mark A. Wilcox
|  |  | Mark A. Wilcox
|  |  | Executive Vice President and Chief Financial Officer
|  |  | (principal financial officer)

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