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Indebtedness
 12 Months Ended
Dec. 31, 2022
Debt Disclosure [Abstract]  
Indebtedness Indebtedness
The table below provides a summary of our outstanding debt at December 31, 2022 and 2021:

Outstanding Debt2022Carry Value
Issuance DateMaturity DateInterest RateOriginal AmountUnamortized Issuance CostsDebt DiscountDecember 31, 2022December 31, 2021
($ in thousands)
Description
Long term
(1) Senior Notes3/1/20193/1/20495.375 %300,000 $2,543 5,576 291,881 291,597 
(2) FHLBI12/16/201612/16/20263.03 %60,000 — — 60,000 60,000 
(3) Senior Notes11/3/200511/1/20356.70 %100,000 256 458 99,286 99,233 
(4) Senior Notes11/16/200411/15/20347.25 %50,000 130 79 49,791 49,770 
Finance lease obligations3,718 5,450 
Total long-term debt$2,929 6,113 504,676 506,050 

On November 7, 2022, the Parent entered into a Credit Agreement (the “Line of Credit”) among the Parent, the lenders named therein (the “Lenders”), and Wells Fargo Bank, National Association, as Administrative Agent. Under the Line of Credit, the Lenders have agreed to provide the Parent with a $50 million revolving credit facility, which can be increased to $125 million with the consent of the Lenders. The Line of Credit will mature on November 7, 2025, and has a variable interest rate based on the Parent’s debt ratings. The Parent, as borrower, was a party to a Credit Agreement dated December 20, 2019, for a $50 million revolving credit facility, which could be increased to $125 million with the consent of the lenders, with the lenders named therein, and Bank of Montreal, Chicago Branch, as Administrative Agent (“Bank of Montreal”), which was scheduled to mature on December 20, 2022 (the “Prior Credit Agreement”). In anticipation of entering into the Line of Credit, the Parent exercised termination rights under the Prior Credit Agreement by sending a termination letter to Bank of Montreal on November 3, 2022. The effective date of the termination of the Prior Credit Agreement was November 7, 2022.

Our Line of Credit contains representations, warranties, and covenants that are customary for credit facilities of this type, including, without limitation, financial covenants under which we are obligated to maintain a minimum consolidated net worth, a maximum ratio of consolidated debt to total capitalization, and covenants limiting our ability to: (i) merge or liquidate; (ii) incur debt or liens; (iii) dispose of assets; (iv) make investments and acquisitions; and (v) engage in transactions with affiliates.

The table below outlines information regarding certain covenants in the Line of Credit:

Required as ofActual as of
December 31, 2022December 31, 2022
Consolidated net worth1
Not less than$1.9 billion$3 billion
Debt to total capitalization ratio1
Not to exceed35%14.3%
1Calculated in accordance with the Line of Credit.

In addition to the above requirements, the Line of Credit contains a cross-default provision that provides that the Line of Credit will be in default if we fail to comply with any condition, covenant, or agreement (including payment of principal and interest when due on any debt with an aggregate principal amount of at least $30 million), which causes or permits the acceleration of
principal. Additionally, the Line of Credit limits borrowings from the FHLBI and the FHLBNY to 10% of the respective member company's admitted assets for the previous year.

Short-term Debt Activity
(1) On April 1, 2022, SICA borrowed short-term funds of $35 million from the FHLBNY at an interest rate of 0.7%. This borrowing was refinanced and extended through June 27, 2022, at an interest rate of 1.10%. This borrowing was repaid on June 27, 2022.

(2) On October 3, 2022, SICA borrowed short-term funds of $25 million from the FHLBNY at an interest rate of 3.21%. This borrowing was repaid on November 3, 2022.

Long-term Debt Activity
(1) In the first quarter of 2019, we issued $300 million of 5.375% Senior Notes due 2049 at a discount of $5.9 million which, when coupled with debt issuance costs of approximately $3.3 million, resulted in net proceeds from the offering of $290.8 million. The 5.375% Senior Notes pay interest on March 1 and September 1 of each year. The first payment was made on September 1, 2019. A portion of the proceeds from this debt issuance was used to fully redeem the $185 million aggregate principal amount of our 5.875% Senior Notes due 2043, with the remaining $106 million being used for general corporate purposes. The 5.875% Senior Notes had pre-tax debt retirement costs of $4.2 million, or $3.3 million after tax, which was recorded in Interest expense on the Consolidated Statements of Income in the first quarter of 2019. There are no financial debt covenants to which we are required to comply in regards to the 5.375% Senior Notes.

(2) In the first quarter of 2009, Selective Insurance Company of South Carolina ("SICSC") and Selective Insurance Company of the Southeast ("SICSE"), which are collectively referred to as the "Indiana Subsidiaries" as they are domiciled in Indiana, joined, and invested in, the FHLBI, which provides them with access to additional liquidity. The Indiana Subsidiaries’ aggregate investment in the FHLBI was $5.2 million at December 31, 2022 and $5.7 million at December 31, 2021. Our investment provides us the ability to borrow approximately 20 times the total amount of the FHLBI common stock purchased with additional collateral, at comparatively low borrowing rates. The proceeds from the FHLBI borrowing on December 16, 2016 of $60 million were used to repay a $45 million borrowing from the FHLBI that was outstanding at the time, with the remaining $15 million used for general corporate purposes. All borrowings from the FHLBI require security. There are no financial debt covenants to which we are required to comply with in regards to these borrowings. For information on investments that are pledged as collateral for these borrowings, see Note 5. "Investments" above.

(3) In November 2005, we issued $100 million of 6.70% Senior Notes due 2035. These notes were issued at a discount of $0.7 million resulting in an effective yield of 6.754%. Net proceeds of approximately $50 million were used to fund an irrevocable trust that subsequently funded certain payment obligations in respect of our outstanding debt. The remainder of the proceeds was used for general corporate purposes. The agreements covering these notes contain a standard default cross-acceleration provision that provides the 6.70% Senior Notes will enter a state of default upon the failure to pay principal when due or upon any event or condition that results in an acceleration of principal of any other debt instrument in excess of $10 million that we have outstanding concurrently with the 6.70% Senior Notes. There are no financial debt covenants to which we are required to comply in regards to these notes.

(4) In November 2004, we issued $50 million of 7.25% Senior Notes due 2034. These notes were issued at a discount of $0.1 million, resulting in an effective yield of 7.27%. We contributed $25 million of the bond proceeds to the Insurance Subsidiaries as capital. The remainder of the proceeds was used for general corporate purposes. The agreements covering these notes contain a standard default cross-acceleration provision that provides the 7.25% Senior Notes will enter a state of default upon the failure to pay principal when due or upon any event or condition that results in an acceleration of principal of any other debt instrument in excess of $10 million that we have outstanding concurrently with the 7.25% Senior Notes. There are no financial debt covenants to which we are required to comply in regards to these notes.