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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 2023
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)
Registrant's telephone number, including area code: (973) 948-3000
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 | ☐ | Emerging growth company | ☐
Non-accelerated filer | ☐ | Smaller reporting 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 28, 2023, there were 60,492,814 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, 2023 (Unaudited) and December 31, 2022 | 1
| Unaudited Consolidated Statements of Income for the Quarter Ended March 31, 2023 and 2022 | 2
| Unaudited Consolidated Statements of Comprehensive Income for the Quarter Ended March 31, 2023 and 2022 | 3
| Unaudited Consolidated Statements of Stockholders' Equity for the Quarter Ended March 31, 2023 and 2022 | 4
| Unaudited Consolidated Statements of Cash Flows for the Quarter Ended March 31, 2023 and 2022 | 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 | 22
| Introduction | 22
| Critical Accounting Policies and Estimates | 23
| Financial Highlights of Results for First Quarter 2023 and First Quarter 2022 | 24
| Results of Operations and Related Information by Segment | 26
| Federal Income Taxes | 34
| Liquidity and Capital Resources | 35
| Ratings | 38
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 38
Item 4. | Controls and Procedures | 38
PART II. OTHER INFORMATION
Item 1. | Legal Proceedings | 38
Item 1A. | Risk Factors | 38
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 39
Item 3. | Defaults Upon Senior Securities | 39
Item 4. | Mine Safety Disclosures | 39
Item 5. | Other Information | 39
Item 6. | Exhibits | 39
Signatures | 40

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, 2023 |  | December 31, 2022
ASSETS |  |  |  |
Investments: |  |  |  |
Fixed income securities, held-to-maturity – at carrying value (fair value: $23,522 – 2023; $29,837 – 2022) |  | $ | 24,650 |  |  | 31,157 |
Less: allowance for credit losses |  | — |  |  | — |
Fixed income securities, held-to-maturity, net of allowance for credit losses |  | 24,650 |  |  | 31,157 |
Fixed income securities, available-for-sale – at fair value (allowance for credit losses: $33,554 – 2023 and $45,721 – 2022; amortized cost: $7,441,048 – 2023 and $7,185,754 – 2022) |  | 6,964,516 |  |  | 6,612,107 |
Commercial mortgage loans – at carrying value (fair value: $147,540 – 2023 and $139,243 – 2022) |  | 157,283 |  |  | 149,305 |
Less: allowance for credit losses |  | (99) |  |  | (116) |
Commercial mortgage loans, net of allowance for credit losses |  | 157,184 |  |  | 149,189 |
Equity securities – at fair value (cost: $134,358 – 2023; $167,431 – 2022) |  | 132,175 |  |  | 162,000 |
Short-term investments |  | 302,750 |  |  | 440,456 |
Alternative investments |  | 380,028 |  |  | 371,316 |
Other investments |  | 68,141 |  |  | 71,244 |
Total investments (Note 4 and 5) |  | $ | 8,029,444 |  |  | 7,837,469 |
Cash |  | 149 |  |  | 26 |
Restricted cash |  | 35,516 |  |  | 25,183 |
Accrued investment income |  | 57,340 |  |  | 59,167 |
Premiums receivable |  | 1,171,265 |  |  | 1,101,787 |
Less: allowance for credit losses (Note 6) |  | (17,100) |  |  | (16,100) |
Premiums receivable, net of allowance for credit losses |  | 1,154,165 |  |  | 1,085,687 |
Reinsurance recoverable |  | 669,342 |  |  | 784,410 |
Less: allowance for credit losses (Note 7) |  | (2,300) |  |  | (1,600) |
Reinsurance recoverable, net of allowance for credit losses |  | 667,042 |  |  | 782,810 |
Prepaid reinsurance premiums |  | 174,574 |  |  | 172,371 |
Current federal income tax |  | — |  |  | 3,545 |
Deferred federal income tax |  | 158,078 |  |  | 172,733 |
Property and equipment – at cost, net of accumulated depreciation and amortization of: $257,277 – 2023; $251,209 – 2022 |  | 83,367 |  |  | 84,306 |
Deferred policy acquisition costs |  | 387,944 |  |  | 368,624 |
Goodwill |  | 7,849 |  |  | 7,849 |
Other assets |  | 259,547 |  |  | 202,491 |
Total assets |  | $ | 11,015,015 |  |  | 10,802,261 |
LIABILITIES AND STOCKHOLDERS’ EQUITY |  |  |  |
Liabilities: |  |  |  |
Reserve for loss and loss expense (Note 8) |  | $ | 5,099,450 |  |  | 5,144,821 |
Unearned premiums |  | 2,092,416 |  |  | 1,992,781 |
Long-term debt |  | 504,150 |  |  | 504,676 |
Current federal income tax |  | 20,295 |  |  | — |
Accrued salaries and benefits |  | 88,779 |  |  | 115,185 |
Other liabilities |  | 540,521 |  |  | 517,234 |
Total liabilities |  | $ | 8,345,611 |  |  | 8,274,697 |
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 – 2023 and 2022 |  |  |  |
Common stock of $2 par value per share: |  |  |  |
Authorized shares 360,000,000 |  |  |  |
Issued: 105,074,577 – 2023; 104,847,111 – 2022 |  | 210,149 |  |  | 209,694 |
Additional paid-in capital |  | 502,713 |  |  | 493,488 |
Retained earnings |  | 2,821,613 |  |  | 2,749,703 |
Accumulated other comprehensive income (loss) (Note 11) |  | (430,349) |  |  | (498,042) |
Treasury stock – at cost (shares: 44,581,991 – 2023; 44,508,211 – 2022) |  | (634,722) |  |  | (627,279) |
Total stockholders’ equity |  | $ | 2,669,404 |  |  | 2,527,564 |
Commitments and contingencies |  |  |  |
Total liabilities and stockholders’ equity |  | $ | 11,015,015 |  |  | 10,802,261 |

The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
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SELECTIVE INSURANCE GROUP, INC. UNAUDITED CONSOLIDATED STATEMENTS OF INCOME |  | Quarter ended March 31, |  |
($ in thousands, except per share amounts) |  | 2023 |  | 2022 |  |  |  |
Revenues: |  |  |  |  |  |  |  |
Net premiums earned |  | $ | 902,336 |  |  | 812,283 |  |  |  |  |
Net investment income earned |  | 91,506 |  |  | 72,602 |  |  |  |  |
Net realized and unrealized investment gains (losses) |  | 3,344 |  |  | (40,352) |  |  |  |  |
Other income |  | 2,634 |  |  | 1,529 |  |  |  |  |
Total revenues |  | 999,820 |  |  | 846,062 |  |  |  |  |
Expenses: |  |  |  |  |  |  |  |
Loss and loss expense incurred |  | 567,438 |  |  | 494,236 |  |  |  |  |
Amortization of deferred policy acquisition costs |  | 189,761 |  |  | 169,757 |  |  |  |  |
Other insurance expenses |  | 108,588 |  |  | 93,990 |  |  |  |  |
Interest expense |  | 7,166 |  |  | 7,168 |  |  |  |  |
Corporate expenses |  | 12,108 |  |  | 11,021 |  |  |  |  |
Total expenses |  | 885,061 |  |  | 776,172 |  |  |  |  |
Income before federal income tax |  | 114,759 |  |  | 69,890 |  |  |  |  |
Federal income tax expense: |  |  |  |  |  |  |  |
Current |  | 25,505 |  |  | 17,178 |  |  |  |  |
Deferred |  | (3,320) |  |  | (3,618) |  |  |  |  |
Total federal income tax expense |  | 22,185 |  |  | 13,560 |  |  |  |  |
Net income |  | $ | 92,574 |  |  | 56,330 |  |  |  |  |
Preferred stock dividends |  | 2,300 |  |  | 2,300 |  |  |  |  |
Net income available to common stockholders |  | $ | 90,274 |  |  | 54,030 |  |  |  |  |
Earnings per common share: |  |  |  |  |  |  |  |
Net income available to common stockholders - Basic |  | $ | 1.49 |  |  | 0.89 |  |  |  |  |
Net income available to common stockholders - Diluted |  | $ | 1.48 |  |  | 0.89 |  |  |  |  |

The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
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SELECTIVE INSURANCE GROUP, INC. UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |  | Quarter ended March 31, |  |
($ in thousands) |  | 2023 |  | 2022 |  |  |  |
Net income |  | $ | 92,574 |  |  | 56,330 |  |  |  |  |
Other comprehensive income (loss), net of tax: |  |  |  |  |  |  |  |
Unrealized gains (losses) on investment securities: |  |  |  |  |  |  |  |
Unrealized holding gains (losses) arising during period |  | 52,079 |  |  | (206,848) |  |  |  |  |
Unrealized gains (losses) on securities with credit loss recognized in earnings |  | 17,721 |  |  | (68,430) |  |  |  |  |
Amounts reclassified into net income: |  |  |  |  |  |  |  |
Held-to-maturity securities |  | — |  |  | 1 |  |  |  |  |
Net realized (gains) losses on disposals and losses on intent-to-sell available-for-sale securities |  | 4,822 |  |  | 12,633 |  |  |  |  |
Credit loss (benefit) expense |  | (7,527) |  |  | 17,421 |  |  |  |  |
Total unrealized gains (losses) on investment securities |  | 67,095 |  |  | (245,223) |  |  |  |  |
Defined benefit pension and post-retirement plans: |  |  |  |  |  |  |  |
Amounts reclassified into net income: |  |  |  |  |  |  |  |
Net actuarial loss |  | 598 |  |  | 329 |  |  |  |  |
Total defined benefit pension and post-retirement plans |  | 598 |  |  | 329 |  |  |  |  |
Other comprehensive income (loss) |  | 67,693 |  |  | (244,894) |  |  |  |  |
Comprehensive income (loss) |  | $ | 160,267 |  |  | (188,564) |  |  |  |  |

The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
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SELECTIVE INSURANCE GROUP, INC. UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY |  | Quarter ended March 31, |  |
($ in thousands, except share and per share amounts) |  | 2023 |  | 2022 |  |  |  |
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 |  | 209,694 |  |  | 208,902 |  |  |  |  |
Dividend reinvestment plan |  | 9 |  |  | 11 |  |  |  |  |
Stock purchase and compensation plans |  | 446 |  |  | 423 |  |  |  |  |
End of period |  | 210,149 |  |  | 209,336 |  |  |  |  |
Additional paid-in capital: |  |  |  |  |  |  |  |
Beginning of period |  | 493,488 |  |  | 464,347 |  |  |  |  |
Dividend reinvestment plan |  | 459 |  |  | 443 |  |  |  |  |
Stock purchase and compensation plans |  | 8,766 |  |  | 8,000 |  |  |  |  |
End of period |  | 502,713 |  |  | 472,790 |  |  |  |  |
Retained earnings: |  |  |  |  |  |  |  |
Beginning of period |  | 2,749,703 |  |  | 2,603,472 |  |  |  |  |
Net income |  | 92,574 |  |  | 56,330 |  |  |  |  |
Dividends to preferred stockholders |  | (2,300) |  |  | (2,300) |  |  |  |  |
Dividends to common stockholders |  | (18,364) |  |  | (17,065) |  |  |  |  |
End of period |  | 2,821,613 |  |  | 2,640,437 |  |  |  |  |
Accumulated other comprehensive income (loss): |  |  |  |  |  |  |  |
Beginning of period |  | (498,042) |  |  | 115,099 |  |  |  |  |
Other comprehensive income (loss) |  | 67,693 |  |  | (244,894) |  |  |  |  |
End of period |  | (430,349) |  |  | (129,795) |  |  |  |  |
Treasury stock: |  |  |  |  |  |  |  |
Beginning of period |  | (627,279) |  |  | (608,935) |  |  |  |  |
Acquisition of treasury stock - share repurchase authorization |  | — |  |  | (76) |  |  |  |  |
Acquisition of treasury stock - shares acquired related to employee share-based compensation plans |  | (7,443) |  |  | (5,516) |  |  |  |  |
End of period |  | (634,722) |  |  | (614,527) |  |  |  |  |
Total stockholders’ equity |  | $ | 2,669,404 |  |  | 2,778,241 |  |  |  |  |
Dividends declared per preferred share |  | $ | 287.50 |  |  | 287.50 |  |  |  |  |
Dividends declared per common share |  | $ | 0.30 |  |  | 0.28 |  |  |  |  |
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 |  | 60,338,900 |  |  | 60,184,382 |  |  |  |  |
Dividend reinvestment plan |  | 4,650 |  |  | 5,641 |  |  |  |  |
Stock purchase and compensation plan |  | 222,816 |  |  | 218,442 |  |  |  |  |
Acquisition of treasury stock - share repurchase authorization |  | — |  |  | (1,000) |  |  |  |  |
Acquisition of treasury stock - shares acquired related to employee share-based compensation plans |  | (73,780) |  |  | (71,993) |  |  |  |  |
End of period |  | 60,492,586 |  |  | 60,335,472 |  |  |  |  |

The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
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SELECTIVE INSURANCE GROUP, INC. UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS |  | Quarter ended March 31,
($ in thousands) |  | 2023 |  | 2022
Operating Activities |  |  |  |
Net income |  | $ | 92,574 |  |  | 56,330 |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |  |  |  |
Depreciation and amortization |  | 8,957 |  |  | 12,807 |
Stock-based compensation expense |  | 7,719 |  |  | 7,031 |
Undistributed gains of equity method investments |  | (6,693) |  |  | (9,406) |
Distributions in excess of current year income of equity method investments |  | 1,876 |  |  | 11,626 |
Net realized and unrealized (gains) losses |  | (3,344) |  |  | 40,352 |
Loss on disposal of fixed assets |  | — |  |  | 2 |
Changes in assets and liabilities: |  |  |  |
Increase in reserve for loss and loss expense, net of reinsurance recoverable |  | 70,397 |  |  | 86,197 |
Increase in unearned premiums, net of prepaid reinsurance |  | 97,432 |  |  | 77,515 |
Decrease in net federal income taxes |  | 20,522 |  |  | 13,656 |
Increase in premiums receivable |  | (68,478) |  |  | (66,346) |
Increase in deferred policy acquisition costs |  | (19,320) |  |  | (14,774) |
Decrease (increase) in accrued investment income |  | 1,456 |  |  | (185) |
Decrease in accrued salaries and benefits |  | (26,406) |  |  | (30,473) |
Increase in other assets |  | (4,083) |  |  | (10,789) |
Decrease in other liabilities |  | (36,840) |  |  | (80,864) |
Net cash provided by (used in) operating activities |  | 135,769 |  |  | 92,679 |
Investing Activities |  |  |  |
Purchases of fixed income securities, held-to-maturity |  | — |  |  | (5,000) |
Purchases of fixed income securities, available-for-sale |  | (1,003,617) |  |  | (874,665) |
Purchases of commercial mortgage loans |  | (8,447) |  |  | (20,399) |
Purchases of equity securities |  | (3,229) |  |  | (13,952) |
Purchases of alternative investments and other investments |  | (7,736) |  |  | (15,555) |
Purchases of short-term investments |  | (1,361,774) |  |  | (910,191) |
Sales of fixed income securities, available-for-sale |  | 639,365 |  |  | 425,234 |
Proceeds from commercial mortgage loans |  | 469 |  |  | 301 |
Sales of short-term investments |  | 1,499,963 |  |  | 1,101,725 |
Redemption and maturities of fixed income securities, held-to-maturity |  | 6,507 |  |  | 756 |
Redemption and maturities of fixed income securities, available-for-sale |  | 109,999 |  |  | 216,024 |
Sales of equity securities |  | 32,918 |  |  | 2,626 |
Sales of other investments |  | — |  |  | 525 |
Distributions from alternative investments and other investments |  | 2,854 |  |  | 4,342 |
Purchases of property and equipment |  | (5,510) |  |  | (7,677) |
Net cash provided by (used in) investing activities |  | (98,238) |  |  | (95,906) |
Financing Activities |  |  |  |
Dividends to preferred stockholders |  | (2,300) |  |  | (2,300) |
Dividends to common stockholders |  | (17,690) |  |  | (16,447) |
Acquisition of treasury stock |  | (7,443) |  |  | (5,592) |
Net proceeds from stock purchase and compensation plans |  | 973 |  |  | 999 |
Repayments of finance lease obligations |  | (615) |  |  | (612) |
Net cash provided by (used in) financing activities |  | (27,075) |  |  | (23,952) |
Net increase (decrease) in cash and restricted cash |  | 10,456 |  |  | (27,179) |
Cash and restricted cash, beginning of period |  | 25,209 |  |  | 45,063 |
Cash and restricted cash, end of period |  | $ | 35,665 |  |  | 17,884 |

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 and 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, 2023 (“First Quarter 2023”) and March 31, 2022 (“First Quarter 2022”). Our Financial Statements do not include all information and disclosures required by GAAP and the SEC for audited annual financial statements. Because interim period results of operations are not necessarily indicative of full-year results, our Financial Statements should be read in conjunction with the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2022 (“2022 Annual Report”) filed with the SEC.
NOTE 2. Adoption of Accounting Pronouncements
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 GAAP guidance 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, 2024, as permitted by the newly issued ASU 2022-06, Reference Rate Reform (Topic 848) — Deferral of the Sunset Date of Topic 848. We adopted this guidance in First Quarter 2023. We are not required to measure the effect of adoption on our financial position, cash flows, or net income because the guidance provides relief from accounting for the effects of the change to a replacement rate.
Pronouncements to be effective in the future
In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”). ASU 2022-03 clarifies that a contractual sales restriction on an equity security is not considered when determining the security's fair value. This ASU was issued to eliminate diversity in practice by clarifying that contractual arrangements restricting an entity's ability to sell the security for a certain period of time is a characteristic of the reporting entity and should not be contemplated when determining the security's fair value. ASU 2022-03 requires new disclosures that provide investors with information about the restriction, including the nature and remaining duration of the restriction. The ASU is effective for annual periods beginning after December 15, 2023, including interim periods within those annual periods. Early adoption is permitted. We are currently evaluating the impact of this guidance.
In March 2023, the FASB issued ASU 2023-02, Investments — Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method ("ASU 2023-02"). This ASU allows companies to elect to account for qualifying tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met. Companies were previously permitted to apply the proportional amortization method only to qualifying tax equity investments in low-income-housing tax credit structures. ASU 2023-02 extends the application of the proportional amortization method to qualifying tax equity investments that generate tax credits through other programs. It also requires new disclosures that provide a better understanding of the nature of the tax equity investments and the effect the tax equity investments and related income tax credits and other income tax benefits have on a company's financial position and results of operations. The ASU is effective for annual periods beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted in any interim period. We are currently evaluating the impact of this guidance.
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NOTE 3. Statements of Cash Flows
Supplemental cash flow information was as follows:

|  | Quarter ended March 31,
($ in thousands) |  | 2023 |  | 2022
Cash paid (received) during the period for: |  |  |  |
Interest |  | $ | 8,528 |  |  | 8,523 |
Federal income tax |  | — |  |  | (800) |
Cash paid for amounts included in the measurement of lease liabilities: |  |  |  |
Operating cash flows from operating leases |  | 2,235 |  |  | 2,058 |
Operating cash flows from financing leases |  | 11 |  |  | 11 |
Financing cash flows from finance leases |  | 615 |  |  | 612 |
Non-cash items: |  |  |  |
Corporate actions related to fixed income securities, available-for-sale ("AFS")1 |  | 4,629 |  |  | 1,244 |
Assets acquired under finance lease arrangements |  | — |  |  | 38 |
Assets acquired under operating lease arrangements |  | 4,237 |  |  | 5,760 |
Non-cash purchase of property and equipment |  | 23 |  |  | — |

1 Examples of corporate actions include like-kind exchanges, non-cash acquisitions, and stock splits.
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, 2023 |  | December 31, 2022
Cash |  | $ | 149 |  |  | 26 |
Restricted cash |  | 35,516 |  |  | 25,183 |
Total cash and restricted cash shown in the Consolidated Statements of Cash Flows |  | $ | 35,665 |  |  | 25,209 |

Amounts in restricted cash represent cash received from the National Flood Insurance Program ("NFIP") that can only be used to pay flood claims under the Write Your Own program.
NOTE 4. Investments
(a) Information regarding our AFS securities as of March 31, 2023 and December 31, 2022, were as follows:

March 31, 2023 |  | Cost/ Amortized Cost |  | Allowance for Credit Losses |  | Unrealized Gains |  | Unrealized Losses |  | Fair Value
($ in thousands) |  |  |  |  |
AFS fixed income securities: |  |  |  |  |  |  |  |  |  |
U.S. government and government agencies |  | $ | 360,176 |  |  | — |  |  | 1,347 |  |  | (18,153) |  |  | 343,370 |
Foreign government |  | 11,185 |  |  | (36) |  |  | — |  |  | (1,262) |  |  | 9,887 |
Obligations of states and political subdivisions |  | 713,515 |  |  | (737) |  |  | 3,048 |  |  | (33,743) |  |  | 682,083 |
Corporate securities |  | 2,631,373 |  |  | (16,756) |  |  | 8,375 |  |  | (175,042) |  |  | 2,447,950 |
Collateralized loan obligations ("CLO") and other asset-backed securities ("ABS") |  | 1,631,305 |  |  | (3,895) |  |  | 4,765 |  |  | (102,040) |  |  | 1,530,135 |
Residential mortgage-backed securities ("RMBS") |  | 1,396,241 |  |  | (11,740) |  |  | 2,543 |  |  | (85,388) |  |  | 1,301,656 |
Commercial mortgage-backed securities ("CMBS") |  | 697,253 |  |  | (390) |  |  | 383 |  |  | (47,811) |  |  | 649,435 |
Total AFS fixed income securities |  | $ | 7,441,048 |  |  | (33,554) |  |  | 20,461 |  |  | (463,439) |  |  | 6,964,516 |

December 31, 2022 |  | Cost/ Amortized Cost |  | Allowance for Credit Losses |  | Unrealized Gains |  | Unrealized Losses |  | Fair Value
($ in thousands) |  |  |  |  |
AFS fixed income securities: |  |  |  |  |  |  |  |  |  |
U.S. government and government agencies |  | $ | 209,528 |  |  | — |  |  | 37 |  |  | (20,326) |  |  | 189,239 |
Foreign government |  | 11,199 |  |  | (284) |  |  | — |  |  | (1,307) |  |  | 9,608 |
Obligations of states and political subdivisions |  | 965,231 |  |  | (1,024) |  |  | 1,812 |  |  | (48,001) |  |  | 918,018 |
Corporate securities |  | 2,558,655 |  |  | (30,330) |  |  | 3,509 |  |  | (196,809) |  |  | 2,335,025 |
CLO and other ABS |  | 1,607,660 |  |  | (2,375) |  |  | 2,408 |  |  | (121,720) |  |  | 1,485,973 |
RMBS |  | 1,169,546 |  |  | (11,597) |  |  | 1,148 |  |  | (99,265) |  |  | 1,059,832 |
CMBS |  | 663,935 |  |  | (111) |  |  | 348 |  |  | (49,760) |  |  | 614,412 |
Total AFS fixed income securities |  | $ | 7,185,754 |  |  | (45,721) |  |  | 9,262 |  |  | (537,188) |  |  | 6,612,107 |

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

Quarter ended March 31, 2023 |  | 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
($ in thousands) |  |  |  |  |  |  |
Foreign government |  | $ | 284 |  |  | — |  |  | — |  |  | (248) |  |  | — |  |  | — |  |  | 36 |
Obligations of states and political subdivisions |  | 1,024 |  |  | 50 |  |  | — |  |  | (254) |  |  | (83) |  |  | — |  |  | 737 |
Corporate securities |  | 30,330 |  |  | 2,854 |  |  | — |  |  | (13,964) |  |  | (2,453) |  |  | (11) |  |  | 16,756 |
CLO and other ABS |  | 2,375 |  |  | 787 |  |  | — |  |  | 736 |  |  | (3) |  |  | — |  |  | 3,895 |
RMBS |  | 11,597 |  |  | 12 |  |  | — |  |  | 219 |  |  | (88) |  |  | — |  |  | 11,740 |
CMBS |  | 111 |  |  | 27 |  |  | — |  |  | 252 |  |  | — |  |  | — |  |  | 390 |
Total AFS fixed income securities |  | $ | 45,721 |  |  | 3,730 |  |  | — |  |  | (13,259) |  |  | (2,627) |  |  | (11) |  |  | 33,554 |

Quarter ended March 31, 2022 |  | 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
($ in thousands) |  |  |  |  |  |  |
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 |

During First Quarter 2023 and 2022, we had no write-offs or recoveries of our AFS fixed income securities.
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 2022 Annual Report. Accrued interest on AFS securities was $55.9 million as of March 31, 2023, and $56.4 million as of December 31, 2022. We did not record any (i) write-offs of accrued interest during First Quarter 2023, and (ii) material write-offs of accrued interest in First Quarter 2022.
(b) Quantitative information about unrealized losses on our AFS portfolio follows:

March 31, 2023 |  | 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 |  | $ | 30,947 |  |  | (1,069) |  |  | 82,522 |  |  | (17,084) |  |  | 113,469 |  |  | (18,153) |
Foreign government |  | 5,135 |  |  | (354) |  |  | 4,752 |  |  | (908) |  |  | 9,887 |  |  | (1,262) |
Obligations of states and political subdivisions |  | 256,332 |  |  | (7,836) |  |  | 179,924 |  |  | (25,907) |  |  | 436,256 |  |  | (33,743) |
Corporate securities |  | 1,251,275 |  |  | (60,040) |  |  | 664,923 |  |  | (115,002) |  |  | 1,916,198 |  |  | (175,042) |
CLO and other ABS |  | 492,148 |  |  | (22,463) |  |  | 780,530 |  |  | (79,577) |  |  | 1,272,678 |  |  | (102,040) |
RMBS |  | 598,559 |  |  | (25,403) |  |  | 445,561 |  |  | (59,985) |  |  | 1,044,120 |  |  | (85,388) |
CMBS |  | 354,433 |  |  | (16,702) |  |  | 253,708 |  |  | (31,109) |  |  | 608,141 |  |  | (47,811) |
Total AFS fixed income securities |  | $ | 2,988,829 |  |  | (133,867) |  |  | 2,411,920 |  |  | (329,572) |  |  | 5,400,749 |  |  | (463,439) |

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December 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 |  | $ | 166,975 |  |  | (13,658) |  |  | 16,011 |  |  | (6,668) |  |  | 182,986 |  |  | (20,326) |
Foreign government |  | 5,573 |  |  | (608) |  |  | 2,456 |  |  | (699) |  |  | 8,029 |  |  | (1,307) |
Obligations of states and political subdivisions |  | 681,795 |  |  | (43,767) |  |  | 16,618 |  |  | (4,234) |  |  | 698,413 |  |  | (48,001) |
Corporate securities |  | 1,889,492 |  |  | (164,197) |  |  | 133,223 |  |  | (32,612) |  |  | 2,022,715 |  |  | (196,809) |
CLO and other ABS |  | 916,423 |  |  | (69,155) |  |  | 411,283 |  |  | (52,565) |  |  | 1,327,706 |  |  | (121,720) |
RMBS |  | 887,229 |  |  | (76,432) |  |  | 108,041 |  |  | (22,833) |  |  | 995,270 |  |  | (99,265) |
CMBS |  | 512,953 |  |  | (37,815) |  |  | 77,181 |  |  | (11,945) |  |  | 590,134 |  |  | (49,760) |
Total AFS fixed income securities |  | $ | 5,060,440 |  |  | (405,632) |  |  | 764,813 |  |  | (131,556) |  |  | 5,825,253 |  |  | (537,188) |

We currently do not intend to sell any of the securities summarized in the tables above, nor do we believe we will be required to sell any of them. The decrease in gross unrealized losses as of March 31, 2023, compared to December 31, 2022, was primarily driven by a decrease in benchmark U.S. Treasury rates. 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 2022 Annual Report, we have concluded that no additional allowance for credit loss is required on these balances beyond the allowance for credit loss recorded as of March 31, 2023. This conclusion reflects our current judgment about the financial position and future prospects of the entities that issued the investment security and underlying collateral.
(c) AFS and held-to-maturity ("HTM") fixed income securities at March 31, 2023, by contractual maturity are shown below. The maturities of mortgage-backed securities were calculated using each security's estimated average life. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

|  | AFS |  | HTM
($ in thousands) |  | Fair Value |  | Carrying Value |  | Fair Value
Due in one year or less |  | $ | 348,132 |  |  | 658 |  |  | 657 |
Due after one year through five years |  | 3,062,605 |  |  | 14,597 |  |  | 13,944 |
Due after five years through 10 years |  | 2,814,604 |  |  | 9,395 |  |  | 8,921 |
Due after 10 years |  | 739,175 |  |  | — |  |  | — |
Total fixed income securities |  | $ | 6,964,516 |  |  | 24,650 |  |  | 23,522 |

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

|  | March 31, 2023 |  | December 31, 2022
($ in thousands) |  | Carrying Value |  | Remaining Commitment |  | Maximum Exposure to Loss |  | Carrying Value |  | Remaining Commitment |  | Maximum Exposure to Loss
Alternative Investments |  |  |  |  |  |  |  |  |  |  |  |
Private equity |  | $ | 289,598 |  |  | 129,839 |  |  | 419,437 |  |  | 280,980 |  |  | 134,676 |  |  | 415,656 |
Private credit |  | 53,445 |  |  | 89,002 |  |  | 142,447 |  |  | 54,866 |  |  | 89,481 |  |  | 144,347 |
Real assets |  | 36,985 |  |  | 20,738 |  |  | 57,723 |  |  | 35,470 |  |  | 21,945 |  |  | 57,415 |
Total alternative investments |  | 380,028 |  |  | 239,579 |  |  | 619,607 |  |  | 371,316 |  |  | 246,102 |  |  | 617,418 |

We are contractually committed to make additional investments up to the remaining commitments stated above. We did not provide any non-contractual financial support during 2023 or 2022.
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The following table shows gross summarized financial information for our alternative investments portfolio, including the portion we do not own. As the majority of these investments report results to us on a one quarter lag, the summarized financial statement information is as of, and for the 3-month period ended, December 31:

Income Statement Information |  | Quarter ended March 31, |  |
($ in millions) |  | 2023 |  | 2022 |  |  |  |
Net investment income (loss) |  | $ | (70.7) |  |  | 135.5 |  |  |  |  |
Realized gains |  | 1,722.3 |  |  | 2,748.0 |  |  |  |  |
Net change in unrealized appreciation |  | 1,443.7 |  |  | 5,178.2 |  |  |  |  |
Net income |  | $ | 3,095.3 |  |  | 8,061.7 |  |  |  |  |
Alternative investment income included in "Net investment income earned" on our Consolidated Statements of Income |  | $ | 7.8 |  |  | 19.1 |  |  |  |  |

(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, we had certain securities on deposit with various state and regulatory agencies at March 31, 2023 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, 2023:

($ in millions) |  | FHLBI Collateral |  | FHLBNY Collateral |  |  |  | State and Regulatory Deposits |  | Total
U.S. government and government agencies |  | $ | — |  |  | — |  |  |  |  | 19.9 |  |  | 19.9 |
Obligations of states and political subdivisions |  | — |  |  | — |  |  |  |  | 3.5 |  |  | 3.5 |
RMBS |  | 61.2 |  |  | 28.4 |  |  |  |  | — |  |  | 89.6 |
CMBS |  | 4.5 |  |  | 9.6 |  |  |  |  | — |  |  | 14.1 |
Total pledged as collateral |  | $ | 65.7 |  |  | 38.0 |  |  |  |  | 23.4 |  |  | 127.1 |

(f) We did not have exposure to any credit concentration risk of a single issuer greater than 10% of our stockholders' equity, other than to certain U.S. government agencies, as of March 31, 2023, or December 31, 2022.
(g) The components of pre-tax net investment income earned were as follows:

|  | Quarter ended March 31, |  |
($ in thousands) |  | 2023 |  | 2022 |  |  |  |
Fixed income securities |  | $ | 80,087 |  |  | 53,925 |  |  |  |  |
Commercial mortgage loans ("CMLs") |  | 1,965 |  |  | 970 |  |  |  |  |
Equity securities |  | 1,205 |  |  | 2,418 |  |  |  |  |
Short-term investments |  | 4,650 |  |  | 101 |  |  |  |  |
Alternative investments |  | 7,768 |  |  | 19,128 |  |  |  |  |
Other investments |  | 43 |  |  | 177 |  |  |  |  |
Investment expenses |  | (4,212) |  |  | (4,117) |  |  |  |  |
Net investment income earned |  | $ | 91,506 |  |  | 72,602 |  |  |  |  |

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

|  | Quarter ended March 31, |  |
($ in thousands) |  | 2023 |  | 2022 |  |  |  |
Gross gains on sales |  | $ | 3,784 |  |  | 2,197 |  |  |  |  |
Gross losses on sales |  | (12,930) |  |  | (13,560) |  |  |  |  |
Net realized gains (losses) on disposals |  | (9,146) |  |  | (11,363) |  |  |  |  |
Net unrealized gains (losses) on equity securities |  | 3,248 |  |  | (2,154) |  |  |  |  |
Net credit loss benefit (expense) on fixed income securities, AFS |  | 9,529 |  |  | (22,052) |  |  |  |  |
Net credit loss benefit (expense) on fixed income securities, HTM |  | — |  |  | 14 |  |  |  |  |
Net credit loss benefit (expense) on CMLs |  | 17 |  |  | — |  |  |  |  |
Losses on securities for which we have the intent to sell |  | (304) |  |  | (4,797) |  |  |  |  |
Net realized and unrealized investment gains (losses) |  | $ | 3,344 |  |  | (40,352) |  |  |  |  |

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Net realized and unrealized investment gains (losses) increased $43.7 million in First Quarter 2023 compared to First Quarter 2022, primarily driven by lower credit loss expense on our AFS fixed income securities portfolio resulting from a decline in benchmark U.S. Treasury rates.
Net unrealized gains and losses recognized in income on equity securities, as reflected in the table above, included the following:

|  | Quarter ended March 31, |  |
($ in thousands) |  | 2023 |  | 2022 |  |  |  |
Unrealized gains (losses) recognized in income on equity securities: |  |  |  |  |  |  |  |
On securities remaining in our portfolio at end of period |  | $ | (142) |  |  | (2,220) |  |  |  |  |
On securities sold in period |  | 3,390 |  |  | 66 |  |  |  |  |
Total unrealized gains (losses) recognized in income on equity securities |  | $ | 3,248 |  |  | (2,154) |  |  |  |  |

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 fair values of our financial liabilities as of March 31, 2023, and December 31, 2022:

|  | March 31, 2023 |  | December 31, 2022
($ in thousands) |  | Carrying Amount |  | Fair Value |  | Carrying Amount |  | Fair Value
Financial Liabilities |  |  |  |  |  |  |  |
Long-term debt: |  |  |  |  |  |  |  |
7.25% Senior Notes |  | $ | 49,923 |  |  | 54,209 |  |  | 49,921 |  |  | 51,705 |
6.70% Senior Notes |  | 99,547 |  |  | 104,484 |  |  | 99,542 |  |  | 99,264 |
5.375% Senior Notes |  | 294,448 |  |  | 278,321 |  |  | 294,424 |  |  | 258,459 |
3.03% borrowings from FHLBI |  | 60,000 |  |  | 57,724 |  |  | 60,000 |  |  | 57,175 |
Subtotal long-term debt |  | 503,918 |  |  | 494,738 |  |  | 503,887 |  |  | 466,603 |
Unamortized debt issuance costs |  | (2,871) |  |  |  |  | (2,929) |  |  |
Finance lease obligations |  | 3,103 |  |  |  |  | 3,718 |  |  |
Total long-term debt |  | $ | 504,150 |  |  |  |  | 504,676 |  |  |

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 2022 Annual Report.
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The following tables provide quantitative disclosures of our financial assets that were measured and recorded at fair value at March 31, 2023, and December 31, 2022:

March 31, 2023 |  |  |  | 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 |  | $ | 343,370 |  |  | 193,922 |  |  | 149,448 |  |  | — |
Foreign government |  | 9,887 |  |  | — |  |  | 9,887 |  |  | — |
Obligations of states and political subdivisions |  | 682,083 |  |  | — |  |  | 675,209 |  |  | 6,874 |
Corporate securities |  | 2,447,950 |  |  | — |  |  | 2,236,365 |  |  | 211,585 |
CLO and other ABS |  | 1,530,135 |  |  | — |  |  | 1,350,377 |  |  | 179,758 |
RMBS |  | 1,301,656 |  |  | — |  |  | 1,301,656 |  |  | — |
CMBS |  | 649,435 |  |  | — |  |  | 646,199 |  |  | 3,236 |
Total AFS fixed income securities |  | 6,964,516 |  |  | 193,922 |  |  | 6,369,141 |  |  | 401,453 |
Equity securities: |  |  |  |  |  |  |  |
Common stock 1 |  | 130,460 |  |  | 21,969 |  |  | — |  |  | 628 |
Preferred stock |  | 1,715 |  |  | 1,715 |  |  | — |  |  | — |
Total equity securities |  | 132,175 |  |  | 23,684 |  |  | — |  |  | 628 |
Short-term investments |  | 302,750 |  |  | 299,543 |  |  | 3,207 |  |  | — |
Total assets measured at fair value |  | $ | 7,399,441 |  |  | 517,149 |  |  | 6,372,348 |  |  | 402,081 |

December 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 |  | $ | 189,239 |  |  | 109,240 |  |  | 79,999 |  |  | — |
Foreign government |  | 9,608 |  |  | — |  |  | 9,608 |  |  | — |
Obligations of states and political subdivisions |  | 918,018 |  |  | — |  |  | 911,357 |  |  | 6,661 |
Corporate securities |  | 2,335,025 |  |  | — |  |  | 2,147,045 |  |  | 187,980 |
CLO and other ABS |  | 1,485,973 |  |  | — |  |  | 1,332,631 |  |  | 153,342 |
RMBS |  | 1,059,832 |  |  | — |  |  | 1,059,832 |  |  | — |
CMBS |  | 614,412 |  |  | — |  |  | 614,037 |  |  | 375 |
Total AFS fixed income securities |  | 6,612,107 |  |  | 109,240 |  |  | 6,154,509 |  |  | 348,358 |
Equity securities: |  |  |  |  |  |  |  |
Common stock 1 |  | 160,355 |  |  | 55,846 |  |  | — |  |  | 897 |
Preferred stock |  | 1,645 |  |  | 1,645 |  |  | — |  |  | — |
Total equity securities |  | 162,000 |  |  | 57,491 |  |  | — |  |  | 897 |
Short-term investments |  | 440,456 |  |  | 418,199 |  |  | 22,257 |  |  | — |
Total assets measured at fair value |  | $ | 7,214,563 |  |  | 584,930 |  |  | 6,176,766 |  |  | 349,255 |

1 Investments amounting to $107.9 million at March 31, 2023, and $103.6 million at December 31, 2022, 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 Level 3 changes in First Quarter 2023 and First Quarter 2022:

Quarter Ended March 31, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
($ in thousands) |  |  | Obligations of States and Political Subdivisions |  | Corporate Securities |  | CLO and Other ABS |  |  |  | CMBS |  | Common Stock |  | Total
Fair value, December 31, 2022 |  |  | $ | 6,661 |  |  | 187,980 |  |  | 153,342 |  |  |  |  | 375 |  |  | 897 |  |  | 349,255 |
Total net gains (losses) for the period included in: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other comprehensive income (loss) ("OCI") |  |  | 152 |  |  | 2,405 |  |  | 696 |  |  |  |  | 17 |  |  | — |  |  | 3,270 |
Net realized and unrealized gains (losses) |  |  | 61 |  |  | 72 |  |  | (73) |  |  |  |  | — |  |  | (269) |  |  | (209) |
Net investment income earned |  |  | — |  |  | 12 |  |  | (32) |  |  |  |  | (1) |  |  | — |  |  | (21) |
Purchases |  |  | — |  |  | 24,799 |  |  | 13,403 |  |  |  |  | — |  |  | — |  |  | 38,202 |
Sales |  |  | — |  |  | — |  |  | — |  |  |  |  | — |  |  | — |  |  | — |
Issuances |  |  | — |  |  | — |  |  | — |  |  |  |  | — |  |  | — |  |  | — |
Settlements |  |  | — |  |  | (4,044) |  |  | (1,192) |  |  |  |  | (3) |  |  | — |  |  | (5,239) |
Transfers into Level 3 |  |  | — |  |  | 361 |  |  | 14,148 |  |  |  |  | 2,848 |  |  | — |  |  | 17,357 |
Transfers out of Level 3 |  |  | — |  |  | — |  |  | (534) |  |  |  |  | — |  |  | — |  |  | (534) |
Fair value, March 31, 2023 |  |  | $ | 6,874 |  |  | 211,585 |  |  | 179,758 |  |  |  |  | 3,236 |  |  | 628 |  |  | 402,081 |
Change in unrealized gains (losses) for the period included in earnings for assets held at period end |  |  | 61 |  |  | 72 |  |  | (73) |  |  |  |  | — |  |  | (269) |  |  | (209) |
Change in unrealized gains (losses) for the period included in OCI for assets held at period end |  |  | 152 |  |  | 2,405 |  |  | 696 |  |  |  |  | 17 |  |  | — |  |  | 3,270 |

Quarter Ended March 31, 2022 |  |  |  |  |  |  |  |  |  |  |
($ in thousands) | Obligation of state 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 gains (losses) for the period included in: |  |  |  |  |  |  |  |  |  |  |
OCI | (343) |  |  | (6,529) |  |  | (4,335) |  |  | (17) |  |  | (415) |  |  | (11,639) |
Net realized and unrealized gains (losses) | (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 gains (losses) for the period included in earnings for assets held at period end | (157) |  |  | (1,809) |  |  | (472) |  |  | — |  |  | (7) |  |  | (2,445) |
Change in unrealized gains (losses) for the period included in OCI for assets held at period end | (343) |  |  | (6,529) |  |  | (4,335) |  |  | (17) |  |  | (415) |  |  | (11,639) |

The following tables present quantitative information about the significant unobservable inputs used in the fair value measurements of Level 3 assets at March 31, 2023, and December 31, 2022:

March 31, 2023 |  |  |  |  |  |  |  |  |  |
($ in thousands) |  | Assets Measured at Fair Value |  | Valuation Techniques |  | Unobservable Inputs |  | Range |  | Weighted Average
Internal valuations: |  |  |  |  |  |  |  |  |  |
Corporate securities |  | $ | 95,499 |  |  | Discounted Cash Flow |  | Illiquidity Spread |  | (4.4)% - 5.3% |  | 1.6%
CLO and other ABS |  | 66,234 |  |  | Discounted Cash Flow |  | Illiquidity Spread |  | 0.01% - 19.6% |  | 2.8%
Total internal valuations |  | 161,733 |  |  |  |  |  |  |  |  |
Other 1 |  | 240,348 |  |  |  |  |  |  |  |  |
Total Level 3 securities |  | $ | 402,081 |  |  |  |  |  |  |  |  |

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December 31, 2022 |  |  |  |  |  |  |  |  |  |
($ in thousands) |  | Assets Measured at Fair Value |  | Valuation Techniques |  | Unobservable Inputs |  | Range |  | Weighted Average
Internal valuations: |  |  |  |  |  |  |  |  |  |
Corporate securities |  | $ | 81,867 |  |  | Discounted Cash Flow |  | Illiquidity Spread |  | (4.4)% - 5.3% |  | 1.3%
CLO and other ABS |  | 59,452 |  |  | Discounted Cash Flow |  | Illiquidity Spread |  | 0.01% - 19.6% |  | 2.5%
Total internal valuations |  | 141,319 |  |  |  |  |  |  |  |  |
Other 1 |  | 207,936 |  |  |  |  |  |  |  |  |
Total Level 3 securities |  | $ | 349,255 |  |  |  |  |  |  |  |  |

1 Other is comprised of broker quotes or other third-party pricing for which there is a lack of transparency into the inputs used to develop the valuations. The quantitative details of these unobservable inputs are 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 about our financial assets and liabilities that were not measured at fair value, but were disclosed as such at March 31, 2023, and December 31, 2022:

March 31, 2023 |  |  |  | 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: |  |  |  |  |  |  |  |
Corporate securities |  | 23,522 |  |  | — |  |  | 23,522 |  |  | — |
Total HTM fixed income securities |  | $ | 23,522 |  |  | — |  |  | 23,522 |  |  | — |
CMLs |  | $ | 147,540 |  |  | — |  |  | — |  |  | 147,540 |
Financial Liabilities |  |  |  |  |  |  |  |
Long-term debt: |  |  |  |  |  |  |  |
7.25% Senior Notes |  | $ | 54,209 |  |  | — |  |  | 54,209 |  |  | — |
6.70% Senior Notes |  | 104,484 |  |  | — |  |  | 104,484 |  |  | — |
5.375% Senior Notes |  | 278,321 |  |  | — |  |  | 278,321 |  |  | — |
3.03% borrowings from FHLBI |  | 57,724 |  |  | — |  |  | 57,724 |  |  | — |
Total long-term debt |  | $ | 494,738 |  |  | — |  |  | 494,738 |  |  | — |

December 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 |  | $ | 3,405 |  |  | — |  |  | 3,405 |  |  | — |
Corporate securities |  | 26,432 |  |  | — |  |  | 26,432 |  |  | — |
Total HTM fixed income securities |  | $ | 29,837 |  |  | — |  |  | 29,837 |  |  | — |
CMLs |  | $ | 139,243 |  |  | — |  |  | — |  |  | 139,243 |
Financial Liabilities |  |  |  |  |  |  |  |
Long-term debt: |  |  |  |  |  |  |  |
7.25% Senior Notes |  | $ | 51,705 |  |  | — |  |  | 51,705 |  |  | — |
6.70% Senior Notes |  | 99,264 |  |  | — |  |  | 99,264 |  |  | — |
5.375% Senior Notes |  | 258,459 |  |  | — |  |  | 258,459 |  |  | — |
3.03% borrowings from FHLBI |  | 57,175 |  |  | — |  |  | 57,175 |  |  | — |
Total long-term debt |  | $ | 466,603 |  |  | — |  |  | 466,603 |  |  | — |

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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 indicated periods:

|  | Quarter ended March 31, |  |
($ in thousands) |  | 2023 |  | 2022 |  |  |  |
Balance at beginning of period |  | $ | 16,100 |  |  | $ | 13,600 |  |  |  |  |
Current period change for expected credit losses |  | 1,910 |  |  | 916 |  |  |  |  |
Write-offs charged against the allowance for credit losses |  | (1,164) |  |  | (520) |  |  |  |  |
Recoveries |  | 254 |  |  | 304 |  |  |  |  |
Allowance for credit losses, end of period |  | $ | 17,100 |  |  | $ | 14,300 |  |  |  |  |

In First Quarter 2023, we recognized an additional allowance for credit losses on premiums receivable of $2.2 million, excluding the impact of write-offs. The additional allowance consisted of a reserve of $2.5 million on 2023 premiums based on our historical write-off percentages and assumptions, partially offset by a $0.3 million allowance reduction on older policies.
In First Quarter 2022, we recognized an additional allowance for credit losses on premiums receivable of $1.2 million, excluding the impact of write-offs. The additional allowance consisted of 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.
For a discussion of the methodology used to evaluate our estimate of expected credit losses on premiums receivable, refer to Note 2. "Summary of Significant Accounting Policies" in Item 8. "Financial Statements and Supplementary Data." of our 2022 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, 2023, and December 31, 2022:

|  | March 31, 2023
($ in thousands) |  | Current |  | Past Due |  | Total Reinsurance Recoverables
Financial strength rating of rated reinsurers |  |  |  |  |  |
A++ |  | $ | 80,787 |  |  | $ | 356 |  |  | $ | 81,143 |
A+ |  | 346,898 |  |  | 3,825 |  |  | 350,723 |
A |  | 119,936 |  |  | 1,963 |  |  | 121,899 |
A- |  | 3,686 |  |  | 89 |  |  | 3,775 |
Total rated reinsurers |  | $ | 551,307 |  |  | $ | 6,233 |  |  | $ | 557,540 |
Non-rated reinsurers |  |  |  |  |  |
Federal and state pools |  | $ | 104,500 |  |  | $ | — |  |  | $ | 104,500 |
Other than federal and state pools |  | 6,805 |  |  | 497 |  |  | 7,302 |
Total non-rated reinsurers |  | $ | 111,305 |  |  | $ | 497 |  |  | $ | 111,802 |
Total reinsurance recoverable, gross |  | $ | 662,612 |  |  | $ | 6,730 |  |  | $ | 669,342 |
Less: allowance for credit losses |  |  |  |  |  | (2,300) |
Total reinsurance recoverable, net |  |  |  |  |  | $ | 667,042 |

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|  | December 31, 2022
($ in thousands) |  | Current |  | Past Due |  | Total Reinsurance Recoverables
Financial strength rating of rated reinsurers |  |  |  |  |  |
A++ |  | $ | 46,282 |  |  | $ | 1 |  |  | $ | 46,283 |
A+ |  | 425,395 |  |  | 3,191 |  |  | 428,586 |
A |  | 106,102 |  |  | 1,315 |  |  | 107,417 |
A- |  | 7,148 |  |  | 89 |  |  | 7,237 |
Total rated reinsurers |  | $ | 584,927 |  |  | $ | 4,596 |  |  | $ | 589,523 |
Non-rated reinsurers |  |  |  |  |  |
Federal and state pools |  | $ | 180,794 |  |  | $ | — |  |  | $ | 180,794 |
Other than federal and state pools |  | 13,678 |  |  | 415 |  |  | 14,093 |
Total non-rated reinsurers |  | $ | 194,472 |  |  | $ | 415 |  |  | $ | 194,887 |
Total reinsurance recoverable, gross |  | $ | 779,399 |  |  | $ | 5,011 |  |  | $ | 784,410 |
Less: allowance for credit losses |  |  |  |  |  | (1,600) |
Total reinsurance recoverable, net |  |  |  |  |  | $ | 782,810 |

The $76.3 million decrease in "Federal and state pools" as of March 31, 2023, compared to December 31, 2022, was primarily due to a decrease in the NFIP reserves recorded as of December 31, 2022 for flood losses in Florida and surrounding states as a result of Hurricane Ian, which are 100% ceded to the NFIP.
The following table provides a roll forward of the allowance for credit losses on our reinsurance recoverable balance for the periods indicated:

($ in thousands) |  | Quarter ended March 31, |  |
|  | 2023 |  | 2022 |  |  |  |
Balance at beginning of period |  | $ | 1,600 |  |  | 1,600 |  |  |  |  |
Current period change for expected credit losses |  | 700 |  |  | — |  |  |  |  |
Write-offs charged against the allowance for credit losses |  | — |  |  | — |  |  |  |  |
Recoveries |  | — |  |  | — |  |  |  |  |
Allowance for credit losses, end of period |  | $ | 2,300 |  |  | 1,600 |  |  |  |  |

For a discussion of the methodology used to evaluate our estimate of expected credit losses on our reinsurance recoverable balance, refer to Note 2. "Summary of Significant Accounting Policies" in Item 8. "Financial Statements and Supplementary Data." of our 2022 Annual Report.
The following table lists direct, assumed, and ceded reinsurance amounts for premiums written, premiums earned, and loss and loss expense incurred for the indicated periods. For more information about reinsurance, refer to Note 9. “Reinsurance” in Item 8. “Financial Statements and Supplementary Data.” of our 2022 Annual Report.

|  | Quarter ended March 31, |  |
($ in thousands) |  | 2023 |  | 2022 |  |  |  |
Premiums written: |  |  |  |  |  |  |  |
Direct |  | $ | 1,132,760 |  |  | 1,001,049 |  |  |  |  |
Assumed |  | 5,394 |  |  | 5,314 |  |  |  |  |
Ceded |  | (138,386) |  |  | (116,565) |  |  |  |  |
Net |  | $ | 999,768 |  |  | 889,798 |  |  |  |  |
Premiums earned: |  |  |  |  |  |  |  |
Direct |  | $ | 1,032,228 |  |  | 931,376 |  |  |  |  |
Assumed |  | 6,290 |  |  | 5,528 |  |  |  |  |
Ceded |  | (136,182) |  |  | (124,621) |  |  |  |  |
Net |  | $ | 902,336 |  |  | 812,283 |  |  |  |  |
Loss and loss expenses incurred: |  |  |  |  |  |  |  |
Direct |  | $ | 613,229 |  |  | 528,588 |  |  |  |  |
Assumed |  | 5,255 |  |  | 4,278 |  |  |  |  |
Ceded |  | (51,046) |  |  | (38,630) |  |  |  |  |
Net |  | $ | 567,438 |  |  | 494,236 |  |  |  |  |

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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) |  | 2023 |  | 2022
Gross reserve for loss and loss expense, at beginning of period |  | $ | 5,144,821 |  |  | 4,580,903 |
Less: reinsurance recoverable on unpaid loss and loss expense, at beginning of period |  | 757,513 |  |  | 578,641 |
Net reserve for loss and loss expense, at beginning of period |  | 4,387,308 |  |  | 4,002,262 |
Incurred loss and loss expense for claims occurring in the: |  |  |  |
Current year |  | 580,408 |  |  | 508,299 |
Prior years |  | (12,970) |  |  | (14,063) |
Total incurred loss and loss expense |  | 567,438 |  |  | 494,236 |
Paid loss and loss expense for claims occurring in the: |  |  |  |
Current year |  | 91,011 |  |  | 91,292 |
Prior years |  | 418,194 |  |  | 312,926 |
Total paid loss and loss expense |  | 509,205 |  |  | 404,218 |
Net reserve for loss and loss expense, at end of period |  | 4,445,541 |  |  | 4,092,280 |
Add: Reinsurance recoverable on unpaid loss and loss expense, at end of period |  | 653,909 |  |  | 552,111 |
Gross reserve for loss and loss expense, at end of period |  | $ | 5,099,450 |  |  | 4,644,391 |

Prior year reserve development in First Quarter 2023 was favorable by $13.0 million, consisting of favorable casualty reserve development of $10.0 million in our workers compensation line of business and $5.0 million in our Excess and Surplus ("E&S") casualty lines of business, partially offset by $2.0 million of unfavorable casualty reserve development in our personal automobile line of business.
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.
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 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 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) |  | 2023 |  | 2022 |  |  |  |
Standard Commercial Lines: |  |  |  |  |  |  |  |
Net premiums earned: |  |  |  |  |  |  |  |
General liability |  | $ | 243,349 |  |  | 216,325 |  |  |  |  |
Commercial automobile |  | 217,371 |  |  | 193,830 |  |  |  |  |
Commercial property |  | 135,292 |  |  | 120,062 |  |  |  |  |
Workers compensation |  | 84,184 |  |  | 84,680 |  |  |  |  |
Businessowners' policies |  | 33,171 |  |  | 30,044 |  |  |  |  |
Bonds |  | 11,397 |  |  | 10,360 |  |  |  |  |
Other |  | 6,851 |  |  | 6,168 |  |  |  |  |
Miscellaneous income |  | 2,181 |  |  | 1,101 |  |  |  |  |
Total Standard Commercial Lines revenue |  | 733,796 |  |  | 662,570 |  |  |  |  |
Standard Personal Lines: |  |  |  |  |  |  |  |
Net premiums earned: |  |  |  |  |  |  |  |
Personal automobile |  | 44,914 |  |  | 39,716 |  |  |  |  |
Homeowners |  | 35,013 |  |  | 31,187 |  |  |  |  |
Other |  | 1,943 |  |  | 1,739 |  |  |  |  |
Miscellaneous income |  | 453 |  |  | 428 |  |  |  |  |
Total Standard Personal Lines revenue |  | 82,323 |  |  | 73,070 |  |  |  |  |
E&S Lines: |  |  |  |  |  |  |  |
Net premiums earned: |  |  |  |  |  |  |  |
Casualty lines |  | 60,817 |  |  | 54,624 |  |  |  |  |
Property lines |  | 28,034 |  |  | 23,548 |  |  |  |  |
Total E&S Lines revenue |  | 88,851 |  |  | 78,172 |  |  |  |  |
Investments: |  |  |  |  |  |  |  |
Net investment income |  | 91,506 |  |  | 72,602 |  |  |  |  |
Net realized and unrealized investment gains (losses) |  | 3,344 |  |  | (40,352) |  |  |  |  |
Total Investments revenue |  | 94,850 |  |  | 32,250 |  |  |  |  |
Total revenues |  | $ | 999,820 |  |  | 846,062 |  |  |  |  |

Income Before and After Federal Income Tax |  | Quarter ended March 31, |  |
($ in thousands) |  | 2023 |  | 2022 |  |  |  |
Standard Commercial Lines: |  |  |  |  |  |  |  |
Underwriting income (loss), before federal income tax |  | $ | 38,921 |  |  | 42,384 |  |  |  |  |
Underwriting income (loss), after federal income tax |  | 30,748 |  |  | 33,483 |  |  |  |  |
Combined ratio |  | 94.7 | % |  | 93.6 |  |  |  |  |
ROE contribution |  | 5.1 |  |  | 5.0 |  |  |  |  |
Standard Personal Lines: |  |  |  |  |  |  |  |
Underwriting income (loss), before federal income tax |  | $ | (13,073) |  |  | 6,520 |  |  |  |  |
Underwriting income (loss), after federal income tax |  | (10,328) |  |  | 5,151 |  |  |  |  |
Combined ratio |  | 116.0 | % |  | 91.0 |  |  |  |  |
ROE contribution |  | (1.7) |  |  | 0.8 |  |  |  |  |
E&S Lines: |  |  |  |  |  |  |  |
Underwriting income (loss), before federal income tax |  | $ | 13,335 |  |  | 6,925 |  |  |  |  |
Underwriting income (loss), after federal income tax |  | 10,535 |  |  | 5,471 |  |  |  |  |
Combined ratio |  | 85.0 | % |  | 91.1 |  |  |  |  |
ROE contribution |  | 1.8 |  |  | 0.8 |  |  |  |  |
Investments: |  |  |  |  |  |  |  |
Net investment income earned |  | $ | 91,506 |  |  | 72,602 |  |  |  |  |
Net realized and unrealized investment gains (losses) |  | 3,344 |  |  | (40,352) |  |  |  |  |
Total investments segment income, before federal income tax |  | 94,850 |  |  | 32,250 |  |  |  |  |
Tax on investments segment income |  | 19,156 |  |  | 5,613 |  |  |  |  |
Total investments segment income, after federal income tax |  | $ | 75,694 |  |  | 26,637 |  |  |  |  |
ROE contribution of after-tax net investment income earned |  | 12.2 |  |  | 8.7 |  |  |  |  |

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Reconciliation of Segment Results to Income Before Federal Income Tax |  | Quarter ended March 31, |  |
($ in thousands) |  | 2023 |  | 2022 |  |  |  |
Underwriting income |  |  |  |  |  |  |  |
Standard Commercial Lines |  | $ | 38,921 |  |  | 42,384 |  |  |  |  |
Standard Personal Lines |  | (13,073) |  |  | 6,520 |  |  |  |  |
E&S Lines |  | 13,335 |  |  | 6,925 |  |  |  |  |
Investment income |  | 94,850 |  |  | 32,250 |  |  |  |  |
Total all segments |  | 134,033 |  |  | 88,079 |  |  |  |  |
Interest expense |  | (7,166) |  |  | (7,168) |  |  |  |  |
Corporate expenses |  | (12,108) |  |  | (11,021) |  |  |  |  |
Income, before federal income tax |  | $ | 114,759 |  |  | 69,890 |  |  |  |  |
Preferred stock dividends |  | (2,300) |  |  | (2,300) |  |  |  |  |
Income available to common stockholders, before federal income tax |  | $ | 112,459 |  |  | 67,590 |  |  |  |  |

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”). The plan is closed to new entrants, and benefits ceased accruing under the Pension Plan after March 31, 2016. For more information about Selective Insurance Company of America's ("SICA") retirement plans, see Note 15. “Retirement Plans” in Item 8. “Financial Statements and Supplementary Data.” of our 2022 Annual Report.
The following tables provide information about the Pension Plan:

|  | Pension Plan
|  | Quarter ended March 31, |  |
($ in thousands) |  | 2023 |  | 2022 |  |  |  |
Net Periodic Pension Cost (Benefit): |  |  |  |  |  |  |  |
Interest cost |  | $ | 3,866 |  |  | 2,486 |  |  |  |  |
Expected return on plan assets |  | (5,773) |  |  | (5,537) |  |  |  |  |
Amortization of unrecognized net actuarial loss |  | 751 |  |  | 366 |  |  |  |  |
Total net periodic pension cost (benefit)1 |  | $ | (1,156) |  |  | (2,685) |  |  |  |  |

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,
|  | 2023 |  | 2022
Weighted-Average Expense Assumptions: |  |  |  |
Discount rate |  | 5.21 | % |  | 2.98 | %
Effective interest rate for calculation of interest cost |  | 5.09 |  |  | 2.48 |
Expected return on plan assets |  | 6.90 |  |  | 5.00 |

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NOTE 11. Comprehensive Income
The components of comprehensive income, both gross and net of tax, for First Quarter 2023 and First Quarter 2022 were as follows:

First Quarter 2023 |  |  |  |  |  |
($ in thousands) |  | Gross |  | Tax |  | Net
Net income |  | $ | 114,759 |  |  | 22,185 |  |  | 92,574 |
Components of OCI: |  |  |  |  |  |
Unrealized gains (losses) on investment securities: |  |  |  |  |  |
Unrealized holding gains (losses) during the period |  | 65,925 |  |  | 13,846 |  |  | 52,079 |
Unrealized gains (losses) on securities with credit loss recognized in earnings |  | 22,431 |  |  | 4,710 |  |  | 17,721 |
Amounts reclassified into net income: |  |  |  |  |  |
Net realized (gains) losses on disposals and intent-to-sell AFS securities |  | 6,104 |  |  | 1,282 |  |  | 4,822 |
Credit loss (benefit) expense |  | (9,529) |  |  | (2,002) |  |  | (7,527) |
Total unrealized gains (losses) on investment securities |  | 84,931 |  |  | 17,836 |  |  | 67,095 |
Defined benefit pension and post-retirement plans: |  |  |  |  |  |
Amounts reclassified into net income: |  |  |  |  |  |
Net actuarial (gain) loss |  | 757 |  |  | 159 |  |  | 598 |
Total defined benefit pension and post-retirement plans |  | 757 |  |  | 159 |  |  | 598 |
Other comprehensive income (loss) |  | 85,688 |  |  | 17,995 |  |  | 67,693 |
Comprehensive income (loss) |  | $ | 200,447 |  |  | 40,180 |  |  | 160,267 |
First Quarter 2022 |  |  |  |  |  |
($ in thousands) |  | Gross |  | Tax |  | Net
Net income |  | $ | 69,890 |  |  | 13,560 |  |  | 56,330 |
Components of OCI: |  |  |  |  |  |
Unrealized gains (losses) on investment securities: |  |  |  |  |  |
Unrealized holding gains (losses) during the period |  | (261,832) |  |  | (54,984) |  |  | (206,848) |
Unrealized gains (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 (gains) losses on disposals and intent-to-sell AFS securities |  | 15,991 |  |  | 3,358 |  |  | 12,633 |
Credit loss (benefit) expense |  | 22,052 |  |  | 4,631 |  |  | 17,421 |
Total unrealized gains (losses) on investment securities |  | (310,409) |  |  | (65,186) |  |  | (245,223) |
Defined benefit pension and post-retirement plans: |  |  |  |  |  |
Amounts reclassified into net income: |  |  |  |  |  |
Net actuarial (gain) loss |  | 417 |  |  | 88 |  |  | 329 |
Total defined benefit pension and post-retirement plans |  | 417 |  |  | 88 |  |  | 329 |
Other comprehensive income (loss) |  | (309,992) |  |  | (65,098) |  |  | (244,894) |
Comprehensive income (loss) |  | $ | (240,102) |  |  | (51,538) |  |  | (188,564) |

The balances of, and changes in, each component of accumulated other comprehensive income ("AOCI") (net of taxes) as of March 31, 2023, were as follows:

March 31, 2023 |  | Net Unrealized Gains (Losses) on Investment Securities |  | Defined Benefit Pension and Post-Retirement Plans |  | Total AOCI
($ in thousands) |  | Credit Loss Related 1 |  | All Other |  | Investments Subtotal |  |
Balance, December 31, 2022 |  | $ | (121,838) |  |  | (295,197) |  |  | (417,035) |  |  | (81,007) |  |  | (498,042) |
OCI before reclassifications |  | 17,721 |  |  | 52,079 |  |  | 69,800 |  |  | — |  |  | 69,800 |
Amounts reclassified from AOCI |  | (7,527) |  |  | 4,822 |  |  | (2,705) |  |  | 598 |  |  | (2,107) |
Net current period OCI |  | 10,194 |  |  | 56,901 |  |  | 67,095 |  |  | 598 |  |  | 67,693 |
Balance, March 31, 2023 |  | $ | (111,644) |  |  | (238,296) |  |  | (349,940) |  |  | (80,409) |  |  | (430,349) |

1 Represents change in unrealized gains (losses) 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) |  | 2023 |  | 2022 |  |  |  |  |
HTM related |  |  |  |  |  |  |  |  |  |
Unrealized (gains) losses on HTM disposals |  | $ | — |  |  | — |  |  |  |  |  |  | Net realized and unrealized investment gains (losses)
Amortization of net unrealized losses (gains) on HTM securities |  | — |  |  | 1 |  |  |  |  |  |  | Net investment income earned
|  | — |  |  | 1 |  |  |  |  |  |  | Income before federal income tax
|  | — |  |  | — |  |  |  |  |  |  | Total federal income tax expense
|  | — |  |  | 1 |  |  |  |  |  |  | Net income
Net realized (gains) losses on disposals and intent-to-sell AFS securities |  |  |  |  |  |  |  |  |  |
Net realized (gains) losses on disposals and intent-to-sell AFS securities |  | 6,104 |  |  | 15,991 |  |  |  |  |  |  | Net realized and unrealized investment gains (losses)
|  | 6,104 |  |  | 15,991 |  |  |  |  |  |  | Income before federal income tax
|  | (1,282) |  |  | (3,358) |  |  |  |  |  |  | Total federal income tax expense
|  | 4,822 |  |  | 12,633 |  |  |  |  |  |  | Net income
Credit loss related |  |  |  |  |  |  |  |  |  |
Credit loss (benefit) expense |  | (9,529) |  |  | 22,052 |  |  |  |  |  |  | Net realized and unrealized investment gains (losses)
|  | (9,529) |  |  | 22,052 |  |  |  |  |  |  | Income before federal income tax
|  | 2,002 |  |  | (4,631) |  |  |  |  |  |  | Total federal income tax expense
|  | (7,527) |  |  | 17,421 |  |  |  |  |  |  | Net income
Defined benefit pension and post-retirement life plans |  |  |  |  |  |  |  |  |  |
Net actuarial loss |  | 175 |  |  | 96 |  |  |  |  |  |  | Loss and loss expense incurred
|  | 582 |  |  | 321 |  |  |  |  |  |  | Other insurance expenses
Total defined benefit pension and post-retirement life |  | 757 |  |  | 417 |  |  |  |  |  |  | Income before federal income tax
|  | (159) |  |  | (88) |  |  |  |  |  |  | Total federal income tax expense
|  | 598 |  |  | 329 |  |  |  |  |  |  | Net income
Total reclassifications for the period |  | $ | (2,107) |  |  | 30,384 |  |  |  |  |  |  | Net income

NOTE 12. Earnings per Common Share
The following table presents the calculations of earnings per common share ("EPS") on a basic and diluted basis:

|  | Quarter ended March 31, |  |
(in thousands, except per share amounts) |  | 2023 |  | 2022 |  |  |  |
Net income available to common stockholders: |  | $ | 90,274 |  |  | 54,030 |  |  |  |  |
Weighted average common shares outstanding: |  |  |  |  |  |  |  |
Weighted average common shares outstanding - basic |  | 60,536 |  | 60,384 |  |  |  |
Effect of dilutive securities - stock compensation plans |  | 372 |  | 440 |  |  |  |
Weighted average common shares outstanding - diluted |  | 60,908 |  | 60,824 |  |  |  |
EPS: |  |  |  |  |  |  |  |
Basic |  | $ | 1.49 |  |  | 0.89 |  |  |  |  |
Diluted |  | 1.48 |  |  | 0.89 |  |  |  |  |

NOTE 13. Litigation
As of March 31, 2023, 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
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states 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. To date, insurers (including us) have prevailed in the majority of these suits, with most decisions holding that COVID-19 does not cause physical loss of or damage to property and the Virus Exclusion is valid. Nonetheless, these two matters continue to be litigated in trial courts, are subject to review by state and federal appellate courts, and their ultimate outcome cannot be assured.
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 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 named defendants in individual actions seeking extra-contractual damages, punitive damages, or penalties, often alleging bad faith in the handling of insurance claims. 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 actions are large or indeterminate, adverse outcomes could potentially have a material adverse effect on our consolidated results of operations or cash flows in particular quarterly or annual periods.
NOTE 14. Subsequent Events
On April 6, 2023, SICA borrowed $20 million from the FHLBNY at an interest rate of 5.00% with repayment due on May 8, 2023. 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, forward-looking statements include the words “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 anytime. 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.
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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, 2022 ("2022 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 2022 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;
•Financial Highlights of Results for the first quarters ended March 31, 2023 (“First Quarter 2023”) and March 31, 2022 (“First Quarter 2022”);
•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 2022 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 highly uncertain matters, making them 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 37 through 45 of our 2022 Annual Report.
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Financial Highlights of Results for First Quarter 2023 and First Quarter 2022 1

($ and shares in thousands, except per share amounts) |  | Quarter ended March 31, |  | Change % or Points |  |  |  |  |  |
| 2023 |  | 2022 |  |  |  |  |  |  |  |
Financial Data: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Revenues |  | $ | 999,820 |  |  | 846,062 |  |  | 18 |  | % |  |  |  |  |  |  |
After-tax net investment income |  | 73,052 |  |  | 58,515 |  |  | 25 |  |  |  |  |  |  |  |  |
After-tax underwriting income |  | 30,955 |  |  | 44,105 |  |  | (30) |  |  |  |  |  |  |  |  |
Net income before federal income tax |  | 114,759 |  |  | 69,890 |  |  | 64 |  |  |  |  |  |  |  |  |
Net income |  | 92,574 |  |  | 56,330 |  |  | 64 |  |  |  |  |  |  |  |  |
Net income available to common stockholders |  | 90,274 |  |  | 54,030 |  |  | 67 |  |  |  |  |  |  |  |  |
Key Metrics: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Combined ratio |  | 95.7 |  | % | 93.1 |  |  | 2.6 |  | pts |  |  |  |  |  |  |
Invested assets per dollar of common stockholders' equity |  | $ | 3.25 |  |  | 3.02 |  |  | 8 |  | % |  |  |  |  |  |  |
Annualized after-tax yield on investment portfolio |  | 3.7 |  | % | 3.0 |  |  | 0.7 |  | pts |  |  |  |  |  |  |
Return on common equity ("ROE") |  | 15.1 |  |  | 8.1 |  |  | 7.0 |  |  |  |  |  |  |  |  |
Net premiums written ("NPW") to statutory surplus ratio |  | 1.46 |  | x | 1.36 |  |  | 0.10 |  |  |  |  |  |  |  |  |
Per Common Share Amounts: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Diluted net income per share |  | $ | 1.48 |  |  | 0.89 |  |  | 66 |  | % |  |  |  |  |  |  |
Book value per share |  | 40.82 |  |  | 42.73 |  |  | (4) |  |  |  |  |  |  |  |  |
Dividends declared per share to common stockholders |  | 0.30 |  |  | 0.28 |  |  | 7 |  |  |  |  |  |  |  |  |
Non-GAAP Information: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-GAAP operating income 2 |  | $ | 87,632 |  |  | 85,908 |  |  | 2 |  | % |  |  |  |  |  |  |
Non-GAAP operating income per diluted common share 2 |  | 1.44 |  |  | 1.41 |  |  | 2 |  |  |  |  |  |  |  |  |
Non-GAAP operating ROE 2 |  | 14.6 |  | % | 12.8 |  |  | 1.8 |  | pts |  |  |  |  |  |  |
Adjusted book value per common share 2 |  | $ | 46.61 |  |  | 43.80 |  |  | 6 |  | % |  |  |  |  |  |  |

1 Refer to the Glossary of Terms attached to our 2022 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. These non-GAAP measures are important financial measures used 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.
Reconciliations of our GAAP to non-GAAP measures 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) |  | 2023 |  | 2022 |  |  |  |
Net income available to common stockholders |  | $ | 90,274 |  |  | 54,030 |  |  |  |  |
Net realized and unrealized investment (gains) losses included in net income, before tax |  | (3,344) |  |  | 40,352 |  |  |  |  |
Tax on reconciling items |  | 702 |  |  | (8,474) |  |  |  |  |
Non-GAAP operating income |  | $ | 87,632 |  |  | 85,908 |  |  |  |  |

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, |  |
| 2023 |  | 2022 |  |  |  |
Net income available to common stockholders per diluted common share |  | $ | 1.48 |  |  | 0.89 |  |  |  |  |
Net realized and unrealized investment (gains) losses included in net income, before tax |  | (0.05) |  |  | 0.66 |  |  |  |  |
Tax on reconciling items |  | 0.01 |  |  | (0.14) |  |  |  |  |
Non-GAAP operating income per diluted common share |  | $ | 1.44 |  |  | 1.41 |  |  |  |  |

Reconciliation of ROE to non-GAAP operating ROE |  | Quarter ended March 31, |  |
|  | 2023 |  | 2022 |  |  |  |
ROE |  | 15.1 | % |  | 8.1 |  |  |  |  |
Net realized and unrealized investment (gains) losses included in net income, before tax |  | (0.6) |  |  | 6.0 |  |  |  |  |
Tax on reconciling items |  | 0.1 |  |  | (1.3) |  |  |  |  |
Non-GAAP operating ROE |  | 14.6 | % |  | 12.8 |  |  |  |  |

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Reconciliation of book value per common share to adjusted book value per common share |  | Quarter ended March 31, |  |
|  | 2023 |  | 2022 |  |  |  |
Book value per common share |  | $ | 40.82 |  |  | 42.73 |  |  |  |  |
Total unrealized investment (gains) losses included in accumulated other comprehensive income (loss), before tax |  | 7.32 |  |  | 1.35 |  |  |  |  |
Tax on reconciling items |  | (1.53) |  |  | (0.28) |  |  |  |  |
Adjusted book value per common share |  | $ | 46.61 |  |  | 43.80 |  |  |  |  |

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

ROE and non-GAAP operating ROE Components |  | Quarter ended March 31, |  | Change Points |  |  |  |
|  | 2023 |  |  | 2022 |  |  |  |  |  |
Standard Commercial Lines Segment |  | 5.1 |  | % |  | 5.0 |  |  | 0.1 |  |  |  |  |  |  |
Standard Personal Lines Segment |  | (1.7) |  |  |  | 0.8 |  |  | (2.5) |  |  |  |  |  |  |
E&S Lines Segment |  | 1.8 |  |  |  | 0.8 |  |  | 1.0 |  |  |  |  |  |  |
Total insurance operations |  | 5.2 |  |  |  | 6.6 |  |  | (1.4) |  |  |  |  |  |  |
Investment income |  | 12.2 |  |  |  | 8.7 |  |  | 3.5 |  |  |  |  |  |  |
Net realized and unrealized investment gains (losses) |  | 0.5 |  |  |  | (4.7) |  |  | 5.2 |  |  |  |  |  |  |
Total investments segment |  | 12.7 |  |  |  | 4.0 |  |  | 8.7 |  |  |  |  |  |  |
Other |  | (2.8) |  |  |  | (2.5) |  |  | (0.3) |  |  |  |  |  |  |
ROE |  | 15.1 |  |  |  | 8.1 |  |  | 7.0 |  |  |  |  |  |  |
Net realized and unrealized investment (gains) losses, after tax |  | (0.5) |  |  |  | 4.7 |  |  | (5.2) |  |  |  |  |  |  |
Non-GAAP operating ROE |  | 14.6 |  |  |  | 12.8 |  |  | 1.8 |  |  |  |  |  |  |

Our First Quarter 2023 non-GAAP operating ROE of 14.6% was above our full-year 2023 target non-GAAP operating ROE of 12% and our First Quarter 2022 non-GAAP operating ROE of 12.8%. The increase compared to First Quarter 2022 was primarily driven by a $14.5 million, or 3.5-point, increase in after-tax net investment income. This increase resulted from greater income earned on our fixed income securities portfolio due to higher book yields received from the investment of operating and investing cash flows over the past year in the higher interest rate environment. This increase was offset by a $13.2 million, or 1.4-point, reduction in after-tax underwriting income, resulting from (i) an increase in net catastrophe losses in First Quarter 2023 compared to First Quarter 2022, and (ii) lower favorable prior year casualty reserve development in First Quarter 2023 compared to First Quarter 2022, partially offset by a decrease in non-catastrophe property loss and loss expenses in First Quarter 2023.
In addition, net realized and unrealized investment gains in First Quarter 2023 compared to net realized and unrealized investment losses in First Quarter 2022 drove the 5.2-point increase in our ROE. The decrease in net realized and unrealized investment losses was primarily due to lower credit loss expense on our AFS fixed income securities portfolio in First Quarter 2023 resulting from a decline in benchmark U.S. Treasury rates.
Outlook
We entered 2023 well positioned to navigate the on-going challenges of elevated inflation, increased interest rates, and financial market volatility. Our overall First Quarter 2023 financial results were strong with 12% growth in NPW and a 14.6% non-GAAP operating ROE, which was above our full-year target of 12%.
We continue to focus on several foundational areas to position us for ongoing success:
•Delivering on our strategy for continued disciplined and profitable growth by:
◦Achieving renewal pure price increases that reflect our current profitability and forward loss trend expectations;
◦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. In 2022, we began writing Standard Commercial Lines business in Vermont, Alabama, and Idaho. We plan to expand our Standard Commercial Lines footprint into other states over time;
◦Increasing customer retention by delivering a superior omnichannel experience and offering value-added technologies and services;
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◦Shifting our Standard Personal Lines products and services towards customers in the mass affluent market, 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 and improving 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.
For 2023, our full-year expectations remain unchanged and are as follows:
•A GAAP combined ratio of 96.5%, including net catastrophe losses of 4.5 points. Our combined ratio estimate assumes no additional prior year casualty reserve development;
•After-tax net investment income of $300 million that includes after-tax net investment income from our alternative investments of $30 million;
•An overall effective tax rate of approximately 21.0%, which assumes an effective tax rate of 20.0% for net investment income and 21.0% for all other items; and
•Weighted average shares of 61 million on a fully diluted basis, which assumes no additional share repurchases we may make under our authorization.
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) |  | 2023 |  | 2022 |  |  |  |  |  |  |  |  |
Insurance Operations Results: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net premiums written ("NPW") |  | $ | 999,768 |  |  | 889,798 |  |  | 12 |  | % |  |  |  |  |  |  |  |
Net premiums earned (“NPE”) |  | 902,336 |  |  | 812,283 |  |  | 11 |  |  |  |  |  |  |  |  |  |
Less: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loss and loss expense incurred |  | 567,438 |  |  | 494,236 |  |  | 15 |  |  |  |  |  |  |  |  |  |
Net underwriting expenses incurred |  | 293,943 |  |  | 260,639 |  |  | 13 |  |  |  |  |  |  |  |  |  |
Dividends to policyholders |  | 1,772 |  |  | 1,579 |  |  | 12 |  |  |  |  |  |  |  |  |  |
Underwriting income |  | $ | 39,183 |  |  | 55,829 |  |  | (30) |  | % |  |  |  |  |  |  |  |
Combined Ratios: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loss and loss expense ratio |  | 62.9 |  | % | 60.8 |  |  | 2.1 |  | pts |  |  |  |  |  |  |  |
Underwriting expense ratio |  | 32.6 |  |  | 32.1 |  |  | 0.5 |  |  |  |  |  |  |  |  |  |
Dividends to policyholders ratio |  | 0.2 |  |  | 0.2 |  |  | — |  |  |  |  |  |  |  |  |  |
Combined ratio |  | 95.7 |  |  | 93.1 |  |  | 2.6 |  |  |  |  |  |  |  |  |  |

The NPW growth of 12% in First Quarter 2023 compared to First Quarter 2022 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) |  | 2023 |  | 2022 |  |  |  |
Direct new business premiums |  | $ | 216.9 |  |  | 177.2 |  |  |  |  |
Renewal pure price increases on NPW |  | 6.6 | % |  | 4.6 |  |  |  |  |

Our NPW growth in First Quarter 2023 also benefited from strong retention and exposure growth.
The increase in NPE in First Quarter 2023 compared to 2022 resulted from the same impacts to NPW described above.
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Loss and Loss Expenses
The loss and loss expense ratio increased 2.1 points in First Quarter 2023 compared to First Quarter 2022, primarily due to the following:

|  | First Quarter 2023 |  | First Quarter 2022 |  |  |
($ 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 |  | $ | 55.3 |  |  | 6.1 |  | pts |  | $ | 20.6 |  |  | 2.5 |  | pts |  | 3.6 |  | pts
(Favorable) prior year casualty reserve development |  | (13.0) |  |  | (1.4) |  |  |  | (20.0) |  |  | (2.5) |  |  |  | 1.1 |  |
Non-catastrophe property loss and loss expenses |  | 148.2 |  |  | 16.4 |  |  |  | 150.4 |  |  | 18.5 |  |  |  | (2.1) |  |
Total |  | $ | 190.5 |  |  | 21.1 |  |  |  | $ | 151.0 |  |  | 18.5 |  |  |  | 2.6 |  |

Net catastrophe losses in First Quarter 2023 included $28.7 million related to two wind and thunderstorm events in March 2023 that impacted Eastern and Midwestern states in our footprint, and $10.1 million related to a winter storm in February 2023 that impacted Northeastern states in our footprint.
Details of the prior year casualty reserve development were as follows:

(Favorable)/Unfavorable Prior Year Casualty Reserve Development | Quarter ended March 31, |  |  |
($ in millions) | 2023 |  |  | 2022 |  |  |  |  |
General liability | $ | — |  |  |  | (5.0) |  |  |  |  |  |
Workers compensation | (10.0) |  |  |  | (10.0) |  |  |  |  |  |
Bonds | — |  |  |  | (5.0) |  |  |  |  |  |
Total Standard Commercial Lines | (10.0) |  |  |  | (20.0) |  |  |  |  |  |
Homeowners | — |  |  |  | — |  |  |  |  |  |
Personal automobile | 2.0 |  |  |  | — |  |  |  |  |  |
Total Standard Personal Lines | 2.0 |  |  |  | — |  |  |  |  |  |
E&S | (5.0) |  |  |  | — |  |  |  |  |  |
Total (favorable) prior year casualty reserve development | $ | (13.0) |  |  |  | (20.0) |  |  |  |  |  |
(Favorable) impact on loss ratio | (1.4) |  | pts |  | (2.5) |  |  |  |  |  |

For additional qualitative discussion on prior year casualty reserve development and non-catastrophe property loss and loss expenses, refer to the insurance segment sections below.
Underwriting Expenses
The underwriting expense ratio increased 0.5 points in First Quarter 2023 compared to First Quarter 2022, of which approximately half was driven by higher reinsurance costs and its associated impact on our NPE in First Quarter 2023 compared to First Quarter 2022. The remainder of the increase was related to our participation in the NFIP program as benefits from our participation in this program are becoming less significant relative to the growth in the overall premium.
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Standard Commercial Lines Segment

|  | Quarter ended March 31, |  | Change % or Points |  |  |  |  |  |
($ in thousands) |  | 2023 |  | 2022 |  |  |  |  |  |  |  |  |
Insurance Segments Results: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
NPW |  | $ | 813,316 |  |  | 737,639 |  |  | 10 |  | % |  |  |  |  |  |  |  |
NPE |  | 731,615 |  |  | 661,469 |  |  | 11 |  |  |  |  |  |  |  |  |  |
Less: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loss and loss expense incurred |  | 447,326 |  |  | 399,474 |  |  | 12 |  |  |  |  |  |  |  |  |  |
Net underwriting expenses incurred |  | 243,596 |  |  | 218,032 |  |  | 12 |  |  |  |  |  |  |  |  |  |
Dividends to policyholders |  | 1,772 |  |  | 1,579 |  |  | 12 |  |  |  |  |  |  |  |  |  |
Underwriting income |  | 38,921 |  |  | 42,384 |  |  | (8) |  |  |  |  |  |  |  |  |  |
Combined Ratios: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loss and loss expense ratio |  | 61.2 |  | % | 60.4 |  |  | 0.8 |  | pts |  |  |  |  |  |  |  |
Underwriting expense ratio |  | 33.3 |  |  | 33.0 |  |  | 0.3 |  |  |  |  |  |  |  |  |  |
Dividends to policyholders ratio |  | 0.2 |  |  | 0.2 |  |  | — |  |  |  |  |  |  |  |  |  |
Combined ratio |  | 94.7 |  |  | 93.6 |  |  | 1.1 |  |  |  |  |  |  |  |  |  |

NPW growth of 10% in First Quarter 2023 compared to First Quarter 2022 reflected (i) renewal pure price increases, (ii) higher direct new business, and (iii) strong retention as shown in the table below. In addition, NPW growth benefited from strong exposure growth.

|  | Quarter ended March 31, |  |  |  |  |  |  |
($ in millions) |  | 2023 |  |  | 2022 |  |  |  |  |  |  |
Direct new business premiums |  | $ | 147.7 |  |  |  | 128.4 |  |  |  |  |  |  |  |  |  |  |
Retention |  | 86 |  | % |  | 87 |  |  |  |  |  |  |  |  |  |  |
Renewal pure price increases on NPW |  | 7.0 |  |  |  | 4.8 |  |  |  |  |  |  |  |  |  |  |

The increase in NPE in First Quarter 2023 compared to First Quarter 2022 resulted from the same impacts to NPW described above.
The loss and loss expense ratio increased 0.8 points in First Quarter 2023 compared to First Quarter 2022, primarily driven by the following:

|  | First Quarter 2023 |  | First Quarter 2022 |  |  |
($ 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 |  | $ | 35.1 |  |  | 4.8 |  | pts |  | $ | 14.9 |  |  | 2.3 |  |  | 2.5 |  | pts
Non-catastrophe property loss and loss expenses |  | 105.5 |  |  | 14.4 |  |  |  | 115.7 |  |  | 17.5 |  |  | (3.1) |  |
(Favorable) prior year casualty reserve development |  | (10.0) |  |  | (1.4) |  |  |  | (20.0) |  |  | (3.0) |  |  | 1.6 |  |
Total |  | 130.6 |  |  | 17.8 |  |  |  | 110.6 |  |  | 16.8 |  |  | 1.0 |  |

Net catastrophe losses in First Quarter 2023 included $14.7 million related to two wind and thunderstorm events in March 2023 that impacted Eastern and Midwestern states in our footprint, and $9.3 million related to a winter storm in February 2023 that impacted Northeastern states in our footprint. For qualitative discussion on non-catastrophe property loss and loss expenses, refer to the commercial property line of business section below.
The favorable prior year casualty reserve development in First Quarter 2023 was was primarily due to improved loss severities in accident years 2020 and prior in our workers compensation line of business. Favorable prior year casualty reserve development in First Quarter 2022 included (i) $10.0 million in our workers compensation line of business primarily due to improved loss severities in accident years 2019 and prior, (ii) $5.0 million in our general liability line of business primarily attributable to improved loss severities in accident years 2019 and prior, and (iii) $5.0 million in our bonds line of business.
The underwriting expense ratio increased 0.3 points in First Quarter 2023 compared to First Quarter 2022, primarily driven by higher reinsurance costs and its associated impact on our NPE in First Quarter 2023 compared to First Quarter 2022.
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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) |  | 2023 |  |  | 2022 |  |  |  |  |  |  |  |  |
NPW |  | $ | 272,126 |  |  |  | 244,118 |  |  | 11 |  | % |  |  |  |  |  |  |  |
Direct new business |  | 44,731 |  |  |  | 37,883 |  |  | n/a |  |  |  |  |  |  |  |  |
Retention |  | 86 |  | % |  | 87 |  |  | n/a |  |  |  |  |  |  |  |  |
Renewal pure price increases |  | 5.5 |  |  |  | 4.0 |  |  | n/a |  |  |  |  |  |  |  |  |
NPE |  | $ | 243,349 |  |  |  | 216,325 |  |  | 12 |  | % |  |  |  |  |  |  |  |
Underwriting income |  | 27,126 |  |  |  | 28,817 |  |  | (6) |  |  |  |  |  |  |  |  |  |
Combined ratio |  | 88.9 |  | % |  | 86.7 |  |  | 2.2 |  | pts |  |  |  |  |  |  |  |
% of total Standard Commercial Lines NPW |  | 33 |  |  |  | 33 |  |  |  |  |  |  |  |  |  |  |  |

1 n/a: not applicable.
NPW growth of 11% in First Quarter 2023 compared to First Quarter 2022 benefited from exposure growth, strong retention, renewal pure price increases, and higher direct new business.
The combined ratio increased 2.2 points in First Quarter 2023 compared to First Quarter 2022, primarily driven by less favorable prior year casualty reserve development, as follows:

|  | First Quarter 2023 |  | First Quarter 2022 |  |  |
($ 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 |  | $ | — |  |  | — |  | pts |  | $ | (5.0) |  |  | (2.3) |  |  | 2.3 |  | pts

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

Commercial Automobile |  |  |  |  |  |  |  |
|  | Quarter ended March 31, |  | Change % or Points 1 |  |  |  |  |  |
($ in thousands) |  | 2023 |  |  | 2022 |  |  |  |  |  |  |  |  |
NPW |  | $ | 240,183 |  |  |  | 212,595 |  |  | 13 |  | % |  |  |  |  |  |  |  |
Direct new business |  | 36,976 |  |  |  | 31,413 |  |  | n/a |  |  |  |  |  |  |  |  |
Retention |  | 86 |  | % |  | 87 |  |  | n/a |  |  |  |  |  |  |  |  |
Renewal pure price increases |  | 10.0 |  |  |  | 7.4 |  |  | n/a |  |  |  |  |  |  |  |  |
NPE |  | $ | 217,371 |  |  |  | 193,830 |  |  | 12 |  | % |  |  |  |  |  |  |  |
Underwriting (loss) income |  | (11,741) |  |  |  | (10,918) |  |  | 8 |  |  |  |  |  |  |  |  |  |
Combined ratio |  | 105.4 |  | % |  | 105.6 |  |  | (0.2) |  | pts |  |  |  |  |  |  |  |
% of total Standard Commercial Lines NPW |  | 30 |  |  |  | 29 |  |  |  |  |  |  |  |  |  |  |  |

1 n/a: not applicable.
NPW growth of 13% in First Quarter 2023 compared to First Quarter 2022 benefited from renewal pure price increases, higher direct new business, and strong retention. NPW also benefited from 5% growth of in-force vehicle counts as of March 31, 2023, compared to March 31, 2022.
The combined ratio decreased 0.2 points in First Quarter 2023 compared to First Quarter 2022, primarily driven by the following:

|  | First Quarter 2023 |  | First Quarter 2022 |  |  |
($ 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 |  |  | 0.1 |  | pts |  | $ | 0.3 |  |  | 0.2 |  |  | (0.1) |  | pts
Non-catastrophe property loss and loss expenses |  | 46.7 |  |  | 21.5 |  |  |  | 43.0 |  |  | 22.2 |  |  | (0.7) |  |
Total |  | $ | 47.0 |  |  | 21.6 |  |  |  | $ | 43.3 |  |  | 22.4 |  |  | (0.8) |  |

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In addition, the combined ratio was impacted by a 0.3-point increase in current year casualty loss costs in First Quarter 2023, compared to First Quarter 2022. The increase in current year casualty loss costs was primarily due to increases in claim severities.

Commercial Property |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Quarter ended March 31, |  | Change % or Points 1 |  |  |  |  |  |
($ in thousands) |  | 2023 |  |  | 2022 |  |  |  |  |  |  |  |  |
NPW |  | $ | 151,604 |  |  |  | 130,905 |  |  | 16 |  | % |  |  |  |  |  |  |  |
Direct new business |  | 34,757 |  |  |  | 27,817 |  |  | n/a |  |  |  |  |  |  |  |  |
Retention |  | 85 |  | % |  | 86 |  |  | n/a |  |  |  |  |  |  |  |  |
Renewal pure price increases |  | 9.5 |  |  |  | 6.2 |  |  | n/a |  |  |  |  |  |  |  |  |
NPE |  | $ | 135,292 |  |  |  | 120,062 |  |  | 13 |  | % |  |  |  |  |  |  |  |
Underwriting income |  | 10,078 |  |  |  | 176 |  |  | NM |  |  |  |  |  |  |  |  |
Combined ratio |  | 92.6 |  | % |  | 99.9 |  |  | (7.3) |  | pts |  |  |  |  |  |  |  |
% of total Standard Commercial Lines NPW |  | 19 |  |  |  | 18 |  |  |  |  |  |  |  |  |  |  |  |

1 n/a: not applicable; NM - Not Meaningful.
NPW growth of 16% in First Quarter 2023 compared to First Quarter 2022 benefited from renewal pure price increases, strong retention, exposure growth, and higher direct new business.
The combined ratio decreased 7.3 points in First Quarter 2023 compared to First Quarter 2022, primarily driven by the following:

|  | First Quarter 2023 |  | First Quarter 2022 |  |  |
($ 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 |  | $ | 27.7 |  |  | 20.5 |  | pts |  | 12.9 |  |  | 10.8 |  |  | 9.7 |  | pts
Non-catastrophe property loss and loss expenses |  | 46.5 |  |  | 34.4 |  |  |  | 63.1 |  |  | 52.5 |  |  | (18.1) |  |
Total |  | $ | 74.2 |  |  | 54.9 |  |  |  | 76.0 |  |  | 63.3 |  |  | (8.4) |  |

Compared to last year, First Quarter 2023 experienced lower non-catastrophe property loss and loss expense, which continues to reflect the variability from period to period that is normally associated with the commercial property line of business. For example, we experienced fewer large fire losses and claims related to water damage and freezing. In addition, our initiatives to execute on (i) price increases, and (ii) targeted underwriting actions to improve our insurance to value ratios, are both beginning to take effect. First Quarter 2023 also experienced elevated net catastrophe losses as discussed in the "Insurance Operations" section above.

Workers Compensation |  |  |  |  |  |  |  |
|  | Quarter ended March 31, |  | Change % or Points 1 |  |  |  |  |  |
($ in thousands) |  | 2023 |  |  | 2022 |  |  |  |  |  |  |  |  |
NPW |  | $ | 93,432 |  |  |  | 97,459 |  |  | (4) |  | % |  |  |  |  |  |  |  |
Direct new business |  | 17,620 |  |  |  | 16,946 |  |  | n/a |  |  |  |  |  |  |  |  |
Retention |  | 84 |  | % |  | 87 |  |  | n/a |  |  |  |  |  |  |  |  |
Renewal pure price increases |  | (1.1) |  |  |  | (1.1) |  |  | n/a |  |  |  |  |  |  |  |  |
NPE |  | $ | 84,184 |  |  |  | 84,680 |  |  | (1) |  | % |  |  |  |  |  |  |  |
Underwriting income |  | 14,586 |  |  |  | 15,905 |  |  | (8) |  |  |  |  |  |  |  |  |  |
Combined ratio |  | 82.7 |  | % |  | 81.2 |  |  | 1.5 |  | pts |  |  |  |  |  |  |  |
% of total Standard Commercial Lines NPW |  | 11 |  |  |  | 13 |  |  |  |  |  |  |  |  |  |  |  |

1 n/a: not applicable.
NPW decreased 4% in First Quarter 2023 compared to First Quarter 2022, primarily due to renewal pure price decreases of 1.1% and lower retention.
The combined ratio increased 1.5 points in First Quarter 2023 compared to First Quarter 2022, primarily driven by an increase in the expense ratio primarily related to an increase in compensation to our distribution partners.
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The increase in the combined ratio was slightly offset by favorable prior year casualty reserve development as follows:

|  | First Quarter 2023 |  | First Quarter 2022 |  |  |
($ 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) |  |  | (11.9) |  | pts |  | $ | (10.0) |  |  | (11.8) |  |  | (0.1) |  | pts

The favorable prior year casualty reserve development in First Quarter 2023 was primarily due to improved loss severities in accident years 2020 and prior. The favorable prior year casualty reserve development in First Quarter 2022 was primarily due to improved loss severities in accident years 2019 and prior.
Standard Personal Lines Segment

|  | Quarter ended March 31, |  | Change % or Points |  |  |  |  |  |
($ in thousands) |  | 2023 |  |  | 2022 |  |  |  |  |  |  |  |  |
Insurance Segments Results: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
NPW |  | $ | 85,278 |  |  |  | 65,057 |  |  | 31 |  | % |  |  |  |  |  |  |  |
NPE |  | 81,870 |  |  |  | 72,642 |  |  | 13 |  |  |  |  |  |  |  |  |  |
Less: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loss and loss expense incurred |  | 73,168 |  |  |  | 48,547 |  |  | 51 |  |  |  |  |  |  |  |  |  |
Net underwriting expenses incurred |  | 21,775 |  |  |  | 17,575 |  |  | 24 |  |  |  |  |  |  |  |  |  |
Underwriting income (loss) |  | (13,073) |  |  |  | 6,520 |  |  | (301) |  |  |  |  |  |  |  |  |  |
Combined Ratios: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loss and loss expense ratio |  | 89.4 |  | % |  | 66.8 |  |  | 22.6 |  | pts |  |  |  |  |  |  |  |
Underwriting expense ratio |  | 26.6 |  |  |  | 24.2 |  |  | 2.4 |  |  |  |  |  |  |  |  |  |
Combined ratio |  | 116.0 |  |  |  | 91.0 |  |  | 25.0 |  |  |  |  |  |  |  |  |  |

NPW increased 31% in First Quarter 2023 compared to First Quarter 2022, due to (i) higher direct new business, (ii) stronger retention, (iii) renewal pure price increases, (iv) higher homeowner coverage amounts due to inflation, and (v) higher average policy sizes from our mass affluent market strategy. In the third quarter of 2021, we transitioned our personal lines strategy to target customers in the mass affluent market where we believe our strong coverage and servicing capabilities will be more competitive.

|  | Quarter ended March 31, |  |  |  |  |  |  |  |
($ in millions) |  | 2023 |  |  | 2022 |  |  |  |  |  |  |  |  |
Direct new business premiums 1 |  | $ | 26.3 |  |  |  | 9.6 |  |  |  |  |  |  |  |  |  |  |  |
Retention |  | 87 |  | % |  | 84 |  |  |  |  |  |  |  |  |  |  |  |
Renewal pure price increases on NPW |  | 1.8 |  |  |  | 0.6 |  |  |  |  |  |  |  |  |  |  |  |

1 Excludes our Flood direct premiums written, which is 100% ceded to the NFIP and therefore, has no impact on our NPW.
The increase in NPE in First Quarter 2023 compared to First Quarter 2022 resulted from the same impacts to NPW described above.
The loss and loss expense ratio increased 22.6 points in First Quarter 2023 compared to First Quarter 2022, driven by the following:

|  | First Quarter 2023 |  | First Quarter 2022 |  |  |
($ 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 |  | $ | 14.6 |  |  | 17.9 |  | pts |  | 4.3 |  |  | 6.0 |  |  | 11.9 |  | pts
Non-catastrophe property loss and loss expenses |  | 33.8 |  |  | 41.3 |  |  |  | 25.6 |  |  | 35.2 |  |  | 6.1 |  |
Unfavorable prior year casualty reserve development |  | 2.0 |  |  | 2.4 |  |  |  | — |  |  | — |  |  | 2.4 |  |
Total |  | $ | 50.4 |  |  | 61.6 |  |  |  | 29.9 |  |  | 41.2 |  |  | 20.4 |  |

Net catastrophe losses in First Quarter 2023 included two large wind and thunderstorm events in March 2023 that primarily impacted our homeowners line of business, resulting in $11.5 million of ultimate pre-tax losses.
First Quarter 2023 experienced elevated non-catastrophe property loss and loss expenses, driven by higher personal automobile
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physical damage losses. These higher losses resulted from continued greater severities from inflationary and supply chain impacts that have increased labor and repair costs, and the duration of claims, which impacts vehicle rental days. The likely continuation of elevated non-catastrophe property loss and loss expenses, coupled with renewal pure price increases below loss trend, will put pressure on this segment's profitability in the near-term. We have and continue to file rate increases on a state-by-state basis to mitigate these inflationary impacts. These filed rate increases began to take effect on a written basis during First Quarter 2023, and we expect rate filings to continue to increase through 2023.
The unfavorable prior year casualty reserve development in First Quarter 2023 was primarily due to increased loss severities in accident year 2022. There was no prior year casualty reserve development in First Quarter 2022.
The underwriting expense ratio increased 2.4 points in First Quarter 2023 compared to First Quarter 2022, primarily due to a 2.2 point impact related to our participation in the NFIP program as benefits from our participation in this program are becoming less significant relative to the growth in the overall Standard Personal Lines's premium, which is being driven by our homeowners and personal automobile business.
E&S Lines Segment

|  | Quarter ended March 31, |  | Change % or Points |  |  |  |  |  |
($ in thousands) |  | 2023 |  |  | 2022 |  |  |  |  |  |  |  |  |
Insurance Segments Results: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
NPW |  | $ | 101,174 |  |  |  | 87,102 |  |  | 16 |  | % |  |  |  |  |  |  |  |
NPE |  | 88,851 |  |  |  | 78,172 |  |  | 14 |  |  |  |  |  |  |  |  |  |
Less: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loss and loss expense incurred |  | 46,944 |  |  |  | 46,215 |  |  | 2 |  |  |  |  |  |  |  |  |  |
Net underwriting expenses incurred |  | 28,572 |  |  |  | 25,032 |  |  | 14 |  |  |  |  |  |  |  |  |  |
Underwriting income (loss) |  | 13,335 |  |  |  | 6,925 |  |  | 93 |  |  |  |  |  |  |  |  |  |
Combined Ratios: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loss and loss expense ratio |  | 52.8 |  | % |  | 59.1 |  |  | (6.3) |  | pts |  |  |  |  |  |  |  |
Underwriting expense ratio |  | 32.2 |  |  |  | 32.0 |  |  | 0.2 |  |  |  |  |  |  |  |  |  |
Combined ratio |  | 85.0 |  |  |  | 91.1 |  |  | (6.1) |  |  |  |  |  |  |  |  |  |

NPW growth of 16% in First Quarter 2023 compared to First Quarter 2022 reflected renewal pure price increases and higher direct new business as shown in the table below. In addition, NPW growth in First Quarter 2023 benefited from exposure growth driven by favorable E&S Lines marketplace conditions.

|  | Quarter ended March 31, |  |  |  |  |  |  |  |
($ in millions) |  | 2023 |  |  | 2022 |  |  |  |  |  |  |  |  |
Direct new business premiums |  | $ | 42.9 |  |  |  | 39.2 |  |  |  |  |  |  |  |  |  |  |  |
Renewal pure price increases on NPW |  | 7.4 |  | % |  | 7.7 |  |  |  |  |  |  |  |  |  |  |  |

The increase in NPE in First Quarter 2023 compared to First Quarter 2022 resulted from the same impacts to NPW described above.
The loss and loss expense ratio decreased 6.3 points in First Quarter 2023 compared to First Quarter 2022, primarily driven by the following:

|  | First Quarter 2023 |  |  | First Quarter 2022 |  |  |
($ 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 |  | $ | 5.6 |  |  | 6.3 |  | pts |  | $ | 1.3 |  |  | 1.7 |  |  | 4.6 |  | pts
Non-catastrophe property loss and loss expenses |  | 8.9 |  |  | 10.1 |  |  |  | 9.1 |  |  | 11.6 |  |  | (1.5) |  |
(Favorable) prior year casualty reserve development |  | (5.0) |  |  | (5.6) |  |  |  | — |  |  | — |  |  | (5.6) |  |
Total |  | $ | 9.5 |  |  | 10.8 |  |  |  | $ | 10.4 |  |  | 13.3 |  |  | (2.5) |  |

First Quarter 2023 experienced higher net catastrophe losses compared to First Quarter 2022, including $2.6 million related to two large wind and thunderstorm events in March 2023 that impacted our property line of business.
The favorable prior year casualty reserve development in First Quarter 2023 was primarily due to lower severities in accident years 2021 and prior. There was no prior year casualty reserve development in First Quarter 2022.
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In addition, the loss and loss expense ratio was favorably impacted by a 3.7-point decrease in current year casualty loss costs in First Quarter 2023 compared to First Quarter 2022. Our E&S casualty lines results have improved over recent years from several underwriting and claims initiatives and strong rate increases. The decrease in current year casualty loss costs reflects the impacts of these actions.
Investments
Our investment portfolio's objectives are to maximize after-tax net investment income and generate long-term growth in book value per share by maximizing the overall total return of the portfolio by investing the premiums we receive from our insurance operations and the amounts generated through our capital management strategies, which may include debt and equity security issuances. We balance those objectives 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 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, 2023, compared to the Insurance Subsidiaries' net loss and loss expense reserves duration of 3.1 years at December 31, 2022. The effective duration is monitored and managed to maximize yield while managing interest rate risk at an acceptable level. Purchases and sales are made with the intent of maximizing investment returns in the current market environment while balancing capital preservation.
Our fixed income and short-term investments represented 93% of our invested assets at March 31, 2023, and 92% at December 31, 2022. Our fixed income and short-term investments portfolio had a weighted average credit rating of "AA-" as of March 31, 2023 and December 31, 2022, with investment grade holdings representing 96% of the total portfolio at both periods.
For further details on the composition, credit quality, and various risks to which our portfolio is subject, see Item 7A. “Quantitative and Qualitative Disclosures About Market Risk.” of our 2022 Annual Report.

Total Invested Assets |  |  |  |  |  |  |
($ in thousands) |  | March 31, 2023 |  | December 31, 2022 |  | Change |
Total invested assets |  | $ | 8,029,444 |  |  | 7,837,469 |  |  | 2 |  | %
Invested assets per dollar of common stockholders' equity |  | 3.25 |  |  | 3.37 |  |  | (4) |  |
Components of unrealized gains (losses) – before tax: |  |  |  |  |  |  |
Fixed income securities |  | (442,961) |  |  | (527,892) |  |  | (16) | % |
Equity securities |  | (2,183) |  |  | (5,431) |  |  | (60) | % |
Net unrealized gains (losses) – before tax |  | (445,144) |  |  | (533,323) |  |  | (17) | % |
Components of unrealized gains (losses) – after tax: |  |  |  |  |  |  |
Fixed income securities |  | (349,940) |  |  | (417,035) |  |  | (16) | % |
Equity securities |  | (1,724) |  |  | (4,290) |  |  | (60) | % |
Net unrealized gains (losses) – after tax |  | (351,664) |  |  | (421,325) |  |  | (17) | % |

Invested assets increased $192.0 million at March 31, 2023, compared to December 31, 2022, reflecting an $88.2 million decrease in pre-tax unrealized losses during First Quarter 2023 and operating cash flows during First Quarter 2023 that were 14% of NPW. The decrease in pre-tax unrealized losses was primarily due to a decrease in benchmark U.S. Treasury rates.
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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) |  | 2023 |  | 2022 |  |  |  |  |  |
Fixed income securities |  | $ | 80,087 |  |  | 53,925 |  |  | 49 |  | % |  |  |  |  |  |  |
Commercial mortgage loans ("CMLs") |  | 1,965 |  |  | 970 |  |  | 103 |  |  |  |  |  |  |  |  |
Equity securities |  | 1,205 |  |  | 2,418 |  |  | (50) |  |  |  |  |  |  |  |  |
Short-term investments |  | 4,650 |  |  | 101 |  |  | 4,504 |  |  |  |  |  |  |  |  |
Alternative investments |  | 7,768 |  |  | 19,128 |  |  | (59) |  |  |  |  |  |  |  |  |
Other investments |  | 43 |  |  | 177 |  |  | (76) |  |  |  |  |  |  |  |  |
Investment expenses |  | (4,212) |  |  | (4,117) |  |  | 2 |  |  |  |  |  |  |  |  |
Net investment income earned – before tax |  | 91,506 |  |  | 72,602 |  |  | 26 |  |  |  |  |  |  |  |  |
Net investment income tax expense |  | (18,454) |  |  | (14,087) |  |  | 31 |  |  |  |  |  |  |  |  |
Net investment income earned – after tax |  | $ | 73,052 |  |  | 58,515 |  |  | 25 |  |  |  |  |  |  |  |  |
Effective tax rate |  | 20.2 | % |  | 19.4 |  |  | 0.8 |  | pts |  |  |  |  |  |  |
Annualized after-tax yield on fixed income investments |  | 3.8 |  |  | 2.6 |  |  | 1.2 |  |  |  |  |  |  |  |  |
Annualized after-tax yield on investment portfolio |  | 3.7 |  |  | 3.0 |  |  | 0.7 |  |  |  |  |  |  |  |  |

Net investment income earned increased 25% in First Quarter 2023 compared to First Quarter 2022, driven by an increase in income earned on our fixed income securities portfolio due to higher book yields received from the investment of operating and investing cash flows over the past year in the higher interest rate environment, partially offset by lower returns on our alternative investments.
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) |  | 2023 |  | 2022 |  |  |  |
Net realized gains (losses) on disposals |  | (9,146) |  |  | (11,363) |  |  | (20) | % |  |  |  |  |  |
Net unrealized gains (losses) on equity securities |  | 3,248 |  |  | (2,154) |  |  | (251) |  |  |  |  |  |  |
Net credit loss benefit (expense) on fixed income securities, AFS |  | 9,529 |  |  | (22,052) |  |  | (143) |  |  |  |  |  |  |
Net credit loss benefit (expense) on fixed income securities, held-to-maturity |  | — |  |  | 14 |  |  | (100) |  |  |  |  |  |  |
Net credit loss benefit (expense) on CMLs |  | 17 |  |  | — |  |  | — |  |  |  |  |  |  |
Losses on securities for which we have the intent to sell |  | (304) |  |  | (4,797) |  |  | (94) |  |  |  |  |  |  |
Total net realized and unrealized investment gains (losses) |  | $ | 3,344 |  |  | (40,352) |  |  | (108) |  |  |  |  |  |  |

Net realized and unrealized investment gains in First Quarter 2023 were primarily driven by lower credit loss expense on our AFS fixed income securities portfolio resulting from a decline in benchmark U.S. Treasury rates.
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) |  | 2023 |  | 2022 |  |  |  |
Tax at statutory rate |  | $ | 24,099 |  |  | 14,677 |  |  |  |  |
Tax-advantaged interest |  | (720) |  |  | (1,074) |  |  |  |  |
Dividends received deduction |  | (68) |  |  | (106) |  |  |  |  |
Executive compensation |  | 740 |  |  | 258 |  |  |  |  |
Stock-based compensation |  | (1,613) |  |  | (731) |  |  |  |  |
Other |  | (253) |  |  | 536 |  |  |  |  |
Federal income tax expense |  | 22,185 |  |  | 13,560 |  |  |  |  |
Income before federal income tax, less preferred stock dividends |  | 112,459 |  |  | 67,590 |  |  |  |  |
Effective tax rate |  | 19.7 | % |  | 20.1 |  |  |  |  |

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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 adjust our liquidity requirements based on economic conditions, market conditions, and future cash flow commitments, 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 our short-term and long-term liquidity and capital preservation strategies.
The Parent's investment portfolio includes (i) short-term investments 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) alternative investments, and (v) a cash balance. In the aggregate, Parent cash and total investments amounted to $497 million at March 31, 2023, and $484 million at December 31, 2022.
The amount and 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 securities with 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 in First Quarter 2023. As of December 31, 2022, our allowable ordinary maximum dividend is $283 million for 2023. 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 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 2022 Annual Report.
Line of Credit
On November 7, 2022, the Parent entered into a Credit Agreement with the lenders named therein (the “Lenders”) and Wells Fargo Bank, National Association, 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 2023. The Line of Credit will mature on November 7, 2025, and has a variable interest rate based on the Parent’s debt ratings. We expect to continue to maintain a credit facility for liquidity purposes. For additional information regarding the Line of Credit and corresponding representations,
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warranties, and covenants, refer to Note 11. "Indebtedness" in Item 8. "Financial Statements and Supplementary Data." of our 2022 Annual Report. We met all covenants under our Line of Credit as of March 31, 2023.
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" because 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, 2023, we had remaining capacity of $469.1 million for FHLB borrowings, with a $18.6 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 2023. For information on a short-term borrowing made on April 6, 2023, see Note 14. "Subsequent Events" in Item 1. "Financial Statements" of this Form 10-Q.
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, 2023, and December 31, 2022. The remaining capacity under these intercompany loan agreements was $121.5 million as of both March 31, 2023, and December 31, 2022.
Capital Market Activities
The Parent had no private or public stock issuances during First Quarter 2023. In addition, we had no common stock share repurchases during First Quarter 2023 under our existing share repurchase program. We had $84.2 million of remaining capacity under our share repurchase program as of March 31, 2023. For additional information on the share repurchase program, refer to Note 17. “Equity” in Item 8. "Financial Statements and Supplementary Data." of our 2022 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 3, 2023, our Board declared:
•A quarterly cash dividend on common stock of $0.30 per common share that is payable June 1, 2023, to holders of record on May 15, 2023; 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, 2023, to holders of record as of May 31, 2023.
Our ability to meet our interest and principal repayment obligations on our debt and 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 in Note 14. "Subsequent Events" in Item 1. "Financial Statements." of this Form 10-Q, 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.
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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, 2023, we had GAAP stockholders' equity of $2.7 billion and statutory surplus of $2.5 billion. With total debt of $504.2 million at March 31, 2023, our debt-to-capital ratio was 15.9%. 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 2022 Annual Report.
The following table summarizes certain contractual obligations we had at March 31, 2023, 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
Alternative and other investments |  | $ | 239.6 |
Non-publicly traded collateralized loan obligations in our fixed income securities portfolio |  | 94.7 |
Non-publicly traded common stock within our equity portfolio |  | 33.1 |
CMLs |  | 4.2 |
Privately-placed corporate securities |  | 20.4 |
Total |  | $ | 392.0 |

There is no certainty (i) that any such additional investments will be required, and (ii) of the actual timing of the funding. We expect to have the capacity to fund these commitments through our normal operating and investing activities as they come due. Our current and long-term material cash requirements associated with (i) loss and loss expense reserves, (ii) contractual obligations under 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, 2022.
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, 2023, and December 31, 2022, 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 2022 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 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 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 potential market opportunities.
Book value per common share increased 6% to $40.82 as of March 31, 2023, from $38.57 as of December 31, 2022, driven by $1.48 in net income available to common stockholders per diluted common share and a $1.10 reduction in unrealized losses on our fixed income securities portfolio, partially offset by $0.30 in dividends to our common stockholders. The decrease in net unrealized losses on our fixed income securities was primarily driven by a decrease in benchmark U.S. Treasury rates. 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 income (loss), increased to $46.61 as of March 31, 2023, from $45.49 as of December 31, 2022.
Cash Flows
Net cash provided by operating activities increased to $135.8 million in First Quarter 2023, compared to $92.7 million in First
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Quarter 2022, primarily driven by lower levels of claim payments made in First Quarter 2023 compared to First Quarter 2022. First Quarter 2022 included an increased level of Flood claim payments related to Hurricane Ida.
Net cash used in investing activities increased to $98.2 million in First Quarter 2023, compared to $95.9 million in First Quarter 2022, as a result of investing more cash from operating activities. Operating cash flows during First Quarter 2023 were 14% of NPW.
Net cash used in financing activities increased to $27.1 million in First Quarter 2023, compared to $24.0 million in First Quarter 2022, primarily due to increased dividends to our common stockholders and increased purchases of shares from employees to satisfy tax withholding obligations associated with the vesting of their restricted stock units.
Ratings
Our ratings remain the same as reported in our "Overview" section of Item 1. "Business." of our 2022 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 ("S&P") |  | A |  | Stable

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 2022 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, 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 2023 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 13. "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, 2023, 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 our actions in 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
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predict or assess may emerge anytime. Consequently, we can neither predict such new risk factors nor assess the potential future impact they might have on our business. There have been no material changes from the risk factors disclosed in Item 1A. “Risk Factors.” in our 2022 Annual Report.
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 2023:

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, 2023 |  | — |  |  | $ | — |  |  | — |  |  | $ | 84.2 |
February 1 – 28, 2023 |  | 73,295 |  |  | 100.90 |  |  | — |  |  | 84.2 |
March 1 – 31, 2023 |  | 485 |  |  | 97.72 |  |  | — |  |  | 84.2 |
Total |  | 73,780 |  |  | $ | 100.88 |  |  | — |  |  | $ | 84.2 |

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.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS.

Exhibit No. |  |
*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, 2023, 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, 2023, 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 4, 2023 |  | By: /s/ John J. Marchioni
|  |  | John J. Marchioni
|  |  | Chairman of the Board, President and Chief Executive Officer
|  |  | (principal executive officer)
Date: | May 4, 2023 |  | By: /s/ Mark A. Wilcox
|  |  | Mark A. Wilcox
|  |  | Executive Vice President and Chief Financial Officer
|  |  | (principal financial officer)

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