SELECTIVE INSURANCE GROUP INC

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 generating sufficient cash flows to meet our business operations' short-term and long-term cash requirements. As discussed further below, we adjust our liquidity requirements based on economic conditions, market conditions, and future cash flow commitments.

Sources of Liquidity

The Parent's sources of cash historically have consisted of dividends from the Insurance Subsidiaries, the Parent's investment portfolio, borrowings under third-party lines of credit, intercompany revolving demand 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 management strategies.

The Parent's cash and investment portfolio components were as follows:

Short-term investments have historically been maintained in "AAA" rated money market funds, and fixed income securities are comprised of high-quality, liquid government and corporate securities.

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. We have an established target for the Parent to maintain liquid investments of at least twice its expected annual net cash outflow needs.

Insurance Subsidiary Dividends

The Insurance Subsidiaries generate liquidity through insurance float, created by collecting premiums and earning investment income before paying claims. The float period 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 did not pay cash dividends to the Parent in 2025. As of December 31, 2025, our allowable ordinary maximum dividend is $466 million for 2026. 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 have historically approved Insurance Subsidiary dividends, there is no assurance they will approve future dividends.

New Jersey corporate law also limits the maximum amount of dividends the Parent can pay its stockholders if either (i) the Parent would be unable to pay its debts as they become 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 from being 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 this Form 10-K.

Line of Credit

On June 30, 2025, the Parent entered into a Credit Agreement (the "Line of Credit") with the lenders named therein (the "Lenders") and Wells Fargo Bank, National Association, as administrative agent. Under the Line of Credit, the Lenders have agreed to provide the Parent with a $100 million revolving credit facility that can be increased to $200 million with the Lenders' consent. The Line of Credit will mature on June 30, 2028, and has a variable interest rate based on the Parent’s debt ratings. This agreement replaced a prior credit agreement that the Parent terminated in conjunction with entering into the Line of Credit. No borrowings were made under either credit facility in 2025.

For additional information regarding the Line of Credit and corresponding representations, warranties, and covenants, refer to Note 11. "Indebtedness" in Item 8. "Financial Statements and Supplementary Data." of this Form 10-K.

Four 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 5. "Investments" in Item 8. "Financial Statements and Supplementary Data." of this Form 10-K.

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. SICNY is domiciled in New York, which limits its FHLBNY borrowings to the lesser of 5% of admitted assets for the most recently completed fiscal quarter or 10% of the previous year-end's admitted assets.

The following table provides information on the remaining capacity for FHLB borrowings based on these restrictions, as well as the additional FHLB stock purchase requirement to allow these member companies to borrow their remaining capacity amounts:

Short-term Borrowings

We made no material short-term borrowings from FHLB branches during 2025.

Intercompany Loan Agreements

The Parent has lending agreements with the Indiana Subsidiaries, approved by the Indiana Department of Insurance, that provide the Parent with additional intercompany liquidity. Like 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 following table provides information on the Parent’s borrowings and remaining borrowing capacity from the two Indiana Subsidiaries:

Additionally, we have other insurance regulator-approved intercompany agreements that facilitate liquidity management between the Parent and the Insurance Subsidiaries, thereby enhancing flexibility.

Capital Market Activities

In 2025, the Parent issued $400 million of 5.90% Senior Notes due 2035, resulting in net proceeds of $395.9 million after a $0.1 million discount and debt issuance costs of approximately $4.1 million. The proceeds from this debt issuance were used for general corporate purposes, including supporting organic growth with a $200 million capital contribution to the Insurance Subsidiaries in March 2025. The Parent had no private or public stock issuances during 2025.

On October 22, 2025, the Company announced that its Board of Directors authorized a new share repurchase program under which the Company may repurchase issued and outstanding shares of common stock up to $200 million, exclusive of any excise tax impact. The program became effective on October 27, 2025, and has no expiration date. The previously existing $100 million share repurchase program remained effective through October 24, 2025. Repurchases under both programs in 2025 were as follows:

For additional information on the share repurchase program, refer to Note 17. "Equity" in Item 8. "Financial Statements and Supplementary Data." of this Form 10-K.

Uses of Liquidity

The Parent uses the liquidity generated from the sources discussed above to pay dividends to our stockholders, among other things. 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. In October 2025, our Board approved a 13% increase in the quarterly cash dividend on common stock, to $0.43, from $0.38 per share. On January 29, 2026, our Board declared:

•A quarterly cash dividend on common stock of $0.43 per common share, that is payable on March 2, 2026, to holders of record as of February 13, 2026; and

•A quarterly cash dividend of $287.50 per share on our 4.60% Non-Cumulative Preferred Stock, Series B (equivalent to $0.28750 per depositary share) payable on March 16, 2026, to holders of record as of February 27, 2026.

Our ability to meet our interest and principal repayment obligations on our debt and continue to pay dividends to our stockholders depends 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. Our next borrowing principal repayment is $60 million to FHLBI due on December 16, 2026.

Restrictions on the Insurance Subsidiaries' ability to declare and pay dividends, without alternative liquidity options, could materially affect our ability to service debt and pay dividends on common and preferred stock.

Capital Resources

Capital resources ensure we can pay policyholder claims, furnish the financial strength to support underwriting insurance risks, and facilitate continued business growth. At December 31, 2025, we had GAAP stockholders’ equity of $3.6 billion and statutory surplus of $3.6 billion. With total debt of $902 million at December 31, 2025, our debt-to-capital ratio was 20.0%. 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 this Form 10-K.

The following table summarizes current and long-term material cash requirements as of December 31, 2025, which we expect to fund primarily with operating cash flows.

The loss and loss expense payments in the table above represent estimated paid amounts by period on our loss and loss expense reserves. These estimates are based on past experience, adjusted for current developments and anticipated trends, and involve considerable judgment. There is no precise method for evaluating the impact of any specific factor on the projected timing of loss and loss expense reserve payments, so the timing and amounts of the actual payments will be affected by many factors. Therefore, the projected settlement of the reserves for net loss and loss expense may differ, perhaps significantly, from actual future payments. The Insurance Subsidiaries' net loss and loss expense reserves duration was 3.0 years at December 31, 2025.

For more information on our case reserves and estimates of reserve for loss and loss expense IBNR, refer to the "Reserve for Loss and Loss Expense" section in the "Critical Accounting Policies and Estimates" section of this MD&A and Note 2. "Summary of Significant Accounting Policies" in Item 8. "Financial Statements and Supplementary Data." of this Form 10-K.

For additional information regarding cross-default provisions associated with our notes payable in the table above or our Line of Credit, see Note 11. "Indebtedness" in Item 8. "Financial Statements and Supplementary Data." in this Form 10-K.

In addition to the above, the following table summarizes certain contractual obligations we had at December 31, 2025, that may require us to invest additional amounts in our investment portfolio, which we would fund primarily with operating cash flows.

There is no certainty (i) that any such additional investments will be required and (ii) about the timing of funding. We expect to have the capacity to fund these commitments through our normal operating and investing activities as they come due.

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 December 31, 2025 and 2024, 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" included in Item 8. "Financial Statements and Supplementary Data." of this Form 10-K, 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 Insurance 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 adjusting common stockholders’ dividends.

Our capital management strategy is intended to protect the interests of the Insurance Subsidiaries' policyholders and our stockholders, and to enhance our financial strength and underwriting capacity. We have a strong capital base and a high-quality underwriting portfolio, positioning us well to capitalize on potential market opportunities.

Book value per common share increased 18% to $56.74 as of December 31, 2025, from $47.99 as of December 31, 2024, driven by $7.49 in net income available to common stockholders per diluted common share and a $3.01 reduction in after-tax net unrealized losses on our fixed income securities portfolio, partially offset by $1.57 in dividends to our common stockholders. The decrease in net unrealized losses on our fixed income securities was primarily driven by a decline 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 $57.91 as of December 31, 2025, from $52.10 as of December 31, 2024.

Cash Flows

Net cash provided by operating activities increased to $1.2 billion in 2025, compared to $1.1 billion in 2024, primarily driven by higher cash premium receipts in 2025 compared to 2024. Operating cash flows were 25% of NPW in 2025 compared to 24% in 2024. For more information on our underwriting results, refer to "Insurance Operations" above in this MD&A.

Net cash used in investing activities increased to $1.5 billion in 2025, compared to $947 million in 2024, primarily due to the investment of proceeds from our 5.9% Senior Note issuance in 2025. These proceeds also drove the $207 million net cash provided by financing activities in 2025 compared to $103 million in net cash used in financing activities in 2024. Partially offsetting cash proceeds from the 5.9% Senior Note issuance was cash used for share repurchases and common stock dividends.