SELECTIVE INSURANCE GROUP INC – 10-Q – MANAGEMENT’S DISCUSSION AND ANALYSIS ON FINANCIAL POSITION 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.

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Introduction
We classify our business into four reportable segments:

•Standard Commercial Lines;
•Standard Personal Lines;
•Excess and Surplus Lines ("E&S Lines"); and
•Investments.

For more details about these segments, refer to Note 9. "Segment Information" in
Item 1. "Financial Statements." of this Form 10-Q and Note 12. "Segment
Information" in Item 8. "Financial Statements and Supplementary Data." of our
Annual Report on Form 10-K for the year ended December 31, 2021 ("2021 Annual
Report").

We write our Standard Commercial and Standard Personal Lines products and
services through nine of our insurance subsidiaries, some of which participate
in the federal government's National Flood Insurance Program's ("NFIP") Write
Your Own Program. We write our E&S products through another subsidiary, Mesa
Underwriters Specialty Insurance Company, a nationally-authorized non-admitted
platform for customers who generally cannot obtain coverage in the standard
marketplace. Collectively, we refer to our ten insurance subsidiaries as the
"Insurance Subsidiaries."

The following is Management's Discussion and Analysis ("MD&A") of the
consolidated results of operations and financial condition, as well as known
trends and uncertainties, that may have a material impact in future periods.
Investors should read the MD&A in conjunction with Item 1. "Financial
Statements." of this Form 10-Q and the consolidated financial statements in our
2021 Annual Report filed with the United States ("U.S.") Securities and Exchange
Commission.

In the MD&A, we will discuss and analyze the following:

•Critical Accounting Policies and Estimates;
•Financial Highlights of Results for the third quarters ended September 30, 2022
("Third Quarter 2022") and September 30, 2021 ("Third Quarter 2021"); and the
nine-month periods ended September 30, 2022 ("Nine Months 2022") and
September 30, 2021 ("Nine Months 2021");
•Results of Operations and Related Information by Segment;
•Federal Income Taxes;
•Liquidity and Capital Resources; and
•Ratings.

Critical Accounting Policies and Estimates
Our unaudited interim consolidated financial statements include amounts for
which we have made informed estimates and judgments for transactions not yet
completed. Such estimates and judgments affect the reported amounts in the
consolidated financial statements. As outlined in our 2021 Annual Report, those
estimates and judgments most critical to the preparation of the consolidated
financial statements involved the following: (i) reserves for loss and loss
expense; (ii) investment valuation and the allowance for credit losses on
available-for-sale ("AFS") fixed income securities; and (iii) reinsurance. These
estimates and judgments require the use of assumptions about 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 35
through 43 of our 2021 Annual Report.

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Financial Highlights of Results for Third Quarter and Nine Months 2022 and Third
Quarter and Nine Months 20211

                                                                        Quarter ended September 30,               Change                      Nine Months ended September 30,               Change
($ and shares in thousands, except per share amounts)                     2022                 2021            % or Points                       2022                   2021             % or Points
Financial Data:
Revenues                                                             $   895,020             865,044                 3       %             $   2,605,900             2,509,469                 4       %
After-tax net investment income                                           51,533              74,690               (31)                          166,706               198,474               (16)
After-tax underwriting income                                             21,434               8,642               148                            95,333               129,984               (27)
Net income before federal income tax                                      52,639              92,636               (43)                          172,433               381,466               (55)
Net income                                                                42,525              73,705               (42)                          138,375               304,858               (55)
Net income available to common stockholders                               40,225              71,405               (44)                          131,475               297,805               (56)

Key Metrics:
Combined ratio                                                              96.8    %           98.6              (1.8)      pts                    95.2         %        92.6               2.6       pts
Invested assets per dollar of common stockholders' equity            $      3.38                2.89                17       %             $        3.38                  2.89                17       %
Return on common equity ("ROE")                                              7.0                10.6              (3.6)      pts                     7.0                  15.1              (8.1)      pts
Net premiums written ("NPW") to statutory surplus ratio                     1.45    x           1.35              0.10                              1.45    x             1.35              0.10

Per Common Share Amounts:
Diluted net income per share                                         $      0.66                1.18               (44)      %             $        2.16                  4.92               (56)      %
Book value per share                                                       36.96               45.27               (18)                            36.96                 45.27               (18)
Dividends declared per share to common stockholders                         0.28                0.25                12                              0.84                  0.75                12

Non-GAAP Information:
Non-GAAP operating income2                                           $    60,514              71,265               (15)      %             $     217,517               285,676               (24)      %
Non-GAAP operating income per diluted common share2                         0.99                1.18               (16)                             3.57                  4.72               (24)
Non-GAAP operating ROE2                                                     10.5    %           10.6              (0.1)      pts                    11.6         %        14.5              (2.9)      pts
Adjusted book value per common share2                                $     44.59               41.56                 7       %             $       44.59                 41.56                 7       %


1Refer to the Glossary of Terms attached to our 2021 Annual Report as Exhibit
99.1 for definitions of terms used of this Form 10-Q.
2Non-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 net income available to common stockholders, net income
available to common stockholders per diluted common share, ROE, and book value
per common share to non-GAAP operating income, non-GAAP operating income per
diluted common share, non-GAAP operating ROE, and adjusted book value per common
share, respectively, are provided in the tables below:

Reconciliation of net income available to common               Quarter ended September 30,           Nine Months ended September 30,
stockholders to non-GAAP operating income
($ in thousands)                                                 2022                2021                2022                 2021
Net income available to common stockholders                 $    40,225             71,405          $    131,475            297,805

Net realized and unrealized investment losses (gains)
included in net income, before tax

                               25,681               (177)              108,913            (15,353)

Tax on reconciling items                                         (5,392)                37               (22,871)             3,224
Non-GAAP operating income                                   $    60,514             71,265          $    217,517            285,676



Reconciliation of net income available to common               Quarter ended September 30,             Nine Months ended September 30,
stockholders per diluted common share to non-GAAP
operating income per diluted common share
                                                                  2022                2021                 2022                  2021
Net income available to common stockholders per
diluted common share                                        $        0.66              1.18          $         2.16               4.92

Net realized and unrealized investment losses (gains)
included in net income, before tax

                                   0.42                 -                    1.79              (0.25)

Tax on reconciling items                                            (0.09)                -                   (0.38)              0.05

Non-GAAP operating earnings per diluted common share $0.99

           1.18          $         3.57               4.72



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Reconciliation of ROE to non-GAAP operating ROE                Quarter ended September 30,            Nine Months ended September 30,
                                                                  2022                2021                 2022                2021
ROE                                                                   7.0  %           10.6                    7.0  %           15.1

Net realized and unrealized investment losses (gains)
included in net income, before tax

                                    4.4                 -                    5.8              (0.8)

Tax on reconciling items                                             (0.9)                -                   (1.2)              0.2
Non-GAAP operating ROE                                               10.5  %           10.6                   11.6  %           14.5



Reconciliation of book value per common share to               Quarter ended September 30,           Nine Months ended September 30,

adjusted book value per common share

                                                                 2022                2021                 2022                2021
Book value per common share                                 $      36.96             45.27          $       36.96             45.27

Total unrealized investment losses (gains) included
in accumulated other comprehensive income,
before tax

                                                          9.67             (4.71)                  9.67             (4.71)
Tax on reconciling items                                           (2.04)             1.00                  (2.04)             1.00
Adjusted book value per common share                        $      44.59             41.56          $       44.59             41.56



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

ROE and non-GAAP operating ROE
Components                                          Quarter ended September 30,                                       Nine Months ended September 30,
                                                  2022                      2021              Change Points               2022                 2021              Change Points
Standard Commercial Lines Segment                  3.1      %                2.1                   1.0                        4.7    %            6.2                (1.5)
Standard Personal Lines Segment                   (0.2)                     (1.3)                  1.1                       (0.3)                0.1                (0.4)
E&S Lines Segment                                  0.8                       0.5                   0.3                        0.7                 0.3                 0.4
Total insurance operations                         3.7                       1.3                   2.4                        5.1                 6.6                (1.5)

Investment income                                  8.9                      11.0                  (2.1)                       8.9                10.1  %             (1.2)
Net realized and unrealized investment
(losses) gains                                    (3.5)                        -                  (3.5)                      (4.6)                0.6                (5.2)
Total investments segment                          5.4                      11.0                  (5.6)                       4.3                10.7                (6.4)

Other                                             (2.1)                     (1.7)                 (0.4)                      (2.4)               (2.2)               (0.2)

ROE                                                7.0                      10.6                  (3.6)                       7.0                15.1                (8.1)
Net realized and unrealized investment
losses (gains), after tax                          3.5                         -                   3.5                        4.6                (0.6)                5.2
Non-GAAP Operating ROE                            10.5                      10.6                  (0.1)                      11.6                14.5                (2.9)


Our non-GAAP operating ROE of 11.6% for the nine months of 2022 was higher than our full year
2022 targets non-GAAP operating ROE of 11%, but lower than our nine-month 2021
Non-GAAP operational ROE of 14.5%.

The decrease in Nine Months 2022 compared to Nine Months 2021 was primarily
driven by a reduction in after-tax underwriting and investment income. After-tax
underwriting income decreased $34.7 million, or 1.5 ROE points, in Nine Months
2022 compared to Nine Months 2021, primarily from increased non-catastrophe
property loss and loss expenses and lower favorable prior year casualty reserve
development, offset partially by a decrease in net catastrophe losses. The
higher non-catastrophe property loss and loss expenses were mainly due to the
higher inflationary environment.

After-tax investment income declined $31.8 millioni.e. 1.2 points of ROE, in Nine
Month 2022 over nine months 2021, from lower after-tax alternative
investment income over nine months of 2022.

In addition, our ROE was reduced by the impact of net realized and unrealized
investment gains and losses, which was 5.2 ROE points in Nine Months 2022. Net
realized and unrealized investment losses in both current-year periods compared
to net realized and unrealized investment gains in the same prior-year periods
drove the reduction in our ROE. The increase in net realized and unrealized
losses resulted from (i) a decrease in valuations reflecting the current public
equities market, (ii) active trading of our fixed income securities to increase
the book yield of our fixed income portfolio due to increasing new money rates,
resulting in realized losses, and (iii) higher credit loss expense on our AFS
fixed income securities portfolio.

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Outlook
We entered 2022 in the strongest financial position in our 95-year history, with
a record level of GAAP equity, statutory capital and surplus, and holding
company cash and investments. We are well positioned to continue executing on
our strategic objectives and delivering growth and profitability. Although not
as favorable as Nine Months 2021, our overall Nine Months 2022 financial results
were strong, with 11% growth in NPW and a 11.6% non-GAAP operating ROE, which
was above our full-year target of 11%.

In 2022, the elevated level of economic inflation, the significant increase in
interest rates, and predictions of a recession in the near term, which have led
to a widening of credit spreads, have all contributed to lower investment
valuations and significant financial market volatility. The higher interest
rates and widening of credit spreads, with interest rates having the most
significant impact, have reduced the fair value of our fixed income securities,
which in turn has negatively impacted our stockholders' equity, which was down
19% during Nine Months 2022. The higher economic inflation has also negatively
impacted our property loss and loss expenses through increased severities in our
short-tail property lines, which has reduced our underwriting income. Should
these trends continue, and in the absence of taking rate and other underwriting
actions, our underwriting profitability could be negatively impacted in the near
term. We will continue to focus on underwriting improvements and achieving
written renewal pure price increases that meet or exceed expected loss trend. In
Third Quarter 2022, we achieved Standard Commercial Lines renewal pure price
increases of 5.8% and exposure growth of 3.8%, resulting in total renewal
premium growth of 9.6%. These rates were up sequentially from the second quarter
of 2022, which experienced renewal pure price increases of 5.3% and exposure
growth of 3.9%, resulting in total renewal premium growth of 9.2%.

While higher interest rates, wider credit spreads, and financial market
volatility have negatively impacted our investment valuations and certain key
financial metrics, such as stockholders' equity and book value per common share,
they have also provided us with the opportunity to invest our cash flows at
significantly higher new money rates. Our pre-tax new money purchase rates for
fixed income securities averaged 4.2% in Nine Months 2022, compared to 2.2% for
Nine Months 2021. The pre-tax new money purchase rates for fixed income
securities increased to 5.1% in Third Quarter 2022, which was above our Third
Quarter 2022 average pre-tax fixed income investment yield of 4.2%. The
portfolio's net investment income also benefits from our 14% allocation to
floating rate fixed income securities, which are primarily tied to 90-day LIBOR,
which increased from 0.21% at December 31, 2021, to 3.75% at September 30, 2022.
These floating securities have reset quarterly at higher rates, which combined
with our higher new money purchase rates for fixed income securities, is
contributing to higher net investment income from our fixed income securities.
Partially offsetting the increase in net investment income from fixed income
securities, are lower returns from our allocation to alternative investments.
These assumptions are factored into our full-year after-tax net investment
income expectations, as discussed below.

We continue to focus on several other fundamental areas to position ourselves
continued success:

•Delivering on our strategy for continued disciplined and profitable growth by:
•Continuing to expand our Standard Commercial Lines market share by (i)
increasing our share towards our 12% target of our agents' premiums, (ii)
strategically appointing new agents, and (iii) maximizing new business growth in
the small business market through utilization of our enhanced small business
platform;
•Expanding our geographic footprint. In June 2022, we began writing Standard
Commercial Lines business in Vermont. In October 2022, we began writing Standard
Commercial Lines business in 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;
•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.

Our expectations for the full year are as follows:

•A GAAP combined ratio, excluding net catastrophe losses, of 91.5% (prior
guidance was 90.5%). Our combined ratio estimate assumes no additional prior
year casualty reserve development;
•Net catastrophe losses of 3.5 points (prior guidance 4.0 points) on the
combined ratio;
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•After-tax net investment income of $215 million (prior guidance was $215
million) that includes after-tax net investment income from our alternative
investments of $7 million (prior guidance was $15 million);
•An overall effective tax rate of approximately 20.5%, which assumes an
effective tax rate of 19.5% for net investment income and 21.0% for all other
items; and
•Weighted average shares of 61 million on a fully diluted basis, which assumes
no additional share repurchases we may make under our authorization.

As we look ahead to 2023, we believe the elevated level of economic inflation
will persist and continue to negatively impact our short-tail property lines of
business and may impact our general and administrative expenses. In addition, we
expect reduced reinsurance capacity and higher demand for new and expanded
reinsurance purchases by U.S. primary companies will likely result in higher
reinsurance prices in 2023 and less favorable terms and conditions for the
industry. These factors could negatively impact our 2023 combined ratio and
underwriting profits, although we are well-positioned to navigate these
challenges and expect to continue generating strong overall returns.

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 September 30,                                                     Nine Months ended September 30,
($ in thousands)                        2022                2021             Change % or Points                       2022                        2021             Change % or Points
Insurance Operations
Results:
Net premiums written ("NPW")       $   903,394             812,906                    11         %              $   2,723,933                  2,444,289                    11         %
Net premiums earned ("NPE")            853,879             767,247                    11                            2,500,601                  2,232,725                    12
Less:
Loss and loss expense
incurred                               547,826             505,269                     8                            1,566,930                  1,340,293                    17
Net underwriting expenses
incurred                               277,988             250,033                    11                              809,455                    724,484                    12
Dividends to policyholders                 933               1,006                    (7)                               3,542                      3,411                     4
Underwriting income                $    27,132              10,939                   148         %              $     120,674                    164,537                   (27)        %
Combined Ratios:
Loss and loss expense ratio               64.1    %           65.9                  (1.8)        pts                     62.7    %                  60.0                   2.7         pts
Underwriting expense ratio                32.6                32.6                     -                                 32.4                       32.4                     -
Dividends to policyholders
ratio                                      0.1                 0.1                     -                                  0.1                        0.2                  (0.1)
Combined ratio                            96.8                98.6                  (1.8)                                95.2                       92.6                   2.6



The NPW growth of 11% in Third Quarter and Nine Months 2022 compared to the same
prior-year periods reflected (i) overall renewal pure price increases, and (ii)
higher direct new business, as shown in the following table:

                                                 Quarter ended September 30,                             Nine Months ended September 30,
($ in millions)                                   2022                  2021                   2022                     2021
Direct new business premiums                $     184.3                  168.3                       $     543.5                    497.3
Renewal pure price increases on NPW                 5.3     %              4.9                               5.0     %                5.1



Our NPW growth in Third Quarter and Nine Months 2022 benefited from strong
retention. In addition, increased economic activity and inflation in the U.S.
resulted in our customers increasing their sales, payrolls, and exposure units,
all of which favorably impacted our NPW.

The increase in NPEs in the third quarter and nine months of 2022 compared to the same
prior year periods resulted from the same impacts on NPW described above.

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Loss and Loss Expenses
The loss and loss expense ratio decreased 1.8 points in Third Quarter 2022 and
increased 2.7 points in Nine Months 2022 compared to the same prior-year
periods, primarily due to the following:

                                                        Third Quarter 2022                                Third Quarter 2021
                                                                                                Loss and
                                           Loss and Loss            Impact on                     Loss               Impact on
                                              Expense             Loss and Loss                 Expense            Loss and Loss
($ in millions)                               Incurred            Expense Ratio                 Incurred           Expense Ratio                Change in Ratio
Net catastrophe losses                     $      34.1                   4.0      pts         $    76.3                  10.0      pts               (6.0)       pts
(Favorable) prior year casualty
reserve development                              (16.0)                 (1.9)                     (14.0)                 (1.8)                      

(0.1)

Non-catastrophe property loss and
loss expenses                                    167.5                  19.6                      123.7                  16.1                         3.5
Total                                      $     185.6                  21.7                  $   186.0                  24.3                        (2.6)

                                                         Nine Months 2022                                  Nine Months 2021
                                                                                                Loss and
                                           Loss and Loss            Impact on                     Loss               Impact on
                                              Expense             Loss and Loss                 Expense            Loss and Loss
($ in millions)                               Incurred            Expense Ratio                 Incurred           Expense Ratio                Change in Ratio
Net catastrophe losses                     $     100.2                   4.0      pts         $   128.9                   5.8      pts               (1.8)       pts
(Favorable) prior year casualty
reserve development                              (48.0)                 (1.9)                     (66.0)                 (3.0)                      

1.1

Non-catastrophe property loss and
loss expenses                                    456.4                  18.3                      346.6                  15.5                         2.8
Total                                      $     508.6                  20.4                  $   409.5                  18.3                         2.1



Net catastrophe losses in Third Quarter and Nine Months 2022 included $10.0
million, or 1.2 points in Third Quarter 2022, and 0.4 points in Nine Months
2022, of net losses from Hurricane Ian, which affected the Southeastern states
of our footprint. These losses were partially offset by $1.9 million, or 0.2
points in Third Quarter 2022 and 0.1 points in Nine Months 2022, of flood claims
handling fees.

We had less losses from Hurricane Ian in Third Quarter and Nine Months 2022 than
Hurricane Ida in Third Quarter and Nine Months 2021. Net catastrophe losses from
Hurricane Ida contributed 5.6 percentage points in Third Quarter 2021 and 1.9
percentage points in Nine Months 2021. Losses from Hurricane Ida were primarily
attributable to property losses, including personal and commercial automobiles,
in New Jersey and the surrounding states. Accordingly, we experienced lower net
catastrophe losses in Third Quarter and Nine Months 2022 compared to the same
prior-year periods.

Also negatively impacting our loss and loss expense ratio was the recognition of
$9.3 million of ceded earned casualty reinstatement premium on the second layer
of our Casualty Excess of Loss Treaty ("Casualty Treaty"), which increased the
ratio by 0.8 points in Third Quarter 2022 and 0.3 points in Nine Months 2022,
compared to the same prior-year periods. The recognition of this reinstatement
premium was principally due to development on one large loss from the 2018
treaty year and two large losses from the 2020 treaty year. Despite the
development on this casualty treaty layer, our prior year loss development, on a
net basis, remains favorable as reflected in the table below:

(Favorable)/Unfavorable Prior Year Casualty Reserve
Development                                                Quarter ended September 30,                 Nine Months ended September 30,
($ in millions)                                          2022                        2021                  2022                 2021
General liability                                   $          -                       (4.0)         $        (5.0)              (29.0)
Commercial automobile                                       15.0                          -                   15.0                   -
Workers compensation                                       (20.0)                      (8.0)                 (40.0)              (28.0)
Businessowners' policies                                    (8.0)                      (2.0)                  (8.0)               (2.0)
Bonds                                                       (3.0)                         -                  (10.0)                  -
  Total Standard Commercial Lines                          (16.0)                     (14.0)                 (48.0)              (59.0)

Homeowners                                                     -                          -                      -                   -
Personal automobile                                            -                          -                      -                   -
  Total Standard Personal Lines                                -                          -                      -                   -

E&S                                                            -                          -                      -                (7.0)

Total (favorable) prior year casualty reserve
development                                         $      (16.0)                     (14.0)         $       (48.0)              (66.0)

(Favorable) impact on loss ratio                            (1.9)   pts                (1.8)                  (1.9)               (3.0)



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

                                            Quarter ended September 30,             Change                       Nine Months ended September 30,               Change
                                                                                     % or                                                                       % or
($ in thousands)                              2022                2021              Points                       2022                        2021              Points
Insurance Segments Results:
NPW                                      $   727,463             652,603              11     %             $   2,225,395                  1,995,297              12     %
NPE                                          692,437             619,571              12                       2,034,143                  1,808,466              12
Less:
Loss and loss expense incurred               438,264             393,503              11                       1,244,639                  1,048,170     

19

Net underwriting expenses incurred           230,739             207,649              11                         674,369                    602,035              12
Dividends to policyholders                       933               1,006              (7)                          3,542                      3,411               4
Underwriting income                           22,501              17,413              29                   $     111,593                    154,850             (28)
Combined Ratios:
Loss and loss expense ratio                     63.4    %           63.5            (0.1)    pts                    61.1    %                  57.9             3.2     pts
Underwriting expense ratio                      33.3                33.5            (0.2)                           33.2                       33.3            (0.1)
Dividends to policyholders ratio                 0.1                 0.2            (0.1)                            0.2                        0.2               -
Combined ratio                                  96.8                97.2            (0.4)                           94.5                       91.4             3.1



NPW growth of 11% in Third Quarter 2022 and 12% in Nine Months 2022 compared to
the same prior-year periods 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 in both current-year periods benefited from
exposure growth.

                                                Quarter ended September 30,                              Nine Months ended September 30,
($ in millions)                               2022                       2021                2022                          2021
Direct new business premiums             $      128.2                     122.3                    $       385.6                       365.6
Retention                                          86    %                   86                               85    %                     85
Renewal pure price increases on
NPW                                               5.8                       5.3                              5.3                         5.5


The increase in NPEs in the third quarter and nine months of 2022 compared to the same
prior year periods resulted from the same impacts on NPW described above.

The loss and expense ratio decreased by 0.1 point in the third quarter of 2022 and
increased by 3.2 points over nine months 2022 compared to the same previous year
periods, mainly motivated by the following elements:

                                                       Third Quarter 2022                              Third Quarter 2021
                                                                                                Loss and
                                          Loss and Loss            Impact on                      Loss               Impact on
                                             Expense             Loss and Loss                  Expense            Loss and Loss
($ in millions)                              Incurred            Expense Ratio                  Incurred           Expense Ratio          Change in Ratio
Net catastrophe losses                    $      18.2                   2.6      pts          $    50.0                   8.1                  (5.5)   

points

Non-catastrophe property loss and
loss expenses                                   129.8                  18.7                        90.1                  14.5                   4.2
(Favorable) prior year casualty
reserve development                             (16.0)                 (2.3)                      (14.0)                 (2.3)                    -

Total                                           132.0                  19.0                       126.1                  20.3                  (1.3)

                                                        Nine Months 2022                                Nine Months 2021
                                                                                                Loss and
                                          Loss and Loss            Impact on                      Loss               Impact on
                                             Expense             Loss and Loss                  Expense            Loss and Loss
($ in millions)                              Incurred            Expense Ratio                  Incurred           Expense Ratio          Change in Ratio
Net catastrophe losses                    $      55.4                   2.7      pts          $    77.3                   4.3                  (1.6)   

points

Non-catastrophe property loss and
loss expenses                                   344.7                  16.9                       248.4                  13.7                   3.2
(Favorable) prior year casualty
reserve development                             (48.0)                 (2.4)                      (59.0)                 (3.3)                  0.9

Total                                           352.1                  17.2                       266.7                  14.7                   2.5



Compared to the same prior-year periods, Third Quarter and Nine Months 2022
included (i) lower net catastrophe losses, and (ii) an increase to the loss and
loss expense ratio of 0.9 points in Third Quarter 2022 and 0.3 points in Nine
Months 2022 due to higher ceded earned casualty reinstatement premium. See the
"Insurance Operations" section above for more information.

For quantitative information on favorable prior year casualty reserve
development by line of business, see the "Insurance Operations" section above.
For qualitative information about the significant drivers of this development,
see the line of business discussions below.

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The following is a discussion of our most significant Standard Commercial Lines
of business:

General Liability

                                              Quarter ended September 30,               Change                      Nine Months ended September 30,              Change
                                                                                          % or                                                                     % or
($ in thousands)                             2022                      2021             Points1                      2022                       2021             Points1
NPW                                     $   234,975                  216,897               8      %             $    736,561                  664,462              11      %
 Direct new business                         38,537                  
38,376                  n/a                    112,700                  109,803                  n/a
 Retention                                       86    %                  86                  n/a                         85    %                  85                  n/a
 Renewal pure price increases                   4.9                      4.4                  n/a                        4.4                      4.5                  n/a
NPE                                     $   225,302                  205,904               9      %             $    667,912                  596,717              12      %
Underwriting income                          21,943                   29,993             (27)                         75,765                   97,611             (22)
Combined ratio                                 90.3    %                85.4             4.9      pts                   88.7    %                83.6             5.1      pts
% of total Standard Commercial                   32                       33                                              33                       33
Lines NPW


1n/a: not applicable.

NPW growth of 8% in Third Quarter 2022 and 11% in Nine Months 2022 compared to
the same prior-year periods benefited from exposure growth, strong retention,
renewal pure price increases, and direct new business.

The combined ratio increased 4.9 points in Third Quarter 2022 and 5.1 points in
Nine Months 2022 compared to the same prior-year periods, partly driven by less
favorable prior year casualty reserve development, as follows:

                                                          Third Quarter 2022                               Third Quarter 2021
                                             Loss and Loss                                       Loss and Loss
                                                Expense               Impact on                     Expense               Impact on
($ in millions)                                 Incurred            Combined Ratio                  Incurred            Combined Ratio          Change in Ratio
(Favorable) prior year casualty
reserve development                          $         -                    -        pts         $      (4.0)                (1.9)                    1.9        pts

                                                           Nine Months 2022                                 Nine Months 2021
                                             Loss and Loss                                       Loss and Loss
                                                Expense               Impact on                     Expense               Impact on
($ in millions)                                 Incurred            Combined Ratio                  Incurred            Combined Ratio          Change in Ratio
(Favorable) prior year casualty
reserve development                          $      (5.0)                (0.7)       pts         $     (29.0)                (4.9)                    4.2        pts



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

The increase in the combined ratio in the third quarter and nine months of 2022 also included
the following loss ratio and claims expense impacts:

•An increase in ceded earned casualty reinstatement premium, adding 1.9 points
in Third Quarter 2022 and 0.7 points in Nine Months 2022 compared to the same
prior-year periods, as discussed in the "Insurance Operations" section above;
and
•An increase in current year casualty loss costs of 0.7 points in Third Quarter
2022 and 0.5 points in Nine Months 2022 compared to the same prior-year periods,
in anticipation of higher loss trend for this line.

Commercial Automobile

                                              Quarter ended September 30,               Change                      Nine Months ended September 30,              Change
                                                                                          % or                                                                     % or
($ in thousands)                             2022                      2021             Points1                      2022                       2021             Points1
NPW                                     $   223,809                  197,459              13      %             $    659,251                  594,011              11      %
 Direct new business                         31,503                   28,968                  n/a                     92,795                   91,120                  n/a
 Retention                                       87    %                  87                  n/a                         86    %                  86                  n/a
 Renewal pure price increases                   8.7                      7.9                  n/a                        8.0                      8.6                  n/a
NPE                                     $   207,129                  185,610              12      %             $    599,340                  535,519              12      %
Underwriting (loss) income                  (30,612)                 (12,547)            144                         (45,790)                  (5,514)            730
Combined ratio                                114.8    %               106.8             8.0      pts                  107.6    %               101.0             6.6      pts
% of total Standard Commercial
Lines NPW                                        31                       30                                              30                       30


1n/a: not applicable.

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NPW growth of 13% in Third Quarter 2022 and 11% in Nine Months 2022 compared to
the same prior-year periods benefited from renewal pure price increases, higher
direct new business, and strong retention. NPW also benefited from 4% growth of
in-force vehicle counts as of September 30, 2022, compared to September 30,
2021.

The combined ratio increased 8.0 points in Third Quarter 2022 and 6.6 points in
Nine Months 2022 compared to the same prior-year periods, primarily driven by
the following:

                                                          Third Quarter 2022                               Third Quarter 2021
                                             Loss and Loss                                       Loss and Loss
                                                Expense               Impact on                     Expense               Impact on
($ in millions)                                 Incurred            Combined Ratio                  Incurred            Combined Ratio          Change in Ratio
Net catastrophe losses                       $       1.4                  0.7        pts         $       8.3                  4.4                    (3.7)       pts
Non-catastrophe property loss and loss
expenses                                            46.2                 22.3                           35.2                 18.9                    

3.4

Unfavorable prior year casualty
reserve development                                 15.0                  7.2                              -                    -                     7.2
Total                                        $      62.6                 30.2                    $      43.5                 23.3                     6.9

                                                           Nine Months 2022                                 Nine Months 2021
                                             Loss and Loss                                       Loss and Loss
                                                Expense               Impact on                     Expense               Impact on
($ in millions)                                 Incurred            Combined Ratio                  Incurred            Combined Ratio          Change in Ratio
Net catastrophe losses                       $       2.3                  0.4        pts         $       8.9                  1.7                    (1.3)       pts
Non-catastrophe property loss and loss
expenses                                           124.0                 20.7                           90.8                 16.9                    

3.8

Unfavorable prior year casualty
reserve development                                 15.0                  2.5                              -                    -                     2.5
Total                                        $     141.3                 23.6                    $      99.7                 18.6                     5.0



Compared to the same prior-year periods, Third Quarter and Nine Months 2022
experienced (i) lower net catastrophe losses, as discussed in the "Insurance
Operations" section above, and (ii) elevated non-catastrophe property loss and
loss expenses, primarily due to higher severities from inflationary and supply
chain impacts that have increased labor and material costs, as well as the
duration of claims, which impacts vehicle rental days.

The unfavorable prior year casualty reserve development in Third Quarter and
Nine Months 2022 was primarily due to increased severities in the 2021 accident
year. There was no prior year casualty reserve development in Third Quarter and
Nine Months 2021.

In addition, the combined ratio was impacted by a 0.9-point increase in current
year casualty loss costs in Third Quarter 2022 and a 1.5-point increase in Nine
Months 2022, compared to the same prior-year periods. The increase in current
year casualty loss costs in both periods was primarily due to an expected
increase in claim frequencies from a more normalized amount of miles driven as
COVID-19-related impacts continue to lessen.

Commercial Property

                                         Quarter ended September 30,               Change                      Nine Months ended September 30,              Change
                                                                                     % or                                                                     % or
($ in thousands)                        2022                      2021             Points1                      2022                       2021             Points1
NPW                                $   143,117                  124,725              15      %             $    414,170                  357,248              16      %
 Direct new business                    30,691                   28,024                  n/a                     89,826                   82,237                  n/a
 Retention                                  85    %                  85                  n/a                         84    %                  84                  n/a
Renewal pure price increases               6.2                      6.4                  n/a                        6.1                      6.0                  n/a
NPE                                $   128,268                  111,981              15      %             $    371,892                  320,904              16      %
Underwriting income                     (2,385)                 (12,137)             80                             608                   11,449             (95)
Combined ratio                           101.9    %               110.8            (8.9)     pts                   99.8    %                96.4             3.4      pts
% of total Standard
Commercial Lines NPW                        20                       19                                              19                       18


1n/a: not applicable.

NPW growth of 15% in the third quarter of 2022 and 16% over nine months of 2022 compared to
the same periods of the previous year benefited from pure renewal price increases,
increased exposure, strong retention and increased direct new business.

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The combined ratio decreased 8.9 points in Third Quarter 2022 and increased 3.4
points in Nine Months 2022 compared to the same prior-year periods, primarily
driven by the following:

                                                          Third Quarter 2022                                    Third Quarter 2021
                                             Loss and Loss
                                                Expense               Impact on                    Loss and Loss                   Impact on
($ in millions)                                 Incurred            Combined Ratio                Expense Incurred              Combined Ratio            Change in Ratio
Net catastrophe losses                       $      13.3                 10.4        pts                  32.8                         29.3                   (18.9)       pts
Non-catastrophe property loss and loss
expenses                                            69.4                 54.1                             48.8                         43.6                    10.5
Total                                        $      82.7                 64.5                             81.6                         72.9                    (8.4)

                                                           Nine Months 2022                                      Nine Months 2021
                                             Loss and Loss
                                                Expense               Impact on                    Loss and Loss                   Impact on
($ in millions)                                 Incurred            Combined Ratio                Expense Incurred              Combined Ratio            Change in Ratio
Net catastrophe losses                       $      45.4                 12.2        pts                  55.7                         17.3                    (5.1)       pts
Non-catastrophe property loss and loss
expenses                                           188.0                 50.6                            133.7                         41.7                     8.9
Total                                        $     233.4                 62.8                            189.4                         59.0                     3.8



Compared to the same prior-year periods, Third Quarter and Nine Months 2022
experienced (i) lower net catastrophe losses, as discussed in the "Insurance
Operations" section above, and (ii) elevated non-catastrophe property loss and
loss expenses. The elevated non-catastrophe property loss and loss expenses was
primarily due to increased severity compared to the same prior-year periods
reflecting period-to-period volatility generally associated with our commercial
property line of business and inflationary pressures on building material and
labor costs.

Workers Compensation

                                              Quarter ended September 30,               Change                      Nine Months ended September 30,              Change
                                                                                          % or                                                                     % or
($ in thousands)                             2022                      2021             Points1                      2022                       2021             Points1
NPW                                     $    74,698                   76,317              (2)     %             $    260,557                  249,099               5      %
Direct new business                          13,597                   15,408                  n/a                     47,552                   47,355                  n/a
Retention                                        85    %                  86                  n/a                         86    %                  86                  n/a
Renewal pure price increases                   (0.1)                       -                  n/a                       (0.4)                       -                  n/a
NPE                                     $    81,996                   78,318               5      %             $    250,178                  230,845               8      %
Underwriting income                          23,220                   15,527              50                          54,756                   44,631              23
Combined ratio                                 71.7    %                80.2            (8.5)     pts                   78.1    %                80.7            (2.6)     pts
% of total Standard Commercial
Lines NPW                                        10                       12                                              12                       12


1n/a: not applicable.

NPW did not significantly change in Third Quarter 2022 compared to Third Quarter
2021, but NPW increased 5% in Nine Months 2022 compared to Nine Months 2021 due
to exposure growth and strong retention.

The combined ratio decreased 8.5 points in Third Quarter 2022 and 2.6 points in
Nine Months 2022 compared to the same prior-year periods, primarily driven by
favorable prior year casualty reserve development, as follows:

                                                          Third Quarter 2022                               Third Quarter 2021
                                             Loss and Loss                                       Loss and Loss
                                                Expense               Impact on                     Expense               Impact on
($ in millions)                                 Incurred            Combined Ratio                  Incurred            Combined Ratio          Change in Ratio
(Favorable) prior year casualty
reserve development                          $     (20.0)               (24.4)       pts         $      (8.0)               (10.2)                  (14.2)       pts

                                                           Nine Months 2022                                 Nine Months 2021
                                             Loss and Loss                                       Loss and Loss
                                                Expense               Impact on                     Expense               Impact on
($ in millions)                                 Incurred            Combined Ratio                  Incurred            Combined Ratio          Change in Ratio
(Favorable) prior year casualty
reserve development                          $     (40.0)               (16.0)       pts         $     (28.0)               (12.1)                   (3.9)       pts



The favorable prior year casualty reserve development in Third Quarter and Nine
Months 2022 was primarily due to improved loss severities in accident years 2019
and prior. The favorable prior year casualty reserve development in Third
Quarter and Nine Months 2021 was primarily due to improved loss severities in
accident years 2018 and prior.

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Partially offsetting the increase in favorable prior year casualty reserve
development this year, was an increase in ceded earned casualty reinstatement
premium that impacted the loss and loss expense ratio by 4.2 points in Third
Quarter 2022 and 1.4 points in Nine Months 2022, compared to the same prior-year
periods, as discussed in the "Insurance Operations" section above.

Standard Personal Lines Segment

                                                 Quarter ended September 30,               Change                     Nine Months ended September 30,              Change
                                                                                            % or                                                                    % or
($ in thousands)                                2022                      2021             Points                      2022                       2021             Points
Insurance Segments Results:
NPW                                        $    86,844                   78,247              11     %             $    234,465                  221,883               6     %
NPE                                             75,638                   73,362               3                        221,618                  220,476               1
Less:
Loss and loss expense incurred                  57,263                   65,123             (12)                       172,396                  160,273               8
Net underwriting expenses incurred              19,760                   19,385               2                         56,454                   58,010              (3)
Underwriting income (loss)                      (1,385)                 (11,146)             88                   $     (7,232)                   2,193            (430)    %
Combined Ratios:
Loss and loss expense ratio                       75.7    %                88.8           (13.1)    pts                   77.8    %                72.7             5.1     pts
Underwriting expense ratio                        26.1                     26.4            (0.3)                          25.5                     26.3            (0.8)
Combined ratio                                   101.8                    115.2           (13.4)                         103.3                     99.0             4.3



NPW increased 11% in Third Quarter 2022 and 6% in Nine Months 2022 compared to
the same prior-year periods, due to (i) higher direct new business, (ii)
stronger retention, (iii) higher homeowner coverage amounts due to inflation
adjustments, and (iv) higher average policy sizes from our mass affluent market
strategy. In the third quarter of 2021, we transitioned our personal lines
strategy to targeting customers in the mass affluent market where we believe our
strong coverage and servicing capabilities will be more competitive.

                                                    Quarter ended September 30,                                   Nine Months ended September 30,
($ in millions)                                    2022                       2021                   2022                           2021
Direct new business premiums1                $        17.4                      10.2                       $         40.5                        31.0
Retention                                               85    %                   84                                   85    %                     83
Renewal pure price increases on NPW                    0.5                       1.2                                  0.6                         1.0


1Excludes our Direct Flood Incentives issued, which are 100% ceded to NFIP and
therefore, has no impact on our NPW.

The increase in NPEs in the third quarter and nine months of 2022 compared to the same
prior year periods resulted from the same impacts on NPW described above.

The loss and expense ratio decreased by 13.1 points in the third quarter of 2022 and
increased by 5.1 points over nine months 2022 compared to the same previous year
periods, motivated by the following elements:

                                                          Third Quarter 2022                                   Third Quarter 2021
                                             Loss and Loss            Impact on                   Loss and Loss                   Impact on
                                                Expense             Loss and Loss                    Expense                Loss and Loss Expense
($ in millions)                                 Incurred            Expense Ratio                    Incurred                       Ratio                Change in Ratio
Net catastrophe losses                       $      11.3                  14.9      pts                19.5                               26.7               (11.8)       pts
Non-catastrophe property loss and loss
expenses                                            29.0                  38.4                         28.7                               39.1                (0.7)

Flood claims handling fee
reimbursement                                       (2.7)                 (3.6)                        (2.9)                              (4.0)                0.4
Total                                        $      37.6                  49.7                         45.3                               61.8               (12.1)

                                                           Nine Months 2022                                     Nine Months 2021
                                             Loss and Loss            Impact on                   Loss and Loss                   Impact on
                                                Expense             Loss and Loss                    Expense                Loss and Loss Expense
($ in millions)                                 Incurred            Expense Ratio                    Incurred                       Ratio                Change in Ratio
Net catastrophe losses                       $      36.7                  16.5      pts                30.1                               13.7                 2.8        pts
Non-catastrophe property loss and loss
expenses                                            81.5                  36.8                         76.7                               34.8                 2.0

Flood claims handling fee
reimbursement                                       (4.0)                 (1.8)                        (4.5)                              (2.0)                0.2
Total                                        $     114.2                  51.5                        102.3                               46.5                 5.0



Third Quarter 2022 experienced lower net catastrophe losses compared to the same
prior-year period, as discussed in the "Insurance Operations" section above. Our
Third Quarter 2022 net catastrophe losses were impacted by Hurricane Ian, which
primarily affected the Southeastern states in our footprint in late September
2022. Partially offsetting these losses was $1.9 million of flood claims
handling fees. Nine Months 2022 experienced elevated net catastrophe losses
compared to the same
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prior-year period as a result of several Midwest wind and thunderstorm events
that occurred throughout the second quarter of 2022.

Nine Months 2022 experienced elevated non-catastrophe property loss and loss
expenses, driven by higher personal automobile physical damage losses. These
higher losses resulted from (i) higher frequencies from increased miles driven,
and (ii) greater severities from inflationary and supply chain impacts that have
increased labor and material 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 are filing rate increases to mitigate these inflationary impacts.

E&S Lines Segment


                                              Quarter ended September 30,               Change                     Nine Months ended September 30,              Change
                                                                                         % or                                                                    % or
($ in thousands)                             2022                      2021             Points                      2022                       2021             Points
Insurance Segments Results:
NPW                                     $    89,087                   82,056               9     %             $    264,073                  227,109              16     %
NPE                                          85,804                   74,314              15                        244,840                  203,783              20
Less:
Loss and loss expense incurred               52,299                   46,643              12                        149,895                  131,850              14
Net underwriting expenses
incurred                                     27,489                   22,999              20                         78,632                   64,439              22
Underwriting income (loss)                    6,016                    4,672              29                   $     16,313                    7,494             118
Combined Ratios:
Loss and loss expense ratio                    61.0    %                62.8            (1.8)    pts                   61.2    %                64.7            (3.5)    pts
Underwriting expense ratio                     32.0                     30.9             1.1                           32.1                     31.6             0.5
Combined ratio                                 93.0                     93.7            (0.7)                          93.3                     96.3            (3.0)



NPW growth of 9% in Third Quarter 2022 and 16% in Nine Months 2022 compared to
the same prior-year periods reflected renewal pure price increases and higher
direct new business as shown in the table below. In addition, NPW growth in
Third Quarter and Nine Months 2022 benefited from exposure growth driven by
favorable E&S Lines marketplace conditions.

                                                Quarter ended September 30,                                  Nine Months ended September 30,
($ in millions)                                2022                       2021                   2022                          2021
Direct new business premiums             $        38.6                      35.7                       $       117.3                       100.7

Renewal pure price increases on
NPW                                                6.7    %                  5.6                                 7.1    %                    6.5


The increase in NPEs in the third quarter and nine months of 2022 compared to the same
prior year periods resulted from the same impacts on NPW described above.

The loss and expense ratio decreased by 1.8 points in the third quarter of 2022 and
3.5 points over nine months 2022 compared to the same periods of the previous year,
mainly motivated by the following:

                                                       Third Quarter 2022                                Third Quarter 2021
                                                                                                  Loss and
                                             Loss and Loss            Impact on                     Loss               Impact on
                                                Expense             Loss and Loss                 Expense            Loss and Loss
($ in millions)                                 Incurred            Expense Ratio                 Incurred           Expense Ratio          Change in Ratio
Net catastrophe losses                       $       4.6                   5.4      pts         $     6.8                   9.2                  (3.8) 

points

Non-catastrophe property loss and loss
expenses                                             8.7                  10.1                        4.8                   6.5                   3.6

Total                                        $      13.3                  15.5                  $    11.6                  15.7                  (0.2)

                                                        Nine Months 2022                                  Nine Months 2021
                                                                                                  Loss and
                                             Loss and Loss            Impact on                     Loss               Impact on
                                                Expense             Loss and Loss                 Expense            Loss and Loss
($ in millions)                                 Incurred            Expense Ratio                 Incurred           Expense Ratio          Change in Ratio
Net catastrophe losses                       $       8.1                   3.3      pts         $    21.5                  10.5      pts         (7.2) 

points

Non-catastrophe property loss and loss
expenses                                            30.2                  12.4                       21.5                  10.5                   1.9
(Favorable) prior year casualty
reserve development                                    -                     -                       (7.0)                 (3.4)                  3.4
Total                                        $      38.3                  15.7                  $    36.0                  17.6                  (1.9)



Third Quarter and Nine Months 2022 experienced lower net catastrophe losses
compared to the same prior-year periods, primarily due to (i) Hurricane Ida in
2021, and (ii) a series of large storms that significantly impacted Texas and
other Southern and Midwestern states in Nine Months 2021. These catastrophe
events resulted in greater net catastrophe losses in Third
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Quarter and Nine Months 2021 compared to events in Third Quarter and Nine Months
2022.

Third Quarter and Nine Months 2022 experienced elevated non-catastrophe property
loss and loss expenses compared to the same prior-year periods, primarily due to
increased severity that reflects the normal period-to-period volatility of our
property lines of business in this segment and inflationary pressures on labor
and material costs.

There was no prior year casualty reserve development in Third Quarter and Nine
Months 2022. The favorable prior year casualty reserve development in Nine
Months 2021 was primarily due to lower loss severities in accident years 2016
through 2018.

In addition, the loss and loss expense ratio was favorably impacted by a
1.6-point decrease in current year casualty loss costs in both Third Quarter
2022 and Nine Months 2022 compared to the same prior year periods. Our E&S
casualty lines results have improved over recent years after several
underwriting and claims initiatives and strong rate increases. The decrease in
current year casualty loss costs reflects the impacts of these actions.

The underwriting expense ratio increased 1.1 points in Third Quarter 2022
compared to Third Quarter 2021, primarily due to an increase of (i) 0.7 points
in labor expenses, and (ii) 0.4 points in commissions. In addition, the
underwriting expense ratio increased 0.5 points in Nine Months 2022 compared to
Nine Months 2021, primarily due to increased travel expenses.

Reinsurance

We have successfully concluded negotiations for our July 1, 2022 stop loss
treaties, which cover our Standard Business Lines, our Standard Personal Lines,
and E&S Lines.

We have renewed the Accident Treaty with substantially the same structure as the
expiring treaty. Treaty year 2022 deposit bonus increased by $16.2
million
or 23%, reflecting a higher premium earned per subject expected due to
growth in our business portfolio and increases in pure renewal rates, coupled with a
modest increase in the risk-adjusted reinsurance rate.

The Property Excess of Loss Treaty ("Property Treaty") was renewed with a $10
million limit increase in the highest layer. The treaty year 2022 deposit
premium increased by $11.3 million, or 28%, from 2021, reflecting (i) an
increase in projected subject premium driven by growth in total insured values,
insured locations, and rate increases on our underlying policies, (ii) the
purchase of additional coverage, and (iii) risk-adjusted insurance rate
increases. We anticipate the increase in expected ceded premium will be
partially offset by the premium reduction benefit of reduced facultative
reinsurance placements resulting from the higher treaty limit.

The following table summarizes the Treaty of Goods and the Treaty of Damages
systems covering our Insurance Subsidiaries:

About Michael S. Montanez

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