TEXT - Fitch rates Selective Insurance Group

Tue Feb 5, 2013 5:48pm EST

Feb 5 - Fitch Ratings has assigned a 'BBB+' rating to Selective Insurance
Group's (Selective) $175 million 5.875% senior note issuance due 2043. The
Rating Outlook for all ratings is Stable. A complete list of ratings is provided
at the end of this release.

Selective has granted the underwriters the option to purchase up to an 
additional $25 million of Senior Notes within 30 days to cover over-allotments 
which could bring the total issuance of the senior notes to $200 million.

The new issue rating is equivalent to the ratings on Selective's existing senior
debt. The net proceeds are expected be used to fund the repayment of the 
company's outstanding $100 million of junior subordinated notes due 2066 that 
became callable in 2011. Fitch expects that the remaining proceeds will be for 
general corporate purposes.

Selective's pro forma debt to capital ratio in the case of a $200 million 
issuance would increase to approximately 27.2% following the refinancing. At 
Dec. 31, 2012, Selective's financial leverage was roughly 22% and GAAP 
earnings-based interest coverage was 2.4x. Fitch does not expect leverage to 
remain above 25% over the long term. Leverage sustained at pro forma levels, 
along with continued modest interest coverage, could put negative pressure on 
Selective's overall ratings.

On Dec. 13, 2012, Fitch affirmed all of its ratings for Selective and its 
subsidiaries with a Stable Outlook.

SENSITIVITY/RATING DRIVERS

Key rating triggers that could lead to a downgrade include prolonged 
underwriting weakness, demonstrated by a failure to produce an underwriting 
profit given normal catastrophe losses, and a material deterioration in current 
balance sheet strengths. Fitch's rating rationale anticipates operating leverage
as measured by net written premiums to equity to remain below 1.7x, financial 
leverage to remain below 25%, and operating earnings based interest coverage to 
reach 5-7(x) or better. 

Fitch considers a rating upgrade to be unlikely in the near term due to 
Selective's current company profile including its regional concentration, 
smaller capital base relative to larger peers, and pressured underwriting 
results. Key rating triggers that could lead to an upgrade over the long term 
include a material and sustained improvement on recent underwriting performance 
that causes Fitch to view Selective as meaningfully better than peers and the 
industry, and material capital growth with all else being equal.

Fitch has assigned the following rating:

Selective Insurance Group, Inc.

--$175 million senior notes 5.875% due 2043 'BBB+'.

Fitch currently rates the Selective Insurance Group's companies as follows:

Selective Insurance Group, Inc. 

--IDR at 'A-';
--$100 million senior notes 6.7% due Nov. 1, 2035 at 'BBB+';
--$50 million senior notes 7.25% due Nov. 15, 2034 at 'BBB+';
--$100 million junior subordinated notes 7.5% due Sept. 27, 2066 at 'BBB-'. 

Selective Insurance Company of America
Selective Way Insurance Company
Selective Insurance Company of South Carolina
Selective Insurance Company of the Southeast
Selective Insurance Company of New York
Selective Insurance Company of New England
Selective Auto Insurance Company of New Jersey
Mesa Underwriters Specialty Insurance Company
--IFS at 'A+'.
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.