As filed with the Securities and Exchange Commission on November 23, 2005.
Registration No. 333-
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
-----------------------
Selective Insurance Group, Inc.
(Exact name of registrant as specified in its charter)
New Jersey 6331 22-2168890
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation or organization) Classifications Code Number)
40 Wantage Avenue
Branchville, NJ 07890
(973) 948-3000
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
-----------------------
Michael H. Lanza, Esq.
Senior Vice President and General Counsel
Selective Insurance Group, Inc.
40 Wantage Avenue
Branchville, NJ 07890
(973) 948-3000
(973) 948-0282 (facsimile)
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
-----------------------
With a copy to:
Richard B. Aftanas, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, NY 10036-6522
(212) 735-3000
(212) 735-2000 (facsimile)
-----------------------
Approximate date of commencement of proposed sale to the public: As soon
as practicable after this registration statement becomes effective.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. |_|
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration number of the earlier effective
registration statement for the same offering. |_|
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
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CALCULATION OF REGISTRATION FEE
================================================================================================================================
Title of Each Class of Amount to Be Proposed Maximum Proposed Maximum Aggregate Amount of
Securities to Be Registered Registered Offering Price Per Offering Price(1) Registration Fee
Unit(1)
--------------------------------------------------------------------------------------------------------------------------------
6.70% Senior Notes due 2035 $100,000,000 100% $100,000,000 $11,770
================================================================================================================================
(1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(f) under the Securities
Act of 1933, as amended.
-----------------------
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
[flag]
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED NOVEMBER 23, 2005
PROSPECTUS
[Graphic Omitted]
Selective Insurance Group, Inc.
Offer to Exchange
$100,000,000 aggregate principal amount of 6.70% Senior Notes due 2035
(CUSIP No. 816300 AE 7)
for
$100,000,000 aggregate principal amount of 6.70% Senior Notes due 2035
(CUSIP No. )
that have been registered under the Securities Act of 1933
The exchange offer will expire at 5:00 p.m.,
New York City time, on , unless extended.
-----------------------
Terms of the exchange offer:
o The exchange notes are being registered with the Securities and Exchange
Commission and are being offered in exchange for the original notes that
were previously issued in an offering exempt from the Securities and
Exchange Commission's registration requirements. The terms of the exchange
offer are summarized below and more fully described in this prospectus.
o We will exchange all original notes that are validly tendered and not
withdrawn prior to the expiration of the exchange offer.
o You may withdraw tenders of original notes at any time prior to the
expiration of the exchange offer.
o The exchange of original notes for exchange notes generally will not be a
taxable event for U.S. federal income tax purposes.
o We will not receive any proceeds from the exchange offer.
o The terms of the exchange notes are substantially identical to the
original notes, except that the exchange notes are registered under the
Securities Act of 1933 and the transfer restrictions and registration
rights applicable to the original notes do not apply to the exchange
notes.
o The exchange notes will not be listed on any national securities exchange
or the Nasdaq Stock Market.
-----------------------
See "Risk Factors" beginning on page 13 to read about important
factors you should consider before tendering your original notes.
-----------------------
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or
determined if this prospectus is truthful or complete. Any representation to
the contrary is a criminal offense.
-----------------------
The date of this prospectus is , 2005.
TABLE OF CONTENTS
Page
----
Special Note Regarding Forward-Looking Statements..........................ii
Summary.....................................................................1
Risk Factors...............................................................13
Use of Proceeds............................................................25
Ratio of Earnings to Fixed Charges.........................................26
The Exchange Offer.........................................................27
Description of Other Indebtedness..........................................36
Description of the Notes...................................................38
Plan of Distribution.......................................................49
Legal Matters..............................................................50
Experts....................................................................50
Where You Can Find More Information........................................50
---------
You should rely only on the information contained or
incorporated by reference in this prospectus. We have not authorized anyone to
provide you with information different from that contained or incorporated by
reference in this prospectus. This prospectus is an offer to exchange only the
notes offered by this prospectus and only under circumstances and in
jurisdictions where it is lawful to do so. The information contained in this
prospectus is accurate only as of the date of this prospectus.
---------
This prospectus incorporates important business and financial
information about us that is not included in or delivered with this prospectus.
This information is available to security holders without charge upon written
or oral request to:
Selective Insurance Group, Inc.
40 Wantage Avenue
Branchville, NJ 07890
(973) 948-3000
Attention: Corporate Secretary
To obtain timely delivery, security holders must request the
information incorporated by reference no later than five business days prior to
the expiration date of the exchange offer.
---------
References in this prospectus to "we," "us," "our" and
"Selective" refer to Selective Insurance Group, Inc., an insurance holding
company incorporated in New Jersey, and its subsidiaries, unless the context
otherwise requires.
i
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the information incorporated by reference
contain forward-looking statements within the meaning of Section 27A of the
Securities Act and Section 21E of the Securities Exchange Act of 1934. These
statements relate to our intentions, beliefs, current expectations and
projections regarding our future operations and performance. Such statements
are "forward-looking" statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements are often
identified by words such as "anticipates," "believes," "expects," "will,"
"should" and "intends" and their negatives. We caution prospective investors
that such forward-looking statements are not guarantees of future performance.
Risks and uncertainties are inherent in our future performance. Factors that
could cause actual results to differ materially from those indicated by such
forward-looking statements include, but are not limited to, those discussed in
"Item 7 --Management's Discussion and Analysis of Financial Condition and
Results of Operations" and its section entitled "Risk Factors" in our Annual
Report on Form 10-K for the year ended December 31, 2004. Those portions of the
Annual Report are incorporated by reference into this report. We make
forward-looking statements based on currently available information and assume
no obligation to update these statements due to changes in underlying factors,
new information, future developments, or otherwise.
Factors which could cause our actual results to differ
materially from those projected, forecasted or estimated by us in
forward-looking statements, include, but are not limited to:
o the frequency and severity of catastrophic events, including, but
not limited to, hurricanes, tornadoes, windstorms, earthquakes,
hail, severe winter weather, fires, explosions and terrorism;
o adverse economic, market, regulatory, legal or judicial
conditions;
o the concentration of our business in a number of Eastern region
states;
o the adequacy of our loss reserves;
o the adequacy of our loss expense reserves;
o the cost and availability of reinsurance;
o our ability to collect on reinsurance and the solvency of our
reinsurers;
o uncertainties related to insurance premium rate increases and
business retention;
o changes in insurance regulations that impact our ability to write
and/or cease writing insurance policies in one or more states
particularly changes in New Jersey automobile insurance laws and
regulations;
o our ability to maintain favorable ratings from ratings agencies,
including A.M. Best Company, Standard & Poor's Ratings Services,
Moody's Investor Services and Fitch Ratings;
o fluctuations in interest rates and the performance of the
financial markets;
o our entry into new markets and businesses; and
o other risks and uncertainties we identify in this prospectus and
other documents incorporated by reference.
We undertake no obligation, other than as may be required
under the federal securities laws, to publicly update or revise any
forward-looking statements, whether as a result of new information,
ii
future events or otherwise. We do not assume responsibility for the accuracy
and completeness of the forward-looking statements. All of the forward-looking
statements are qualified in their entirety by reference to the factors
discussed under "Risk Factors."
We caution you that these risk factors may not be exhaustive.
We operate in a continually changing business environment, and new risk factors
emerge from time to time. We cannot predict such new risk factors, nor can we
assess the impact, if any, of such new risk factors on our businesses or the
extent to which any factor or combination of factors may cause actual results
to differ materially from those expressed or implied by any forward-looking
statements. In light of these risks, uncertainties and assumptions, the
forward-looking events discussed in this prospectus might not occur.
For these statements, we claim the protection of the safe
harbor for forward-looking statements contained in Section 27A of the
Securities Act.
You should carefully read this prospectus and the documents
incorporated by reference in their entirety. They contain information that you
should consider when making your investment decision.
iii
SUMMARY
The following summary highlights selected information
contained or incorporated by reference in this prospectus and does not contain
all the information that you should consider before participating in the
exchange offer. The following summary is qualified in its entirety by the more
detailed information included elsewhere or incorporated by reference in this
prospectus. You should read the entire prospectus, as well as the information
incorporated by reference, before participating in this exchange offer.
Selective Insurance Group, Inc.
We are a holding company that, through our subsidiaries,
offers property and casualty insurance products and diversified insurance
services products. Through our six property and casualty insurance
subsidiaries, which we refer to collectively as the Insurance Subsidiaries,
Selective Insurance Company of America, Selective Way Insurance Company,
Selective Insurance Company of New England, Selective Insurance Company of New
York, Selective Insurance Company of the Southeast and Selective Insurance
Company of South Carolina, we offer primary and alternative market property and
casualty insurance for commercial and personal risks. We primarily write
business in the following states: Connecticut, Delaware, Georgia, Illinois,
Indiana, Iowa, Kentucky, Maryland, Michigan, Minnesota, Missouri, New Jersey,
New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina,
Virginia and Wisconsin.
We offer a broad range of commercial insurance and
alternative risk management products to small and medium-sized businesses and
state and local government entities. Our commercial insurance products
represented approximately 86% of our net premiums written for the nine
month-period ended September 30, 2005. In approximately ten states, we also
provide personal insurance products to individuals and families, which
represented approximately 14% of our net premiums written for the nine
month-period ended September 30, 2005.
Since our inception in 1926, we have distributed almost all
of our insurance products through non-exclusive independent agents. We have
agency agreements with approximately 750 independent insurance agencies.
Pursuant to our agency agreements, we pay commissions for the business written
with us. The commission structure paid on each policy is disclosed as part of
our rate filings made in the states in which we write insurance business. We
also pay additional compensation to our independent agents.
Our flood insurance, human resource administration
outsourcing and managed care ("Diversified Insurance Services") products are
sold by: Alta Services LLC, a New Jersey-based managed care company that
provides claims handling services to our Insurance Subsidiaries and other
insurers, Consumer Health Network Plus, LLC, a New Jersey-based preferred
provider organization, Northeast Health Direct, LLC, a New England-based
preferred provider organization, and Selective Technical Administrative
Resources, Inc., a New Jersey-based third party administrator, Selective HR
Solutions, Inc. and its subsidiaries ("SHRS"), a Florida-based human resource
administration outsourcing organization, and a division of Selective Insurance
Company of America that provides flood insurance and flood claim administration
services to homeowners and commercial customers. The flood insurance that we
write is 100% reinsured by the federal government.
Corporate Strategy
Our corporate strategy is to create profitable growth and
long-term shareholder value. Our goal is to establish ourselves as the market
of choice for each of the independent agents who distribute our products and
services. We intend to achieve this goal by focusing on our customers' needs
and tailoring our products and services to meet and exceed those needs.
1
We place a high value on the quality of the independent
agents selling our products and services. The strength of our relationships
with our agents is the foundation of our success. As insurance counselors,
independent agents help their customers determine the coverages and services
they need to protect their assets and help us analyze potential exposures to
loss.
Our agency management specialists (field underwriters) work
closely with agents in their offices. This on-site approach, supported by six
regional offices and technology links to automated systems, enables a quick
response to business opportunities. A parallel program puts claim management
specialists (field claim adjustors) in the field working with agents, insureds
and claimants.
Behind the risk management products and services we offer are
a strong underwriting tradition and knowledge of our regional markets. The
field and regional staffs are backed by customer-focused strategic business
units that quickly develop and market products designed to meet customers'
developing needs.
Our long-standing service ethic is strengthened by the use of
new technology tools. By using Internet technology to remove friction and
redundant work from both the sales and service processes, we are significantly
increasing both our effectiveness and efficiency. We have created a
straight-through processing environment -- empowering agents and employees to
spend more time attending to customer needs and less on administrative tasks.
Headquarters
Our principal executive offices are located at 40 Wantage
Avenue, Branchville, New Jersey 07890. Our telephone number at that address is
(973) 948-3000. Our Web site address is www.selective.com. We do not intend the
information on our Web site to constitute part of this prospectus.
2
Summary of the Exchange Offer
On November 3, 2005, we completed the private placement of
$100,000,000 aggregate principal amount of 6.70% senior notes due 2035. As part
of that offering, we entered into a registration rights agreement with Keefe,
Bruyette & Woods, Inc., the initial purchaser of the original notes, dated as
of November 3, 2005, in which we agreed, among other things, to deliver this
prospectus to you and to complete an exchange offer for the original notes.
Below is a summary of the exchange offer.
Securities offered.................Up to $100,000,000 aggregate principal
amount of new 6.70% senior notes due 2035,
which have been registered under the
Securities Act. The form and terms of these
exchange notes are identical in all material
respects to those of the original notes
except that (i) interest thereon shall
accrue from the last date to which interest
has been paid on the original notes or, if
no such interest has been paid, from
November 3, 2005, (ii) provisions relating
to an increase in the stated rate of
interest thereon upon the occurrence of a
registration default shall be eliminated and
(iii) the transfer restrictions, minimum
purchase requirements and legends relating
to restrictions on ownership and transfer
thereof as a result of the issuance of the
original notes without registration under
the Securities Act shall be eliminated other
than requiring transfers in multiples of
$1,000.
The exchange offer.................We are offering to exchange up to
$100,000,000 principal amount of our 6.70%
senior notes due 2035 that have been
registered under the Securities Act for a
like principal amount of the original notes
outstanding. You may tender original notes
only in integral multiples of $1,000
principal amount. We will issue exchange
notes as soon as practicable after the
expiration of the exchange offer.
In order to be exchanged, an original note
must be properly tendered and accepted. All
original notes that are validly tendered and
not withdrawn will be exchanged. As of the
date of this prospectus, there are
$100,000,000 aggregate principal amount of
original notes outstanding.
The $100,000,000 aggregate principal amount
of our original 6.70% senior notes due 2035
were offered under an indenture dated
November 3, 2005.
Expiration date; Tenders...........The exchange offer will expire at 5:00 p.m.,
New York City time, on ,2005, unless we
extend the exchange offer in our sole and
absolute discretion. By tendering your
original notes, you represent that:
o you are neither our "affiliate" (as
defined in Rule 405 under the Securities
Act) nor a broker-dealer tendering
3
notes acquired directly from us for our
own account;
o any exchange notes you receive in the
exchange offer are being acquired by you
in the ordinary course of business;
o at the time of commencement of the
exchange offer, neither you nor, to your
knowledge, anyone receiving exchange
notes from you, has any arrangement or
understanding with any person to
participate in the distribution, as
defined in the Securities Act, of the
original notes or the exchange notes in
violation of the Securities Act;
o if you are not a participating
broker-dealer, you are not engaged in,
and do not intend to engage in, the
distribution, as defined in the
Securities Act, of the original notes or
the exchange notes; and
o if you are a broker-dealer, you will
receive the exchange notes for your own
account in exchange for the original
notes that you acquired as a result of
your market-making or other trading
activities and you will deliver a
prospectus in connection with any resale
of the exchange notes that you receive.
For further information regarding resales
of the exchange notes by participating
broker-dealers, see the discussion under
the caption "Plan of Distribution."
Accrued interest on the
exchange notes and
original notes.....................The exchange notes will bear interest from
the most recent date to which interest has
been paid on the original notes or, if no
such interest has been paid, from November
3, 2005. If your original notes are accepted
for exchange, you will receive interest on
the exchange notes and not on the original
notes. Any original notes not tendered will
remain outstanding and continue to accrue
interest according to their terms.
Conditions to the exchange offer...The exchange offer is subject to customary
conditions. We may assert or waive these
conditions in our sole discretion. If we
materially change the terms of the exchange
offer, we will resolicit tenders of the
original notes. See "The Exchange
Offer--Conditions to the Exchange Offer" for
more information regarding conditions to the
exchange offer.
Procedures for tendering
original notes.....................Except as described in the section titled
"The Exchange Offer--Guaranteed Delivery
Procedures," a tendering holder must, on or
prior to the expiration date:
o transmit a properly completed and duly
executed letter of transmittal, including
all other documents
4
required by the letter of transmittal, to
the exchange agent at the address listed
in this prospectus; or
o if original notes are tendered in
accordance with the book-entry procedures
described in this prospectus, the
tendering holder must transmit an agent's
message to the exchange agent at the
address listed in this prospectus. See
"The Exchange Offer--Procedures for
Tendering."
Special procedures for
beneficial holders.................If you are a beneficial holder of original
notes that are registered in the name of
your broker, dealer, commercial bank, trust
company or other nominee, and you wish to
tender in the exchange offer, you should
promptly contact the person in whose name
your original notes are registered and
instruct that person to tender on your
behalf. See "The Exchange Offer--Procedures
for Tendering."
Guaranteed delivery procedures.....If you wish to tender your original notes
and you cannot deliver your original notes,
the letter of transmittal or any other
required documents to the exchange agent
before the expiration date, you may tender
your original notes by following the
guaranteed delivery procedures under the
heading "The Exchange Offer--Guaranteed
Delivery Procedures."
Withdrawal rights..................Tenders may be withdrawn at any time before
5:00 p.m., New York City time, on the
expiration date.
Acceptance of original
notes and delivery of exchange
notes..............................Subject to the conditions stated in the
section "The Exchange Offer--Conditions to
the Exchange Offer" of this prospectus, we
will accept for exchange any and all
original notes which are properly tendered
in the exchange offer before 5:00 p.m., New
York City time, on the expiration date. The
exchange notes will be delivered as soon as
practicable after the expiration date. See
"The Exchange Offer--Terms of the Exchange
Offer."
Material U.S. federal
tax consequences...................Your exchange of original notes for exchange
notes pursuant to the exchange offer
generally will not be a taxable event for
U.S. federal income tax purposes.
Regulatory requirements............Following the effectiveness of the
registration statement covering the exchange
offer with the SEC, no other material
federal regulatory requirement must be
complied with in connection with this
exchange offer.
Exchange agent.....................Wachovia Bank, National Association is
serving as exchange agent in connection with
the exchange offer. The address and
telephone number of the exchange agent are
listed under the heading "The Exchange
5
Offer--Exchange Agent."
Use of proceeds....................We will not receive any proceeds from the
issuance of exchange notes in the exchange
offer. We have agreed to pay all expenses
incidental to the exchange offer other than
commissions and concessions of any broker or
dealer and certain transfer taxes and will
indemnify holders of the notes, including
any broker-dealers, against certain
liabilities, including liabilities under the
Securities Act.
Resales............................Based on interpretations by the staff of the
SEC as detailed in a series of no-action
letters issued to third parties, we believe
that the exchange notes issued in the
exchange offer may be offered for resale,
resold or otherwise transferred by you
without compliance with the registration and
prospectus delivery requirements of the
Securities Act as long as:
o you are acquiring the exchange notes in
the ordinary course of your business;
o you are not participating, do not intend
to participate and have no arrangement or
understanding with any person to
participate, in a distribution of the
exchange notes; and
o you are neither an affiliate of ours nor
a broker-dealer tendering notes acquired
directly from us for your own account.
If you are an affiliate of ours, are engaged
in or intend to engage in or have any
arrangement or understanding with any person
to participate in the distribution of the
exchange notes:
o you cannot rely on the applicable
interpretations of the staff of the SEC;
and
o you must comply with the registration
requirements of the Securities Act in
connection with any resale transaction.
Each broker or dealer that receives exchange
notes for its own account in exchange for
original notes that were acquired as a
result of market-making or other trading
activities must acknowledge that it will
comply with the registration and prospectus
delivery requirements of the Securities Act
in connection with any offer to resell,
resale, or other transfer of the exchange
notes issued in the exchange offer,
including the delivery of a prospectus that
contains information with respect to any
6
selling holder required by the Securities
Act in connection with any resale of the
exchange notes.
Furthermore, any broker-dealer that acquired
any of its original notes directly from us:
o may not rely on the applicable
interpretation of the staff of the SEC's
position contained in Exxon Capital
Holdings Corp., SEC no-action letter
(April 13, 1988), Morgan, Stanley & Co.
Inc., SEC no-action letter (June 5,
1991), and Shearman & Sterling, SEC
no-action letter (July 2, 1993); and
o must also be named as a selling holder in
connection with the registration and
prospectus delivery requirements of the
Securities Act relating to any resale
transaction.
As a condition to participation in the
exchange offer, each holder will be required
to represent that it is not our affiliate or
a broker-dealer that acquired the original
notes directly from us.
Consequences of not exchanging
original notes.....................If you do not exchange your original notes
in the exchange offer, you will continue to
be subject to the restrictions on transfer
described in the legend on your original
notes. In general, you may offer or sell
your original notes only:
o if they are registered under the
Securities Act and applicable state
securities laws;
o if they are offered or sold under an
exemption from registration under the
Securities Act and applicable state
securities laws; or
o if they are offered or sold in a
transaction not subject to the Securities
Act and applicable state securities laws.
Although your original notes will continue
to accrue interest, they will retain no
rights under the registration rights
agreement.
We currently do not intend to register the
original notes under the Securities Act.
Under some circumstances, holders of the
original notes, including holders who are
not permitted to participate in the exchange
offer or who may not freely sell exchange
notes received in the exchange offer,
however, may require us to file, and to
cause to become effective, a shelf
registration statement covering resales of
the original notes by these holders. For
more information regarding the consequences
of not
7
tendering your original notes and our
obligations to file a shelf registration
statement, see "The Exchange
Offer--Consequences of Exchanging or Failing
to Exchange the Original Notes" and
"Description of the Notes--Registration
Rights Agreement."
Risk factors.......................See "Risk Factors" and the other information
in this prospectus for a discussion of
factors you should consider carefully before
deciding to invest in the exchange notes.
8
Summary of the Terms of the Exchange Notes
The following is a summary of the terms of the exchange notes. The
form and terms of these exchange notes are identical in all material respects
to those of the original notes except that (i) interest thereon shall accrue
from the last date to which interest has been paid on the original notes or, if
no such interest has been paid, from November 3, 2005, (ii) provisions relating
to an increase in the stated rate of interest thereon upon the occurrence of a
registration default shall be eliminated and (iii) the transfer restrictions,
minimum purchase requirements and legends relating to restrictions on ownership
and transfer thereof as a result of the issuance of the original notes without
registration under the Securities Act shall be eliminated other than requiring
transfers in multiples of $1,000. The exchange notes will evidence the same
debt as the original notes and will be governed by the same indenture. When we
refer to the terms of "note" or "notes" in this prospectus, we are referring to
the original notes and the exchange notes. For a more complete description of
the terms of the exchange notes, see "Description of the Notes" in this
prospectus.
Issuer.............................Selective Insurance Group, Inc.
Exchange notes offered.............$100,000,000 aggregate principal amount of
6.70% Senior Notes due 2035
Maturity date......................November 1, 2035
Interest payment dates.............May 1 and November 1, commencing on May 1,
2006
Ranking............................The notes will be unsecured senior
obligations and will rank equally with our
other unsecured senior indebtedness. The
notes will be effectively subordinated to
any of our future secured indebtedness as to
the assets securing such indebtedness. As of
September 30, 2005, we had outstanding
approximately $240.1 million of unsecured
indebtedness, including approximately (1)
$115.9 million of senior convertible notes,
(2) $123.4 million of senior notes and (3)
$0.8 million of convertible subordinated
debentures. The notes will rank equally with
the senior convertible notes and the senior
notes. The notes will be senior to the
convertible subordinated debentures. As of
September 30, 2005, we had no secured
indebtedness outstanding.
We are structured as a holding company, and
we conduct most of our business operations
through our subsidiaries. The notes will be
effectively subordinated to all existing and
future indebtedness and other liabilities
and commitments of our subsidiaries. As of
September 30, 2005, our subsidiaries had an
aggregate of approximately $278.8 million of
liabilities (excluding $2.0 billion of
reserves for losses and loss expenses and
$808.1 million of unearned premium
reserves).
Optional redemption................The notes may not be redeemed at our option
or at the option of any noteholder.
9
Sinking fund.......................There is no provision for a sinking fund.
Governing law......................The notes will be governed by New York law.
Covenants..........................Except for certain limitations on liens on
stock of Restricted Subsidiaries (see
"Description of the Notes--Limitation on
Liens on Stock of Restricted Subsidiaries"),
the indenture does not contain any
provisions restricting us or any of our
subsidiaries from incurring, assuming or
becoming liable with respect to any
indebtedness or other obligations, whether
secured or unsecured, or any financial
covenants or provisions restricting us or
our subsidiaries from paying dividends or
making other distributions on capital stock
or from purchasing or redeeming capital
stock. In addition, we are not required to
repurchase, redeem or modify the terms of
any of the notes upon a change of control or
other event involving us, which may
adversely affect the value of the notes.
Listing............................The notes will not be listed on any
exchange, PORTAL or any quotation system.
Clearance and settlement...........The notes will be cleared through DTC,
Euroclear Bank S.A./N.V., as operator of the
Euroclear system (Euroclear), or Clearstream
Banking, S.A. (Clearstream Banking).
10
Summary Historical Consolidated Financial and Other Data
The following table sets forth our summary historical
consolidated financial data. The statement of operations data and balance sheet
data as of and for each of the years in the five-year period ended December 31,
2004 have been derived from our audited financial statements. The statements of
operations data and balance sheet data as of and for each of the nine-month
periods that ended September 30, 2005 and 2004 have been derived from our
unaudited financial statements, and in the opinion of management, (i) reflect
all adjustments consisting of normal recurring adjustments necessary for a fair
presentation of our financial condition and results of operations for the
relevant periods and (ii) have been prepared on the same basis as our audited
consolidated financial statements. Results for the nine months that ended
September 30, 2005 are not necessarily indicative of results of operations for
the full fiscal year.
Unaudited
Nine Months Ended
September 30, Year Ended December 31,
-------------------------- -----------------------------------------------------------------
2005 2004 2004 2003 2002 2001 2000
----------- ------------ ----------- ----------- ------------ ------------ -----------
(In thousands)
Statement of Operations
Data:
Net premiums written ....... $ 1,149,801 $ 1,080,963 $ 1,365,148 $ 1,219,159 $ 1,053,487 $ 925,420 $ 843,604
Net premiums earned ........ 1,054,254 978,366 1,318,390 1,133,070 988,268 883,048 821,265
Net investment income
earned ................... 97,864 87,268 120,540 114,748 103,067 96,767 99,495
Net realized gains ......... 9,536 7,131 24,587 12,842 3,294 6,816 4,191
Diversified Insurance
Services revenue(1, 2) ... 88,766 78,274 104,396 91,840 80,796 69,626 57,527
Total revenues ............. 1,253,231 1,153,444 1,571,536 1,356,116 1,178,950 1,059,020 986,217
Underwriting gain (loss).... 48,777 27,147 40,768 (25,252) (38,743) (60,638) (65,122)
Diversified Insurance
Services net income (loss)
from continuing
operations(1, 2) ......... 14,742 10,382 14,170 9,223 5,914 (427) 5,509
Net income from continuing
operations(2) ............ 107,455 84,730 128,639 66,344 42,138 26,318 26,686
Loss from discontinued
operations(2) ............ -- -- -- -- (169) (625) (151)
Net income ................. 107,455 84,730 128,639 66,344 41,969 25,693 26,535
Comprehensive income........ 84,216 89,318 134,723 99,362 59,366 24,405 49,166
Unaudited
Nine Months Ended
September 30, Year Ended December 31,
-------------------------- ------------------------------------------------------------------
2005 2004 2004 2003 2002 2001 2000
----------- ------------ ----------- ----------- ------------ ------------ ------------
(In thousands)
Balance Sheet Data:
Total cash and investments.. $ 3,070,020 $ 2,729,904 $ 2,841,543 $ 2,437,656 $ 2,128,779 $ 1,820,604 $ 1,785,822
Total assets ............... 4,288,555 3,869,505 3,929,400 3,438,782 3,029,847 2,684,344 2,590,903
Total liabilities .......... 3,335,183 3,035,282 3,047,382 2,688,998 2,377,745 2,093,184 2,013,106
Total stockholders' equity.. 953,372 834,223 882,018 749,784 652,102 591,160 577,797
Senior convertible notes.... 115,937 115,937 115,937 115,937 115,937 -- --
Notes payable(3) ........... 123,383 97,500 147,380 121,500 145,500 152,643 159,786
Convertible subordinated
debentures ............... 785 1,033 1,033 1,184 1,331 3,790 3,848
Short-term debt ............ -- -- -- -- -- -- --
------------ ------------ ----------- ----------- ------------ ------------ ------------
Total debt ................. 240,105 214,470 264,350 238,621 262,768 156,433 163,634
11
Unaudited
Nine Months
Ended
September 30, Year Ended December 31,
-------------------- ------------------------------------------------
2005 2004 2004 2003 2002 2001 2000
-------- -------- -------- -------- -------- -------- --------
(In thousands)
Selected Ratios:
---------------------------------------------------------
Ratio of debt to capitalization ..................... 20.1% 20.5% 23.1% 24.1% 28.7% 21.0% 22.1%
Return on average equity ............................ 15.6% 14.3% 15.8% 9.5% 6.8% 4.4% 4.6%
Yield on investment ................................. 4.4% 4.6% 4.7% 5.1% 5.4% 5.4% 5.8%
Statutory premiums to surplus(4, 5) ................. 1.6:1 1.9:1 1.7:1 1.8:1 1.9:1 1.8:1 1.7:1
Ratio of earnings to fixed charges .................. 10.8x 9.3x 10.5x 5.4x 4.0x 2.4x 2.5x
Statutory combined ratio(1, 4, 6) ................... 94.2% 95.6% 95.9% 101.5% 103.2% 106.7% 108.2%
Combined ratio(1, 4, 6) ............................. 95.4% 97.2% 96.9% 102.2% 103.9% 106.9% 107.9%
-------------------
(1) Flood business is included in statutory underwriting results in accordance
with prescribed statutory accounting practices. On a basis in accordance
with GAAP only, flood servicing revenue and expense has been reclassified
from underwriting results to Diversified Insurance Services. Prior years
have been restated to reflect the exclusion of results from discontinued
operations.
(2) See Item 8, "Financial Statements and Supplementary Data," Note 14 to the
consolidated financial statements, Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations," the section
entitled "Results of Operations" for a discussion of discontinued
operations, and Item 8, "Financial Statements and Supplementary Data,"
Note 11 for components of income (loss), in each case included in our
annual report on Form 10-K for the year ended December 31, 2004
incorporated by reference herein.
(3) See Item 8, "Financial Statements and Supplementary Data," Note 8 to the
consolidated financial statements, in each case included in our annual
report on Form 10-K for the year ended December 31, 2004 incorporated by
reference herein, for a discussion of senior convertible notes issued
during 2002.
(4) "Combined ratio" means a measure of underwriting profitability determined
by dividing the sum of all GAAP expenses (losses, loss expenses,
underwriting expenses, and dividends to policyholders) by GAAP net
premiums earned for the period. "Ratio of earnings to fixed charges"
indicates how many times interest charges have been earned by us on a
pretax basis. Since failure to meet interest payments would be a default
under the terms of indenture agreements, this coverage ratio measures a
margin of safety. "Statutory combined ratio" means a measurement commonly
used within the property and casualty insurance industry to measure
underwriting profit or loss. It is a combination of an underwriting
expense ratio, a loss and loss expense ratio and dividends to
policyholders ratio. "Statutory premiums to surplus ratio" means a
statutory measure of solvency risk that is calculated by dividing the net
statutory premiums written for the year by the ending statutory surplus.
For example, a ratio of 1.5:1 means that for every dollar of surplus, we
wrote $1.50 in premiums.
(5) Regulatory and rating agencies use the statutory premiums to surplus ratio
as a measure of solvency, viewing an increase in the ratio as a possible
increase in solvency risk. Management and analysts also view this ratio as
a measure of the effective use of capital since, as the ratio increases,
revenue per dollar of invested capital increases, indicating the possible
opportunity for an increased return.
(6) Changes in both the GAAP and statutory combined ratios are viewed by
management and analysts as indicative of changes in the profitability of
underwriting operations. A ratio over 100% is indicative of an
underwriting loss, and a ratio below 100% is indicative of an underwriting
profit.
12
RISK FACTORS
You should carefully consider the following risk factors in
addition to the other information included, or incorporated by reference, in
this prospectus before investing in the exchange notes. If any of the following
risk factors actually occur, our business, financial condition or results of
operations could likely suffer which, in turn, could materially and adversely
affect the price of the exchange notes.
Risks Relating to the Exchange Offer
You may have difficulty selling the original notes that you do not exchange.
If you do not exchange your original notes for exchange notes
pursuant to the exchange offer, the original notes you hold will continue to be
subject to the existing transfer restrictions. The original notes may not be
offered, sold or otherwise transferred, except in compliance with the
registration requirements of the Securities Act, pursuant to an exemption from
registration under the Securities Act or in a transaction not subject to the
registration requirements of the Securities Act, and in compliance with
applicable state securities laws. We do not anticipate that we will register
the original notes under the Securities Act. After the exchange offer is
consummated, the trading market for the remaining untendered original notes may
be small and inactive. Consequently, you may find it difficult to sell any
original notes you continue to hold because there will be fewer original notes
of such series outstanding.
Some noteholders may be required to comply with the registration and prospectus
delivery requirements of the Securities Act.
If you exchange your original notes in the exchange offer for
the purpose of participating in a distribution of the exchange notes, you may
be deemed to have received restricted securities and, if so, you will be
required to comply with the registration and prospectus delivery requirements
of the Securities Act in connection with any resale transaction.
In addition, a broker-dealer that purchased original notes
for its own account as part of market-making or trading activities must deliver
a prospectus when it sells the exchange notes it received in the exchange
offer. Our obligation to make this prospectus available to broker-dealers is
limited. We cannot guarantee that a proper prospectus will be available to
broker-dealers wishing to resell their exchange notes.
Late deliveries of original notes or any other failure to comply with the
exchange offer procedures could prevent a holder from exchanging its old notes.
Noteholders are responsible for complying with all exchange
offer procedures. The issuance of exchange notes in exchange for original notes
will only occur upon completion of the procedures described in this prospectus
under "The Exchange Offer." Therefore, holders of original notes who wish to
exchange them for exchange notes should allow sufficient time for timely
completion of the exchange procedure. Neither we nor the exchange agent are
obligated to extend the offer or notify you of any failure to follow the proper
procedure.
Risks Relating to the Notes
Your right to receive payments on the notes will be effectively subordinated to
the rights of any future secured creditors. The notes will be effectively
subordinated to any existing and future liabilities of our subsidiaries.
The notes represent unsecured obligations for Selective.
Accordingly, holders of any future secured indebtedness will have claims that
are superior to your claims as holders of the notes to the extent of the value
of the assets securing that other indebtedness. In the event of any
distribution or
13
payment of our assets in any foreclosure, dissolution, winding-up,
liquidation, reorganization, or other bankruptcy proceeding, holders of secured
indebtedness will have superior claim to those of our assets that constitute
their collateral. In any of the foregoing events, we cannot assure you that
there will be sufficient assets to pay amounts due on the notes. Holders of the
notes will participate ratably with all holders of our unsecured indebtedness
that ranks equally in right of payment with the notes, and potentially with all
our other general creditors, based upon the respective amounts owed to each
holder or creditor, in our remaining assets. As a result, holders of notes may
receive less, ratably, than holders of secured indebtedness.
In addition, we are a holding company and conduct
substantially all our operations through our subsidiaries. As a result, holders
of the notes are effectively subordinated to the debt and other liabilities of
our subsidiaries. Therefore, in the event of the insolvency or liquidation of a
subsidiary, following payment by such subsidiary of its liabilities, such
subsidiary may not have sufficient remaining assets to make payments to us as a
shareholder or otherwise. In the event of a default by a subsidiary under any
credit arrangement or other indebtedness, its creditors could accelerate such
debt, prior to such subsidiary distributing amounts to us that we could have
used to make payments on the notes. In addition, if we caused a subsidiary to
pay a dividend to us to make payment on the notes, and such dividend were
determined to be a fraudulent transfer, holders of the notes would be required
to return the payment to the subsidiary's creditors.
Except for certain limitations on liens of stock of Restricted Subsidiaries,
the indenture does not contain restrictive covenants. Therefore, holders of the
notes may not be protected in the event we are involved in a highly leveraged
transaction, reorganization, restructuring, merger or similar transaction in
the future.
The indenture under which the notes will be issued may not
sufficiently protect holders of notes in the event we are involved in a highly
leveraged transaction, reorganization, restructuring, merger or similar
transaction. The indenture does not contain:
o any provision restricting us or any of our subsidiaries from
incurring, assuming or being liable with respect to any
indebtedness or other obligations, whether secured or unsecured,
or from paying dividends or making other distributions on capital
stock or from purchasing or redeeming capital stock;
o any restrictions on the ability of our subsidiaries to issue
securities that would be senior to the common stock of the
subsidiary held by us;
o any financial ratios or specified level of net worth to which we
or our subsidiaries must adhere;
o any restrictions on our ability to pledge our assets as
collateral or otherwise encumber our assets, except for a
limitation on liens on the capital stock of our Restricted
Subsidiaries (see "Description of the Notes--Limitation on Liens
on Stock of Restricted Subsidiaries"); or
o any restrictions on our ability to contribute our assets to our
subsidiaries.
There is no public market for the exchange notes.
The exchange notes are a new issue of securities and there is
no existing trading market for the exchange notes. Although the initial
purchaser of the original notes has informed us that it intends to make a
market in the exchange notes, it has no obligation to do so and may discontinue
making a market at any time without notice. Accordingly, we cannot assure you
that a liquid market will develop for the exchange notes, that you will be able
to sell your exchange notes at a particular time or that the prices that you
receive when you sell the exchange notes will be favorable.
14
We do not intend to apply for listing or quotation of the
exchange notes on any securities exchange or stock market or for inclusion of
the notes in any automated quotation system. The liquidity of any market for
the exchange notes will depend on a number of factors, including:
o the number of holders of exchange notes;
o our operating performance and financial condition;
o our ability to complete the offer to exchange the original notes
for the exchange notes;
o the market for similar securities;
o the interest of securities dealers in making a market in the
exchange notes; and
o prevailing interest rates.
Risks Relating to Our Business
Catastrophic events can have a significant impact on our financial and
operational condition.
Results of property and casualty insurers are subject to
weather and other conditions. While one year may be relatively free of major
weather or other disasters, another year may have numerous such events causing
results for such a year to be materially worse than for other years.
Our Insurance Subsidiaries have experienced, and are expected
in the future to experience, catastrophe losses. It is possible that a
catastrophic event or a series of multiple catastrophic events could have a
material adverse effect on the operating results and financial condition of the
Insurance Subsidiaries, thereby limiting the ability of the Insurance
Subsidiaries to pay dividends to us.
Various natural and man-made events can cause catastrophes,
including, but not limited to hurricanes, tornadoes, windstorms, earthquakes,
hail, explosions, severe winter weather and fires. The frequency and severity
of these catastrophes are inherently unpredictable. The extent of losses from a
catastrophe is determined by the severity of the event and the total amount of
insured exposures in the area affected by the event. Although catastrophes can
cause losses in a variety of property and casualty lines, most of the
catastrophe-related claims of our Insurance Subsidiaries historically have been
related to commercial property and homeowners' coverages.
Our Insurance Subsidiaries seek to reduce their exposure to
catastrophe losses through the purchase of catastrophe reinsurance. Reinsurance
may prove inadequate if:
o a major catastrophic loss exceeds the reinsurance limit or the
reinsurers' financial capacity,
o an Insurance Subsidiary pays a number of smaller catastrophic
loss claims, which individually fall below the subsidiary's
retention level, or
o the modeling software used to analyze the Insurance Subsidiaries'
risk proves inadequate.
Acts of terrorism could have a significant impact on our financial and
operational condition.
On November 26, 2002, the Terrorism Risk Insurance Act of
2002, or TRIA, was signed into law. It is currently scheduled to expire on
December 31, 2005. TRIA requires sharing the risk of future losses from
terrorism between private insurers and the federal government, and is
applicable to almost all commercial lines of insurance. Insurance companies
with direct commercial insurance exposure in the United States are required to
participate in this program. TRIA rescinded all previously approved exclusions
for terrorism. Policyholders for non-workers' compensation policies have the
option to accept
15
or decline the terrorism coverage we offer in our policies, or
negotiate other terms. In 2004, approximately 90% of our commercial
non-workers' compensation policyholders purchased terrorism coverage. The
terrorism coverage is mandatory for all workers' compensation primary policies.
In addition, ten of the twenty primary states in which we write commercial
property coverage mandate the coverage of fire following an act of terrorism.
These provisions apply to new policies written after enactment of TRIA. A
terrorism act has to be certified by the Secretary of Treasury in order to be
covered by TRIA. TRIA limits the certified losses to "international terrorism"
defined as an act committed on behalf of any foreign person or foreign interest
where the damage from the event is in excess of $5 million and the event was
not committed in the course of a war declared by the United States. Terrorism
acts related to the use of nuclear, biological or chemical weapons are covered
by TRIA provided that the Secretary of the Treasury certifies the loss. Each
participating insurance company will be responsible for paying out a certain
amount in claims (a deductible) before federal assistance becomes available.
This deductible is based on a percentage of commercial lines direct earned
premiums from the prior calendar year. For losses above an insurer's
deductible, the federal government will cover 90%, while the insurer
contributes 10%. Although the provisions of TRIA will serve to mitigate our
exposure in the event of a large-scale terrorist attack, our deductible is
substantial. In addition, it is uncertain whether TRIA will be extended past
its current termination date. The characteristics of terrorism risks make their
insurability by the private sector alone problematic. Given the demand for
terrorism insurance, the cancellation of TRIA without arrangements for
addressing terrorism risks could significantly impact the insurance market. We
continue to monitor concentrations of risk and have purchased a separate
terrorism treaty to supplement our protection to this highly unknown exposure.
Our geographic concentration ties our performance to the economic and
regulatory conditions and weather-related events in the Eastern region of the
United States.
Our property and casualty insurance business is concentrated
geographically in the Eastern region of the United States. New Jersey accounted
for thirty-seven percent of our total net premiums written for the year ended
December 31, 2004. Substantially all of our remaining business is written in
other Eastern region jurisdictions (Connecticut, Delaware, District of
Columbia, Georgia, Illinois, Indiana, Iowa, Kentucky, Maryland, Michigan,
Minnesota, Missouri, New York, North Carolina, Ohio, Pennsylvania, Rhode
Island, South Carolina, Virginia and Wisconsin). Unusually severe storms or
other natural or man-made disasters that destroy property in these states could
adversely affect our operations. Our revenues and profitability are also
subject to prevailing economic and regulatory conditions in the states in which
we write insurance. Because our business is concentrated in a limited number of
geographic markets, we may be exposed to risks of adverse developments that are
greater than the risks of having business in a greater number of geographic
markets.
We face significant competition from other regional and national insurance
companies, agents and from self-insurance.
We compete with regional and national insurance companies,
including direct writers of insurance coverage. Many of these competitors are
larger than we are and have greater financial, technical and operating
resources. In addition, most of the insurance agencies that sell our insurance
represent more than one insurance company. We face competition within each of
these agencies.
The property and casualty insurance industry is highly
competitive on the basis of both price and service. If our competitors price
their products more aggressively, our ability to grow or renew our business and
our profitability may be adversely impacted. There are many companies competing
for the same insurance customers in the geographic areas in which we operate.
The Internet may also emerge as a significant source of new competition, both
from existing competitors using their brand name and resources to write
business through this distribution channel and from new competitors.
We also face competition, primarily in the commercial
insurance market, from entities that self-insure their own risks. Many of our
customers and potential customers are examining the benefits and risks of
self-insuring as an alternative to traditional insurance.
16
A number of new, proposed, potential or enacted legislative
or industry developments could further increase competition in the property and
casualty insurance industry. These developments include:
o the Gramm-Leach-Bliley Act, which could result in increased
competition from new entrants to the insurance market, including
banks and other financial service companies;
o programs in which state-sponsored entities provide property
insurance in catastrophe-prone areas or other alternative market
types of coverage; and
o changing practices caused by the Internet, which has led to
greater competition in the insurance business and, in some cases,
greater expectations for customer service.
New competition from these developments could cause the
supply or demand for insurance to change, which could adversely affect our
results of operations and financial condition.
Legal actions and regulatory investigations are increasingly common in the
insurance business and may result in financial losses and harm our reputation.
We face a significant risk of litigation in the ordinary
course of operating our businesses, including the risk of class action lawsuits
and regulatory actions. In connection with our insurance operations, we may
face individual and class action claims alleging inappropriate business
practices relating to agency compensation and underwriting practices, claims
payments and procedures, product design, disclosure, administration,
installment charges, denial or delay of payment of benefits and breaches of
fiduciary duties or contractual and extra-contractual obligations to our
insureds or claimants against our insureds. The damages claimed in these
actions may be very large or indeterminate, including punitive and treble
damages. Given the claims made in these cases and the litigation process, it
may be difficult and take us a long period of time to disprove the allegations
or quantify damages.
We could be subject to various state and federal regulatory
inquiries, including information requests, subpoenas, and books and records
examinations. Recently, the insurance industry has become the focus of
increased scrutiny by law enforcement authorities, particularly related to
allegations of improper conduct in connection with the payment of and
disclosure of commissions, antitrust and unfair trade practices issues, and the
sales of financial insurance products that have been inappropriately used by
publicly traded companies to remove liabilities from their balance sheets. Due
to the adverse impact that such an investigation could have on our reputation
and our ability to attract and retain customers and employees, a significant
regulatory action against us could have a materially adverse effect on our
business, financial condition, and results of operations.
One possible result of lawsuits and investigations is that
many insurance industry practices and customs may change, including, but not
limited to, the manner in which insurance is marketed and distributed through
independent insurance agents, who are the primary distributors of our insurance
products and services. We cannot predict at this time the effect that any
current or future regulatory activity, investigations or litigation will have
on our business. Given the current regulatory environment, and the number of
our subsidiaries operating in local markets throughout the country, it is
possible that we will become subject to governmental inquiries and subpoenas
and that lawsuits may be filed against us. Our involvement in any
investigations and lawsuits would cause us to incur additional costs and, if we
were found to have violated any laws, we could be required to pay fines,
damages and other costs, perhaps in material amounts. Our ultimate liability,
if any, in connection with these matters and any which may arise in the future,
is uncertain and subject to contingencies that are not yet known.
We are heavily regulated in the states in which we operate.
We are subject to extensive supervision and regulation in the
states in which our Insurance Subsidiaries transact insurance business. The
primary purpose of insurance regulation is to
17
protect individual policyholders and not shareholders or other investors. Our
business can be adversely affected by regulations affecting property and
casualty insurance companies. For example, laws and regulations can lead to
mandated reductions in rates to levels that we do not believe are adequate for
the risks we insure. Other laws and regulations limit our ability to cancel or
refuse to renew policies and require us to offer coverage to all consumers.
Changes in laws and regulations, or their interpretations, pertaining to
insurance, including workers' compensation, healthcare or managed care,
preferred provider organizations, and human resource administration outsourcing
organizations may also have an adverse effect on our business. Although the
federal government does not directly regulate the insurance industry, federal
initiatives, from time to time, can also impact the insurance industry.
Proposals intended to control the cost and availability of
healthcare services have been debated in the U.S. Congress and state
legislatures. Although we neither write health insurance in our managed care
business nor assume any healthcare risk, rules affecting healthcare services
can affect workers' compensation, commercial and personal automobile,
liability, and other insurance that we do write. We cannot determine whether,
or in what form, healthcare reform legislation may be adopted by the U.S.
Congress or any state legislature. We also cannot determine the nature and
effect, if any, that the adoption of healthcare legislation or regulations, or
changing interpretations, at the federal or state level would have on us.
Examples of regulatory risks include:
Automobile Insurance Regulation
The New Jersey Urban Enterprise Zone, or UEZ, Program
requires New Jersey auto insurers, including us, to have a market share in
certain urban territories which is in proportion to their statewide market
share. Due to mandated urban rate caps, the premiums on these urban policies
are typically insufficient to cover losses. While the law was repealed in 1998
to eliminate the rate caps, rate caps are still required through the state's
regulatory scheme.
We are periodically subject to potential legislation that, if
passed, could adversely affect our results of operations. In May 2003,
legislation was introduced to allow claimants to file lawsuits for non-economic
damages without proving that the injuries sustained had a serious impact on
their life. While this legislation ultimately was not passed, in June 2005, the
New Jersey Supreme Court rendered a decision which eliminated the serious life
impact test in personal injury claims under personal automobile policies under
the verbal tort threshold of New Jersey's Automobile Insurance Cost Reduction
Act of 1998. As a result, we increased our New Jersey personal automobile
reserves in the second quarter of 2005.
We are also potentially subject to unfair competition based
on uneven application of regulatory requirements by state regulators.
Workers' Compensation Insurance Regulation
Because we voluntarily write workers' compensation insurance,
we are required by state law to support the involuntary market. Insurance
companies that underwrite voluntary workers' compensation insurance can either
directly write involuntary coverage, which is assigned by state regulatory
authorities, or participate in a sharing arrangement, where the business is
written by a servicing carrier and the profits or losses of that serviced
business are shared among the participating insurers. In all states other than
New Jersey, where we directly write involuntary coverage, we participate
through a sharing arrangement. Historically, this business has been
unprofitable; whether written directly or handled through a sharing
arrangement. Additionally, we are required to provide workers' compensation
benefits for losses arising from acts of terrorism under our workers'
compensation policies. The impact of any terrorist act is unpredictable, and
the ultimate impact on us will depend upon the nature, extent, location and
timing of such an act. Any such impact on us could be material.
18
Homeowners Insurance Regulation
We are subject to regulatory provisions that are designed to
address potential availability and/or affordability problems in the homeowners
property insurance marketplace. Involuntary market mechanisms, such as the New
Jersey Insurance Underwriting Association (the "New Jersey FAIR Plan"),
generally result in assessments to us. The New Jersey FAIR Plan writes fire and
extended coverage on homeowners for those individuals unable to secure
insurance elsewhere. Insurance companies who voluntarily write homeowners
insurance in New Jersey are assessed a portion of any deficit from the New
Jersey FAIR Plan based on their share of the voluntary market. Similar
involuntary plans exist in most other states where we operate. In addition, ten
of the twenty primary states in which we write commercial property coverage
mandate the coverage of fire following an act of terrorism.
A change in our market share in New Jersey could adversely impact the results
in our private passenger automobile business.
New Jersey insurance regulations require New Jersey auto
insurers to involuntarily write private passenger automobile insurance for
individuals who are unable to obtain insurance in the voluntary market. These
policies are priced according to a separate rating scheme, which is established
by the assigned risk plan and subject to approval by the New Jersey Department
of Banking of Insurance ("DOBI"). The amount of involuntary insurance which an
insurer must write in New Jersey depends on the insurer's statewide market
share -- the greater the market share the more involuntary coverage the insurer
is required to write. The underwriting of involuntary personal automobile
insurance in New Jersey has been historically unprofitable.
During 2002, the DOBI issued an order exempting State Farm
Indemnity Company, which had approximately 17% of the market share for New
Jersey private passenger automobile insurance, from the state's
"take-all-comers" law, assigned risk program, and UEZ program. As a result of
State Farm's exemption from the assigned risk program, in 2003 every other
participating insurer's share of the program, including ours, was increased to
offset the unapplied State Farm share. In 2004, the DOBI issued an order which
will transition State Farm back into the assigned risk and UEZ programs;
however, State Farm will not be required to meet its full share of these
programs during 2005.
The property and casualty insurance industry is cyclical
Historically, the results of the property and casualty
insurance industry have been subject to significant fluctuations due to
competition, economic conditions, interest rates and other factors. For
example, commercial lines premium pricing increased from 2001 to 2004, but it
decreased for several years before 2000. Furthermore, the industry's
profitability is affected by unpredictable developments, including:
o natural and man-made disasters;
o fluctuations in interest rates and other changes in the
investment environment that affect returns on our investments;
o inflationary pressures that affect the size of losses;
o medical losses; and
o judicial decisions that affect insurers' liabilities.
The demand for property and casualty insurance, particularly
commercial lines, can also vary with the overall level of economic activity.
19
We are a holding company, and our subsidiaries may be restricted in declaring
dividends, and thus we may not have access to the cash that is needed to meet
our cash needs.
Substantially all of our operations are conducted through our
subsidiaries. Restrictions on our subsidiaries' ability to pay dividends or to
make other cash payments to us may materially affect our ability to pay
principal and interest on our indebtedness and dividends on our common stock.
Our subsidiaries are permitted under the terms of our debt
agreements to incur indebtedness up to certain levels that may restrict or
prohibit the making of distributions, the payment of dividends or the making of
loans by our subsidiaries to us. We cannot assure you that the agreements
governing the current and future indebtedness of our subsidiaries will permit
our subsidiaries to provide us with sufficient dividends or other permissible
payments to meet our financial needs.
The Insurance Subsidiaries' sources of funds consist
primarily of premiums, investment income and proceeds from sales and redemption
of investments. Such funds are applied primarily to payment of claims,
insurance operating expenses, income taxes and the purchase of investments, as
well as dividends and other payments.
The Insurance Subsidiaries may declare and pay dividends to
us only if they are permitted to do so under the insurance regulations of their
respective domiciliary state. All of the states in which our Insurance
Subsidiaries are domiciled regulate the payment of dividends. Some states,
including New Jersey, North Carolina and South Carolina, require that we give
notice to the relevant state insurance commissioner prior to our Insurance
Subsidiaries declaring any dividends and distributions payable to us. During
the notice period, the state insurance commissioner may disallow all or part of
the proposed dividend upon determination that (i) the insurer's surplus is not
reasonable in relation to its liabilities and adequate to its financial needs
and those of its policyholders, or (ii) in the case of New Jersey, if the
regulatory authority determines that the insurer is otherwise in a hazardous
financial condition.
Notwithstanding the foregoing, if insurance regulators
otherwise determine that payment of a dividend or any other payment to an
affiliate would be detrimental to an Insurance Subsidiary's policyholders or
creditors, because of the financial condition of the Insurance Subsidiary or
otherwise, the regulators may block dividends or other payments to affiliates
that would otherwise be permitted without prior approval.
The Diversified Insurance Services subsidiaries may also
declare and pay dividends. The potential dividends are restricted only by the
operating needs of the subsidiaries, with the exception of our flood insurance
operation, which is restricted by the same limitations as our Insurance
Subsidiaries noted above. The Diversified Insurance Services subsidiaries'
sources of funds consist primarily of fees for services rendered. Such funds
are applied primarily to payment of operating expenses as well as dividends and
other payments.
Our reserves may not be adequate to cover actual losses and expenses.
We are required to maintain loss reserves for our estimated
liability for losses and loss expenses associated with reported and unreported
claims for each accounting period. From time to time we adjust reserves and, if
our reserves are inadequate, we will be required to increase reserves. An
increase in reserves: (i) increases losses in the income statement, (ii)
reduces net income and stockholders' equity for the period in which the
deficiency in reserves is identified, and (iii) could have a material adverse
effect on our results of operations, liquidity, financial condition and
financial strength ratings. Our estimates of reserve amounts are based on facts
and circumstances of which we are aware, including our expectations of the
ultimate settlement and claim administration expenses, predictions of future
events, trends in claims severity and frequency, and other subjective factors.
There is no method for precisely estimating our ultimate liability for
settlement and claims.
20
We regularly review our reserving techniques and our overall
amount of reserves. We also review:
o information regarding each claim for losses;
o our loss history and the industry's loss history;
o legislative enactments, judicial decisions and legal developments
regarding damages;
o changes in political attitudes; and
o trends in general economic conditions, including inflation.
We cannot be certain that the reserves we establish are
adequate or will be adequate in the future.
Our ability to reduce our exposure to risks depends on the availability and
cost of reinsurance.
We transfer our risk exposure to other insurance and
reinsurance companies through reinsurance arrangements. In these arrangements,
another insurer assumes a specified portion of our losses and loss adjustment
expenses in exchange for a specified portion of the insurance policy premiums.
The availability, amount, and cost of reinsurance depend on market conditions,
which may vary significantly. Any decrease in the amount of our reinsurance
will increase our risk of loss.
We also face credit risk with respect to reinsurance. The
inability of any of our reinsurers to meet their financial obligations could
materially and adversely affect our operations, as we remain primarily liable
to our customers under the policies that we have reinsured.
In the Fall of 2005, Hurricanes Katrina, Rita, and Wilma
caused significant insured losses in the Southeastern United States for the
insurance industry. Many reinsurers have taken reserving actions in response to
anticipated claims. We are uncertain what effect these hurricane-related
damages will have on the reinsurance industry, but it is conceivable that we
will face reduced availability of reinsurance, higher reinsurance premiums,
tighter terms and conditions for reinsurance and greater reinsurance credit
risk in the future.
Our investments support our operations and provide a significant portion of our
revenues and earnings.
We, like many other property and casualty insurance
companies, depend on income from our investment portfolio for a significant
portion of our revenues and earnings. Any significant decline in our investment
income as a result of falling interest rates, decreased dividend payment rates
or general market conditions would have an adverse effect on our results.
Fluctuations in interest rates cause inverse fluctuations in the market value
of our debt portfolio. Any significant decline in the market value of our
investments would reduce our stockholders' equity and our policyholders'
surplus which could impact our ability to write additional premiums. In
addition, certain of our notes payable are subject to certain
debt-to-capitalization restrictions which could also be impacted by a
significant decline in investment values.
We depend on our independent insurance agents.
We market and sell almost all of our insurance products
through independent, non-exclusive insurance agencies and brokers. Agencies and
brokers are not obligated to promote our insurance products, and they may also
sell our competitors' insurance products. As a result, our business depends in
part on the marketing and sales efforts of these agencies and brokers. As we
diversify and expand our business geographically, we may need to expand our
network of agencies and brokers to successfully market our products. If these
agencies and brokers fail to market our products successfully, our business
21
may be adversely impacted. Also, independent agents may decide to sell their
businesses to banks, other insurance agencies or other businesses. Agents with
a Selective appointment may decide to buy other agents. Changes in ownership of
agencies or expansion of agencies through acquisition could adversely affect an
agency's ability to control growth and profitability, thereby adversely
affecting our business.
We may be adversely impacted by a change in our ratings.
Insurance companies are subject to financial strength ratings
produced by external rating agencies. Higher ratings generally indicate
financial stability and a strong ability to pay claims. Ratings are assigned by
rating agencies to insurers based upon factors relevant to policyholders.
Ratings are not recommendations to buy, hold or sell any of our securities.
The principal agencies that cover the property and casualty
industry are A.M. Best Company ("A.M. Best"), Standard & Poor's Ratings
Services ("S&P"), Moody's Investors Service ("Moody's") and Fitch Ratings
("Fitch"). We believe our ability to write insurance business is most
influenced by our rating from A.M. Best. We are currently rated "A+" (Superior)
by A.M. Best, which is their second highest of fifteen ratings. A significant
downgrade from A.M. Best could materially adversely affect the business we
write. We believe that ratings from S&P, Moody's or Fitch, although important,
have less of an impact on our business. We are currently rated "A" by S&P, "A2"
by Moody's and "A+" by Fitch. An unfavorable change in any of these ratings
could (i) affect our ability to write new business with customers, some of
which are required (under various third-party agreements) to maintain insurance
with a carrier that maintains a specified minimum rating; (ii) be an event of
default under our current lines of credit, under which we had no outstanding
borrowings at September, 30, 2005 or December 31, 2004, 2003 or 2002; (iii)
result in an increase in the interest rate charged under those lines of credit;
or (iv) make it more expensive for us to access capital markets.
We depend on key personnel.
The success of our business is dependent, to a large extent,
on our ability to attract and retain key employees, in particular our senior
officers, key management, sales, information systems, underwriting, claims,
managed care, human resource outsourcing and corporate personnel. Competition
to attract and retain key personnel is intense. While we have employment
agreements with a number of key managers, in general, we do not have employment
contracts with our employees and cannot ensure that we will be able to attract
and retain key personnel.
We face risks from technology-related failures.
Our businesses are increasingly dependent on computer and
Internet-enabled technology. Our inability to anticipate or manage problems
with technology associated with scalability, security, functionality or
reliability could adversely affect our ability to write business and service
accounts and could adversely impact our results of operations and financial
conditions.
Emerging claim and coverage issues could adversely affect our business.
Unanticipated developments in the law as well as changes in
social and environmental conditions could result in unexpected claims for
coverage under our insurance contracts. These developments and changes may
adversely affect us, perhaps materially. For example, we could be subject to
developments that impose additional coverage obligations on us beyond our
underwriting intent, or to increases in the number or size of claims to which
we are subject. With respect to our casualty coverage, these legal, social and
environmental changes may not become apparent until some time after their
occurrence. Our exposure to these uncertainties could be exacerbated by the
increased willingness of some market participants to dispute insurance contract
and policy wordings.
22
We face risks in the human resource administration outsourcing business.
Regulatory
The operations of SHRS are affected by numerous federal and
state laws and regulations relating to employment matters, benefits plans and
taxes. In addition, there is an increasing trend for states to require
licensing of companies engaged in the professional employee organization
business. In performing services for its clients, SHRS assumes some obligations
of an employer under these laws and regulations. If these federal or state laws
are ultimately applied in a manner unfavorable to SHRS, it could have a
material adverse effect on our operations and financial condition. Regulation
in the human resource administration outsourcing business is constantly
evolving. We are unable to predict what additional government initiatives, if
any, affecting SHRS's business may be promulgated in the future. Consequently,
we are also unable to predict whether SHRS will be able to adapt to new or
modified regulatory requirements or obtain necessary licenses and government
approvals.
Liability for worksite employee payroll and payroll taxes
When providing co-employment services, SHRS assumes the
obligations to pay the salaries, wages and related benefit costs and payroll
taxes of its clients' worksite employees. Clients are required to fund these
obligations for us. If clients fail to fund these obligations, and if these
obligations are significant, it could have a material adverse effect on our
results of operations or financial condition. As a co-employer, SHRS is also
responsible for calculating and remitting state unemployment taxes to those
states in which its co-employees work.
Liabilities for client and employee actions
SHRS establishes, by contract, a division of responsibility
with its client for various personnel management matters, including compliance
with and liability under various governmental regulations. Because of this
relationship, however, SHRS may be subject to liability for its clients'
violations of laws and regulations. Although the agreements with clients
generally obligate them to indemnify SHRS for any liability attributable to the
conduct of the clients, SHRS may not be able to collect on the contractual
indemnification claim. In addition, worksite employees may be deemed to be
agents of SHRS subjecting SHRS to liability for the actions of those worksite
employees which could have a material adverse effect on our results of
operations or financial condition. SHRS maintains professional liability
insurance and such other coverages that it believes are reasonable in light of
its experiences to date. There can be no assurance, however, that such
insurance will be sufficient or available in the future at reasonable cost to
protect SHRS from liability which might adversely affect its business,
financial condition, or results of operations.
Class action litigation could affect our business practices and financial
results.
Our industries have been the target of class action
litigation in areas including the following:
o after-market automobile crash parts;
o urban homeowner underwriting practices;
o health maintenance organization practices; and
o discounting and payment of personal injury protection claims.
It is possible that future class action litigation could
adversely affect results of our insurance and Diversified Insurance Services
businesses and our financial condition.
23
We face risks in our managed care operations.
Regulation
Our subsidiaries, which comprise our CHN Solutions
operations, build medical provider networks and leases networks to insurers,
medical management companies, third-party administrators and other medical
claim payors. Some states in which CHN Solutions transacts business have
licensing and other statutory or regulatory requirements, particularly for
medical review services. Some of these requirements apply to medical review of
care covered by workers' compensation. Typically, these laws establish minimum
standards for qualifications of personnel, confidentiality, internal quality
control, and dispute resolution procedures. In addition, some states regulate
the operation of managed care provider networks. If additional statutory or
regulatory requirements are imposed, CHN Solutions might encounter increased
costs of operations.
Regulation in the healthcare, automobile personal injury
protection and workers' compensation fields is constantly evolving. We are
unable to predict what additional government initiatives, if any, affecting CHN
Solutions' business may be promulgated in the future. Consequently, we are also
unable to predict whether CHN Solutions will be able to adapt to new or
modified regulatory requirements or obtain necessary licenses and government
approvals.
Litigation
Healthcare providers have become more active in their efforts
to minimize the use of certain cost containment techniques and are litigating
to prevent application of certain cost containment practices. Their success in
these efforts could limit the scope of certain cost containment services that
we provide and revenue, accordingly, could decline. Although CHN Solutions does
not grant or deny claims for payment of benefits and does not engage in the
practice of medicine or deliver medical services, it does make recommendations
concerning the appropriateness of providers' medical treatment plans of
patients. Consequently, there can be no assurance that CHN Solutions will not
be subject to claims for adverse medical consequences, including being joined
in suits brought against its customers. Such litigation might adversely affect
its business, financial condition, or results of operations. CHN Solutions
maintains professional liability insurance and such other coverages that it
believes are reasonable in light of its experiences to date. There can be no
assurance, however, that such insurance will be sufficient or available in the
future at reasonable cost to protect CHN Solutions from liability which might
adversely affect its business, financial condition, or results of operations.
Unionization of medical providers could impact our operations.
The lessees of our medical provider network receive medical
fee discounts from network providers in exchange for potential patient volume
commitments, where permitted under state law, from CHN Solutions' client and
payor base. If medical providers, such as physicians, decided to unionize, that
might impair CHN Solutions' ability to maintain and grow networks, negotiate
fee discount arrangements and lease networks to their customers. These events
would have an adverse impact not only on CHN Solutions, but also on our
business as a whole because we rely, in part, on provider networks and
discounts to manage our claim medical expenses. Those events could also have an
adverse effect on our results of operations and financial condition.
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USE OF PROCEEDS
We will not receive any proceeds from the exchange offer. In
consideration for issuing the exchange notes, we will receive in exchange the
original notes of like principal amount. The original notes surrendered in
exchange for exchange notes will be retired and canceled and cannot be
reissued. Accordingly, the issuance of exchange notes will not result in any
change in our indebtedness. We have agreed to bear the expenses of the exchange
offer other than commissions and concessions of any broker or dealer and
certain transfer taxes and will indemnify holders of the notes, including any
broker-dealers, against certain liabilities under the Securities Act. No
underwriter is being used in connection with the exchange offer.
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RATIO OF EARNINGS TO FIXED CHARGES
The table below sets forth our ratio of earnings to fixed
charges on a consolidated basis for each of the time periods indicated. This
ratio shows the extent to which our business generates enough earnings after
the payment of all expenses other than interest to make required interest
payments on our debt.
Unaudited
Nine Months
Ended
September 30 Year Ended December 31,
-----------------------------------------------------------------------------------------------------
2005 2004 2004 2003 2002 2001 2000
-------- ------- ------- ------- ------ ------- ------
10.8x 9.3x 10.5x 5.4x 4.0x 2.4x 2.5x
For the purpose of computing the ratio of earnings to fixed
charges, earnings consist of pretax income from continuing operations and fixed
charges. Fixed charges consist of interest whether expensed or capitalized,
amortization of expenses related to indebtedness and the portion of rental
expense that is considered to be representative of the interest factors in our
leases.
26
THE EXCHANGE OFFER
Purpose of the Exchange Offer
When we sold the original notes on November 3, 2005, we
entered into a registration rights agreement with the initial purchaser of the
original notes. Under the registration rights agreement, we agreed to file a
registration statement regarding the exchange of the original notes for
exchange notes which are registered under the Securities Act. We also agreed to
use our reasonable best efforts to cause the registration statement to become
effective with the SEC and to conduct this exchange offer after the
registration statement is declared effective. The registration rights agreement
provides that we will be required to pay additional interest to the holders of
the original notes if:
o the registration statement is not filed by March 3, 2006,
o the registration statement is not declared effective by May 2,
2006, or
o the exchange offer has not been consummated within 45 days of
being declared effective.
See "Description of the Notes--Registration Rights" for more information on
additional interest we will owe if we do not complete the exchange offer within
a specified timeline.
The exchange offer is not being made to holders of original
notes in any jurisdiction where the exchange would not comply with the
securities or blue sky laws of such jurisdiction. A copy of the registration
rights agreement is being filed as an exhibit to the registration statement of
which this prospectus forms a part.
Terms of the Exchange Offer
Upon the terms and conditions described in this prospectus
and in the accompanying letter of transmittal, which together constitute the
exchange offer, we will accept for exchange original notes that are properly
tendered on or before the expiration date and not withdrawn as permitted below.
As used in this prospectus, the term "expiration date" means 5:00 p.m., New
York City time, on , 2005. However, if we, in our sole discretion, have
extended the period of time for which the exchange offer is open, the term
"expiration date" means the latest time and date to which we extend the
exchange offer.
As of the date of this prospectus, $100,000,000 aggregate
principal amount of the original notes is outstanding. The original notes were
offered under an indenture dated November 3, 2005. This prospectus, together
with the letter of transmittal, is first being sent on or about , 2005 to all
holders of original notes known to us. Our obligation to accept original notes
for exchange in the exchange offer is subject to the conditions described below
under "Conditions to the Exchange Offer." We reserve the right to extend the
period of time during which the exchange offer is open. We would then delay
acceptance for exchange of any original notes by giving oral or written notice
of an extension to the holders of original notes as described below. During any
extension period, all original notes previously tendered will remain subject to
the exchange offer and may be accepted for exchange by us. Any original notes
not accepted for exchange will be returned to the tendering holder after the
expiration or termination of the exchange offer.
Original notes tendered in the exchange offer must be in
denominations of principal amount of $1,000 and any integral multiple of
$1,000.
We reserve the right to amend or terminate the exchange
offer, and not to accept for exchange any original notes not previously
accepted for exchange, upon the occurrence of any of the conditions of the
exchange offer specified below under "--Conditions to the Exchange Offer." We
will give oral or written notice of any extension, amendment, non-acceptance or
termination to the holders of the original notes as promptly as practicable. If
we materially change the terms of the exchange offer, we will resolicit tenders
of the original notes, file a post-effective amendment to the prospectus and
provide
27
notice to the noteholders. If the change is made less than five business days
before the expiration of the exchange offer, we will extend the offer so that
the noteholders have at least five business days to tender or withdraw. We will
notify you of any extension by means of a press release or other public
announcement no later than 9:00 a.m., New York City time on that date.
Our acceptance of the tender of original notes by a tendering
holder will form a binding agreement upon the terms and subject to the
conditions provided in this prospectus.
Procedures for Tendering
Except as described below, a tendering holder must, on or
prior to the expiration date:
o transmit a properly completed and duly executed letter of
transmittal, including all other documents required by the letter
of transmittal, to Wachovia Bank, National Association, as the
exchange agent, at the address listed below under the heading
"--Exchange Agent;" or
o if original notes are tendered in accordance with the book-entry
procedures listed below, the tendering holder must transmit an
agent's message to the exchange agent at the address listed below
under the heading "--Exchange Agent."
In addition:
o the exchange agent must receive, on or before the expiration
date, certificates for the original notes, if any;
o a timely confirmation of book-entry transfer of the original
notes into the exchange agent's account at the Depository Trust
Company, the book-entry transfer facility, along with the letter
of transmittal or an agent's message; or
o the holder must comply with the guaranteed delivery procedures
described below.
The Depository Trust Company will be referred to as DTC in
this prospectus.
The term "agent's message" means a message, transmitted to
DTC and received by the exchange agent and forming a part of a book-entry
transfer, that states that DTC has received an express acknowledgment that the
tendering holder agrees to be bound by the letter of transmittal and that we
may enforce the letter of transmittal against this holder.
The method of delivery of original notes, letters of
transmittal and all other required documents is at your election and risk. If
the delivery is by mail, we recommend that you use registered mail, properly
insured, with return receipt requested. In all cases, you should allow
sufficient time to assure timely delivery. You should not send letters of
transmittal or original notes to us.
If you are a beneficial owner whose original notes are
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee, and wish to tender, you should promptly instruct the registered
holder to tender on your behalf. Any registered holder that is a participant in
DTC's book-entry transfer facility system may make book-entry delivery of the
original notes by causing DTC to transfer the original notes into the exchange
agent's account.
Signatures on a letter of transmittal or a notice of
withdrawal must be guaranteed unless the original notes surrendered for
exchange are tendered:
o by a registered holder of the original notes who has not
completed the box entitled "Special Issuance Instructions" or
"Special Delivery Instructions" on the letter of transmittal, or
28
o for the account of an "eligible institution."
If signatures on a letter of transmittal or a notice of
withdrawal are required to be guaranteed, the guarantees must be by an
"eligible institution." An "eligible institution" is a financial institution,
including most banks, savings and loan associations and brokerage houses, that
is a participant in the Securities Transfer Agents Medallion Program, the New
York Stock Exchange Medallion Signature Program or the Stock Exchanges
Medallion Program.
We will determine in our sole discretion all questions as to
the validity, form and eligibility of original notes tendered for exchange.
This discretion extends to the determination of all questions concerning the
timing of receipts and acceptance of tenders. These determinations will be
final and binding.
We reserve the right to reject any particular original note
not properly tendered, or any acceptance that might, in our judgment or our
counsel's judgment, be unlawful. We also reserve the right to waive any
conditions of the exchange offer as applicable to all original notes prior to
the expiration date. We also reserve the right to waive any defects or
irregularities or conditions of the exchange offer as to any particular
original note prior to the expiration date. Our interpretation of the terms and
conditions of the exchange offer as to any particular original note either
before or after the expiration date, including the letter of transmittal and
the instructions to the letter of transmittal, shall be final and binding on
all parties. Unless waived, any defects or irregularities in connection with
tenders of original notes must be cured within a reasonable period of time.
None of we, the exchange agent or any other person will be under any duty to
give notification of any defect or irregularity in any tender of original
notes. Nor will we, the exchange agent or any other person incur any liability
for failing to give notification of any defect or irregularity.
If the letter of transmittal is signed by a person other than
the registered holder of original notes, the letter of transmittal must be
accompanied by a written instrument of transfer or exchange in satisfactory
form duly executed by the registered holder with the signature guaranteed by an
eligible institution. The original notes must be endorsed or accompanied by
appropriate powers of attorney. In either case, the original notes must be
signed exactly as the name of any registered holder appears on the original
notes.
If the letter of transmittal or any original notes or powers
of attorney are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, these persons should so indicate when signing. Unless
waived by us, proper evidence satisfactory to us of their authority to so act
must be submitted.
By tendering, each holder will represent to us that, among
other things:
o the holder is not an affiliate of ours (as defined in Rule 405
under the Securities Act) or a broker-dealer tendering notes
acquired directly from us for its own account,
o the exchange notes are being acquired in the ordinary course of
business of the person receiving the exchange notes, whether or
not that person is the holder, and
o neither the holder nor the other person has any arrangement or
understanding with any person to participate in the distribution
(within the meaning of the Securities Act) of the exchange notes.
In the case of a holder that is not a broker-dealer, that
holder, by tendering, will also represent to us that the holder is not engaged
in, and does not intend to engage in, a distribution of the exchange notes.
29
However, any purchaser of original notes who is our
"affiliate" (within the meaning of the Securities Act) who intends to
participate in the exchange offer for the purpose of distributing the exchange
notes or a broker-dealer (within the meaning of the Securities Act) that
acquired original notes in a transaction other than as part of its trading or
market-making activities and who has arranged or has an understanding with any
person to participate in the distribution of the exchange notes: (1) will not
be able to rely on the interpretation by the staff of the SEC set forth in the
applicable no-action letters; (2) will not be able to tender its original notes
in the exchange offer; and (3) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any sale or
transfer of the notes unless such sale or transfer is made pursuant to an
exemption from such requirements.
Each broker or dealer that receives exchange notes for its
own account in exchange for original notes, where the original notes were
acquired by it as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus that meets the
requirements of the Securities Act in connection with any resale of the
exchange notes. The letter of transmittal states that by so acknowledging and
by delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act. However, a
broker-dealer may be a statutory underwriter. See "Plan of Distribution."
Acceptance of Original Notes for Exchange; Delivery of Exchange Notes
Upon satisfaction or waiver of all of the conditions to the
exchange offer, we will accept, promptly after the expiration date, all
original notes properly tendered, unless we terminate the exchange offer
because of the non-satisfaction of conditions. We will issue the exchange notes
as soon as practicable after acceptance of the original notes. See
"--Conditions to the Exchange Offer" below. For purposes of the exchange offer,
we will be deemed to have accepted properly tendered original notes for
exchange when, as and if we have given oral or written notice to the exchange
agent, with prompt written confirmation of any oral notice.
For each original note accepted for exchange, the holder of
the original note will receive an exchange note having a principal amount equal
to that of the surrendered original note. The exchange notes will bear interest
from the most recent date to which interest has been paid on the original
notes. Accordingly, registered holders of exchange notes on the relevant record
date for the first interest payment date following the completion of the
exchange offer will receive interest accruing from the most recent date to
which interest has been paid. Original notes accepted for exchange will cease
to accrue interest from and after the date of completion of the exchange offer.
Holders of original notes whose original notes are accepted for exchange will
not receive any payment for accrued interest on the original notes otherwise
payable on any interest payment date, the record date for which occurs on or
after completion of the exchange offer and will be deemed to have waived their
rights to receive the accrued interest on the original notes.
In all cases, issuance of exchange notes for original notes
will be made only after timely receipt by the exchange agent of:
o certificates for the original notes, or a timely book-entry
confirmation of the original notes into the exchange agent's
account at the book-entry transfer facility;
o a properly completed and duly executed letter of transmittal; and
o all other required documents.
Unaccepted or non-exchanged original notes will be returned
without expense to the tendering holder of the original notes. In the case of
original notes tendered by book-entry transfer in accordance with the
book-entry procedures described below, the non-exchanged original notes will be
returned or recredited promptly.
30
Book-Entry Transfer
The exchange agent will make a request to establish an
account for the original notes at DTC for purposes of the exchange offer within
two business days after the date of this prospectus. Any financial institution
that is a participant in DTC's systems must make book-entry delivery of
original notes by causing DTC to transfer those original notes into the
exchange agent's account at DTC in accordance with DTC's procedure for
transfer. This participant should transmit its acceptance to DTC on or prior to
the expiration date or comply with the guaranteed delivery procedures described
below. DTC will verify this acceptance, execute a book-entry transfer of the
tendered original notes into the exchange agent's account at DTC and then send
to the exchange agent confirmation of this book-entry transfer. The
confirmation of this book-entry transfer will include an agent's message
confirming that DTC has received an express acknowledgment from this
participant that this participant has received and agrees to be bound by the
letter of transmittal and that we may enforce the letter of transmittal against
this participant. Delivery of exchange notes issued in the exchange offer may
be effected through book-entry transfer at DTC. However, the letter of
transmittal or facsimile of it or an agent's message, with any required
signature guarantees and any other required documents, must:
o be transmitted to and received by the exchange agent at the
address listed below under "--Exchange Agent" on or prior to the
expiration date; or
o comply with the guaranteed delivery procedures described below.
Exchanging Book-Entry Notes
The exchange agent and the book-entry transfer facility have
confirmed that any financial institution that is a participant in the
book-entry transfer facility may utilize the book-entry transfer facility
Automated Tender Offer Program, or ATOP, procedures to tender original notes.
Any participant in the book-entry transfer facility may make book-entry
delivery of original notes by causing the book-entry transfer facility to
transfer such original notes into the exchange agent's account in accordance
with the book-entry transfer facility's ATOP procedures for transfer. However,
the exchange for the original notes so tendered will only be made after a
book-entry confirmation of the book-entry transfer of original notes into the
exchange agent's account, and timely receipt by the exchange agent of an
agent's message and any other documents required by the letter of transmittal.
The term "agent's message" means a message, transmitted by the book-entry
transfer facility and received by the exchange agent and forming part of a
book-entry confirmation, which states that the book-entry transfer facility has
received an express acknowledgment from a participant tendering original notes
that are the subject of such book-entry confirmation that such participant has
received and agrees to be bound by the terms of the letter of transmittal, and
that we may enforce such agreement against such participant.
Guaranteed Delivery Procedures
If a registered holder of original notes desires to tender
the original notes, and the original notes are not immediately available, or
time will not permit the holder's original notes or other required documents to
reach the exchange agent before the expiration date, or the procedure for
book-entry transfer described above cannot be completed on a timely basis, a
tender may nonetheless be made if:
o the tender is made through an eligible institution;
o prior to the expiration date, the exchange agent received from an
eligible institution a properly completed and duly executed
letter of transmittal, or a facsimile of the letter of
transmittal, and notice of guaranteed delivery, substantially in
the form provided by us, by facsimile transmission, mail or hand
delivery;
(1) stating the name and address of the holder of
original notes and the amount of original notes
tendered;
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(2) stating that the tender is being made; and
(3) guaranteeing that within three New York Stock
Exchange trading days after the expiration date, the
certificates for all physically tendered original
notes, in proper form for transfer, or a book-entry
confirmation, as the case may be, and any other
documents required by the letter of transmittal will
be deposited by the eligible institution with the
exchange agent; and
o the certificates for all physically tendered original notes, in
proper form for transfer, or a book-entry confirmation, as the
case may be, and all other documents required by the letter of
transmittal, are received by the exchange agent within three New
York Stock Exchange trading days after the expiration date.
Withdrawal Rights
Tenders of original notes may be withdrawn at any time before
5:00 p.m., New York City time, on the expiration date.
For a withdrawal to be effective, the exchange agent must
receive a written notice of withdrawal at the address or, in the case of
eligible institutions, at the facsimile number, indicated below under
"--Exchange Agent" before 5:00 p.m., New York City time, on the expiration
date. Any notice of withdrawal must:
o specify the name of the person, referred to as the depositor,
having tendered the original notes to be withdrawn;
o identify the original notes to be withdrawn, including the
certificate number or numbers and principal amount of the
original notes;
o in the case of original notes tendered by book-entry transfer,
specify the number of the account at the book-entry transfer
facility from which the original notes were tendered and specify
the name and number of the account at the book-entry transfer
facility to be credited with the withdrawn original notes and
otherwise comply with the procedures of such facility;
o contain a statement that the holder is withdrawing his election
to have the original notes exchanged;
o be signed by the holder in the same manner as the original
signature on the letter of transmittal by which the original
notes were tendered, including any required signature guarantees,
or be accompanied by documents of transfer to have the trustee
with respect to the original notes register the transfer of the
original notes in the name of the person withdrawing the tender;
and
o specify the name in which the original notes are registered, if
different from that of the depositor.
If certificates for original notes have been delivered or
otherwise identified to the exchange agent, then, prior to the release of these
certificates, the withdrawing holder must also submit the serial numbers of the
particular certificates to be withdrawn and signed notice of withdrawal with
signatures guaranteed by an eligible institution unless this holder is an
eligible institution. We will determine all questions as to the validity, form
and eligibility, including time of receipt, of notices of withdrawal. Any
original notes so withdrawn will be deemed not to have been validly tendered
for exchange. No exchange notes will be issued unless the original notes so
withdrawn are validly re-tendered. Any original notes that have been tendered
for exchange, but which are not exchanged for any reason, will be returned to
the tendering holder without cost to the holder. In the case of original notes
tendered by
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book-entry transfer, the original notes will be credited to an account
maintained with the book-entry transfer facility for the original notes.
Properly withdrawn original notes may be re-tendered by following the
procedures described under "--Procedures for Tendering" above at any time on or
before 5:00 p.m., New York City time, on the expiration date.
Conditions to the Exchange Offer
Notwithstanding any other provision of the exchange offer, we
shall not be required to accept for exchange, or to issue exchange notes in
exchange for, any original notes, and may terminate or amend the exchange
offer, if at any time prior to the expiration date any of the following events
occurs:
o there is threatened, instituted or pending any action or
proceeding before, or any injunction, order or decree issued by,
any court or governmental agency or other governmental regulatory
or administrative agency or commission;
o a change in applicable law prohibits the consummation of such
exchange offer; or
o any change, or any development involving a prospective change,
has occurred or been threatened in our business, financial
condition, operations or prospects and those of our subsidiaries
taken as a whole that is or may be adverse to us, or we have
become aware of facts that have or may have an adverse impact on
the value of the original notes or the exchange notes, which in
our reasonable judgment in any case makes it inadvisable to
proceed with the exchange offer and about which change or
development we make a public announcement.
All conditions will be deemed satisfied or waived prior to
the expiration date, unless we assert them prior to the expiration date. The
foregoing conditions to the exchange offer are for our sole benefit and we may
prior to the expiration date assert them regardless of the circumstances giving
rise to any of these conditions, or we may prior to the expiration date waive
them in whole or in part in our reasonable discretion. If we do so, the
exchange offer will remain open for at least 5 business days following any
waiver of the preceding conditions. Our failure at any time to exercise any of
the foregoing rights will not be deemed a waiver of any right.
In addition, we will not accept for exchange any original
notes tendered, and no exchange notes will be issued in exchange for any
original notes, if at this time any stop order is threatened or in effect
relating to the registration statement of which this prospectus constitutes a
part. We are required to make every reasonable effort to obtain the withdrawal
of any order suspending the effectiveness of a Registration Statement at the
earliest possible moment.
Exchange Agent
We have appointed Wachovia Bank, National Association as the
exchange agent for the exchange offer. You should direct all executed letters
of transmittal to the exchange agent at the address indicated below. You should
direct questions and requests for assistance, requests for additional copies of
this prospectus or of the letter of transmittal and requests for notices of
guaranteed delivery to the exchange agent addressed as follows:
Delivery To:
Wachovia Bank, National Association
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By Hand, Registered or Certified Mail, or Overnight Courier:
Wachovia Bank, National Association
Bond Department-NC11531525
1525 West W. T. Harris Blvd., 3C3
Charlotte, NC 28262-8522
For Information Call:
(704) 590-7413
Attn: Marsha Rice
By Facsimile Transmission
(for eligible Institutions only):
(704) 590-7628
Attn: Marsha Rice
Confirm by Telephone:
(704) 590-7413
Attn: Marsha Rice
All other questions should be addressed to Selective Insurance Group, Inc., 40
Wantage Avenue, Branchville, New Jersey 07890, Attention: Michael H. Lanza,
Esq. If you deliver the letter of transmittal to an address other than any
address indicated above or transmit instructions via facsimile other than to
any facsimile number indicated above, then your delivery or transmission will
not constitute a valid delivery of the letter of transmittal.
Fees and Expenses
We will not make any payment to brokers, dealers or others
soliciting acceptances of the exchange offer. We have agreed to pay all
expenses incidental to the exchange offer other than commissions and
concessions of any broker or dealer and will indemnify holders of the notes,
including any broker-dealers, against certain liabilities, including
liabilities under the Securities Act. The estimated cash expenses to be
incurred in connection with the exchange offer will be paid by us. We estimate
these expenses in the aggregate to be approximately $75,000.
Accounting Treatment
We will not recognize any gain or loss for accounting
purposes upon the consummation of the exchange offer. We will amortize the
expense of the exchange offer over the term of the exchange notes in accordance
with accounting principles generally accepted in the United States of America.
Transfer Taxes
Holders who tender their original notes for exchange shall
pay transfer taxes, if any, relating to the sale or disposition of such
holder's securities, including pursuant to a shelf registration statement.
Consequences of Exchanging or Failing to Exchange the Original Notes
Holders of original notes who do not exchange their original
notes for exchange notes in the exchange offer will continue to be subject to
the provisions in the indenture regarding transfer and exchange of the original
notes and the restrictions on transfer of the original notes as described in
the
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legend on the original notes as a consequence of the issuance of the original
notes under exemptions from, or in transactions not subject to, the
registration requirements of the Securities Act and applicable state securities
laws. In general, the original notes may not be offered or sold, unless
registered under the Securities Act, except under an exemption from, or in a
transaction not subject to, the Securities Act and applicable state securities
laws. Original note holders that do not exchange original notes for exchange
notes in the exchange offer will no longer have any registration rights with
respect to such notes.
Under existing interpretations of the Securities Act by the
SEC's staff contained in several no-action letters to third parties, and
subject to the immediately following sentence, we believe that the exchange
notes would generally be freely transferable by holders after the exchange
offer without further registration under the Securities Act, subject to certain
representations required to be made by each holder of exchange notes, as set
forth below. However, any purchaser of exchange notes who is one of our
"affiliates" (as defined in Rule 405 under the Securities Act) or who intends
to participate in the exchange offer for the purpose of distributing the
exchange notes:
o will not be able to rely on the interpretation of the SEC's
staff;
o will not be able to tender its original notes in the exchange
offer; and
o must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any sale or
transfer of the notes unless such sale or transfer is made
pursuant to an exemption from such requirements. See "Plan of
Distribution."
We do not intend to seek our own interpretation regarding the
exchange offer and there can be no assurance that the SEC's staff would make a
similar determination with respect to the exchange notes as it has in other
interpretations to other parties, although we have no reason to believe
otherwise.
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DESCRIPTION OF OTHER INDEBTEDNESS
8.75% Convertible Subordinated Debentures Due 2008
On December 29, 1982, we issued convertible subordinated
debentures in the principal amount of $25.0 million. The debentures bear
interest at a rate of 8.75% per annum, which is payable on the unpaid principal
semiannually on January 1 and July 1 in each year to holders of record at 5:00
p.m., New York City time, on the preceding December 15 and June 15,
respectively. The debentures are convertible into common stock at an effective
conversion price of $7.08 per share. The remaining principal amount of the
debentures, including any accrued interest, is due on January 1, 2008.
1.6155% Senior Convertible Notes Due 2032
In 2002, we issued $305 million aggregate principal amount of
1.6155% senior convertible notes due September 24, 2032, at a discount of
61.988% resulting in an effective yield of 4.25%. Interest on the convertible
notes is payable at a rate of 1.6155% semiannually on March 24 and September 24
in each year to holders of record at 5:00 p.m., New York City time, on the
preceding March 9 or September 9, respectively. After that date, cash interest
will not be paid on the convertible notes prior to maturity unless contingent
cash interest becomes payable. Contingent cash interest becomes payable if the
average market price of a convertible note for the applicable five-trading day
period equals 120% or more of the sum of the convertible note's issue price,
accrued original issue discount and accrued cash interest, if any, for a
convertible note to the day immediately preceding the relevant six-month
period. The contingent cash interest payable per convertible note in respect of
any quarterly period within any six-month period will equal the greater of (a)
any regular cash dividends per share paid by us on our common stock during that
quarterly period multiplied by the then applicable conversion rate or (b) $0.15
multiplied by 12.9783. The convertible notes will be convertible at the option
of the holders, if the conditions for conversion are satisfied, into shares of
our common stock at a conversion price of $29.29 per share. The convertible
notes have a contingent conversion feature that allows conversion of the
convertible notes when the stock price has maintained a 20% premium to the
conversion price of $29.29, or $35.15, for 20 of 30 consecutive trading days
ending on the last trading day of a calendar quarter. Then, on any business day
in the following calendar quarter, the holders may surrender notes for
conversion into shares of common stock, or cash at our option. Our Board of
Directors at their quarterly meeting on October 26, 2004, voted to waive this
contingency, and the convertible notes are now, and will continue to be,
convertible into shares of our common stock pursuant to the terms of the
indenture. If all the convertible notes were converted, we would be required to
issue 3.9 million shares of common stock. The 20% premium trigger is in effect
until and including September 30, 2009 and declines approximately 0.11% per
calendar quarter thereafter to 10% on the last day of the quarter ending June
30, 2032. Holders may also surrender convertible notes for conversion only
during any period in which the credit rating assigned to the convertible notes
is "Ba2" or lower by Moody's or "BB+" or lower by S&P, the convertible notes
are no longer rated by either Moody's or S&P, or the credit rating assigned to
the convertible notes has been suspended or withdrawn by either Moody's or S&P.
The convertible notes will cease to be convertible pursuant to this credit
rating criteria during any period or periods in which all of the credit ratings
are increased above such levels. The convertible notes are redeemable by us in
whole or in part, at any time on or after September 24, 2007, at a price equal
to the sum of the issue price, plus the call premium, if any, plus accrued
original issue discount and accrued and unpaid cash interest, if any, on such
convertible notes to the applicable redemption date. The holders of the
convertible notes may require us to purchase all or a portion of their
convertible notes on either September 24, 2009, 2012, 2017, 2022 or 2027 at
stated prices plus accrued cash interest, if any, to the purchase date. The
holders may also require us to purchase all or a portion of their convertible
notes upon a change in control. We may pay the purchase price in cash or shares
of our common stock or in a combination of cash and shares of our common stock.
Notes Payable
Between 2000 and 2004, we entered into two note purchase
agreements with various lenders for three series of senior notes at interest
rates ranging from 7.25% to 8.87%. The aggregate principal amount of these
senior notes outstanding is $123.4 million as of September 30, 2005. Each note
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purchase agreement contains restrictive covenants that limit our ability to
declare dividends or incur additional indebtedness in excess of certain
debt-to-capitalization ratios. At September 30, 2005, the amount available for
dividends to stockholders under said restrictions was $306.7 million for the
8.63% and 8.87% senior notes. After taking into account this offering, we will
be in compliance with the debt-to-capitalization ratios under both note
purchase agreements.
The 8.63% and 8.87% Senior Notes
On May 4, 2000, we entered into a $30.0 million and a $61.5
million note purchase agreement with various lenders covering the 8.63% and
8.87% senior notes, respectively.
Commencing on May 4, 2003, we paid $6.0 million in principal,
together with accrued interest thereon, for the 8.63% senior notes. This $6.0
million principal payment is required annually through May 4, 2007. For the
8.87% senior notes, we are required to pay $12.3 million principal amount in
each year commencing on May 4, 2006 and ending on May 4, 2010, inclusive,
together with accrued interest thereon. The unpaid principal amount of the
8.63% and 8.87% senior notes accrues interest and is payable semiannually on
May 4 and November 4 of each year, until the principal is paid in full.
The 7.25% Senior Notes
On November 16, 2004, we sold unsecured senior notes with an
annual interest rate of 7.25% and a 2034 maturity date in the aggregate
principal amount of $50.0 million. The senior notes were issued under an
indenture between us and Wachovia Bank, National Association, as trustee, dated
November 16, 2004. The notes were offered in the United States to qualified
institutional buyers pursuant to Rule 144A under the Securities Act and to
institutional investors that are accredited investors within the meaning of the
Securities Act and to non-U.S. persons outside the United States pursuant to
Regulation S under the Securities Act. We received $49.6 million in net
proceeds from the transaction, which we used for general corporate purposes. In
May 2005, we completed an exchange offer in which the privately issued notes
were exchanged for publicly registered notes. The terms of the exchange notes
are substantially identical to the original notes, except that the exchange
notes are registered under the Securities Act and the transfer restrictions and
registration rights applicable to the original notes do not apply to the
exchange notes.
Revolving Lines of Credit
As of September 30, 2005, we had revolving lines of credit
totaling $45.0 million with State Street Corporation ($20.0 million) and
Wachovia Bank, National Association ($25.0 million). As of September 30, 2005,
there was no balance outstanding. Interest is determined on a LIBOR, prime rate
or money market rate basis at our option.
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DESCRIPTION OF THE NOTES
The exchange notes will be issued under an indenture between
us and Wachovia Bank, National Association, as trustee, dated as of November 3,
2005. The indenture contains provisions that define your rights under the notes
and governs our obligations under the notes. The indenture provides for the
issuance of the notes and sets forth the duties of the trustee. The following
description is only a summary of certain provisions of the indenture and the
notes, and is qualified in its entirety by reference to the provisions of the
indenture and the notes, including the definitions therein of certain terms. A
copy of the indenture has been filed as an exhibit to our current report on
Form 8-K filed on November 9, 2005.
When we refer to "we," "our" or "us" in this section, we
refer only to Selective Insurance Group, Inc., not including any of its current
or future subsidiaries.
General
The exchange notes are limited to $100 million aggregate
principal amount. We may, without the consent of the holders, reopen this
series of notes and issue additional notes of the series having the same terms
as the notes offered hereby (except for the issue date and offering price).
Additional notes issued in this manner will be consolidated with, and form a
single series with, the previously outstanding notes.
Except for certain limitations on liens on stock of
Restricted Subsidiaries, as defined below in "--Limitations on Liens on Stock
of Restricted Subsidiaries," the indenture does not contain any provisions
restricting us or any of our subsidiaries from incurring, assuming or becoming
liable with respect to any indebtedness or other obligations, whether secured
or unsecured, or from paying dividends or making other distributions on capital
stock or from purchasing or redeeming capital stock. The indenture also does
not contain any financial covenants or any covenants or other provisions that
afford protection to holders of notes in the event of a highly leveraged
transaction, reorganization, restructuring, merger or similar transaction
except to the extent described under "--Other Terms of the
Indenture--Consolidation, Merger and Sale of Assets" below.
Ranking. The exchange notes will be unsecured senior
obligations and will rank equally with our other unsecured senior indebtedness.
As of September 30, 2005, we had outstanding approximately $240.1 million of
unsecured indebtedness, including approximately (1) $115.9 million of senior
convertible notes, (2) $123.4 million of senior notes and (3) $0.8 million of
convertible subordinated debentures. The exchange notes will rank equally with
the senior convertible notes and the senior notes. The exchange notes will be
senior to the convertible subordinated debentures. As of September 30, 2005, we
had no secured indebtedness outstanding.
In addition, we are structured as a holding company, and we
conduct most of our business operations through our subsidiaries. The exchange
notes will be effectively subordinated to all existing and future indebtedness
and other liabilities and commitments of our subsidiaries. As of September 30,
2005, our subsidiaries had an aggregate of approximately $278.8 million of
liabilities (excluding $2.0 billion of reserves for losses and loss expenses
and $808.1 million of unearned premium reserves).
Available Information; No Resales of Notes by Us. We file
certain reports and other information with the SEC in accordance with the
requirements of Sections 13 and 15(d) under the Exchange Act. See "Where You
Can Find More Information." In addition, at any time that Sections 13 and 15(d)
cease to apply to us, we will file comparable reports and information with the
trustee and the SEC, and mail such reports and information to holders of notes
at their registered addresses, for so long as any notes remain outstanding.
Except as otherwise provided in the indenture, during the two-year period
following the issuance of the notes, we will not, and will not permit any of
our affiliates to, resell any notes which constitute "restricted securities"
under Rule 144 except pursuant to an effective registration statement under the
Securities Act.
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Interest
The exchange notes will accrue interest at the rate of 6.70%
per annum (based on a 360-day year of twelve 30-day months) from the last
interest payment date on which interest was paid on the original note
surrendered in exchange therefor or, if no interest has been paid on such
original note, from November 3, 2005; provided, that if an original note is
surrendered for exchange on or after a record date for an interest payment date
that will occur on or after the date of such exchange and as to which interest
will be paid, interest on the exchange note received in exchange therefor will
accrue from the date of such interest payment date. Interest on the exchange
notes is payable on May 1 and November 1 of each year, commencing May 1, 2006.
Interest payments on an interest payment date will be made to the holder in
whose name a note is registered at 5:00 p.m., New York City time, on the April
15 or October 15 immediately preceding the interest payment date, whether or
not a business day. Except as otherwise specified under "--Payments" below,
interest payments will be made by check mailed or delivered to the registered
holder at the address appearing in the security register. The trustee initially
will act as paying agent for the exchange notes. No additional interest will be
paid on original notes tendered and accepted for exchange.
Maturity; Optional Redemption
The exchange notes will mature on November 1, 2035, the
stated maturity date. The exchange notes will not be redeemable, in whole or in
part, at our option or at the option of any noteholder at any time prior to
November 1, 2035.
Payments
We will pay interest on each exchange note on each interest
payment date, and the principal of each exchange note on November 1, 2035
against presentation and surrender of such exchange note by the registered
holder thereof at the office of the paying agent, which initially will be an
office or agency of the trustee, or an office or agency maintained by us for
such a purpose, as the case may be, by wire transfer of immediately available
funds, if appropriate written wire transfer instructions are received by the
paying agent not less than 15 days prior to the stated maturity date. If those
instructions are not so received, the principal will be paid by check against
such presentation and surrender.
If an interest payment date or the stated maturity date falls
on a Saturday, Sunday or other day on which banking institutions in the State
of New York are authorized or obligated by law or executive order to close, the
required payment due on such date will instead be made on the next business
day. No additional interest will accrue as a result of such delayed payment.
Prior to presentment of a note for registration of transfer,
we, the trustee and any other agent of ours or the trustee may treat the
registered holder of each note as the owner of the note for the purpose of
receiving payments of principal of and interest on the note and for all other
purposes whatsoever.
All moneys paid by us to the trustee or a paying agent for
the payment of principal of and any interest on the notes that remain unclaimed
two years after that principal, premium or interest becomes due and payable
will, unless otherwise required by mandatory provisions of applicable escheat,
abandoned or unclaimed property law, be repaid to us and the holder of the
notes as an unsecured general creditor may thereafter look only to us for
payment.
Limitation on Liens on Stock of Restricted Subsidiaries
The terms of the notes provide that we and our Restricted
Subsidiaries may not incur any indebtedness secured by a lien on the capital
stock of a Restricted Subsidiary unless the notes are secured equally and
ratably with that indebtedness.
For purposes of this covenant:
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"lien" means any mortgage, deed of trust, pledge, lien,
security interest or other encumbrance (including, without limitation, any
conditional sale or other title retention agreement or lease in the nature
thereof, any filing or agreement to give a lien or file a financing statement
as a debtor under the Uniform Commercial Code or any similar statute other than
to reflect ownership by a third party of property under a lease that is not in
the nature of a conditional sale or title retention agreement); and
"Restricted Subsidiary" means any subsidiary that is
incorporated under the laws of any state of the United States or of the
District of Columbia except a subsidiary (a) that has total assets which are
less than 20% of our and our consolidated subsidiaries' total assets (including
that subsidiary) on the most recent fiscal year-end balance sheets of the
subsidiary and our and our consolidated subsidiaries or (b) that, in the
judgment of our Board of Directors, as evidenced by a Board resolution, is not
material to our and our consolidated subsidiaries' financial condition, taken
as a whole. As of the date of this prospectus, Selective Insurance Company of
America meets the definition of Restricted Subsidiary.
Limitation on Disposition of Stock of Restricted Subsidiaries
As long as any notes are outstanding, we will not issue,
sell, transfer or otherwise dispose of any shares of capital stock of any
Restricted Subsidiary, or any securities convertible into or exercisable or
exchangeable for shares of capital stock of any Restricted Subsidiary, or
warrants, rights or options to subscribe for or purchase shares of capital
stock of any Restricted Subsidiary, unless such issuance, sale, transfer or
other disposition is for at least fair value (as determined by our board of
directors or a committee thereof acting in good faith) ("Fair Value") and we
will own, directly or indirectly, at least 80% of the capital stock of such
Restricted Subsidiary after giving effect to that transaction. Furthermore, we
will not permit any Restricted Subsidiary to:
(1) merge or consolidate with or into any corporation or
other person, unless such merger or consolidation is for at least fair
value and (i) such Restricted Subsidiary is the surviving corporation
or person, or (ii) at least 80% of the surviving corporation's issued
and outstanding voting stock is owned, directly or indirectly, by such
Restricted Subsidiary; or
(2) lease, sell, assign or transfer all or substantially all
of its properties and assets to any corporation or other person (other
than to us), unless such lease, sale, assignment or transfer is for at
least fair value and at least 80% of the issued and outstanding voting
stock of that corporation or other person is owned, directly or
indirectly, by such Restricted Subsidiary following such lease, sale
or assignment.
Notwithstanding the foregoing, we may merge or consolidate
any of our other subsidiaries (including our Insurance Subsidiaries) into or
with another of our wholly owned subsidiaries and we may sell, transfer or
otherwise dispose of our business in accordance with the provisions of "--Other
Terms of the Indenture--Consolidation, Merger and Sale of Assets" below. In
addition, the foregoing covenant will not prohibit any issuance or disposition
of securities by any of our other subsidiaries either (1) to us or any
Restricted Subsidiary in accordance with applicable law or (2) if required by
law or any regulation or order of any governmental or insurance regulatory
authority.
Form, Denomination and Registration
The exchange notes will be issued in fully registered form in
minimum denominations of $1,000 and integral multiples of $1,000. Except as
described below, the exchange notes will initially be represented by one or
more global notes, in definitive, fully registered form without interest
coupons. The global notes will be deposited with the trustee as custodian for
DTC and registered in the name of Cede & Co. or another nominee as DTC may
designate. All interests in the global notes will be subject to the operations
and procedures of DTC, the Euroclear and Clearstream Banking.
DTC
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DTC has advised us as follows. DTC is:
o a limited-purpose trust company organized under the laws of the
State of New York;
o a member of the Federal Reserve System;
o a "clearing corporation" within the meaning of the New York
Uniform Commercial Code; and
o a "clearing agency" registered pursuant to the provisions of
Section 17A of the Securities Exchange Act of 1934.
DTC was created to hold securities for DTC participants and
to facilitate the clearance and settlement of transactions between DTC
participants through electronic book entry changes in accounts of DTC
participants, thereby eliminating the need for physical movement of
certificates. DTC participants include securities brokers and dealers, banks,
trust companies, clearing corporations and may in the future include certain
other organizations, (the "DTC participants"). Indirect access to the DTC
system is also available to other banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a DTC participant,
either directly or indirectly, (the "indirect DTC participants").
Transfers of ownership or other interests in the notes in DTC
may be made only through DTC participants. Indirect DTC participants are
required to effect transfers through a DTC participant. DTC has no knowledge of
the actual beneficial owners of the notes. DTC's records reflect only the
identity of the DTC participants to whose accounts the notes are credited,
which may not be the beneficial owners. DTC participants will remain
responsible for keeping account of their holdings on behalf of their customers
and for forwarding all notices concerning the notes to their customers.
So long as DTC, or its nominee, is a registered owner of the
global note, payments of principal of and interest on the notes will be made in
immediately available funds to DTC. DTC's practice is to credit DTC
participants' accounts on the applicable payment date in accordance with their
respective holdings shown on its records, unless DTC has reason to believe that
it will not receive payment on that date. Payment to DTC is our responsibility.
Disbursement of payments to DTC participants will be DTC's responsibility.
Disbursement of payments to the beneficial owners will be the responsibility of
DTC participants and indirect DTC participants, will be governed by standing
instructions and customary practices as is the case with securities held for
the accounts of customers in bearer form or registered in "street name," and
will not be the responsibility of DTC or any other party, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Because DTC can only act on behalf of DTC participants, who in turn act on
behalf of indirect DTC participants, and because owners of beneficial interests
in the notes holding through DTC will hold interests in the notes through DTC
participants or indirect DTC participants, the ability of the owners of
beneficial interests to pledge notes to persons or entities that do not
participate in DTC, or otherwise take actions with respect to the notes, may be
limited.
Ownership of interests in the global notes will be shown on,
and the transfer of that ownership will be effected only through, records
maintained by DTC, the DTC participants and the indirect DTC participants. All
interests in a global note, including those held through Euroclear or
Clearstream Banking, may be subject to the procedures and requirements of DTC.
The laws of some jurisdictions require that certain persons take physical
delivery in definitive form of securities which they own. Consequently, the
ability to transfer beneficial interests in the global note is limited to such
extent.
According to DTC, the foregoing information with respect to
DTC has been provided to the industry for informational purposes only and is
not intended to serve as a representation, warranty or contract modification of
any kind.
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Euroclear
Euroclear has advised us as follows: Euroclear was created in
1968 to hold securities for its participants and to clear and settle
transactions between its participants through simultaneous electronic
book-entry delivery against payment, thereby eliminating the need for physical
movement of certificates and any risk from lack of simultaneous transfers of
securities and cash. Euroclear provides various other services, including
securities lending and borrowing, and interfaces with domestic markets in
several countries. Euroclear is operated by the Euroclear Operator, under
contract with Euroclear Clearance Systems, S.C., a Belgian cooperative
corporation (the "Cooperative"). All operations are conducted by the Euroclear
Operator, and all Euroclear securities clearance accounts and Euroclear cash
accounts are accounts with the Euroclear Operator, not the Cooperative. The
Cooperative establishes policy for Euroclear on behalf of Euroclear
participants. Euroclear participants include banks (including central banks),
securities brokers and dealers and other professional financial intermediaries
and may include the initial purchaser. Indirect access to Euroclear is also
available to others that clear through or maintain a custodial relationship
with a Euroclear participant, either directly or indirectly.
The Euroclear Operator was granted a banking license by the
Belgian Banking and Finance Commission in 2000, authorizing it to carry out
banking activities on a global basis. It took over operation of Euroclear from
the Brussels, Belgium office of Morgan Guaranty Trust Company of New York on
December 31, 2000.
Securities clearance accounts and cash accounts with the
Euroclear Operator are governed by the Terms and Conditions Governing Use of
Euroclear and the related Operating Procedures of the Euroclear System, and
applicable Belgian law, or the Terms and Conditions. The Terms and Conditions
govern transfers of securities and cash within Euroclear, withdrawals of
securities and cash from Euroclear, and receipts of payments with respect to
securities in Euroclear. All securities in Euroclear are held on a fungible
basis without attribution of specific certificates to specific securities
clearance accounts. The Euroclear Operator acts under the Terms and Conditions
only on behalf of Euroclear participants and has no record of or relationship
with persons holding through Euroclear participants.
Distributions with respect to notes held beneficially through
Euroclear will be credited to the cash accounts of Euroclear participants in
accordance with the Terms and Conditions, to the extent received by Euroclear.
Clearstream Banking
Clearstream Banking has advised us as follows: Clearstream
Banking is incorporated under the laws of The Grand Duchy of Luxembourg as a
professional depository. Clearstream Banking holds securities for its
participants and facilitates the clearance and settlement of securities
transactions between its participants through electronic book-entry changes in
accounts of its participants, thereby eliminating the need for physical
movement of certificates. Clearstream Banking provides to its participants,
among other things, services for safekeeping, administration, clearance and
settlement of internationally traded securities and securities lending and
borrowing. Clearstream Banking interfaces with domestic markets in several
countries. As a professional depository, Clearstream Banking is subject to
regulation by the Luxembourg Monetary Institute. Clearstream Banking
participants are financial institutions around the world, including securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations and may include the initial purchaser. Indirect access to
Clearstream Banking is also available to others that clear through or maintain
a custodial relationship with a Clearstream Banking participant either directly
or indirectly.
Distributions with respect to notes held beneficially through
Clearstream Banking will be credited to cash accounts of Clearstream Banking
participants in accordance with its rules and procedures, to the extent
received by Clearstream Banking.
42
Transfer and Exchange
Transfers between DTC participants will be effected in
accordance with DTC's procedures, and will be settled in same-day funds.
Transfers between participants in Euroclear or Clearstream Banking will be
effected in the ordinary way in accordance with their respective rules and
operating procedures.
Cross-market transfers between DTC participants, on the one
hand, and Euroclear or Clearstream Banking participants, on the other hand,
will be effected through DTC in accordance with DTC's rules on behalf of
Euroclear or Clearstream Banking, as the case may be, by its respective
depository; however, such cross-market transactions will require delivery of
instructions to Euroclear or Clearstream Banking, as the case may be, by the
counterparty in such system in accordance with the rules and procedures and
within the established deadlines (Brussels time) of such system. Euroclear or
Clearstream Banking, as the case may be, will, if the transaction meets its
settlement requirements, deliver instructions to its respective depository to
take action to effect final settlement on its behalf by delivering or receiving
interests in the relevant global notes in DTC, and making or receiving payment
in accordance with normal procedures for same-day funds settlement on its
behalf by delivering or receiving interests in the relevant global notes in
DTC, and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC. Euroclear participants and
Clearstream Banking participants may not deliver instructions directly to the
depositaries for Euroclear or Clearstream Banking.
DTC has advised us that it will take any action permitted to
be taken by a holder of the exchange notes only at the direction of one or more
participants to whose account with DTC interests in the exchange notes are
credited.
Although DTC, Euroclear and Clearstream Banking have agreed
to the foregoing procedures to facilitate transfers of interests in the
exchange notes among participants in DTC, Euroclear and Clearstream Banking,
they are under no obligation to perform or to continue to perform such
procedures, and such procedures may be discontinued at any time. Neither we nor
the trustee will have any responsibility for the performance by DTC, Euroclear
or Clearstream Banking or their respective participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
Other Terms of the Indenture
Exchange of Notes. Notes are exchangeable for other notes of
a like aggregate principal amount and with like terms and conditions of
different authorized denominations. Notes may be presented for exchange or for
registration of transfer at the office of a paying agent designated by us for
that purpose. We may at any time rescind the designation of a paying agent or
approve a change in the location through which any paying agent acts, except
that we are required to maintain a paying agent in each place of payment for
the notes.
Consolidation, Merger and Sale of Assets. Under the
indenture, we may not consolidate with or merge into any other entity or sell,
convey, transfer or lease all or substantially all of our properties and assets
as an entirety to any entity, unless: (1) either (a) we are the continuing
corporation or (b) the entity (if other than us) formed by the consolidation or
into which we are merged or the entity that acquires all or substantially all
of our properties and assets is a corporation, partnership or trust organized
and validly existing under the laws of United States, any State or the District
of Columbia, and expressly assumes, through a supplemental indenture, payment
of the principal of and any premium and interest on all the debt securities and
the performance of all of our covenants applicable to the indebtedness; (2)
immediately thereafter, no event of default, as defined below, (and no event
that, after notice or lapse of time, or both, would become an event of default)
has occurred and is continuing; (3) if, as a result of any such consolidation
or merger or such conveyance, transfer or lease, our properties or assets would
become subject to a mortgage, pledge, lien, security interest or other
encumbrance which would not be permitted by the indenture, we or such successor
Person, as the case may be, shall secure the notes equally and ratably
43
with (or prior to) all indebtedness secured thereby; and (4) we have delivered
to the trustee certificates and opinions stating that the foregoing conditions
have been complied with.
In the event of any transaction (other than a lease)
described above in which we are not the continuing corporation, the successor
entity formed or remaining would be substituted for us under the indenture, and
we would be discharged from all obligations and covenants under the indenture
and the notes.
Events of Default. The following are events of default under
the indenture with respect to the notes: (1) default in the payment of any
interest on any note for 30 days after becoming due; (2) default in the payment
of the principal of any note when due; (3) default in the performance of, or
breach of, any covenant or warranty applicable to the notes for 60 days after
written notice of the failure, requiring us to remedy the same, is given to us
by the trustee or to us and the trustee by the holders of 25% in aggregate
principal amount of outstanding notes; (4) default under any bond, debenture,
note or other evidence of indebtedness or any mortgages, indentures or
instruments under which we then have outstanding indebtedness in an aggregate
amount of $10 million or more that has not already matured in accordance with
its terms, has become due after the expiration of any applicable grace period
or has been accelerated and the acceleration has not been rescinded or annulled
or the indebtedness has not been discharged within ten days after notice is
given to us by the trustee or to us and the trustee by the holders of at least
25% in aggregate principal amount of the outstanding notes; or (5) certain
events of bankruptcy, insolvency or reorganization with respect to us occur.
If an event of default occurs and is continuing with respect
to a series of debt securities, either the trustee or the holders of at least
25% in principal amount of the outstanding notes may declare the entire
principal amount of all the notes to be immediately due and payable.
We are required to furnish the trustee annually a statement
by certain of our officers to the effect that, to the best of their knowledge,
we are not in default of any of our obligations under the indenture or, if
there has been a default, specifying each default.
The trustee must, within 90 days after a default, give the
holders of the notes notice of the default (the term default to mean the events
specified above without grace periods). However, except in the case of a
default in the payment of principal, premium or interest, the trustee may
withhold notice if it in good faith determines that withholding the notice is
in the interest of the holders of the notes.
The holders of a majority in outstanding principal amount of
the notes have the right, subject to certain limitations, to direct the time,
method and place of conducting any proceeding for any remedy available to the
trustee or exercising any trust or power conferred on the trustee, and to waive
certain defaults. The indenture provides that if an event of default occurs and
is continuing, the trustee must exercise such of its rights and powers under
the indenture, and use the same degree of care and skill in their exercise, as
a prudent person would exercise or use under the circumstances in the conduct
of his or her own affairs. Subject to those provisions, the trustee will be
under no obligation to exercise any of its rights or powers under the indenture
at the request of any of the holders of the notes unless (i) they have offered
to the trustee reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in compliance with the request and
(ii) the trustee in good faith reasonably determines that such exercise would
involve the trustee in personal liability for which the security and all other
remedies available to the trustee are not sufficient.
Satisfaction and Discharge. The indenture provides that we
generally will be discharged from our obligations under the notes if we deliver
to the trustee for cancellation all outstanding notes or if, within one year
prior to or following the notes having become due or payable, (1) we deposit
with the trustee, in trust, sufficient funds to pay the principal of, premium,
if any, and any interest to stated maturity on the notes, (2) we pay all other
sums payable with respect to the notes and (3) certain other conditions are
met. Upon discharge, the holders of the notes are no longer entitled to the
benefits of the indenture, except for certain rights, including registration of
transfer and exchange of the notes and replacement of mutilated, destroyed,
lost or stolen debt securities, and may look only to the deposited funds.
44
Such a discharge may be treated as a taxable exchange of the
debt securities for an issue of obligations of the trust or a direct interest
in the cash and securities held in the trust. In that case, holders of the debt
securities would recognize gain or loss as if the trust obligations, or the
cash or securities deposited, had actually been received by them in exchange
for their debt securities and might be required to include in income a
different amount than would be includable in the absence of discharge.
Prospective investors are urged to consult their own tax advisors as to the
specific consequences of discharge.
Full Defeasance. If there is a change in U.S. federal tax
law, as described below, we can legally release ourselves from all payment and
other obligations on the notes. This is called full defeasance. To do so, each
of the following must occur:
o We must deposit in trust for the benefit of all holders of the
notes a combination of money and U.S. Government or U.S.
Government agency notes or bonds that will, in the opinion of a
nationally recognized accounting firm, generate enough cash to
make interest, principal and any other payments on the notes we
are offering on their various due dates.
o There must be a change in current U.S. federal tax law or an
Internal Revenue Service ruling that lets us make the above
deposit without causing you to be taxed on your notes any
differently as compared to if we did not make the deposit and
just continued to repay the notes ourselves. Under current
federal tax law, the deposit and our legal release from the notes
would be treated as though we took back your notes and gave you
your share of the cash and notes or bonds deposited in trust. In
that event, you could recognize gain or loss on your notes.
We must deliver to the trustee a legal opinion of our counsel
confirming the tax law change described above. If we ever did accomplish full
defeasance, you would have to rely solely on the trust deposit for payments on
your notes. You could not look to us for payment in the event of any shortfall.
Covenant Defeasance. Under current U.S. federal tax law, we
can make the same type of deposit described above under "--Full Defeasance" and
be released from certain restrictive covenants relating to the notes. This is
called covenant defeasance. In that event, you would lose the protection of
those restrictive covenants. In order to achieve covenant defeasance, we must
do both of the following:
o We must deposit in trust for the benefit of the holders of the
notes a combination of money and U.S. Government or U.S.
Government agency notes or bonds that will, in the opinion of a
nationally recognized accounting firm, generate enough cash to
make interest, principal and any other anticipated payments on
the notes we are offering on their various due dates.
o We must deliver to the trustee a legal opinion of our counsel
confirming that under current U.S. federal income tax law we may
make the above deposit without causing you to be taxed on your
notes any differently than if we did not make the deposit and
just continued to repay the notes ourselves.
If we accomplish covenant defeasance with regard to your
note, the following provisions of the indenture and the notes would no longer
apply: the covenants described under "Limitation on Liens on Stock of
Restricted Subsidiaries" and "Limitation on Disposition of Stock of Restricted
Subsidiaries", the conditions described in clause (3) of "--Consolidation,
Merger and Sales of Assets", covenants to maintain our properties and pay all
taxes and claims for labor, material and supplies and our covenant to provide
information to holders and prospective purchasers of the notes to permit
compliance with Rule 144A in connection with resales of the notes.
If we accomplish covenant defeasance, you can still look to
us for repayment of your notes in the event of any shortfall in the trust
deposit. You should note, however, that if one of the remaining events of
default occurred, such as our bankruptcy or insolvency, and your notes became
immediately due and payable, there may be a shortfall. Depending on the event
causing the default, you may not be able to obtain payment of the shortfall.
45
Our obligations under the indenture and the notes, other than
our obligations under the covenants defeased, will remain in full force and
effect. This provision is in addition to the provisions for satisfaction and
discharge described above.
Modification and Waiver. Certain modifications and amendments
of the indenture (which, generally, either benefit or do not affect the holders
of outstanding debt securities) may be made by us and the trustee without the
consent of holders of the notes. Other modifications and amendments of the
indenture require the consent of the holders of more than a majority in
principal amount of the outstanding notes. However, no modification or
amendment may, without the consent of the holder of each affected outstanding
note, (1) change the stated maturity of the principal of, or any installment of
principal of or interest on, the note, (2) reduce the principal amount of or
any interest on the note, (3) change the place of payment, (4) impair the right
to institute suit for the enforcement of any payment on or with respect to the
notes on or after its stated maturity or (5) reduce the percentage in principal
amount of outstanding debt securities of any series, the consent of the holders
of which is required for modification or amendment of the indenture or for
waiver of compliance with certain provisions of such indenture or for waiver of
certain defaults.
The holders of not less than a majority in principal amount
of the outstanding notes may on behalf of the holders of all the notes waive
compliance by us with certain restrictive provisions of the indenture. The
holders of not less than a majority in principal amount of the outstanding
notes may on behalf of the holders of all the notes waive any past default
under the indenture, except a default in the payment of the principal of or
interest, if any, on any note or in respect of a provision which under the
indenture cannot be modified or amended without the consent of the holder of
each affected outstanding note.
Notices. Notices to holders of the notes are given by mail to
the addresses of such holders as they appear in the debt security register.
Governing Law. The indenture and the notes are to be governed
by and construed in accordance with the laws of the State of New York.
The Trustee. The trustee is Wachovia Bank, National
Association. We have other commercial dealings in the ordinary course of
business with Wachovia Bank, National Association, and its affiliates.
Registration Rights
The following description is a summary of the material
provisions of the registration rights agreement. It does not restate that
agreement in its entirety. We urge you to read the registration rights
agreement in its entirety because it, and not this description, defines the
registration rights of holders of the original notes. A copy of the
registration rights agreement is included as an exhibit of which this
prospectus forms a part.
We entered into a registration rights agreement with the
initial purchaser pursuant to which we agreed, for the benefit of the holders
of original notes, at our expense, to (1) no later than March 3, 2006, prepare
and file a registration statement with the SEC with respect to a registered
offer to exchange the notes for exchange notes that will be issued in the same
aggregate principal amount as and with terms that will be substantially
identical in all material respects to the original notes (except that the
exchange notes will not contain terms with respect to the transfer
restrictions) and (2) use our reasonable best efforts to cause the exchange
offer registration statement to be declared effective under the Securities Act
no later than May 2, 2006. Promptly after the exchange offer registration
statement being declared effective, we will offer the exchange notes in
exchange for surrender of the original notes. If we commence the exchange
offer, we will be entitled to consummate the exchange offer 30 days after such
commencement (provided that we have accepted all the original notes theretofore
validly tendered in accordance with the terms of the exchange offer), unless
applicable law requires us to keep the offer open longer. For each original
note tendered to us pursuant to the exchange offer and not validly withdrawn by
46
the holder thereof, the holder of such note will receive an exchange note
having a principal amount equal to the principal amount of such surrendered
note.
Based on existing interpretations of the Securities Act by
the staff of the SEC set forth in several no-action letters to third parties,
and subject to the immediately following sentence, we believe that the exchange
notes that will be issued pursuant to the exchange offer may be offered for
resale, resold and otherwise transferred by the holders thereof without further
compliance with the registration and prospectus delivery provisions of the
Securities Act except for certain broker-dealers or affiliates of ours. See
"The Exchange Offer--Procedures for Tendering."
Each holder (other than certain specified holders) who wishes
to exchange its notes for exchange notes in the exchange offer will be required
to make certain representations to us. See "The Exchange Offer-- Procedures for
Tendering." In addition, in connection with any resales of exchange notes, any
broker or dealer who acquired notes for its own account as a result of
market-making activities or other trading activities must deliver a prospectus
meeting the requirements of the Securities Act. The SEC has taken the position
that such broker or dealer may fulfill its prospectus delivery requirements
with respect to the exchange notes (other than a resale of an unsold allotment
from the original sale of the notes) with the prospectus contained in the
exchange offer registration statement. Under the registration rights agreement,
we are required to allow a broker or dealer and other persons, if any, with
similar prospectus delivery requirements to use the prospectus contained in the
exchange offer registration statement in connection with the resale of such
exchange notes for a period of time following the issuance of the exchange
notes.
If (1) because of any change in law or in applicable
interpretations thereof by the staff of the SEC, we are not permitted to effect
the exchange offer, (2) the exchange offer is not consummated by May 2, 2006,
(3) the exchange offer is not consummated within 45 days after the date on
which the exchange offer registration statement is declared effective, (4) an
initial purchaser so requests with respect to notes not eligible to be
exchanged for exchange notes in the exchange offer and held by it following
consummation of the exchange offer or (5) any holder (other than a broker or
dealer who acquired the original notes for its own account as a result of
trading or market-making activities) who is not eligible to participate in the
exchange offer or, in the case of any holder (other than a broker or dealer who
acquired the original notes for its own account as a result of trading or
market-making activities) that participates in the exchange offer, such holder
does not receive freely tradeable exchange notes on the date of the exchange
and any such holder so requests for any reason other than the failure by such
holder to make a timely and valid tender in accordance with the exchange offer,
we will be required to: (a) prepare and file with the SEC a shelf registration
statement relating to the offer and sale of the notes or the exchange notes, as
the case may be, as promptly as practicable (but no later than, in the case of
clause (1) above, March 3, 2006 or, in the case of clause (2), (3), (4) or (5)
above, 60 days after the filing obligation arises), and thereafter use our
reasonable best efforts to cause such shelf registration statement to be
declared effective as promptly as practicable (but no later than, in the case
of clause (1) above, May 2, 2006 or, in the case of clause (2), (3), (4) or (5)
above, 90 days after such filing obligation arises); and (b) use our reasonable
best efforts to keep the shelf registration statement continuously effective
for a period of two years from the closing date or such shorter period that
will terminate when all the notes covered by the shelf registration statement
have been sold pursuant thereto or are no longer restricted securities (as
defined in Rule 144). We will, in the event of the filing of the shelf
registration statement, provide to each holder covered by the shelf
registration statement copies of the prospectus that is a part of the shelf
registration statement, notify each such holder when the shelf registration
statement has become effective, and take certain other actions as are required
to permit unrestricted resales of notes or the exchange notes, as the case may
be. A holder that sells such notes or the exchange notes, as the case may be,
pursuant to the shelf registration statement generally will be required to be
named as a selling security holder in the related prospectus and to deliver a
prospectus to the purchaser, will be subject to certain of the civil liability
provisions under the Securities Act in connection with such sales and will be
bound by the provisions of the registration rights agreement that are
applicable to such holder (including certain indemnification obligations). In
addition, each holder of the notes or the exchange notes to be registered under
the shelf registration statement will be required to deliver information to be
used in connection with the shelf registration statement.
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If (1) the exchange offer registration statement is not filed
with the SEC as described above, (2) the exchange offer registration statement
is not declared effective by May 2, 2006, (3) the exchange offer is not
consummated within 45 days after the exchange offer registration statement is
declared effective, (4) if required, the shelf registration statement is not
filed within 60 days after the filing obligation arises, (5) if required, the
shelf registration statement is not declared effective within 90 days after the
filing obligation arises, or (6) after either the exchange offer registration
statement or the shelf registration statement is declared effective, such
registration statement or the related prospectus thereafter ceases to be
effective or usable (subject to certain exceptions) in connection with resales
of notes or exchange notes for the periods specified and in accordance with the
registration rights agreement (each such event referred to in clauses (1)
through (6), a registration default, additional interest will accrue on the
notes subject to such registration default at a rate per year equal to 0.25%
for the first 90-day period after such registration default occurs (from and
including the date on which any such registration default occurs to but
excluding the date on which all such registration defaults have ceased to be
continuing) and 0.50% thereafter of the applicable principal amount of the
notes. In each case, such additional interest is payable in addition to any
other interest payable from time to time with respect to the notes and the
exchange notes.
48
PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own
account under the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of those notes. This prospectus, as it
may be amended or supplemented from time to time, may be used by a
broker-dealer for resales of exchange notes received in exchange for original
notes that had been acquired as a result of market-making or other trading
activities. We have agreed that, for a period of 180 days after the expiration
date of the exchange offer, we will make this prospectus, as it may be amended
or supplemented, available to any broker-dealer for use in connection with any
such resale. Any broker-dealers required to use this prospectus and any
amendments or supplements to this prospectus for resales of the exchange notes
must notify us of this fact by checking the box on the letter of transmittal
requesting additional copies of these documents.
Notwithstanding the foregoing, we are entitled under the
registration rights agreement to suspend the use of this prospectus by
broker-dealers under specified circumstances. For example, we may suspend the
use of this prospectus if:
o the SEC or any state securities authority requests an amendment
or supplement to this prospectus or the related registration
statement or additional information;
o the SEC or any state securities authority issues any stop order
suspending the effectiveness of the registration statement or
initiates proceedings for that purpose;
o we receive notification of the suspension of the qualification of
the new notes for sale in any jurisdiction or the initiation or
threatening of any proceeding for that purpose;
o the suspension is required by law; or
o an event occurs which makes any statement in this prospectus
untrue in any material respect or which constitutes an omission
to state a material fact in this prospectus.
If we suspend the use of this prospectus, the 180-day period
referred to above will be extended by a number of days equal to the period of
the suspension.
We will not receive any proceeds from any sale of exchange
notes by broker-dealers. Exchange notes received by broker-dealers for their
own account under the exchange offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on those notes or a combination of those
methods, at market prices prevailing at the time of resale, at prices related
to prevailing market prices or at negotiated prices. Any resales may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from the selling
broker-dealer or the purchasers of the new notes. Any broker-dealer that
resells exchange notes received by it for its own account under the exchange
offer and any broker or dealer that participates in a distribution of the
exchange notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any resale of exchange notes and any
commissions or concessions received by these persons may be deemed to be
underwriting compensation under the Securities Act. The letter of transmittal
states that, by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
We will not receive any proceeds from the issuance of
exchange notes in the exchange offer. We have agreed to pay all expenses
incidental to the exchange offer other than commissions and concessions of any
broker or dealer and certain transfer taxes and will indemnify holders of the
notes, including any broker-dealers, against certain liabilities, including
liabilities under the Securities Act.
49
LEGAL MATTERS
Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York,
will pass upon the validity of the notes offered hereby.
EXPERTS
The consolidated financial statements and schedules of
Selective Insurance Group, Inc. and subsidiaries as of December 31, 2004 and
2003, and for each of the years in the three-year period ended December 31,
2004, and management's assessment of the effectiveness of internal control over
financial reporting as of December 31, 2004 have been incorporated by reference
in the registration statement (No. 333- ) on Form S-4 in reliance upon the
reports of KPMG LLP, an independent registered public accounting firm,
incorporated by reference herein, and upon the authority of said firm as
experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy materials
that we file with the SEC at the SEC public reference room located at 100 F
Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the public reference room. Our SEC
filings are also available to the public on the SEC's Internet Web site at
http://www.sec.gov.
We are "incorporating by reference" into this prospectus
certain information that we file with the SEC, which means that we are
disclosing important information to you by referring you to those documents.
The information incorporated by reference is deemed to be part of this
prospectus, except for any information superseded by information contained
directly in this prospectus. This prospectus incorporates by reference the
documents set forth below that we have previously filed with the SEC. These
documents contain important information about us and our finances. The
documents are:
o Our annual report on Form 10-K for the year ended December 31,
2004; and
o Our quarterly reports on Form 10-Q for the periods ending March
31, 2005, June 30, 2005 and September 30, 2005; and
o Our definitive proxy statement relating to our 2005 annual
meeting of stockholders; and
o Our current reports on Form 8-K dated May 20, 2005, October 31,
2005 and November 9, 2005.
All documents that we file with the SEC pursuant to Section
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act from the date of this
prospectus to the end of the offering under this prospectus shall also be
deemed to be incorporated herein by reference and will automatically update
information included in or previously incorporated by reference in this
prospectus.
You may request a copy of these filings, at no cost, by
writing or calling us at the following address or telephone number:
Corporate Secretary
Selective Insurance Group, Inc.
40 Wantage Avenue
Branchville, New Jersey 07890
(973) 948-3000
50
Exhibits to the filings, however, will not be sent unless
those exhibits have specifically been incorporated by reference in that filing.
Information contained on our Web site is not intended to be
incorporated by reference in this prospectus and you should not consider that
information a part of this prospectus.
51
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[Graphic Omitted]
Selective Insurance Group, Inc.
Offer to Exchange
Any and All Outstanding 6.70% Senior Notes due 2035
Issued on November 3, 2005
for
6.70% Senior Notes due 2035
That Have Been Registered under the Securities Act of 1933
-----------------------------------
PROSPECTUS
-----------------------------------
, 2005
===============================================================================
===============================================================================
52
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
We are organized under the laws of the State of New Jersey.
The New Jersey Business Corporation Act, as amended (the "Act"), provides that
a New Jersey corporation has the power generally to indemnify its directors,
officers, employees and other agents against expenses and liabilities in
connection with any proceeding involving such person by reason of his or her
being or having been a corporate agent, other than a proceeding by or in the
right of the corporation, if such person acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal proceeding, such person had no
reasonable cause to believe his or her conduct was unlawful. In the case of an
action brought by or in the right of the corporation, indemnification of
directors, officers, employees and other agents against expenses is permitted
if such person acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the corporation;
however, no indemnification is permitted in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
corporation, unless and only to the extent that the New Jersey Superior Court,
or the court in which such proceeding was brought, shall determine upon
application that despite the adjudication of liability, but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
such indemnification. Expenses incurred by a director, officer, employee or
other agent in connection with a proceeding may be, under certain
circumstances, paid by the corporation in advance of the final disposition of
the proceeding as authorized by the board of directors. The power to indemnify
and advance expenses under the Act does not exclude other rights to which a
director, officer, employee or other agent of the corporation may be entitled
to under the certificate of incorporation, by-laws, agreement, vote of
stockholders, or otherwise; provided that no indemnification is permitted to be
made to or on behalf of such person if a judgment or other final adjudication
adverse to such person establishes that his or her acts or omissions were in
breach of his or her duty of loyalty to the corporation or its shareholders,
were not in good faith or involved a violation of the law, or resulted in the
receipt by such person of an improper personal benefit.
Under the Act, a New Jersey corporation has the power to
purchase and maintain insurance on behalf of any director, officer, employee or
other agent against any expenses incurred in any proceeding and any liabilities
asserted against him or her by reason of his or her being or having been a
corporate agent, whether or not the corporation has the power to indemnify him
or her against such expenses and liabilities under the Act. All of the
foregoing powers of indemnification granted to a New Jersey corporation may be
exercised by such corporation notwithstanding the absence of any provision in
its certificate of incorporation or by-laws authorizing the exercise of such
powers. A New Jersey corporation, however, may provide, with certain
limitations, in its certificate of incorporation that a director or officer
shall not be personally liable, or shall be liable only to the extent therein
provided, to the corporation or its shareholders for damages for breach of a
duty owed to the corporation or its shareholders.
Reference is made to Sections 14A:3-5 and 14A:2-7(3) of the
Act in connection with the above summary of indemnification, insurance and
limitation of liability.
Section (a) of Article Ninth of our restated certificate of
incorporation, as amended, and Section 14 of our By-Laws provide generally that
a director shall not be personally liable to us or our stockholders for damages
from breach of any duty owed to us or our stockholders, except to the extent
such personal liability may not be eliminated or limited under the Act. Such
provisions further provide generally that an officer of ours shall not be
personally liable to us or our stockholders for damages or breach of any duty
owed to us or our stockholders, except to the extent and for the duration of
any period of time such personal liability may not be eliminated or limited
under the Act.
Section (b) of Article Ninth of our restated certificate of
incorporation, as amended, and Section 14A of our By-Laws provide generally
that each person who was or is made a party to or involved in a pending,
threatened or completed civil, criminal, administrative or arbitrative action,
suit or proceeding, or any appeal therein or any inquiry or investigation which
could lead to such action, suit or proceeding of us or any constituent
corporation absorbed by us in a consolidation or merger, or by reason of his or
her having been a director, officer, trustee, employee or agent of another
entity serving as such at our request, shall be indemnified and held harmless
by us to the fullest extent permitted by the Act, as amended (but, in the case
of any amendments, only to the extent such amendment permits us to provide
broader indemnification rights than the Act permitted prior to such amendment),
from and against any and all reasonable costs, disbursements and attorney's
fees, and any and all amounts paid or incurred in satisfaction of settlements,
judgments, fines and penalties, incurred or suffered in connection with any
such proceeding, and such indemnification shall continue as to a person who has
ceased to be a director, officer, trustee, employee or agent and shall inure to
the benefit of such person's heirs, executors, administrators and assigns;
provided, however, that, except as provided above, we shall indemnify any such
person seeking indemnification in connection with a proceeding (or part
thereof) initiated by such person only if such proceeding (or part thereof) was
specifically authorized by our board of directors. Such provisions of our
certificate of incorporation and By-Laws provide, under certain circumstances,
for a right to be paid by us the expenses incurred in any proceeding in advance
of the final disposition of such proceeding as authorized by our board of
directors. Further, we are authorized to purchase and maintain insurance on
behalf of any director, officer, employee or agent of ours against any expenses
incurred and any liabilities asserted against him/her in any proceeding by
reason of such person having been a director, officer, employee or agent,
whether or not we would have the power to indemnify such person.
Our directors and officers are insured by policies purchased
by us against liability and expenses incurred in their capacity as directors or
officers.
Item 21. Exhibits and Financial Statement Schedules.
Exhibit
Number
------
3.1 Restated Certificate of Incorporation of Selective
Insurance Group, Inc., dated August 4, 1977, as amended
(incorporated by reference herein to Exhibit 3.1 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1997, File No. 0-8641).
3.2 The Company's By-Laws, adopted on August 26, 1977, as
amended (incorporated by reference herein to Exhibit 3.2
to the Company's Annual Report on Form 10-K for the year
ended December 31, 2001, file No. 0-8641).
4.1 The form of Indenture dated December 29, 1982, between
Selective Insurance Group, Inc. and Midlantic National
Bank, as Trustee, relating to the Company's 8 3/4%
Subordinated Convertible Debentures due 2008
(incorporated by reference herein to Exhibit 4.3 to the
Company's Registration Statement on Form S-3 No.
2-80881).
4.2 The form of Indenture dated September 24, 2002, between
Selective Insurance Group, Inc. and National City Bank,
as Trustee, relating to the Company's 1.6155% Senior
Convertible Notes due September 24, 2032 (incorporated by
reference herein to the Company's Registration Statement
on Form S-3 No. 333-101489).
4.3 Indenture, dated as of November 16, 2004, between
Selective Insurance Group, Inc. and Wachovia Bank,
National Association, as Trustee, relating to the
Company's 7.25% Senior Notes due 2034 (incorporated by
reference herein to the Company's Current Report on Form
8-K filed November 18, 2004, File No. 0-8641).
4.4 Indenture, dated as of November 3, 2005, between
Selective Insurance Group, Inc. and Wachovia Bank,
National Association, as Trustee, relating to the
Company's 6.70% Senior Notes due 2035 (incorporated by
reference herein to the Company's Current Report on Form
8-K filed November 9, 2005, File No. 0-8641).
4.5 Amended and Restated Rights Agreement, dated February 2,
1999, between Selective Insurance Group, Inc., and First
Chicago Trust (incorporated by reference herein to the
Company's Current Report on Form 8-K filed February 2,
1999, File No. 0-8641).
4.6 Registration Rights Agreement, dated as of November 16,
2004, between Selective Insurance Group, Inc., and Keefe,
Bruyette & Woods, Inc. (incorporated by reference herein
to the Company's Current Report on Form 8-K filed
November 18, 2004, File No. 0-8641).
4.7 Registration Rights Agreement, dated as of November 3,
2005, between Selective Insurance Group, Inc., and Keefe,
Bruyette & Woods, Inc. (incorporated by reference herein
to the Company's Current Report on Form 8-K filed
November 9, 2005, File No. 0-8641).
*5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
regarding the legality of the securities being registered
hereby.
*5.2 Opinion of John E. Wisinger, Esq., Corporate Counsel of
Selective regarding certain matters of New Jersey law.
*10.1 Selective Insurance Company of America Supplemental
Pension Plan, effective January 1, 1989.
10.2 Selective Insurance Company of America Deferred
Compensation Plan, effective July 1, 2002 (incorporated
by reference herein to Exhibit 99.1 of the Company's
Registration Statement on Form S-8, No. 333-97799).
10.3 Selective Insurance Group, Inc. Stock Option Plan II, as
amended through October 9, 1997, and related forms of
option agreements (incorporated by reference herein to
Exhibits 4.1 to the Company's Registration Statement on
Form S-8 No. 333-37501).
10.3a The Selective Insurance Group, Inc. Stock Option Plan II,
as amended through July 28, 1998 (incorporated by
reference herein to Exhibit 10.13a to the Company's
Annual Report on Form 10-K for the year ended December
31, 1993, File No. 0-8641).
10.3b The Selective Insurance Group, Inc. Stock Option Plan II,
as amended through January 31, 2000 (incorporated by
reference herein to Exhibit 10.13b to the Company's
Annual Report on Form 10-K for the year ended December
31, 1999, File No. 0-8641).
10.4 The Selective Insurance Group, Inc. Stock Option Plan III
(incorporated by reference herein to Exhibit A to the
Company's Definitive Proxy Statement for its 2002 Annual
Meeting of Stockholders' filed with the Securities and
Exchange Commission on April 1, 2002).
10.5 Selective Insurance Group, Inc. 2005 Omnibus Stock Plan
(incorporated by reference herein to Appendix A of the
Company's Definitive Proxy Statement for its 2005 Annual
Meeting of Stockholders filed with the Securities and
Exchange Commission on April 6, 2005).
10.5a Selective Insurance Group, Inc. 2005 Omnibus Stock Plan
Amendment (incorporated by reference herein to Exhibit
10.3 to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 2005, File No. 0-8641).
10.6 Selective Insurance Group, Inc. 2005 Omnibus Stock Plan
Stock Option Agreement (incorporated by reference herein
to Exhibit 1 of the Company's Definitive Proxy Statement
for its 2005 Annual Meeting of Stockholders filed with
the Securities and Exchange Commission on April 6,
2005).
10.7 Selective Insurance Group, Inc. 2005 Omnibus Stock Plan
Automatic Director Stock Option Agreement (incorporated
by reference herein to Exhibit 2 of the Company's
Definitive Proxy Statement for its 2005 Annual Meeting of
Stockholders filed with the Securities and Exchange
Commission on April 6, 2005).
10.8 Selective Insurance Group, Inc. 2005 Omnibus Stock Plan
Restricted Stock Agreement (incorporated by reference
herein to Exhibit 3 of the Company's Definitive Proxy
Statement for its 2005 Annual Meeting of Stockholders
filed with the Securities and Exchange Commission on
April 6, 2005).
10.9 Selective Insurance Group, Inc. 2005 Omnibus Stock Plan
Restricted Stock Agreement (incorporated by reference
herein to Exhibit 10.4 to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 2005, File
No. 0-8641).
10.10 Deferred Compensation Plan for Directors (incorporated by
reference herein to Exhibit 10.5 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1993,
File No. 0-8641).
10.11 The Company's 1987 Employee Stock Purchase Savings Plan
(incorporated by reference herein to Exhibit 10.6 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1993, File No. 0-8641).
10.11a Amendment, dated May 2, 1997, to the 1987 Employee Stock
Purchase Savings Plan in Exhibit 10.6 above (incorporated
by reference herein to Exhibit 10.5 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June
30, 1997, File No. 0-8641).
10.12 Selective Insurance Group, Inc. Cash Incentive Plan
(incorporated by reference herein to Appendix B to the
Company's Definitive Proxy Statement for its 2005 Annual
Meeting of Stockholders filed with the Securities and
Exchange Commission on April 6, 2005).
10.13 The Selective Insurance Group, Inc. Stock Purchase Plan
for Independent Insurance Agents, as amended
(incorporated by reference herein to the Company's Post
Effective Amendment No. 2 on Form S-3 No. 033-30833).
10.14 The Selective Insurance Group, Inc. Stock Option Plan for
Directors, as amended (incorporated by reference herein
to Exhibit 4.4 of the Company's Registration Statement on
Form S-8 No. 333-10465).
10.15 The Selective Insurance Group, Inc. Stock Compensation
Plan for Nonemployee Directors (incorporated by reference
herein to Exhibit 4 to the Company's Registration
Statement on Form S-8 No. 333-10465).
10.15a The Selective Insurance Group, Inc. Stock Compensation
Plan for Nonemployee Directors, as amended (incorporated
by reference herein to Exhibit A to the Company's
Definitive Proxy Statement for its 2000 Annual Meeting of
Stockholders filed with the Securities and Exchange
Commission on March 31, 2000).
10.16 Employment, Termination and Severance Agreements.
10.16a Employment Agreement with Gregory E. Murphy, dated August
1, 1995 (incorporated by reference herein to Exhibit 10.1
to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995, File No. 0-8641).
10.16a1 Amendment No. 1, dated May 1, 1998, to the Employment
Agreement with Gregory E. Murphy (incorporated by
reference herein to Exhibit 10.4 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June
30, 1998, File No. 0-8641).
10.16a2 Amendment No. 2, dated May 5, 2000, to the Employment
Agreement with Gregory E. Murphy (incorporated by
reference herein to Exhibit 10.16a to the Company's
Quarterly Report on Form 10-Q for the quarter ended June
30, 2000, File No. 0-8641).
10.16a3 Amendment No. 3, dated August 1, 2001, to the Employment
Agreement with Gregory E. Murphy (incorporated by
reference herein to Exhibit 10.16a to the Company's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 2001, File No. 0-8641).
10.16b Termination Agreement, dated August 1, 1995, between
Selective Insurance Company of America and Gregory E.
Murphy (incorporated by reference herein to Exhibit 10.2
to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995, File No. 0-8641).
10.16bl Amendment No. 1, dated December 16, 1998, to the
Termination Agreement between Selective Insurance Company
of America and Gregory E. Murphy (incorporated by
reference herein to Exhibit 10.16t to the Company's
Annual Report on Form 10-K for the year ended December
31, 1998, File No. 0-8641).
10.16c Employment Agreement with Jamie Ochiltree, III, dated
October 31, 1995 (incorporated by reference herein to
Exhibit 10.11f to the Company's Annual Report on Form
10-K for the year ended December 31, 1995, File No.
0-8641).
10.16c1 Amendment No. 1, dated October 31, 1998, to the
Employment Agreement with Jamie Ochiltree, III
(incorporated by reference herein to Exhibit 10.16r to
the Company's Annual Report on Form 10-K for the year
ended December 31, 1998, File No. 0-8641).
10.16c2 Amendment No. 2, dated May 5, 2000, to the Employment
Agreement with Jamie Ochiltree, III (incorporated by
reference herein to Exhibit 10.16b to the Company's
Quarterly Report on Form 10-Q for the quarter ended June
30, 2000, File No. 0-8641).
10.16c3 Amendment No. 3, dated October 31, 2001, to the
Employment Agreement with Jamie Ochiltree, III
(incorporated by reference herein to Exhibit 10.16c to
the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 2001, File No. 0-8641).
10.16d Termination Agreement, dated August 1, 1995, between
Selective Insurance Company of America and Jamie
Ochiltree, III (incorporated by reference herein to
Exhibit 10.11j to the Company's Annual Report on Form
10-K for the year ended December 31, 1995, File No.
0-8641).
10.16d1 Amendment No. 1, dated December 16, 1998, to the
Termination Agreement between Selective Insurance Company
of America and Jamie Ochiltree, III (incorporated by
reference herein to Exhibit 10.16v to the Company's
Annual Report on Form 10-K for the year ended December
31, 1998, File No. 0-8641).
10.16e Employment Agreement, dated May 2, 1997, between
Selective Insurance Company of America and James W.
Coleman, Jr. (incorporated by reference herein to Exhibit
10.3 to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1997, File No. 0-8641).
10.16el Amendment No. 1, dated May 5, 2000, to the Employment
Agreement with James W. Coleman, Jr. (incorporated by
reference herein to Exhibit 10.16c to the Company's
Quarterly Report on Form 10-Q for the quarter ended June
30, 2000, File No. 0-8641).
10.16e2 Amendment No. 2, dated March 1, 2003, to the Employment
Agreement with James W. Coleman, Jr. (incorporated by
reference herein to Exhibit 10.12e2 to the Company's
Annual Report on Form 10-K for the year ended December
31, 2004, File No. 000-08641).
10.16f Termination Agreement, dated May 2, 1997, between
Selective Insurance Company of America and James W.
Coleman, Jr. (incorporated by reference herein to Exhibit
10.4 to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1997, File No. 0-8641).
10.16f1 Amendment No. 1, dated December 16, 1998, to the
Termination Agreement between Selective Insurance Company
of America and James W. Coleman, Jr. (incorporated by
reference herein to Exhibit 10.16w to the Company's
Annual Report on Form 10-K for the year ended December
31, 1998, File No. 0-8641).
10.16g Termination Agreement, dated September 27, 1999, between
Selective Insurance Company of America and Ronald J.
Zaleski (incorporated by reference herein to Exhibit
10.16z to the Company's Annual Report on Form 10-K for
the year ended December 31, 1999, File No. 0-8641).
10.16h Employment Agreement with Dale A. Thatcher, dated May 5,
2000 (incorporated by reference herein to Exhibit 10.16f
to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 2000, File No. 0-8641).
10.16hl Amendment No. 1, dated March 1, 2003, to the Employment
Agreement with Dale A. Thatcher (incorporated by
reference herein to Exhibit 10.12i1 to the Company's
Annual Report on Form 10-K for the year ended December
31, 2004, File No. 000-08641).
10.16i Termination Agreement with Dale A. Thatcher, dated May 5,
2000 (incorporated by reference herein to Exhibit 10.16g
to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 2000, File No. 0-8641).
10.16j Employment Agreement with Richard F. Connell, dated
August 8, 2000 (incorporated by reference herein to
Exhibit 10.16a to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 2000, File No.
0-8641).
10.16jl Amendment No. 1, dated March 1, 2003, to the Employment
Agreement with Richard F. Connell (incorporated by
reference herein to Exhibit 10.12k1 to the Company's
Annual Report on Form 10-K for the year ended December
31, 2004, File No. 000-08641).
10.16k Termination Agreement with Richard F. Connell, dated
August 8, 2000 (incorporated by reference herein to
Exhibit 10.16b to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 2000, File No.
0-8641).
10.16l Termination agreement with Michael H. Lanza, dated July
27, 2004 (incorporated by reference herein to Exhibit
10.16a to the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 2004, File No. 0-8641).
10.17 Form of Note Purchase Agreement dated as of August 1,
1994 with respect to Selective Insurance Group, Inc.
8.77% Senior Notes due August 1, 2005 (incorporated by
reference herein to Exhibit 99.2 to the Company's
Post-Effective Amendment No. 1 to the Registration
Statement on Form S-3, No. 33-30833).
10.18 Promissory Note of $25,000,000 Revolving Line of Credit
with State Street Bank and Trust Company (incorporated by
reference herein to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended March
31, 1997, File No. 0-8641).
10.18a Amendment, dated June 30, 1998, to the Promissory Note of
$25,000,000 Revolving Line of Credit with State Street
Bank and Trust Company in Exhibit 10.16 above
(incorporated by reference herein to Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1998, File No. 0-8641).
10.18a1 Amendment, dated November 6, 1998, to the Promissory
Note of $25,000,000 Revolving Line of Credit with State
Street Bank and Trust Company in Exhibit 10.16 above
(incorporated by reference herein to Exhibit 10.24 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1998, File No. 0-8641).
10.18a2 Amendment, dated June 30, 2000, to the Promissory Note of
$25,000,000 Revolving Line of Credit with State Street
Bank and Trust Company in Exhibit 10.16 above
(incorporated by reference herein to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 2000, File No. 0-8641).
10.18a3 Amendment, dated June 29, 2001, to the Promissory Note of
$25,000,000 Revolving Line of Credit with State Street
Bank and Trust Company in Exhibit 10.16 above
(incorporated by reference herein to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 2001, File No. 0-8641).
10.18a4 Amendment, dated June 30, 2003, to the Promissory Note of
$20,000,000 Line of Credit with State Street Bank and
Trust Company with respect to Selective Insurance Company
of America and Selective Insurance Group, Inc.
(incorporated by reference herein to Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2003, File No. 0-8641).
10.18a5 Amendment, dated June 28, 2004, to the Promissory Note of
$20,000,000 Line of Credit with State Street Bank and
Trust Company with respect to Selective Insurance Company
of America and Selective Insurance Group, Inc.
(incorporated by reference herein to Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2004, File No. 0-8641).
10.18a6 Amendment, dated June 27, 2005, to the Promissory Note of
$20,000,000 Line of Credit with State Street Bank and
Trust Company with respect to Selective Insurance Company
of America and Selective Insurance Group, Inc.
(incorporated by reference herein to Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2005, File No. 0-8641).
10.19 Commercial Loan Note of $25,000,000 Line of Credit with
First Union National Bank as of October 22, 1999
(incorporated by reference herein to Exhibit 10.28 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2000, File No. 0-8641).
10.19a Fifth amendment, dated June 28, 2002, effective through
June 27, 2003, to the $25,000,000 Line of Credit
Agreement dated October 22, 1999, between Wachovia Bank,
National Association (formerly known as First Union
National Bank) and Selective Insurance Group, Inc. and
Selective Insurance Company of America (incorporated by
reference herein to Exhibit 10.2 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June
30, 2002, File No. 0-8641).
10.19al Seventh amendment, dated June 27, 2003, effective through
June 26, 2004, to the $25,000,000 Line of Credit
Agreement dated October 22, 1999, between Wachovia Bank,
National Association and Selective Insurance Group, Inc.
and Selective Insurance Company of America (incorporated
by reference herein to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June
30, 2003, File No. 0-8641).
10.19a2 Eighth amendment, dated June 25, 2004, effective through
June 24, 2005, to the $25,000,000 Line of Credit
Agreement dated October 22, 1999, between Wachovia Bank,
National Association and Selective Insurance Group, Inc.
and Selective Insurance Company of America (incorporated
by reference herein to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June
30, 2004, File No. 0-8641).
10.19a3 Ninth amendment, dated June 24, 2005, effective through
June 23, 2006, to the $25,000,000 Line of Credit
Agreement dated October 22, 1999, between Wachovia Bank,
National Association and Selective Insurance Group, Inc.
and Selective Insurance Company of America (incorporated
by reference herein to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June
30, 2005, File No. 0-8641).
*12.1 Statement re: computation of ratio of earnings to fixed
charges.
21 Subsidiaries of Selective Insurance Group, Inc.
(incorporated by reference herein to Exhibit 21 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 2004, File No. 000-08641).
*23.1 Consent of KPMG LLP.
*23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 5).
*24.1 Power of Attorney of Paul D. Bauer.
*24.2 Power of Attorney of A. David Brown.
*24.3 Power of Attorney of C. Edward Herder.
*24.4 Power of Attorney of William M. Kearns, Jr.
*24.5 Power of Attorney of Joan M. Lamm-Tennant.
*24.6 Power of Attorney of S. Griffin McClellan III.
*24.7 Power of Attorney of Ronald L. O'Kelley.
*24.8 Power of Attorney of John F. Rockart.
*24.9 Power of Attorney of William M. Rue.
*24.10 Power of Attorney of J. Brian Thebault.
*25 Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939, as amended, of Wachovia Bank.
*99.1 Form of Letter of Transmittal.
*99.2 Form of Notice of Guaranteed Delivery.
*99.3 Form of Letter to Clients.
*99.4 Form of Letter to Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.
* Filed herewith.
Item 22. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933, or the Securities Act.
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement
(or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a
fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would
not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum
offering range may be reflected in the form of the
prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person, if any, of the registrant in the successful defense of any action,
suit, or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(d) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon
Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(e) The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt
of such requests, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(f) The undersigned registrant hereby undertakes to supply by means of
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Branchville, State of New Jersey, on the 23rd day of November, 2005.
SELECTIVE INSURANCE GROUP, INC.
By: /s/ Gregory E. Murphy
-------------------------------
Name: Gregory E. Murphy
Title: Chairman, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933,
this registration statement has been signed by the following persons in the
capacities and on the date indicated.
Signature Title Date
--------- ----- ----
/s/ Gregory E. Murphy Chairman, President and Chief November 23, 2005
------------------------ Executive Officer
Gregory E. Murphy (Principal executive officer)
/s/ Dale A. Thatcher Executive Vice President, November 23, 2005
------------------------ Chief Financial Officer
Dale A. Thatcher (Principal financial officer and
principal accounting officer)
* Director November 23, 2005
------------------------
Paul D. Bauer
* Director November 23, 2005
------------------------
A. David Brown
* Director November 23, 2005
------------------------
C. Edward Herder
* Director November 23, 2005
------------------------
William M. Kearns, Jr.
* Director November 23, 2005
------------------------
Joan M. Lamm-Tennant
* Director November 23, 2005
------------------------
S. Griffin McClellan III
* Director November 23, 2005
---------------------
Ronald L. O'Kelley
* Director November 23, 2005
---------------------
John F. Rockart
* Director November 23, 2005
---------------------
William M. Rue
* Director November 23, 2005
---------------------
J. Brian Thebault
*By: /s/ Michael H. Lanza
---------------------
Attorney-in-Fact
EXHIBIT INDEX
Exhibit
Number
------
3.1 Restated Certificate of Incorporation of Selective
Insurance Group, Inc., dated August 4, 1977, as amended
(incorporated by reference herein to Exhibit 3.1 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1997, File No. 0-8641).
3.2 The Company's By-Laws, adopted on August 26, 1977, as
amended (incorporated by reference herein to Exhibit 3.2
to the Company's Annual Report on Form 10-K for the year
ended December 31, 2001, file No. 0-8641).
4.1 The form of Indenture dated December 29, 1982, between
Selective Insurance Group, Inc. and Midlantic National
Bank, as Trustee, relating to the Company's 8 3/4%
Subordinated Convertible Debentures due 2008
(incorporated by reference herein to Exhibit 4.3 to the
Company's Registration Statement on Form S-3 No.
2-80881).
4.2 The form of Indenture dated September 24, 2002, between
Selective Insurance Group, Inc. and National City Bank,
as Trustee, relating to the Company's 1.6155% Senior
Convertible Notes due September 24, 2032 (incorporated by
reference herein to the Company's Registration Statement
on Form S-3 No. 333-101489).
4.3 Indenture, dated as of November 16, 2004, between
Selective Insurance Group, Inc. and Wachovia Bank,
National Association, as Trustee, relating to the
Company's 7.25% Senior Notes due 2034 (incorporated by
reference herein to the Company's Current Report on Form
8-K filed November 18, 2004, File No. 0-8641).
4.4 Indenture, dated as of November 3, 2005, between
Selective Insurance Group, Inc. and Wachovia Bank,
National Association, as Trustee, relating to the
Company's 6.70% Senior Notes due 2035 (incorporated by
reference herein to the Company's Current Report on Form
8-K filed November 9, 2005, File No. 0-8641).
4.5 Amended and Restated Rights Agreement, dated February 2,
1999, between Selective Insurance Group, Inc., and First
Chicago Trust (incorporated by reference herein to the
Company's Current Report on Form 8-K filed February 2,
1999, File No. 0-8641).
4.6 Registration Rights Agreement, dated as of November 16,
2004, between Selective Insurance Group, Inc., and Keefe,
Bruyette & Woods, Inc. (incorporated by reference herein
to the Company's Current Report on Form 8-K filed
November 18, 2004, File No. 0-8641).
4.7 Registration Rights Agreement, dated as of November 3,
2005, between Selective Insurance Group, Inc., and Keefe,
Bruyette & Woods, Inc. (incorporated by reference herein
to the Company's Current Report on Form 8-K filed
November 9, 2005, File No. 0-8641).
*5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
regarding the legality of the securities being registered
hereby.
*5.2 Opinion of John E. Wisinger, Esq., Corporate Counsel of
Selective regarding certain matters of New Jersey law.
*10.1 Selective Insurance Company of America Supplemental
Pension Plan, effective January 1, 1989.
10.2 Selective Insurance Company of America Deferred
Compensation Plan, effective July 1, 2002 (incorporated
by reference herein to Exhibit 99.1 of the Company's
Registration Statement on Form S-8, No. 333-97799).
10.3 Selective Insurance Group, Inc. Stock Option Plan II, as
amended through October 9, 1997, and related forms of
option agreements (incorporated by reference herein to
Exhibits 4.1 to the Company's Registration Statement on
Form S-8 No. 333-37501).
10.3a The Selective Insurance Group, Inc. Stock Option Plan II,
as amended through July 28, 1998 (incorporated by
reference herein to Exhibit 10.13a to the Company's
Annual Report on Form 10-K for the year ended December
31, 1993, File No. 0-8641).
10.3b The Selective Insurance Group, Inc. Stock Option Plan II,
as amended through January 31, 2000 (incorporated by
reference herein to Exhibit 10.13b to the Company's
Annual Report on Form 10-K for the year ended December
31, 1999, File No. 0-8641).
10.4 The Selective Insurance Group, Inc. Stock Option Plan III
(incorporated by reference herein to Exhibit A to the
Company's Definitive Proxy Statement for its 2002 Annual
Meeting of Stockholders' filed with the Securities and
Exchange Commission on April 1, 2002).
10.5 Selective Insurance Group, Inc. 2005 Omnibus Stock Plan
(incorporated by reference herein to Appendix A of the
Company's Definitive Proxy Statement for its 2005 Annual
Meeting of Stockholders filed with the Securities and
Exchange Commission on April 6, 2005).
10.5a Selective Insurance Group, Inc. 2005 Omnibus Stock Plan
Amendment (incorporated by reference herein to Exhibit
10.3 to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 2005, File No. 0-8641).
10.6 Selective Insurance Group, Inc. 2005 Omnibus Stock Plan
Stock Option Agreement (incorporated by reference herein
to Exhibit 1 of the Company's Definitive Proxy Statement
for its 2005 Annual Meeting of Stockholders filed with
the Securities and Exchange Commission on April 6,
2005).
10.7 Selective Insurance Group, Inc. 2005 Omnibus Stock Plan
Automatic Director Stock Option Agreement (incorporated
by reference herein to Exhibit 2 of the Company's
Definitive Proxy Statement for its 2005 Annual Meeting of
Stockholders filed with the Securities and Exchange
Commission on April 6, 2005).
10.8 Selective Insurance Group, Inc. 2005 Omnibus Stock Plan
Restricted Stock Agreement (incorporated by reference
herein to Exhibit 3 of the Company's Definitive Proxy
Statement for its 2005 Annual Meeting of Stockholders
filed with the Securities and Exchange Commission on
April 6, 2005).
10.9 Selective Insurance Group, Inc. 2005 Omnibus Stock Plan
Restricted Stock Agreement (incorporated by reference
herein to Exhibit 10.4 to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 2005, File
No. 0-8641).
10.10 Deferred Compensation Plan for Directors (incorporated by
reference herein to Exhibit 10.5 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1993,
File No. 0-8641).
10.11 The Company's 1987 Employee Stock Purchase Savings Plan
(incorporated by reference herein to Exhibit 10.6 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1993, File No. 0-8641).
10.11a Amendment, dated May 2, 1997, to the 1987 Employee Stock
Purchase Savings Plan in Exhibit 10.6 above (incorporated
by reference herein to Exhibit 10.5 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June
30, 1997, File No. 0-8641).
10.12 Selective Insurance Group, Inc. Cash Incentive Plan
(incorporated by reference herein to Appendix B to the
Company's Definitive Proxy Statement for its 2005 Annual
Meeting of Stockholders filed with the Securities and
Exchange Commission on April 6, 2005).
10.13 The Selective Insurance Group, Inc. Stock Purchase Plan
for Independent Insurance Agents, as amended
(incorporated by reference herein to the Company's Post
Effective Amendment No. 2 on Form S-3 No. 033-30833).
10.14 The Selective Insurance Group, Inc. Stock Option Plan for
Directors, as amended (incorporated by reference herein
to Exhibit 4.4 of the Company's Registration Statement on
Form S-8 No. 333-10465).
10.15 The Selective Insurance Group, Inc. Stock Compensation
Plan for Nonemployee Directors (incorporated by reference
herein to Exhibit 4 to the Company's Registration
Statement on Form S-8 No. 333-10465).
10.15a The Selective Insurance Group, Inc. Stock Compensation
Plan for Nonemployee Directors, as amended (incorporated
by reference herein to Exhibit A to the Company's
Definitive Proxy Statement for its 2000 Annual Meeting of
Stockholders filed with the Securities and Exchange
Commission on March 31, 2000).
10.16 Employment, Termination and Severance Agreements.
10.16a Employment Agreement with Gregory E. Murphy, dated August
1, 1995 (incorporated by reference herein to Exhibit 10.1
to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995, File No. 0-8641).
10.16a1 Amendment No. 1, dated May 1, 1998, to the Employment
Agreement with Gregory E. Murphy (incorporated by
reference herein to Exhibit 10.4 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June
30, 1998, File No. 0-8641).
10.16a2 Amendment No. 2, dated May 5, 2000, to the Employment
Agreement with Gregory E. Murphy (incorporated by
reference herein to Exhibit 10.16a to the Company's
Quarterly Report on Form 10-Q for the quarter ended June
30, 2000, File No. 0-8641).
10.16a3 Amendment No. 3, dated August 1, 2001, to the Employment
Agreement with Gregory E. Murphy (incorporated by
reference herein to Exhibit 10.16a to the Company's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 2001, File No. 0-8641).
10.16b Termination Agreement, dated August 1, 1995, between
Selective Insurance Company of America and Gregory E.
Murphy (incorporated by reference herein to Exhibit 10.2
to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995, File No. 0-8641).
10.16bl Amendment No. 1, dated December 16, 1998, to the
Termination Agreement between Selective Insurance Company
of America and Gregory E. Murphy (incorporated by
reference herein to Exhibit 10.16t to the Company's
Annual Report on Form 10-K for the year ended December
31, 1998, File No. 0-8641).
10.16c Employment Agreement with Jamie Ochiltree, III, dated
October 31, 1995 (incorporated by reference herein to
Exhibit 10.11f to the Company's Annual Report on Form
10-K for the year ended December 31, 1995, File No.
0-8641).
10.16c1 Amendment No. 1, dated October 31, 1998, to the
Employment Agreement with Jamie Ochiltree, III
(incorporated by reference herein to Exhibit 10.16r to
the Company's Annual Report on Form 10-K for the year
ended December 31, 1998, File No. 0-8641).
10.16c2 Amendment No. 2, dated May 5, 2000, to the Employment
Agreement with Jamie Ochiltree, III (incorporated by
reference herein to Exhibit 10.16b to the Company's
Quarterly Report on Form 10-Q for the quarter ended June
30, 2000, File No. 0-8641).
10.16c3 Amendment No. 3, dated October 31, 2001, to the
Employment Agreement with Jamie Ochiltree, III
(incorporated by reference herein to Exhibit 10.16c to
the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 2001, File No. 0-8641).
10.16d Termination Agreement, dated August 1, 1995, between
Selective Insurance Company of America and Jamie
Ochiltree, III (incorporated by reference herein to
Exhibit 10.11j to the Company's Annual Report on Form
10-K for the year ended December 31, 1995, File No.
0-8641).
10.16d1 Amendment No. 1, dated December 16, 1998, to the
Termination Agreement between Selective Insurance Company
of America and Jamie Ochiltree, III (incorporated by
reference herein to Exhibit 10.16v to the Company's
Annual Report on Form 10-K for the year ended December
31, 1998, File No. 0-8641).
10.16e Employment Agreement, dated May 2, 1997, between
Selective Insurance Company of America and James W.
Coleman, Jr. (incorporated by reference herein to Exhibit
10.3 to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1997, File No. 0-8641).
10.16el Amendment No. 1, dated May 5, 2000, to the Employment
Agreement with James W. Coleman, Jr. (incorporated by
reference herein to Exhibit 10.16c to the Company's
Quarterly Report on Form 10-Q for the quarter ended June
30, 2000, File No. 0-8641).
10.16e2 Amendment No. 2, dated March 1, 2003, to the Employment
Agreement with James W. Coleman, Jr. (incorporated by
reference herein to Exhibit 10.12e2 to the Company's
Annual Report on Form 10-K for the year ended December
31, 2004, File No. 000-08641).
10.16f Termination Agreement, dated May 2, 1997, between
Selective Insurance Company of America and James W.
Coleman, Jr. (incorporated by reference herein to Exhibit
10.4 to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1997, File No. 0-8641).
10.16f1 Amendment No. 1, dated December 16, 1998, to the
Termination Agreement between Selective Insurance Company
of America and James W. Coleman, Jr. (incorporated by
reference herein to Exhibit 10.16w to the Company's
Annual Report on Form 10-K for the year ended December
31, 1998, File No. 0-8641).
10.16g Termination Agreement, dated September 27, 1999, between
Selective Insurance Company of America and Ronald J.
Zaleski (incorporated by reference herein to Exhibit
10.16z to the Company's Annual Report on Form 10-K for
the year ended December 31, 1999, File No. 0-8641).
10.16h Employment Agreement with Dale A. Thatcher, dated May 5,
2000 (incorporated by reference herein to Exhibit 10.16f
to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 2000, File No. 0-8641).
10.16hl Amendment No. 1, dated March 1, 2003, to the Employment
Agreement with Dale A. Thatcher (incorporated by
reference herein to Exhibit 10.12i1 to the Company's
Annual Report on Form 10-K for the year ended December
31, 2004, File No. 000-08641).
10.16i Termination Agreement with Dale A. Thatcher, dated May 5,
2000 (incorporated by reference herein to Exhibit 10.16g
to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 2000, File No. 0-8641).
10.16j Employment Agreement with Richard F. Connell, dated
August 8, 2000 (incorporated by reference herein to
Exhibit 10.16a to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 2000, File No.
0-8641).
10.16jl Amendment No. 1, dated March 1, 2003, to the Employment
Agreement with Richard F. Connell (incorporated by
reference herein to Exhibit 10.12k1 to the Company's
Annual Report on Form 10-K for the year ended December
31, 2004, File No. 000-08641).
10.16k Termination Agreement with Richard F. Connell, dated
August 8, 2000 (incorporated by reference herein to
Exhibit 10.16b to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 2000, File No.
0-8641).
10.16l Termination agreement with Michael H. Lanza, dated July
27, 2004 (incorporated by reference herein to Exhibit
10.16a to the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 2004, File No. 0-8641).
10.17 Form of Note Purchase Agreement dated as of August 1,
1994 with respect to Selective Insurance Group, Inc.
8.77% Senior Notes due August 1, 2005 (incorporated by
reference herein to Exhibit 99.2 to the Company's
Post-Effective Amendment No. 1 to the Registration
Statement on Form S-3, No. 33-30833).
10.18 Promissory Note of $25,000,000 Revolving Line of Credit
with State Street Bank and Trust Company (incorporated by
reference herein to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended March
31, 1997, File No. 0-8641).
10.18a Amendment, dated June 30, 1998, to the Promissory Note of
$25,000,000 Revolving Line of Credit with State Street
Bank and Trust Company in Exhibit 10.16 above
(incorporated by reference herein to Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1998, File No. 0-8641).
10.18a1 Amendment, dated November 6, 1998, to the Promissory
Note of $25,000,000 Revolving Line of Credit with State
Street Bank and Trust Company in Exhibit 10.16 above
(incorporated by reference herein to Exhibit 10.24 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1998, File No. 0-8641).
10.18a2 Amendment, dated June 30, 2000, to the Promissory Note of
$25,000,000 Revolving Line of Credit with State Street
Bank and Trust Company in Exhibit 10.16 above
(incorporated by reference herein to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 2000, File No. 0-8641).
10.18a3 Amendment, dated June 29, 2001, to the Promissory Note of
$25,000,000 Revolving Line of Credit with State Street
Bank and Trust Company in Exhibit 10.16 above
(incorporated by reference herein to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 2001, File No. 0-8641).
10.18a4 Amendment, dated June 30, 2003, to the Promissory Note of
$20,000,000 Line of Credit with State Street Bank and
Trust Company with respect to Selective Insurance Company
of America and Selective Insurance Group, Inc.
(incorporated by reference herein to Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2003, File No. 0-8641).
10.18a5 Amendment, dated June 28, 2004, to the Promissory Note of
$20,000,000 Line of Credit with State Street Bank and
Trust Company with respect to Selective Insurance Company
of America and Selective Insurance Group, Inc.
(incorporated by reference herein to Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2004, File No. 0-8641).
10.18a6 Amendment, dated June 27, 2005, to the Promissory Note of
$20,000,000 Line of Credit with State Street Bank and
Trust Company with respect to Selective Insurance Company
of America and Selective Insurance Group, Inc.
(incorporated by reference herein to Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2005, File No. 0-8641).
10.19 Commercial Loan Note of $25,000,000 Line of Credit with
First Union National Bank as of October 22, 1999
(incorporated by reference herein to Exhibit 10.28 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2000, File No. 0-8641).
10.19a Fifth amendment, dated June 28, 2002, effective through
June 27, 2003, to the $25,000,000 Line of Credit
Agreement dated October 22, 1999, between Wachovia Bank,
National Association (formerly known as First Union
National Bank) and Selective Insurance Group, Inc. and
Selective Insurance Company of America (incorporated by
reference herein to Exhibit 10.2 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June
30, 2002, File No. 0-8641).
10.19al Seventh amendment, dated June 27, 2003, effective through
June 26, 2004, to the $25,000,000 Line of Credit
Agreement dated October 22, 1999, between Wachovia Bank,
National Association and Selective Insurance Group, Inc.
and Selective Insurance Company of America (incorporated
by reference herein to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June
30, 2003, File No. 0-8641).
10.19a2 Eighth amendment, dated June 25, 2004, effective through
June 24, 2005, to the $25,000,000 Line of Credit
Agreement dated October 22, 1999, between Wachovia Bank,
National Association and Selective Insurance Group, Inc.
and Selective Insurance Company of America (incorporated
by reference herein to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June
30, 2004, File No. 0-8641).
10.19a3 Ninth amendment, dated June 24, 2005, effective through
June 23, 2006, to the $25,000,000 Line of Credit
Agreement dated October 22, 1999, between Wachovia Bank,
National Association and Selective Insurance Group, Inc.
and Selective Insurance Company of America (incorporated
by reference herein to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June
30, 2005, File No. 0-8641).
*12.1 Statement re: computation of ratio of earnings to fixed
charges.
21 Subsidiaries of Selective Insurance Group, Inc.
(incorporated by reference herein to Exhibit 21 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 2004, File No. 000-08641).
*23.1 Consent of KPMG LLP.
*23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 5).
*24.1 Power of Attorney of Paul D. Bauer.
*24.2 Power of Attorney of A. David Brown.
*24.3 Power of Attorney of C. Edward Herder.
*24.4 Power of Attorney of William M. Kearns, Jr.
*24.5 Power of Attorney of Joan M. Lamm-Tennant.
*24.6 Power of Attorney of S. Griffin McClellan III.
*24.7 Power of Attorney of Ronald L. O'Kelley.
*24.8 Power of Attorney of John F. Rockart.
*24.9 Power of Attorney of William M. Rue.
*24.10 Power of Attorney of J. Brian Thebault.
*25 Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939, as amended, of Wachovia Bank.
*99.1 Form of Letter of Transmittal.
*99.2 Form of Notice of Guaranteed Delivery.
*99.3 Form of Letter to Clients.
*99.4 Form of Letter to Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.
* Filed herewith.