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Selective Insurance Group: Can an A+ Credit Portfolio and Higher New-Purchase Yields Drive Stronger ROE?

Selective Insurance Group’s third quarter 2025 earnings presented a mixed bag of results, reflecting strengths in its investment income as well as challenges in its casualty lines. The company reported an operating return on equity of 13.2%, an increase in investment income by 18% year-over-year, and strong investment portfolio performance. However, the combined ratio for the quarter stood at 98.6%, which exceeds the company’s long-term target of 95%. A significant concern was the unfavorable prior year casualty reserve development of $40 million, attributed primarily to the 2024 accident year, with commercial auto and personal auto lines affected, driven mostly by developments in New Jersey. This added pressure to the current year’s casualty loss cost, impacting the overall combined ratio. Despite these challenges, the company still managed underwhelming catastrophe activity, which partially offset the negative impacts on casualty lines.