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Item 1A. Risk Factors.

Certain risk factors can significantly impact our business, liquidity, capital resources, results of operations, financial condition, and debt ratings. These risk factors might affect, alter, or change actions we might take to execute our long-term capital strategy. Examples include, without limitation, contributing capital to any or all of the Insurance Subsidiaries, issuing additional debt and/or equity securities, repurchasing our existing debt and/or equity securities, or increasing or decreasing common stockholders' dividends. We operate in a continually changing business environment, and new risk factors emerge from time to time. Consequently, we can neither predict such new risk factors nor assess their potential future impact on our business, if any.

Risks Related to our Insurance Operations

We are subject to losses from catastrophic events.

Losses from natural and human-made catastrophes can negatively impact our financial results. Examples include, without limitation, hurricanes, tornadoes, windstorms, earthquakes, hail, severe convective storms, severe winter weather, derechos, floods, and fires, some related to climate change, and criminal and terrorist acts, including cyber-attacks, civil unrest, and explosions. The frequency and severity of these catastrophes are inherently unpredictable, and the frequency and severity of catastrophe losses have increased globally in recent years. Although we use sophisticated catastrophe modeling techniques to

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manage our catastrophe exposure, catastrophe models provide estimates, and actual exposure and loss experience may materially differ. For example, catastrophe models did not fully estimate the potential for some recent catastrophe loss activity (such as Hurricane Ida-related severe flooding in the Mid-Atlantic and Northeast in 2021 and Winter Storm Elliott freeze losses in December 2022) and the concurrent recent economic inflation on construction costs. Unmodeled or under-modeled catastrophe risks could result in understated catastrophe exposure, and our actual catastrophe losses could be higher.

Our insurance operations primarily write risks in the Eastern, Midwestern, and Southwestern regions of the U.S. Our most significant natural and/or human-made catastrophe exposures are (i) hurricanes impacting the Eastern U.S., (ii) severe convective storms, including hailstorms and tornadoes, (iii) winter storms, (iv) earthquakes, and (v) terrorism events. Single storms could adversely impact our financial results, but it is also possible that we could experience more than one severe catastrophic event in any given calendar year. We track our severe weather and catastrophe losses using definitions and information we obtain from ISO’s Property Claim Services unit, an internationally recognized authority on insured property losses from catastrophes in the U.S., Puerto Rico, and the U.S. Virgin Islands.

Certain factors can impact our estimates of ultimate costs for natural and/or human-made catastrophes, including:

•Inability to access portions of the affected areas after a catastrophic event;

•Scarcity of necessary labor and materials that delay repairs and increase our loss costs;

•Regulatory uncertainties, including new or expanded interpretations of coverage;

•Residual market assessment-related increases in our catastrophe losses;

•Potential fraud and inflated repair costs, partly driven by (a) demand surge post-event, and (b) opportunistic service providers;

•Higher loss adjustment expenses due to shortages of claims adjusters available to appraise damage;

•Late claims reporting;

•Escalation of business interruption costs due to infrastructure disruption; and

•Whether the U.S. Secretary of the Treasury certifies an event as a terrorist act under TRIPRA.

Natural catastrophes

Temperature changes can impact weather patterns and the frequency and/or severity of catastrophes, including hurricanes, severe convective storms, wildfires, and flooding — all of which could cause our catastrophe losses to increase relative to historical levels. The United Nation’s Intergovernmental Panel on Climate Change ("IPCC") is an international body responsible for assessing climate change science. In 2021, the IPCC estimated in its “Sixth Assessment Report: Physical Science Basis” that human activities (i) have caused approximately 1.1°C of global warming to date above pre-industrial levels and (ii) this could rise to an increase between 1.2°C and 3.0°C above pre-industrial levels between 2041 and 2060.

Climate change models also project significant differences in global regional warming above pre-industrial levels, depending on future levels of climate mitigation and geographic location. These global regional differences, whether attributable to nature or human activities, include increases in (i) mean temperature in most land and ocean regions, (ii) hot extremes in most inhabited regions, (iii) heavy precipitation in several regions, and (iv) the probability of drought and precipitation deficits in some regions.

Human-made catastrophes

Cybersecurity

The risk of a wide-scale criminal or terrorist cyber-attack has become more significant and has drawn increased attention from IT and national security experts, U.S. policymakers, the U.S. military, and the insurance industry. There is general recognition that a wide-scale cyber-attack that simultaneously impacts multiple victims is more likely, and insurance industry systemic risk has increased. We have identified three primary sources of potential insured exposure to cyber losses: (i) cyber-specific policies designed to cover both first-party and third-party losses; (ii) affirmative cyber coverage grants included in other types of policies, such as commercial property or businessowners policies; and (iii) "silent cyber" exposures, otherwise known as non-affirmative cyber exposures, which describes cyber risk that is neither expressly covered nor excluded in insurance policies. This exposure may exist if courts, regardless of intent, interpret policy forms without specific related coverage exclusions to provide coverage for a cyber-related incident.

We provide cyber-specific policies to our commercial lines and personal lines customers through 100% reinsured solutions with highly-rated specialty cyber markets. These solutions allow us to meet our customers' needs for cyber insurance while mitigating our underwriting risk, as we develop our expertise in the cyber insurance market.

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Beyond our cyber-specific policies, our other insurance policies provide some first- and third-party cyber coverages:

•We offer limited first-party affirmative cyber coverage in our commercial property and businessowners' policy forms. We limited our "silent cyber" exposure through an affirmative coverage grant subject to a sub-limit.

•Our base property forms typically include a coverage grant of $2,000 or $10,000. Most of our property policies also contain an affirmative endorsement providing "virus and harmful code" coverage subject to a sub-limit. Over 90% of our policies with virus/harmful code coverage on commercial property, businessowners', commercial output policy, or inland marine forms have sub-limits of $25,000 or lower. For policies effective October 1, 2022, we implemented cyber incident exclusions that exclude malicious cyber except for the sub-limited coverage provided in the base ISO coverage forms and our property and businessowners' property “virus and harmful code” extension endorsements. These exclusions clarify coverage and have no premium impact.

•Most of our general liability and businessowners' policies specifically exclude cyber-related liability losses, except for "bodily injury." Our specific cyber-exclusion and liability forms' lack of affirmative sub-limited cyber coverage, effectively limit most "silent cyber" exposure. However, any related potential exposures are subject to our casualty reinsurance program, which has no cyber-related loss exclusion.

•By statute, workers compensation policies do not have cyber exclusions, and a cyber-attack-related workplace injury could trigger coverage.

Terrorism

We are required to participate in TRIPRA, now extended to December 31, 2027, for our Standard Commercial Lines and E&S Lines business. TRIPRA rescinded all previously approved coverage exclusions for terrorism and requires private insurers and the U.S. government to share the risk of loss on future acts of terrorism certified by the U.S. Secretary of the Treasury. Under TRIPRA, each participating insurer is responsible for paying a significant deductible of specified losses before federal assistance is available. Our $480 million deductible is based on a percentage of our prior year’s applicable Standard Commercial Lines and E&S Lines premiums. In 2023, the federal government will pay 80% of losses above the deductible, with the insurer retaining 20%. Although TRIPRA will mitigate some of our loss exposure to a large-scale terrorist attack, our deductible could have a material adverse effect on our results of operations, liquidity, financial condition, financial strength, and debt ratings. If the U.S. Secretary of the Treasury does not certify specific terrorist events (as occurred with the 2013 Boston Marathon bombing and the 2015 San Bernardino shootings), we could be required to pay terrorism-related covered losses without TRIPRA's risk-sharing benefits. We also could be required to pay terrorism-related losses for customers who declined terrorism coverage.

Our primary workers compensation policies are required to cover terrorism risk, so TRIPRA applies to those policies. Insureds with non-workers compensation commercial policies can accept or decline our terrorism coverage or negotiate with us for other terms. In 2022, 85% of our Standard Commercial Lines non-workers compensation policyholders purchased terrorism coverage that included nuclear, biological, chemical, and radioactive ("NBCR") events. TRIPRA also applies to cyber liability insurance policies reported under a Terrorism Risk Insurance Program-eligible line of insurance.

Many states mandate that commercial property policies cover fire following an act of terrorism - regardless of whether the insured purchased terrorism coverage. We also sometimes elect to provide terrorism coverage for lines of business not included in TRIPRA, such as Commercial Automobile. TRIPRA has never covered personal lines of business. Our Standard Personal Lines homeowner policies exclude nuclear losses but not biological, chemical, or conventional terrorism losses. Our current reinsurance programs cover some losses from conventional foreign and domestic terrorism acts but not NBCR events.

An increase in natural or man-made catastrophe losses, including a systemic cyber-attack that produces an aggregation of property and/or casualty cyber losses, will reduce our net income and stockholders’ equity and could have a material adverse effect on our liquidity, financial strength, and debt ratings. The closer a catastrophe occurs to the end of a reporting period, the more likely we have limited information to estimate loss and loss expense reserves, increasing the uncertainty of our estimates. More detailed claims information available after a reporting period may result in reserve changes in subsequent periods.

Our loss and loss expense reserves may not adequately cover actual losses and expenses.

We maintain reserves for our estimated liability for loss and loss expense associated with reported and unreported insurance claims. Estimating loss and loss expense reserves is inherently uncertain, and there is no method for precisely estimating the ultimate liability for the settlement of claims. We base our loss and loss expense reserve estimates on our internal comprehensive reserve review, which uses our own loss experience, claims payment and reporting patterns, and our view of underlying claims frequency and severity trends. We supplement the estimates with other subjective considerations, including projected impacts from economic, political, social, and legal developments or trends, such as inflation, continually evolving trends driven by the post-COVID-19 pandemic environment, judicial trends and tort decisions, and various state legislative

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initiatives. We cannot predict the timing or impact of these developments or trends with certainty, and we cannot be sure the reserves we establish are adequate or will be so in the future.

We review our reserve position quarterly and adjust the reserve position accordingly. An increase in reserves (i) reduces net income and stockholders' equity, and (ii) could have a material adverse effect on our liquidity, financial strength, and debt ratings. As we underwrite new business and renew existing business, we estimate future loss cost trends in pricing our products to generate an adequate risk-adjusted return. If our future loss cost trend estimates prove to be understated, our pricing of future new and renewal business could be inadequate to cover actual loss costs, and our future loss and loss expense reserves could be understated.

Two examples of how loss and loss expense reserves might be affected by economic, political, social, or legal developments or trends are:

•If inflation, including medical and social inflation, is higher than our assumptions, our loss and loss expense reserves for our longer tail lines of business could be insufficient. For example, 2022 inflation rates reflected in the overall consumer price index ("CPI"), the Core CPI, and the Producer Price Index, were higher than 2021. We, however, do not know how long elevated inflation will persist. Our workers compensation line of business is particularly susceptible to inflation because of its extended payment pattern and exposure to medical care services and commodities. While relatively less affected by recent rising inflation rates, these medical care costs could have a more material impact on our overall loss and loss expense reserves if they were to rise significantly or persist for an extended period. Our short-tail property lines of business are also susceptible to inflation because of their exposure to increased labor and material costs.

•Various states have expanded or could expand the statute of limitations for civil actions alleging sexual abuse. By retroactively permitting previously time-barred claims, these "reviver" laws may result in insurance claims that could significantly increase loss costs and require a re-evaluation of previously-established reserves or the creation of new reserves. Since reviver statutes have been enacted, we have received some notices of claims or potential claims for acts alleged to have occurred, some dating as far back as the 1950s. Without prior experience, we cannot estimate how many "reviver" claims notices we may receive. Most notices (i) are blanket notices sent by attorneys representing claimants unsure of the alleged assailant or supervising entity's insurer or policy (if any) and (ii) may not implicate any of our or a predecessor's insurance policies. For those we determine implicate one of our or a predecessor's policy, we (i) have investigated or are investigating facts, (ii) have evaluated policy terms, (iii) believe we have appropriate coverage defenses to most of these claims and/or sufficient reinsurance protections, and (iv) have considered these factors in establishing our reserves, which we believe provide a reasonable estimate of the aggregate ultimate net exposure for these claims. Our coverage positions may be challenged through litigation or otherwise, so we face litigation risks. These are discussed further below in the Risk Factor entitled, "We are engaged in ordinary routine legal proceedings incidental to our insurance operations that, because litigation outcomes are inherently unpredictable, could impact our reputation and/or have a material adverse effect on our consolidated results of operations or cash flows in particular quarterly or annual periods."

For further discussion on our loss and loss expense reserves, please see the "Critical Accounting Policies and Estimates" section of Item 7. "Management’s Discussion and Analysis of Financial Condition and Results of Operations." and Note 2. "Summary of Significant Accounting Policies" in Item 8. "Financial Statements and Supplementary Data." of this Form 10-K.

Our ability to reduce our risk exposure depends on the availability and cost of reinsurance.

We transfer a significant portion of our underwriting risk to third parties through reinsurance contracts. These contracts provide reimbursement of losses exceeding specified amounts or percentages of premiums. Typically, our reinsurance coverages align with the coverages offered under our primary insurance policies.

The availability, quality, amount, and cost of reinsurance depend on market conditions, including retrocessional reinsurance market capacity. Most of our reinsurance contracts have annual terms. Consequently, reinsurance costs may fluctuate significantly, not necessarily correlating to the loss experience of our specific book of business. State insurance regulators generally permit us to consider catastrophe reinsurance expense in our filed rates and rating plans. However, the conditions and timing of regulatory approval may not align with the actual expense of new reinsurance terms. Disproportionate increases in our reinsurance expense that we cannot include in our filed rates and rating plans will reduce our earnings. If we are unable to negotiate desired reinsurance amounts or terms, we may experience (i) increased reinsurance expense, (ii) increased risk retention on individual or aggregate claim losses, and (iii) limitations on our ability to write future business.

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Commercial property and homeowners coverages have historically accounted for most of our catastrophe-related claims. To limit our exposure to catastrophe losses, we purchase catastrophe reinsurance. Our reinsurance coverage may prove to be inadequate, particularly if:

•We do not purchase sufficient amounts of reinsurance because of defects or inaccuracies in the various modeling software programs we use to analyze our Insurance Subsidiaries' risk;

•A major catastrophe loss exceeds (i) the purchased reinsurance limit or (ii) the financial capacity of one or more of our reinsurers even if the loss is within the purchased limit;

•The combination of multiple catastrophe events in a single year is such that our Insurance Subsidiaries' insured losses exceed the aggregate limits of the catastrophe reinsurance treaty or our Insurance Subsidiaries experience an unusually large number of catastrophe losses that fall below our per occurrence reinsurance retention;

•Our reinsurance counterparties (i) are unable to access their reinsurance markets, or retrocessions, (ii) suffer significant financial losses, (iii) are sold, (iv) cease writing reinsurance business, or (v) are unable or unwilling to satisfy their contractual obligations to us; or

•The catastrophe losses insured in our primary policies are excluded from coverage in our reinsurance contracts.

Recent economic, geopolitical, and insured loss events have increased global reinsurance market uncertainty. The impacts of (i) higher inflation-related reinsurance demand, (ii) reduced capacity due to reinsurer investment portfolio losses, (iii) weakened Euro-United States dollar currency exchange rates, (iv) recent Hurricane Ian-related reinsurer losses, (v) poor reinsurer profitability over the past six years, and (vi) investor and reinsurer concerns about the potential impacts of climate change have caused an increase in reinsurance prices and reduced the availability of reinsurance. How reinsurance supply and demand will adjust in the coming months and years is uncertain. To the extent we are exposed to primary policy losses from risks, such as cyber and communicable disease, now principally excluded from coverage under our reinsurance treaties, we face increased underwriting risk. Some of our reinsurance contracts also contain coverage wording that restricts our ability to cede potential losses related to terrorism, strikes, riots, or civil unrest. Increased underwriting risk could increase our net loss and loss expense, increasing our underwriting results volatility. Decreased reinsurance capacity also would increase our underwriting risk if we cannot fully place our existing reinsurance treaty coverage on renewal. If our reinsurers have difficulty collecting their retrocession programs or reinstating retrocession coverage after a large loss, our reinsurance claims may not be paid timely or in full.

Even with the benefits of reinsurance, our catastrophe risk exposure could have a material adverse effect on our results of operations, liquidity, financial condition, financial strength, and debt ratings.

We are exposed to credit risk.

We face credit risk in several areas of our insurance operations, including from:

•Our reinsurers, which are obligated to make us payments under our reinsurance agreements. Reinsurance credit risk can fluctuate over time, increasing during periods of high industry catastrophe and liability losses. Reinsurers generally manage their significant loss exposure through their own reinsurance programs, or retrocessions, about which we do not always have the full details. If our reinsurers experience difficulty collecting on their retrocession programs or reinstating retrocession coverage after a large loss, we may not receive timely or full payment of our reinsurance claims. This means that we have direct and indirect counterparty credit risk to our reinsurers and the reinsurance industry, which is a global but concentrated market.

•Certain life insurance companies, if they fail to fulfill their contractual obligations to our policyholders or claimants under annuities we purchased as part of structured claims settlements.

•Some of our independent distribution partners, who collect premiums from policyholders for us.

•Some policyholders, who are directly obligated to us for premium and/or deductible payments, the timing of which may be impacted by mandated payment moratoriums.

Our exposure to credit risk could have a material adverse effect on our results of operations, liquidity, financial condition, financial strength, and debt ratings.

We depend on distribution partners.

We market and sell our insurance products through independent, non-employee distribution partners. Insurance law and regulation makes us responsible for our distribution partners' business practices and customer interactions. Independent distribution partners have – and we expect will continue to have – a significant role in overall insurance industry premium

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production. While our customers find advantages in using independent distribution partners, our reliance on independent distribution partners presents risks and challenges, including:

•Competition in our distribution channel, as we must market our products and services to our independent distribution partners who have access to products from multiple carriers and markets.

•Brand recognition challenges because we closely coordinate marketing with our distribution partners and some customers cannot differentiate their insurance agent from their insurer.

•Our market share growth is tied to our distribution partners' market share. Consequently, growth in our Standard Personal Lines could be more limited than in our Standard Commercial Lines. Competitors have focused on lower-cost "direct-to-customer" distribution models that emphasize digital ease and efficiencies to address the discrepancy in agency control of standard personal lines business. Continued advancements in "direct-to-customer" distribution models may impact our independent distribution partners' overall market share, make it more difficult for us to grow, or require us to establish relationships with more distribution partners.

•Aggregation and consolidation of our independent distribution partners and their market share, as some publicly-traded and private equity-backed independent distribution partners have deployed consolidation strategies to acquire other independent distribution partners and increase their market share ("Aggregators") over the last decade. If more of our independent distribution partners become Aggregators or are acquired by Aggregators, Aggregator demands and influence on our business could increase. For example, Aggregators could develop and implement strategies to consolidate their business with fewer insurers and demand higher base and supplemental commissions. Aggregators accounted for approximately 39% of our DPW at December 31, 2022, up from 33% three years ago. No one distribution partner is responsible for 10% or more of our combined insurance operations' premium.

Our financial condition and results of operations are impacted by our independent distribution partners' success in marketing and selling our products and services.

National and global economic conditions could adversely and materially affect our business, results of operations, financial condition, and growth.

Unfavorable economic developments, such as increased inflation levels, could adversely affect our earnings if our policyholders need less insurance coverage, cancel existing insurance policies, modify coverage, or choose not to renew with us. Inflation could significantly impact our claims severity across multiple lines of business and could result in adverse reserve development. Heightened economic inflation levels could also cause higher interest rates, likely increasing unrealized losses within our portfolio of fixed income securities and lowering total returns from our other invested assets. An economic downturn also could lead to increased credit and premium receivable risk, failure of reinsurance counterparties and other financial institutions, limitations on our ability to issue new debt, reduced liquidity, and declines in our investments' fair value and financial strength ratings. These potential events and other economic factors could adversely and materially affect our business, results of operations, financial condition, and growth. During 2022, 27% of DPW in our Standard Commercial Lines business was based on payroll or sales of our underlying policyholders. An economic downturn in which our policyholders have declining revenue or employee count could adversely affect our total written premium, including audit and endorsement premium.

We write business domestically in the United States, and our insurance operations do not have direct exposure to businesses or individuals in Russia or Ukraine. We do not have material exposure to investments subject to embargoes or Russian reinsurance counterparties. However, the ongoing Russian war against Ukraine is impacting global economic, banking, commodity, and financial markets, exacerbating ongoing economic challenges, including inflation and supply chain disruption, which influence insurance loss costs, premiums, and investment valuation.

A downgrade or a potential downgrade in our financial strength or credit ratings could result in a loss of business and could have a material adverse effect on our financial condition and results of operations.

A significant financial strength rating downgrade, particularly from AM Best, would affect our ability to write new or renewal business. Most policyholders are required by various third-party agreements, primarily with lenders, to maintain insurance policies from a carrier with a minimum AM Best or S&P rating. Credit rating downgrades could also make it more expensive to access capital markets. We cannot predict the rating actions NRSROs could take that might adversely affect our business or our potential responses. Any significant downgrade in our financial strength and credit ratings below an "A-" could have a material adverse effect on our results of operations, liquidity, financial condition, financial strength, and debt ratings. For additional information on our current financial strength and credit ratings, refer to "Overview" in Item 1. "Business." of this Form 10-K.

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Markets for insurance products and services are highly competitive and subject to rapid technological change, and we may be unable to compete effectively.

We offer our insurance products and services in a highly competitive market characterized by consumer and business price sensitivity, aggressive price competition and improvements based on performance characteristics and large data sets that can compact underwriting margins, new products and services, evolving industry standards, and rapid adoption of technological advancements. Our ability to compete successfully depends heavily on our timely and consistent introduction of innovative new products and services.

We face substantial competition from a wide range of property and casualty insurance companies for customers, distribution partners, and employees. Competitors include public, private, and mutual insurance companies. Many competitors are larger and may have lower relative operating costs, lower capital costs, or greater capacity to absorb or diversify more risk while maintaining their financial strength ratings. Other competitors, such as mutual or reciprocal companies, are owned by or operated cooperatively for insureds and, unlike us, do not have shareholders who evaluate ROE performance. Consequently, some competitors may be able to price their products more competitively.

The Internet has emerged as a significant competitive digital marketplace for existing and new competitors. Established insurance competitors, like The Progressive Corporation, are beginning to explore broader digital Internet offerings. New competitors with variations on traditional business models have emerged, such as Lemonade, Root, and Next. Because the Internet makes it easier and less expensive to bundle products and services, it also is possible that non-insurance companies conducting business on the Internet could enter the insurance business or form strategic alliances with insurers in the future. Changes in competitors and competition, particularly on the Internet, could cause changes in the supply or demand for insurance and adversely affect our business.

The increasing importance of the Internet, technology, and digital strategy in our industry also demands that we attract and retain employees in difficult-to-fill data science, advanced analytics, and IT roles – or suffer potential negative impacts.

We have less loss experience data than our larger competitors.

Insurers depend on access to reliable data about their policyholders and loss experience to build complex analytics and predictive models that assess risk profitability, reserve adequacy, adverse claim development potential, recovery opportunities, fraudulent activities, and customer buying habits. Because we use and depend on the aggregated industry loss data assembled by rating bureaus under the antitrust exemptions of the McCarran-Ferguson Act, we likely would be at a competitive disadvantage to larger insurers if Congress repealed the McCarran-Ferguson Act.

We expect the importance of data science and analytics to increase, becoming more complex and accurate with larger sets of relevant data. Some larger competitors have significantly more data about the performance of their underwritten risks. In comparison, we may not have sufficient volumes of loss experience data to analyze and project our future costs as accurately or granularly. We supplement our data with industry loss experience from Verisk, AAIS, NCCI, and other publicly available sources. While relevant, industry data may not correlate specifically to the performance of our underwritten risks or be as predictive as data on a larger book of our own business.

We are subject to various modeling risks that could have a material adverse impact on our business results.

We rely on complex financial and other statistical models, developed internally and by third parties, to predict (i) underwriting results on individual risks and our overall portfolio, (ii) claims fraud and other claims impacts, such as escalation, (iii) impacts from catastrophes, (iv) enterprise risk management capital scenarios, and (v) investment portfolio changes. We rely on these financial and other statistical models to analyze historical loss costs and pricing, claims severity and frequency trends, catastrophe losses, reinsurance attachment and exhaustion points, investment performance, portfolio risk, and our economic capital position. Flaws in financial and statistical models and their embedded assumptions could lead to increased losses. For example, a significant component of climate change risk is that the frequency and severity of extreme weather events may evolve differently relative to historical levels – leading to greater model uncertainty. The increase in the frequency of land-falling hurricanes and tropical storms in the U.S. over the past five years could partly be climate change-related. In addition, increasing insurance regulatory interest in data and model use, combined with any potential restrictions on traditional rating factors or model use, could have a material adverse impact on our financial condition and operating results. Our statistical models are extremely useful in monitoring and controlling risk, but they are no substitute for senior management's experience or judgment.

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Risks Related to Our Investments Segment

Our investments are exposed to credit risk, interest rate fluctuation, and changes in value.

We depend on income from our investment portfolio for a significant portion of our revenue and earnings. Our investments can be negatively affected by (i) liquidity, (ii) credit deterioration, (iii) financial results, (iv) public equity and/or debt market changes, (v) economic conditions, including heightened levels of economic inflation and any ongoing post-COVID-19 pandemic impacts, (vi) political risk, (vii) sovereign risk, (viii) interest rate fluctuations, or (ix) other factors, including climate change risk and civil unrest.

Our investment portfolio's value is subject to credit risk from our held securities' issuers, guarantors, and financial guarantee insurers, and other counterparties in certain transactions. Defaults on any of our investments by any issuer, guarantor, financial guarantee insurer, or other counterparty could reduce our net investment income and increase net realized investment losses. We are subject to the risk that the issuers or guarantors of fixed income securities we own may default on principal and interest payment obligations.

Additionally, we are exposed to interest rate risk, primarily related to the market price and cash flow variability associated with changes in interest rates. Consequently, the amount of our cash and cash equivalents, and the value and liquidity of our marketable and non-marketable securities may fluctuate substantially. Future fluctuations in the value of our cash, cash equivalents, and marketable and non-marketable securities could result in significant losses that have a material adverse impact on our financial condition and operating results.

Our investment portfolio is exposed to climate change-related transition and physical investment risks.

•Transition risks arise from society’s transition to a low-carbon economy, driven by policy and regulations, low-carbon technology advances, and shifting public sentiment and societal preferences. This transition to renewable energy sources may lead to (i) stranded assets in sectors with high carbon footprints or those closely tied to carbon-based economic activity, such as the fossil fuel and automotive industries, (ii) increased costs for infrastructure reinvestment and replacement, and litigation defense of carbon-intensive sectors, (iii) lower corporate profitability, (iv) lower property values, and (v) lower household wealth. The Paris Agreement Capital Transition Assessment defines the carbon-intensive sectors as the most exposed to transition risks: oil and gas, coal, power, automotive, cement, aviation, and steel. As of December 31, 2022, carbon intensive sectors within our fixed income securities portfolio represented less than 4% of our total invested assets, down from 5% as of December 31, 2021.

•Physical investment risks include the risk of investment losses on our commercial and residential mortgage-backed securities that are exposed to climate-related catastrophic losses that can cause business disruption, destroy capital, increase costs to recover from disasters, reduce revenue, and cause population displacement and migration. These, in turn, can lower residential and commercial property values, household wealth, and corporate profitability, all potentially creating financial and credit market losses impacting insurer asset values. As of December 31, 2022, about 69% of our residential mortgage-backed securities were backed by government agencies. We generally invest in the top tranches of commercial mortgage-backed securities, which limit potential losses from property value declines.

Significant future investment value declines could require further losses recorded on securities we sell and credit losses. For more information regarding market interest rate, credit, and equity price risk, see Item 7A. "Quantitative and Qualitative Disclosures About Market Risk." of this Form 10-K.

We have securities tied to LIBOR, which will be eliminated on June 30, 2023.

As of December 31, 2022, approximately 11% of our fixed income securities portfolio had floating rate securities primarily tied to 90-day U.S. dollar-denominated London Interbank Offered Rate ("LIBOR"). Historically, the global banking industry has used LIBOR as a primary metric to calculate interest rates for certain debt obligations, including personal and commercial loans, interest rate swaps, and other derivative products. In anticipation of LIBOR's elimination, the U.S. Federal Reserve established the Alternative Reference Rates Committee ("ARRC") to select a U.S. Dollar replacement index. The ARRC, comprised of a broad group of private-market participants, including banks, asset managers, insurers, and industry regulators, identified the Secured Overnight Financing Rate ("SOFR") as the LIBOR-replacement benchmark rate. SOFR is based on overnight repurchase agreement transactions backed by U.S. Treasury securities. The ARRC announced a paced transition plan for this new rate, including specific steps and timelines designed to encourage the adoption of SOFR. Effective June 30, 2023, LIBOR will cease to exist, requiring remaining floating rate securities to transition to SOFR. Consequently, our fixed income securities portfolio may be subject to (i) interest rate and prepayment risk associated with the resetting of our floating rate coupons from LIBOR to SOFR, (ii) potential rating agency downgrades, (iii) reduced trading liquidity on securities with

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insufficient fallback transition language, and (iv) lower returns associated with basis risk from a reference rate mismatch between liabilities and assets in certain securitized assets. We continue to monitor the potential impact LIBOR's elimination and the transition to SOFR will have on our floating rate investments' performance. We have and will continue to evaluate and monitor other LIBOR risks across the organization.

We are subject to the risks inherent in investing in private limited partnerships.

Our alternative investments include private limited partnerships that invest in various strategies, such as private equity, private credit, and real assets. The primary assets and liabilities underlying in these limited partnership investments generally do not have quoted prices in active markets for the same or similar assets, so their valuation is subject to a higher level of subjectivity and unobservable inputs than substantially all of our other investments. Because we record these limited partnership investments under the equity method of accounting, any valuation decreases could negatively impact our results of operations.

Determining the amount of credit losses taken on our investments is highly subjective and could materially impact our results of operations or our financial position.

The determination of the amount of credit losses taken on our investments is based on our quarterly evaluation and assessment of our investments and known and inherent risks associated with the various asset classes. Such evaluations and assessments are revised as conditions change and new information becomes available. Management updates its evaluations regularly, reflecting changes in credit losses. There can be no assurance that management has accurately assessed the level of credit losses recorded in our Financial Statements. For further information about our evaluation and considerations for determining whether a security has a credit loss, please refer to "Critical Accounting Policies and Estimates" in Item 7. "Management’s Discussion and Analysis of Financial Condition and Results of Operations." of this Form 10-K.

Risks Related to Evolving Laws, Regulations, and Public Policy Debates

We are subject to complex and changing laws, regulations, and public policy debates that expose us to regulatory scrutiny, potential liabilities, increased costs, reputational harm, and other adverse effects on our business.

Our operations are subject to complex and changing state and federal laws, regulations, and public policy debates on subjects, including, without limitation, the following:

•Pricing and underwriting practices;

•Claims practices;

•Loss and loss adjustment expense reserves;

•Exiting geographic markets and/or canceling or non-renewing policies;

•ESG-related issues, including ESG investment mandates;

•Climate change, including potential liability for related public disclosures;

•Assessments for guaranty funds and second-injury funds, and other mandatory assigned risks and reinsurance;

•The types, quality, and concentration of investments we make;

•Minimum capital requirements for the Insurance Subsidiaries;

•Dividends from our Insurance Subsidiaries to the Parent;

•Privacy and data security;

•Tax;

•Antitrust;

•Consumer protection;

•Advertising;

•Sales;

•Billing and e-commerce;

•Intellectual property ownership and infringement;

•Digital platforms;

•Internet, telecommunications, and mobile communications;

•Media and digital content;

•Availability of third-party software applications and services;

•Labor and employment;

•Anti-money laundering; and

•Workplace environmental, health, and safety issues.

Changes to laws and regulations can adversely affect our business by increasing our costs, limiting our ability to offer a product or service to customers, requiring changes to our business practices, or otherwise making our products and services less attractive to customers.

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If Congress passed legislation regulating insurer solvency oversight and state regulators remained responsible for rate approval, we could be subject to a conflicting regulatory framework that could impact our profitability and capital adequacy.

While we underwrite risks only in the U.S., international regulatory developments, primarily capital adequacy and risk management requirements in the European Union ("EU"), may influence U.S. regulators as they develop or revise domestic regulatory standards. In the fourth quarter of 2020, the NAIC's Group Capital Calculation Working Group adopted the basic structure of its new Group Capital Calculation and drafted model law changes that provide for its adoption as a state law requirement for U.S. insurance groups. Our New Jersey state insurance regulators adopted the GCC model law in 2022. Based on our 2022 statutory financial statements prepared in accordance with SAP, our GCC ratio exceeds the regulatory action minimum threshold. If the GCC requirements or our financial position changes, it could increase the amount of capital our Insurance Subsidiaries are required to hold.

We have implemented policies and procedures designed to ensure compliance with applicable laws and regulations. However, we can provide no assurance that our employees, contractors, or independent distribution partners will not violate such laws and regulations or our policies and procedures. To some degree, we have multiple regulators whose authority may overlap and may have different interpretations and/or regulations related to the same legal issues. Consequently, we have the risk that one regulator's position or interpretation may conflict with another regulator on the same issue. The cost of complying with various, potentially conflicting laws and regulations, and changes in those laws and regulations, could have a material adverse effect on our results of operations, liquidity, financial condition, financial strength, and debt ratings.

Insurers are subject to regulatory, political, and media scrutiny. We are subject to government market conduct reviews and investigations, legal actions, and penalties. There can be no assurance that our business will not be materially adversely affected by the outcomes of such examinations, investigations, or media scrutiny in the future. If we are found to have violated laws and regulations, it could materially adversely affect our reputation, financial condition, and operating results.

Our business is subject to various state, federal, and other laws, rules, policies, and other obligations regarding data protection.

We are subject to federal and state laws relating to the collection, use, retention, security, and transfer of personally identifiable information ("PII"). Federal laws include the Gramm-Leach-Bliley Act, the Fair Credit Reporting Act, the Drivers Privacy Protection Act, the Health Insurance Portability and Accountability Act, and Unfair and Deceptive Acts and Practices laws. Several states, like New York, Nevada, Colorado, Virginia, and California, have passed laws in this area, and other jurisdictions are considering imposing additional restrictions or creating new rights concerning PII. These laws continue to develop and may be inconsistent from jurisdiction to jurisdiction. Complying with emerging and changing requirements may cause us to incur substantial costs or require us to change our business practices. Noncompliance could result in significant reputational harm, penalties, and legal liability.

The EU adopted the General Data Protection Regulation ("GDPR") in 2016 but it did not become effective until 2018. GDPR regulates data protection and privacy in the EU and transfers of personal data outside the EU. GDPR’s main tenet is to give individuals primary control over their personal data. Because we do not write coverages in the EU, GDPR does not directly impact us. Some U.S. states have subsequently incorporated individual-control mechanisms into state privacy laws. Future EU data privacy actions likely will influence U.S. regulators over time.

We make statements about our use and disclosure of PII in our privacy policy, on our website, and in other public venues. If we fail to comply with these public statements or federal and state privacy-related and data protection laws and regulations, we could be subject to litigation or governmental actions. Such proceedings could impact our reputation and result in penalties, including ongoing audit requirements and significant legal liability.

We are engaged in ordinary routine legal proceedings incidental to our insurance operations that are inherently unpredictable and could impact our reputation and/or have a material adverse effect on our consolidated results of operations or cash flows in particular quarterly or annual periods.

We are engaged in ordinary routine legal proceedings incidental to our insurance operations that include:

•Defense of or indemnity for third-party suits brought against our insureds;

•Defense of actions brought against us by our insureds who disagree with our coverage decisions, some of which allege bad faith claims handling and seek extra-contractual damages, punitive damages, or other penalties;

•Actions we file, primarily for declaratory judgment, seeking confirmation that we have made appropriate coverage decisions under our insurance contracts;

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•Actions brought against competitors or us alleging improper business practices and sometimes seeking class status. Such actions historically have included issues and allegations, without limitation, related to (i) unfairly discriminatory underwriting practices, including the impact of credit score usage, (ii) managed care practices, such as provider reimbursement, and (iii) automobile claims practices; and

•Actions we file against third parties and other insurers for subrogation and recovery of other amounts we paid on behalf of our insureds.

From time to time, legal proceedings in which we are involved may receive media attention based on their perceived newsworthiness and/or relationship to various broad economic, political, social, and legal developments or trends. Such media stories could negatively impact our reputation.

We expect any potential ultimate liability for ordinary routine legal proceedings incidental to our insurance business will not be material to our consolidated financial condition after considering estimated loss provisions. Litigation outcomes, however, are inherently unpredictable, even with meritorious defenses. The time a case is in litigation also is unpredictable, as state court dockets are increasingly overcrowded. Generally, the longer a case is in litigation, the more expensive it can become. Because the amounts sought in certain actions are large or indeterminate, any adverse outcomes could have a material adverse effect on our consolidated results of operations or cash flows in particular quarterly or annual periods.

Additionally, we do not have any material litigation risks related to climate change.

Risks Related to Our Corporate Structure and Governance

We are a holding company, and our ability to declare dividends to our shareholders, pay indebtedness, and enter into affiliate transactions may be limited because our Insurance Subsidiaries are regulated.

Restrictions on our Insurance Subsidiaries' ability to pay dividends, make loans or advances to the Parent, or enter into transactions with affiliates may materially affect our ability to pay dividends on our preferred stock and common stock, or repay our indebtedness.

Based on these restrictions, the maximum ordinary annual dividends the Insurance Subsidiaries can provide the Parent in 2023 is $283 million. Their ability to pay dividends or make loans or advances, however, is subject to domiciliary state insurance regulators' approval or review. For additional details regarding dividend restrictions, see Note 22. "Statutory Financial Information, Capital Requirements, and Restrictions on Dividends and Transfers of Funds" in Item 8. "Financial Statements and Supplementary Data." of this Form 10-K.

The Parent’s ability to pay dividends to its stockholders is also impacted by covenants in its credit agreement (the "Line of Credit") among the Parent, the named lenders (the "Lenders"), and Wells Fargo Bank, National Association, as Administrative Agent. These covenants obligate the Parent to, among other things, maintain a minimum consolidated net worth and a maximum ratio of debt to capitalization. Our preferred stock's terms limit the Parent's ability to declare or pay dividends on, or purchase, redeem or otherwise acquire, shares of its common stock or any shares of the Parent that rank junior to, or on parity with, the preferred stock if the Parent does not declare and pay (or set aside) dividends on the preferred stock for the last preceding dividend period. For additional details about the Line of Credit's financial covenants, see Note 11. "Indebtedness" in Item 8. "Financial Statements and Supplementary Data" of this Form 10-K. For additional details about conditions related to our preferred stock, see Note 17. "Equity" in Item 8. "Financial Statements and Supplementary Data" of this Form 10-K.

Because we are a New Jersey corporation and an insurance holding company, we may be less attractive to potential acquirers and our common stock's value could be adversely affected.

We are a New Jersey company, and provisions of the New Jersey Shareholders' Protection Act and our Amended and Restated Certificate of Incorporation may discourage, delay, or prevent us from being acquired. A supermajority of our shareholders must approve (i) certain business combinations with interested shareholders, or (ii) any amendment to the related provisions of our Amended and Restated Certificate of Incorporation unless certain conditions are met. These conditions may relate to, among other things, the interested stockholder's acquisition of stock, the approval of the business combination by disinterested members of our Board and disinterested stockholders, and the price and payment of the consideration proposed in the business combination. In addition to considering the effects of any action on our shareholders (including any offer or proposal to acquire the Parent), our Board may consider: (i) the long-term, and short-term interests of the Parent and our shareholders, including the possibility that these interests may best be served by the Parent's continued independence; (ii) the effects of the action on the Parent's employees, suppliers, creditors, and customers; and (iii) the effects of the action on the community in which the Parent operates.

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These provisions of our Amended and Restated Certificate of Incorporation and New Jersey law could deprive our common shareholders of an opportunity to receive a premium over the prevailing market price in a hostile takeover and could adversely affect the value of our common stock.

Because we own insurance subsidiaries, any party seeking to acquire 10% or more of our common stock must seek prior approval from the subsidiaries' domiciliary insurance regulators and file extensive information about their business operations and finances. The New Jersey Department of Banking and Insurance Commissioner, who regulates seven of our Insurance Subsidiaries, also considers whether (i) the acquisition of control of an insurer would be adverse to the public interest or the protection of existing and future policyholders or (ii) persons seeking control would use control adversely to the public interest or the protection of policyholders.

Risks Related to Our General Operations

We and our distribution partners and vendors are subject to attempted cyber-attacks and other cybersecurity and system availability risks.

Our business heavily relies on IT and application systems connected to or accessed from the Internet. Consequently, a malicious cyber-attack could affect us. Our systems also house proprietary and confidential information, including PII, about our operations, employees, agents, and customers and their employees and property. A malicious cyber-attack on (i) our systems, (ii) our distribution partners or their key operating systems, and (iii) any other of our third-party partners or vendors and their key operating systems may interrupt our ability to operate, damage our reputation and result in monetary damages that are difficult to quantify, and have a material adverse effect on our results of operations, liquidity, financial condition, financial strength, and debt ratings.

We have implemented systems and processes, through encryption and authentication technologies, intended to mitigate or secure our IT systems and prevent unauthorized access to, or loss of, sensitive data. As cyber-attacks continue to evolve daily, our security measures may not be sufficient for all eventualities. We may be vulnerable to hacking, employee error, malfeasance, system error, faulty password management, or other irregularities. These risks may be higher or lower for our third-party providers depending on the maturity of their security program, and we review their control environments to the extent possible and practical, aligning the risk exposure with our business requirements and risk tolerances. Any disruption or breach of our systems or data security could damage our reputation, result in difficult to quantify monetary damages, and have a material adverse effect on our results of operations, liquidity, financial condition, financial strength, and debt ratings. To mitigate this risk, we have and expect to continue to (i) conduct employee education programs and tabletop exercises and (ii) develop and invest in a variety of controls to prevent, detect, and appropriately react to cyber-attacks, including frequently testing our systems' security and access controls. We have insurance coverage for certain cybersecurity risks, including privacy breach incidents, which may be insufficient to indemnify against all arising losses or types of claims.

In addition to cyber-attack risk, we face system availability risk. Our business relies heavily on various IT and application systems. We have robust business continuity plans designed to minimize the duration and impact of an unexpected loss of availability of any of these systems. Nevertheless, we could experience an event that impacts one or more of these systems, including those based in facilities where our vendors or we operate. This may interrupt our ability to operate and negatively impact our results of operations, despite our business continuity plans.

Our long-term strategy to deploy operational leverage is dependent on the success of our risk management strategies, and their failure could have a material adverse effect on our financial condition or results of operations.

As an insurer, we assume risk from our policyholders. Our long-term strategy includes using above-average operational leverage, measured as the ratio of NPW to our equity or statutory surplus. We balance and mitigate our operational leverage risk with several risk management strategies within our insurance operations to achieve a balance of growth and profit, including an underwriting risk appetite focused on small-to-medium-sized accounts. We do this by using significant reinsurance, a disciplined reserving approach, and a conservative investment philosophy. These strategies have inherent limitations. We cannot be certain that an event or series of unanticipated events will not occur and result in losses greater than we expect. Given our higher-than-industry average operating leverage, an event or series of unanticipated events could have a more material adverse effect on our results of operations, liquidity, financial condition, financial strength, and debt ratings compared to our industry.

Item 1B. Unresolved Staff Comments.

None.

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Item 2. Properties.

Our headquarters is a 315,000 square foot building on an owned 56-acre site zoned for office and professional use in Branchville, New Jersey. We lease all our other operating facilities from unrelated parties. The principal office locations of our insurance operations are listed in the "Geographic Markets" section of Item 1. "Business." of this Form 10-K. Our Investments operations are principally located in leased space in Farmington, Connecticut. Our facilities provide adequate space for our present needs and, if additional space is needed, should be available on reasonable terms.

Item 3. Legal Proceedings.

We are routinely engaged in legal proceedings incidental to our insurance operations that have inherently unpredictable outcomes and could have a material adverse effect on our consolidated results of operations or cash flows in particular quarterly or annual periods. For additional information regarding our legal risks, refer to Item 1A. "Risk Factors." and Note 21. "Litigation" included in Item 8. "Financial Statements and Supplementary Data." of this Form 10-K. As of December 31, 2022, we have no material pending legal proceedings that could have a material adverse effect on our consolidated financial condition, results of operations, or cash flows.

Item 4. Mine Safety Disclosures.

Not applicable.

PART II

Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

(a) Market Information

Our common stock is traded on the Nasdaq Global Select Market under the symbol "SIGI."

(b) Holders

We had 2,872 common stockholders of record as of January 31, 2023, according to our transfer agent's records.

Dividends on shares of our common stock are declared and paid at the discretion of the Board of Directors (the "Board") based on our results of operations, financial condition, capital requirements, contractual restrictions, and other relevant factors. We expect to continue to pay quarterly cash dividends on shares of our common stock in the future.

On November 2, 2022, the Board approved a 7% increase in our common stock dividend to $0.30 per share. In addition, on February 2, 2023, the Board declared a $0.30 per share quarterly cash dividend on common stock that is payable March 1, 2023, to stockholders of record as of February 15, 2023.

(d) Securities Authorized for Issuance under Equity Compensation Plans

The following table provides information about our common stock authorized for issuance under equity compensation plans as of December 31, 2022:

(a) (b) (c)

Equity compensation plans approved by security holders — $ — 5,142,946

1Includes 1,116,863 shares available for issuance under our Employee Stock Purchase Plan (2021); 1,551,498 shares available for issuance under the Stock Purchase Plan for Independent Insurance Agencies; and 2,474,585 shares for issuance under the Selective Insurance Group, Inc. 2014 Omnibus Stock Plan ("Stock Plan"). Future grants under the Stock Plan can be made, among other things, as stock options, restricted stock units, or restricted stock.

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(e) Performance Graph

The following chart, produced by Research Data Group, Inc., depicts our performance for the period beginning December 31, 2017, and ending December 31, 2022, comparing total stockholder return on our common stock to the total return of (i) the NASDAQ Composite Index and (ii) a select group of peer companies comprised of NASDAQ-listed companies in SIC Code 6330-6339, Fire, Marine, and Casualty Insurance.

We have not incorporated this performance graph into any other filings we have made with the SEC. Unless we otherwise specifically state, it will not be incorporated by reference into any future SEC filings. This performance graph shall not be deemed "soliciting material" or be "filed" with the SEC unless we specifically request so or incorporate it by reference in any SEC filings we make.

(f) Purchases of Equity Securities by the Issuer and Affiliated Purchasers

The following table provides information about our purchases of our common stock in the fourth quarter of 2022:

1We purchased these shares from employees to satisfy tax withholding obligations associated with the vesting of their restricted stock units.

2On December 2, 2020, we announced our Board authorized a $100 million share repurchase program with no set expiration or termination date. Our repurchase program does not obligate us to acquire any particular amount of our common stock. Management will determine the timing and amount of any share repurchases under the authorization at its discretion based on market conditions and other considerations.

Item 6. Reserved.

Not applicable.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-looking Statements

The terms "Company," "we," "us," and "our" refer to Selective Insurance Group, Inc. (the "Parent"), and its subsidiaries, except as expressly indicated or the context otherwise requires. Certain statements in this Annual Report on Form 10-K, including information incorporated by reference, are “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995 (“PSLRA”). The PSLRA provides a safe harbor under the Securities Act of 1933 and the Securities Exchange Act of 1934 for forward-looking statements. These statements relate to our intentions, beliefs, projections, estimations, or forecasts

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of future events and financial performance. They involve known and unknown risks, uncertainties, and other factors that may cause our or industry actual results, activity levels, or performance to materially differ from those expressed or implied by the forward-looking statements. In some cases, forward-looking statements include the words “may,” “will,” “could,” “would,” “should,” “expect,” “plan,” “anticipate,” “target,” “project,” “intend,” “believe,” “estimate,” “predict,” “potential,” “pro forma,” “seek,” “likely,” “continue,” or comparable terms. Our forward-looking statements are only predictions, and we can give no assurance that such expectations will prove correct. We undertake no obligation, other than as federal securities laws may require, to publicly update or revise any forward-looking statements for any reason.

Factors that could cause our actual results to differ materially from what we project, forecast, or estimate in forward-looking statements are discussed in further detail in Item 1A. “Risk Factors.” of this form 10-K. These risk factors may not be exhaustive. We operate in a constantly changing business environment, and new risk factors may emerge anytime. We can neither predict these new risk factors nor assess their impact, if any, on our businesses or the extent any factor or combination of factors may cause actual results to differ materially from any forward-looking statements. Given these risks, uncertainties, and assumptions, the forward-looking events we discuss in this report might not occur.

Introduction

We classify our business into four reportable segments:

•Standard Commercial Lines;

•Standard Personal Lines;

•Excess and Surplus Lines ("E&S Lines"); and

•Investments.

For more details about these segments, refer to Note 1. "Organization" and Note 12. "Segment Information" in Item 8. "Financial Statements and Supplementary Data." of this Form 10-K.

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

The following is Management's Discussion and Analysis ("MD&A") of the consolidated results of operations and financial condition, as well as known trends and uncertainties, that may have a material impact in future periods. The MD&A discusses and analyzes our 2022 results compared to 2021. Investors should read the MD&A in conjunction with Item 8. "Financial Statements and Supplementary Data." of this Form 10-K. For discussion and analysis of our 2021 results compared to 2020, refer to Item 7. "Management’s Discussion and Analysis of Financial Condition and Results of Operations." of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

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

•Critical Accounting Policies and Estimates;

•Financial Highlights of Results for Years Ended December 31, 2022, 2021, and 2020;

•Results of Operations and Related Information by Segment;

•Federal Income Taxes; and

•Liquidity and Capital Resources.

Critical Accounting Policies and Estimates

We have identified the policies and estimates critical to our business operations and the understanding of our results of operations. The policies and estimates we considered most critical to the preparation of the Financial Statements involved (i) reserves for loss and loss expense, (ii) investment valuation and the allowance for credit losses on available-for-sale ("AFS") fixed income securities, and (iii) reinsurance.

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Reserves for Loss and Loss Expense

Significant time can elapse between the occurrence of an insured loss, the reporting of the claim to us, and the final settlement and payment of the claim. To recognize liabilities for unpaid loss and loss expense, insurers establish reserves as balance sheet liabilities. The following tables provide case and incurred but not reported (“IBNR”) reserves for loss and loss expenses, and reinsurance recoverable on unpaid loss and loss expense as of December 31, 2022 and 2021:

Loss and Loss Expense Reserves

1Includes our flood loss exposure related to our participation in the NFIP's WYO program, to which we cede 100% of our flood losses.

2Includes general liability (96% of net reserves) and commercial auto liability coverages (4% of net reserves).

3Includes commercial property (90% of net reserves) and commercial auto property coverages (10% of net reserves).

Loss and Loss Expense Reserves

1Includes our flood loss exposure relates to our participation in the NFIP's WYO program, to which we cede 100% of our flood losses.

2Includes general liability (95% of net reserves) and commercial auto liability coverages (5% of net reserves).

3Includes commercial property (91% of net reserves) and commercial auto property coverages (9% of net reserves).

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The Insurance Subsidiaries' net loss and loss expense reserves duration was approximately 3.1 years at December 31, 2022, down from 3.5 years at December 31, 2021.

How reserves are established

Reserves for loss and loss expense include case reserves on reported claims and IBNR reserves. Case reserves are estimated on each individual claim based on claim-specific facts and circumstances known at the time. Case reserves may be adjusted up or down as the claim's specific facts and circumstances change. IBNR reserves are established at more aggregated levels, and they include provisions for (i) claims not yet reported, (ii) future development on reported claims, (iii) closed claims that could reopen in the future, and (iv) anticipated salvage and subrogation recoveries.

Our thorough reserving process relies on quarterly internal reserve reviews, based on our own loss experience, with consideration given to various internal and external factors. Changes in claim dynamics may inherently change paid and reported development patterns. While the selections in our reserve analyses aim to account for these impacts, there remains an increased risk of variability in the estimated reserves. In addition to our internal reserve reviews, we have an external consulting actuary perform an independent review of our reserves semi-annually. We do not rely on the external consulting actuary's report to determine our recorded reserves; however, we review and discuss with the consulting actuary our respective observations regarding trends, key assumptions, and actuarial methodologies. While not required, our independent consulting actuary issues the annual statutory Statements of Actuarial Opinion for our Insurance Subsidiaries. For additional information on our accounting policy for reserves for loss and loss expense, refer to Note. 2. “Summary of Significant Accounting Policies” in Item 8. “Financial Statements and Supplementary Data.” of this Form 10-K.

Range of Reasonable Reserve Estimates

We have estimated a range of reasonable reserve estimates for net loss and loss expense of $3,920 million to $4,662 million at December 31, 2022. This range reflects low and high reasonable reserve estimates determined by judgmentally adjusting the methods, factors, and assumptions selected within the internal reserve review. This approach produces a range of reasonable reserve estimates, and does not represent a distribution of all possible outcomes. Therefore, the final outcomes may be greater than or less than these amounts.

The range of reasonable reserve estimates increased as of December 31, 2022, relative to December 31, 2021. This increase primarily relates to the growth in reserves commensurate with our growth in net premiums earned ("NPE").

Changes in Reserve Estimates (Loss Development)

Our quarterly reserving process may lead to changes in the recorded reserves for prior accident years, referred to as favorable or unfavorable prior year loss and loss expense development. In 2022, we experienced net favorable prior year loss development of $78.9 million, compared to $82.9 million in 2021 and $72.9 million in 2020. The following table summarizes prior year development by line of business:

(Favorable)/Unfavorable Prior Year Loss and Loss Expense Development

Businessowners' policies (7.3) (0.4) 3.9

Commercial property (1.6) (2.6) 9.2

Bonds (10.0) — —

Personal automobile 0.5 (0.2) (1.8)

E&S casualty lines (5.0) (7.0) —

E&S property lines (2.5) (0.8) (4.0)

Other 0.1 — —

A detailed discussion of recent reserve development by line of business follows.

Standard Market General Liability Line of Business

At December 31, 2022, our general liability line of business had recorded reserves, net of reinsurance, of $1.7 billion, representing 40% of our total net reserves. In 2022, this line experienced favorable development of $5.0 million, attributable to favorable inception-to-date claim frequencies in accident years 2020 and 2021. In 2021, this line experienced favorable development of $29.0 million, attributable to improved loss severities in accident years 2018 and prior.

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By its nature, general liability presents a diverse set of exposures. Losses and loss trends are influenced by various factors, including legislative enactments, judicial decisions, and economic and social inflation. Economic inflation directly impacts our claims severities by increasing the costs of raw materials, medical procedures, and labor. Social inflation may impact both the frequency and severity of claims by affecting (i) the propensity for a claimant to file a claim, (ii) the percentage of claimants who engage lawyers, and (iii) the nature of judicial verdicts and amount of the associated awards, which influence settlement values going forward. We monitor claim litigation rates regularly and have observed modest increases in the percentage of claims with attorney involvement in recent periods. This trend and the impact of previous court closures are affecting the time to settle claims.

We have exposure to abuse or molestation claims, mainly through insurance policies that we (i) underwrite through our Community and Public Services ("CAPS") strategic business unit, and (ii) issue to schools, religious institutions, day-care facilities, and other social services. These customers within our CAPS business unit represented approximately 10% of our total Standard Commercial Lines NPW in both 2022 and 2021. Through 2017, our exposure to abuse or molestation risk increased, reflective of our CAPS book's growth. In 2018, we implemented more stringent underwriting eligibility guidelines and partnered with a third party to better assess exposure and enhance loss control measures. In 2019, we filed and approved significant rate increases for this exposure. We continue to monitor each jurisdiction's statute of limitations to ensure our rate level accounts for the changing exposure as best we reasonably can. While these underwriting and pricing actions have been necessary to ensure the profitability of the portfolio going forward, they have limited our CAPS growth in recent years.

We also have exposure to abuse or molestation claims from recently enacted state laws that extend the statute of limitations or permit windows for abuse or molestation claims and lawsuits to be filed that statutes of limitations previously barred. Consequently, we may receive claims decades after the alleged acts occurred that will involve complex claims coverage determinations, potential litigation, higher defense costs, and potentially the need to collect from reinsurers under older reinsurance agreements. Our claims and actuarial departments actively monitor these claims to identify changes in frequency or severity and any emerging or shifting trends. While this should help us better understand this rapidly evolving exposure, the ultimate impact of social, political, and legal trends remains highly uncertain, and may significantly impact the ultimate settlement values for these claims.

Standard Market Workers Compensation Line of Business

At December 31, 2022, our workers compensation line of business had recorded reserves, net of reinsurance, of $844 million, representing 19% of our total net reserves. During 2022, this line experienced favorable reserve development of $70.0 million, due to favorable inception-to-date claim frequencies in accident year 2020, and improved loss severities in accident years 2020 and prior. Similarly, this line experienced favorable reserve development during 2021 of $58.0 million, driven by accident years 2019 and prior. During both 2022 and 2021, the lower loss emergence than expected was partly due to: (i) medical inflation that was lower than originally anticipated; and (ii) various claims initiatives we have implemented. Because of the length of time injured workers can receive related medical treatment, decreases in medical inflation can cause favorable loss development over an extended number of accident years.

A variety of issues can impact the workers compensation line of business, such as:

Unexpected changes in medical cost inflation – The industry is currently experiencing a period of lower medical claim cost inflation. However, alongside elevated inflation as measured by the Consumer Price Index, medical costs are also beginning to rise, though to a lesser degree. Changes in our historical workers compensation medical costs, along with potential changes in future medical inflation, can create additional variability in our reserves;

Changes in statutory workers compensation benefits – Benefit changes may be enacted that affect all outstanding claims, including claims that have occurred in the past, but have not yet been settled. Depending on the social and political climate, these changes may either increase or decrease associated claim costs;

Changes in utilization of the workers compensation system –These changes may be driven by economic, legislative, or other changes, such as increased pharmaceutical prescriptions, more complex medical procedures, changes in permanently injured workers' life expectancy, and health insurance availability.

Standard Market Commercial Automobile Line of Business

At December 31, 2022, our commercial automobile line of business had recorded reserves, net of reinsurance, of $863 million, which represented 20% of our total net reserves. In 2022, this line experienced unfavorable prior year reserve development of $22.5 million, driven by increased severities in the 2021 accident year. In 2021, this line experienced unfavorable prior year reserve development of $13.3 million, driven by higher loss severities in accident years 2016 through 2019.

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For both us and the industry, the commercial automobile line has experienced unfavorable trends in recent years. Pre-pandemic, increased frequencies were likely due to increased miles driven related to lower unemployment, poor road quality, and an increase in distracted driving. The pandemic and the governmental "stay-at-home" orders issued in early 2020 dramatically reduced miles driven and road traffic, significantly reducing claims frequency in 2020. At the same time, along with industry reporting of dramatic increases in risky driving behaviors, such as speeding, distracted driving, and driving while under the influence, traffic deaths per mile driven increased significantly. As miles driven increased in 2021 and 2022, fatality rates per mile driven have somewhat tempered, but remain well above pre-pandemic levels. This, along with the impacts of social inflation, continue to put pressure on claim severities in this line. As of the end of 2022, frequencies remained somewhat below pre-pandemic levels due to shifts in commuting patterns and fewer low-speed crashes.

Increasing property damage and physical damage severities relate to (i) elevated repair costs for increasingly complex vehicles that incorporate more technology, (ii) longer periods of rental reimbursement costs for claims, and (iii) recent inflationary impacts and disruptions to the supply chain. Continued complications in the supply chain, including labor shortages, increase the risk of longer-term elevated economic inflation.

Over the last several years, we have taken actions to improve the profitability of this line of business, including:

•Taking meaningful rate and underwriting actions on our renewal portfolio. We continue to leverage our predictive modeling and analytical capabilities that provide guidance and automatic retrieval of relevant public information on existing and potential policyholders to provide more granular insights about where we should focus our actions.

•Reducing premium leakage by improving the quality of our rating information, including validating application information with third-party data and obtaining more detailed vehicle usage information.

•Aggressively managing new business pricing and hazard mix while deploying co-underwriting by our regional underwriters and corporate underwriting teams' subject matter experts for selected higher hazard classes to improve risk-driver recognition and exposure-based pricing.

Standard Market Personal Automobile Line of Business

At December 31, 2022, our personal automobile line of business had recorded reserves, net of reinsurance, of $104 million, which represented 2% of our total net reserves. In 2022, this line experienced unfavorable prior year reserve development of $0.5 million. In 2021, this line experienced favorable prior year reserve development of $0.2 million.

Some of the same issues affecting the commercial automobile line are affecting this line. The COVID-19-related reduction in frequencies was even more pronounced than in the commercial automobile line. As with the commercial automobile line, these frequencies significantly rebounded in 2021 and 2022, yet remain less than pre-pandemic levels. This line has a similar potential for increasing average severities like the commercial automobile line. In addition to the COVID-19-related temporary impacts, the underlying trends of increased vehicle repair costs and poor road quality are likely causes of rising severities, exacerbated by riskier driving behaviors, including distracted driving trends. We continue to recalibrate our predictive models and refine our underwriting and pricing approaches. While we believe these underwriting and pricing changes will ultimately lead to improved profitability and greater stability, the resulting changes to our exposure profile may impact paid and reported development patterns, thereby increasing the uncertainty in the reserves in the near term.

E&S Casualty Lines of Business

At December 31, 2022, our E&S casualty lines of business had recorded reserves, net of reinsurance, of $494 million, representing 11% of our total net reserves. Our E&S casualty lines results have improved over recent years. In 2022, this line experienced favorable prior year reserve development of $5.0 million, primarily attributable to favorable inception-to-date claim frequencies and lower loss severities in accident years 2020 and 2021. In 2021, this line experienced favorable prior year reserve development of $7.0 million, primarily attributable to lower loss severities in accident years 2016 and prior.

Some of the risk factors for the general liability line also affect the E&S casualty lines. These include (i) economic inflation, such as materials and labor costs; and (ii) social trends, such as increased attorney involvement.

The E&S casualty lines also are impacted by operational changes we have made to improve the portfolio's performance. Prior to 2022, our underwriting operations have substantially exited several targeted business classes that have historically produced volatile results, including commercial automobile liability, liquor liability, and snow removal. In addition, we have shifted more of our sales towards middle market business without materially increasing the overall risk profile of the portfolio.

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Recent E&S casualty claims actions have created further casualty improvements:

•We created a dedicated E&S claims team in our corporate claims function, bringing greater expertise and consistency to E&S claims handling.

•We segregated “litigated,” “non-litigated,” and "high exposure" claims, with separate specialized teams for each.

•We implemented the following operational and expense improvement initiatives for legal counsel:

◦Increased the use of staff counsel, increasing legal staff in their assigned territories to support claims volume;

◦Heightened focus on legal budgeting and expense management; and

◦Implemented a panel counsel review process.

While we believe these underwriting and claims operational changes improved our underwriting experience, there is risk associated with these changes. Most notably, changes in portfolio composition or our claims processes may inherently change paid and reported development patterns. While our reserve analyses incorporate methods that adjust for these changes, there remains a greater risk of fluctuation in the estimated reserves.

Other impacts creating additional loss and loss expense reserve uncertainty

Claims Initiative Impacts

Consistent with our strategic imperative to optimize operational effectiveness and efficiency, our Claims Department continually identifies areas for improvement and efficiency to increase our value proposition to policyholders. These improvements may lead to claims practice changes that affect average case reserve levels and claims settlement rates, which directly impact the data used to project ultimate loss and loss expense. While these changes may increase uncertainty in our estimates in the short term, we expect refined management of the claims process to be the longer-term benefit.

Our internal reserve analyses incorporate certain actuarial projection methods that make adjustments for changes in case reserve adequacy and claims settlement rates. These methods adjust our historical loss experience to the current case adequacy or settlement rate level, providing a more consistent basis for projecting future development patterns. These methods, like all projection methods, have their own associated assumptions and judgments. Therefore, no single method can be interpreted as definitive.

Unanticipated Changes in Inflation

United States ("U.S.") monetary policy and global economic conditions bring additional uncertainty related to inflationary trends. Changes in inflation affect the ultimate settlement costs for many of our lines of business, with the greatest reserve impact on the longer-tailed lines, such as general liability and workers compensation. Therefore, uncertainty about future inflation or deflation creates the potential for additional reserve variability in these lines of business.

Sensitivity analysis: Potential impact on reserve estimates due to changes in key assumptions

Our process to establish reserves includes a variety of key assumptions, such as:

•The selection of loss and loss expense development factors;

•The weight to be applied to each individual actuarial projection method;

•Projected future loss trends; and

•Expected claim frequencies, severities, and ultimate loss and loss expense ratios for the current accident year.

The importance of any single assumption depends on several considerations, such as line of business and accident year. If the actual experience emerges differently than the assumptions underlying the reserve process, changes in our reserve estimates are possible that may be material to the results of operations in future periods. Below are sensitivity tests highlighting potential impacts to loss and loss expense reserves for the major casualty lines of business under different scenarios. These tests consider each assumption and line of business individually, without any consideration of correlation between lines of business and accident years. Therefore, the results do not constitute an actuarial range. While the figures represent possible impacts from variations in certain key assumptions, there is no assurance that future loss and loss expense emergence will be consistent with either our current or alternative sets of assumptions.

While the sources of reserve variability are generated by different internal and external trends and operational changes, they ultimately manifest themselves as changes in the expected loss and loss expense development patterns. These patterns are a key assumption in the reserving process. In addition, the current accident year expected loss and loss expense ratios are a key assumption. These ratios are developed through a rigorous process of projecting recent accident years' experience to an ultimate settlement basis. Then they are adjusted to the current accident year's pricing and loss cost levels. The impact from underwriting portfolio and claims handling practice changes are also quantified and reflected where appropriate. As with all estimates, the ultimate loss and loss expense ratios may differ from those currently estimated.

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The sensitivities of loss and loss expense reserves to these key assumptions are illustrated below for the major casualty lines. The first table displays estimated impacts from changes in expected reported loss and loss expense development patterns for our major casualty lines of business. It shows line of business reserve impacts if the actual calendar year incurred amounts are greater or less than current expectations by the selected percentages. While judgmental, the selected percentages by line are based on the reserve range analysis and the actual historical reserve development for the line of business. The second table displays the estimated impacts from changes to the expected loss and loss expense ratios for the current accident year. It shows reserve impacts by line of business if the expected loss and loss expense ratios for the current accident year are greater or less than current expectations by the selected percentages.

Reserve Impacts of Changes to Expected Loss and Loss Expense Reporting Patterns

Commercial automobile liability 15 (115) 115

Personal automobile liability 15 (10) 10

General liability 10 pts $ (90) $ 90

Workers compensation 10 (35) 35

Commercial automobile liability 10 (60) 60

Personal automobile liability 10 (10) 10

Note that there is some overlap between the impacts in the two tables. For example, increases in the calendar year development would ultimately impact our view of the current accident year's loss and loss expense ratios. However, these tables provide perspective on the sensitivity of each key assumption. While the changes represent outcomes based on reasonably likely changes to our underlying reserving assumptions, they do not represent a range of possible outcomes. Our reserves could increase or decrease significantly from what the tables above reflect.

Asbestos and Environmental Reserves

Our general liability, excess liability, businessowners' policies, and homeowners reserves include exposure to asbestos and environmental claims. The emergence of these claims occurs over an extended period and can be unpredictable. The total recorded net loss and loss expense reserves for these claims were $20.3 million as of December 31, 2022 and $21.1 million as of December 31, 2021, with asbestos claims constituting approximately 23% of these reserves in both years.

Environmental claims have arisen primarily from insured landfill exposures in municipal government and small non-manufacturing commercial risk, as well as leaking underground storage tanks within our homeowners policies. Asbestos claims have arisen primarily from policies issued to various distributors of asbestos-containing products, such as electrical and plumbing materials. We handle our asbestos and environmental claims in a centralized and specialized asbestos and environmental claim unit. That unit establishes case reserves on individual claims based on the facts and circumstances known at a given point in time, which are supplemented by IBNR reserves.

Estimating IBNR reserves for asbestos and environmental claims is difficult because these claims have delayed and inconsistent reporting patterns. In addition, there are significant uncertainties associated with estimating critical reserve assumptions, such as average clean-up costs, third-party costs, potentially responsible party shares, allocation of damages, litigation and coverage costs, and potential state and federal legislative changes. Limiting our exposure to asbestos and environmental claims are (i) the fuel oil system exclusion on our New Jersey homeowners policies that we introduced in 2007, and (ii) the Insurance Services Office, Inc.'s Total Pollution Exclusion that was introduced in the mid-1980s. Prior to the mid-1980s, we primarily wrote Standard Personal Lines, which has also limited our exposure to asbestos and environmental claims.

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Other Latent Exposures

We also have other latent and continuous trigger exposures in our ongoing portfolio. Examples include claims for construction defect and abuse or molestation, for which states have increased and expanded the statute of limitations. We manage our exposure to these liabilities through our underwriting and claims practices, and a dedicated claims unit, similar to our handling of asbestos and environmental claims. The impact of social, political, and legal trends on these claims remains highly uncertain, so our related loss and loss expense reserves remain highly uncertain. These exposures remain in our ongoing portfolio, and as such, are reserved in aggregate, with other exposures within the line of business reserves.

Investment Valuation and the Allowance for Credit Losses on AFS Fixed Income Securities

Investment Valuation

Accounting guidance defines the fair value of our investment portfolio as the exit price, or the amount that would be (i) received to sell an asset, or (ii) paid to transfer a liability in an orderly transaction between market participants. When determining an exit price, we must rely on observable market data, if available. Most securities in our equity portfolio have readily determinable fair values and are recorded at fair value with changes in unrealized gains or losses recognized through income. Our AFS fixed income securities portfolio is recorded at fair value, and the related unrealized gains or losses are reflected in stockholders' equity, net of tax. For our AFS fixed income securities portfolios, fair value is a key factor in the measurement of (i) losses on securities for which we have the intent to sell, and (ii) changes in the allowance for credit losses.

The fair value of approximately 93% of our investments measured at fair value are classified as either Level 1 or Level 2 in the fair value hierarchy and are priced using observable inputs for identical or similar assets. About 7% are classified as either (i) Level 3 and are based on unobservable market inputs because the related securities are not traded on a public market, or (ii) not leveled because the related securities are measured at fair value using net asset value per share (or its practical expedient). For additional information, refer to the following within Item 8. "Financial Statements and Supplementary Data." of this Form 10-K: (i) item (d) of Note 2. "Summary of Significant Accounting Policies" regarding descriptions of the levels within the fair value hierarchy and the valuation techniques used for our Level 3 securities, and (ii) Note 7. "Fair Value Measurements" for additional information on the unobservable inputs in our securities measured using Level 3 inputs.

Allowance for Credit Losses on AFS Fixed Income Securities

When fixed income securities are in an unrealized loss position and we do not intend to sell them, we record an allowance for credit losses for the portion of the unrealized loss related to an expected credit loss. We estimate expected credit losses on these securities by performing a risk-adjusted discounted cash flow (“DCF”). The allowance for credit losses is the excess of amortized cost over the greater of (i) our estimate of the present value of expected future cash flows, or (ii) fair value. The allowance for credit losses cannot exceed the unrealized loss, and therefore it may fluctuate with changes in the security's fair value. We also consider the need to record losses on securities in an unrealized loss position for which we have the intent to sell.

We analyze unrealized losses for credit loss in accordance with our existing accounting policy, which includes performing DCF analyses on securities at the lot level and analyzing these DCFs using various economic scenarios. In performing these DCF analyses, we calculate the present value of future cash flows using various models specific to the major security types in our portfolio. These models use security-specific information and forecasted macroeconomic data to determine possible expected credit loss scenarios based on projected changes in the economy. The models contain forecasted economic data from the Federal Reserve Board’s annual supervisory stress test review on certain large banks and financial institutions. We also have the ability to incorporate internally-developed forecast information into the models as we deem appropriate. In developing our best estimate of the allowance for credit losses, we consider our outlook as to the probability of the various scenarios occurring.

Based on these analyses, we recorded an allowance for credit losses of $45.7 million in 2022, and $9.7 million in 2021, on our AFS fixed income securities portfolio. After considering the allowance for credit losses, the remaining unrealized losses on this portfolio were $537.2 million in 2022 and $17.4 million in 2021. The increase in 2022 compared to 2021 was driven by an increase in benchmark U.S. Treasury rates and a widening of credit spreads, with the increase in interest rates having the most significant impact. If the security-specific and macroeconomic assumptions in our DCF analyses or our outlook as to the occurrence probability of our DCF model scenarios were to change, our allowance for credit losses and the resulting credit loss expense or benefit will negatively or positively impact our results of operations. Factors considered in determining the allowance for credit losses require significant judgment, including our evaluation of the security's projected cash flow stream.

For additional information regarding our allowance for credit losses on AFS fixed income securities, see item (c) of Note 2. "Summary of Significant Accounting Policies" and item (i) of Note 5. "Investments" within Item 8. "Financial Statements and Supplementary Data." of this Form 10-K, respectively.

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Reinsurance

Reinsurance recoverables on paid and unpaid loss and loss expense represent our estimates of the amounts we will recover from reinsurers. Each reinsurance contract is analyzed to ensure that sufficient risk is transferred to record the transactions appropriately as reinsurance in the Financial Statements. Amounts recovered from reinsurers are recognized as assets contemporaneously and in a manner consistent with the paid and unpaid losses associated with the reinsured policies. An allowance for credit losses on our reinsurance recoverable balance is recorded based on an evaluation of balances due from reinsurers and other available information, including collateral we hold under the terms and conditions of the underlying agreements. Reinsurers often purchase and rely on their own retrocessional reinsurance programs to manage their capital position and improve their financial strength ratings. Details about retrocessional reinsurance programs are not always transparent, making it difficult to assess our reinsurers' exposure to counterparty credit risk. Our reinsurer's credit quality is also impacted by other factors, such as their reserve adequacy, investment portfolio, regulatory capital position, catastrophe aggregations, and risk management expertise. In addition, contractual language interpretations and willingness to pay valid claims can impact our allowance for estimated uncollectible reinsurance. Our allowance for estimated uncollectible reinsurance was $1.6 million at both December 31, 2022, and December 31, 2021. We continually monitor developments that may impact recoverability from our reinsurers, for which we have contractual remedies if necessary. For further information regarding reinsurance, see the “Reinsurance” section below in "Results of Operations and Related Information by Segment" and Note 9. “Reinsurance” in Item 8. “Financial Statements and Supplementary Data.” of this Form 10-K.

Financial Data:

Key Metrics:

Total return on investments 2.9 % 3.4 (0.5) pts 2.6 % 0.8 pts

Return on average common equity ("ROE") 8.8 14.8 (6.0) 10.4 4.4

Per Common Share Amounts:

Dividends declared per share to common stockholders 1.14 1.03 11 0.94 10

Non-GAAP Information:

Non-GAAP operating income per diluted common share2 5.03 6.27 (20) 4.15 51

1Refer to the Glossary of Terms attached to this Form 10-K as Exhibit 99.1 for definitions of terms used in this financial review.

2Non-GAAP operating income, non-GAAP operating income per diluted common share, and non-GAAP operating ROE are measures comparable to net income available to common stockholders, net income available to common stockholders per diluted common share, and ROE, respectively, but exclude after-tax net realized and unrealized gains and losses on investments included in net income. Adjusted book value per common share is a measure comparable to book value per common share, but excludes total after-tax unrealized gains and losses on investments included in accumulated other comprehensive (loss) income. These non-GAAP measures are important financial measures used by us, analysts, and investors because the timing of realized and unrealized investment gains and losses on securities in any given period is largely discretionary. In addition, net realized and unrealized investment gains and losses on investments could distort the analysis of trends.

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Reconciliations of our GAAP to non-GAAP measures are provided in the tables below:

Non-GAAP operating income per diluted common share $ 5.03 6.27 4.15

Reconciliation of ROE to non-GAAP operating ROE 2022 2021 2020

Tax on reconciling items (1.1) 0.2 (0.1)

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

Standard Commercial Lines segment 4.6 % 5.9 (1.3) pts 5.1 0.8 pts

Standard Personal Lines segment (0.2) 0.1 (0.3) (0.5) 0.6

Net realized and unrealized investment (losses) gains (3.6) 0.5 (4.1) (0.1) 0.6

In 2022, we generated our ninth consecutive year of double-digit non-GAAP operating ROEs, with a 12.4% non-GAAP operating ROE, which was above our full-year 2022 target of 11%, but below our 2021 non-GAAP operating ROE of 14.3%. This was a significant achievement in a year with elevated net catastrophe losses, capital market volatility, and higher loss cost trends driven by elevated inflation, among other factors. Our results reflect the success of our underwriting discipline and profitable growth strategies.

The 1.9-point decrease in non-GAAP operating ROE in 2022 compared to 2021 was primarily driven by a reduction in after-tax underwriting and investment income. After-tax underwriting income decreased $40.9 million, or 1.1 ROE points, in 2022 compared to 2021, primarily from increased non-catastrophe property loss and loss expenses. The higher non-catastrophe property loss and loss expenses were mainly due to the higher inflationary environment that resulted in an increase in the cost

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of materials and labor associated with repairs.

While net catastrophe losses were down slightly in 2022 compared to 2021, these losses included a significant impact from Winter Storm Elliott. This storm, which occurred in late-December 2022, impacted 37 states, 26 of which are in our Standard Commercial Lines footprint. We recorded $135.0 million of gross losses, or $46.1 million net of reinsurance. In addition, we incurred $11.7 million in reinstatement premium, resulting in a total impact of $57.8 million, pre-tax, or 1.9 ROE points and $0.75 per diluted common share.

After-tax net investment income decreased $30.8 million, or 0.5 ROE points, in 2022 compared to 2021, from lower after-tax alternative investment income in 2022. Partially offsetting this decrease was an increase in income earned on fixed income securities, which benefited from higher new purchase yields in 2022 as a result of the rapid rise in benchmark U.S. Treasury rates and slightly wider credit spreads.

In addition, our ROE was reduced by the impact of net realized and unrealized investment gains and losses, which was 3.6 ROE points in 2022. Net realized and unrealized investment losses in 2022 compared to net realized and unrealized investment gains in 2021 drove the reduction in our ROE. The increase in net realized and unrealized losses resulted from (i) a decrease in valuations reflecting the current public equities market, (ii) active trading of our fixed income securities to increase the book yield of our fixed income portfolio due to increasing new purchase yields, resulting in realized losses, and (iii) higher credit loss expense on our AFS fixed income securities portfolio.

Outlook

For 2023, we established a non-GAAP operating ROE target of 12%. Our 2023 target is based on (i) our current estimated weighted average cost of capital ("WACC"), (ii) an approximate 400 basis point spread over our estimated WACC, (iii) the current interest rate environment, and (iv) property and casualty insurance market conditions. Our 2023 12% non-GAAP operating ROE target sets a high bar for our financial performance, challenges us to perform at our best, and aligns our incentive compensation structure with shareholder interests.

In 2022, the elevated level of economic inflation, the significant increase in interest rates, and predictions of a recession in the near term, which led to a widening of credit spreads, have all contributed to lower investment valuations and significant financial market volatility. The higher interest rates, and to a lesser extent the widening of credit spreads, have reduced the fair value of our fixed income securities, which in turn has negatively impacted our stockholders' equity, which was down 15% in 2022. The higher economic inflation has also negatively impacted our property loss and loss expenses through increased severities in our short-tail property lines, which has reduced our underwriting income. Should these trends continue, and in the absence of taking enough rate and other underwriting actions, our underwriting profitability could be negatively impacted in the near term. We will continue to focus on underwriting improvements, proper insurance-to-value on our property exposures, and achieving written renewal pure price increases that meet or exceed expected loss trend. In 2022, we achieved Standard Commercial Lines renewal pure price increases of 5.4% and exposure growth of 4.0%. These rates were up from 2021, which experienced renewal pure price increases of 5.3% and exposure growth of 2.6%.

While higher interest rates, wider credit spreads, and financial market volatility have negatively impacted our investment valuations and certain key financial metrics, such as stockholders' equity and book value per common share, they have also provided us with the opportunity to invest our cash flows at significantly higher new purchase yields. Our pre-tax new purchase yields for fixed income securities averaged 4.5% in 2022, compared to 2.3% in 2021. The portfolio's net investment income also benefited from our 11% allocation to floating rate fixed income securities, which are primarily tied to 90-day U.S. dollar-denominated London Interbank Offered Rate ("LIBOR"). The 90-day LIBOR increased to 4.77% at December 31, 2022 from 0.21% at December 31, 2021. These floating securities have reset quarterly at higher rates, which combined with our higher new purchase yields for fixed income securities, contributed to higher net investment income from our fixed income securities. Partially offsetting the increase in net investment income from fixed income securities were lower returns from our allocation to alternative investments. We expect these dynamics to continue in 2023, and as such, are factored into our full-year 2023 after-tax net investment income expectations, as discussed below.

Our focus in 2023 will continue to be on several other foundational areas to position us for ongoing success:

•Delivering on our strategy for continued disciplined and profitable growth by:

◦Continuing to expand our Standard Commercial Lines market share by (i) increasing our share towards our 12% target of our agents' premiums, (ii) strategically appointing new agents, and (iii) maximizing new business growth in the small business market through the utilization of our enhanced small business platform;

◦Expanding our geographic footprint. In June 2022, we began writing Standard Commercial Lines business in Vermont. In October 2022, we began writing Standard Commercial Lines business in Alabama and Idaho.

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We plan to expand our Standard Commercial Lines footprint into other states over time;

◦Increasing customer retention by delivering a superior omnichannel experience and offering value-added technologies and services;

◦Shifting our Standard Personal Lines products and services towards customers in the mass affluent market, where we believe we can be more competitive with the strong coverage and servicing capabilities that we offer; and

◦Deploying our new underwriting platform in our E&S segment and improving agents' ease of interactions with us.

•Continuing to build on a culture centered on the values of diversity, equity, and inclusion that fosters innovation, idea generation, and developing a group of specially trained leaders who can guide us successfully into the future.

As we look ahead to 2023, we believe the elevated level of economic inflation will persist and continue to negatively impact our short-tail property lines of business and may impact our general and administrative expenses. In addition, we expect reduced reinsurance capacity and higher demand for new and expanded reinsurance purchases by U.S. primary insurance companies will result in higher reinsurance prices in 2023 and less favorable terms and conditions for the industry, including us. We experienced reinsurance price increases at our January 1, 2023 renewals, as discussed in the "Reinsurance" section below. While these factors could negatively impact our 2023 combined ratio and underwriting profits, we believe we are well-positioned to navigate these challenges and expect to continue generating strong overall returns.

For 2023, our full-year guidance is as follows:

•A GAAP combined ratio of 96.5%, including net catastrophe losses of 4.5 points. Our combined ratio estimate assumes no prior year casualty reserve development;

•After-tax net investment income of $300 million that includes after-tax net investment income from our alternative investments of $30 million;

•An overall effective tax rate of approximately 21.0%, which assumes an effective tax rate of 20.0% for net investment income and 21.0% for all other items; and

•Weighted average shares of 61 million on a fully diluted basis, which assumes no share repurchases we may make under our authorization.

Results of Operations and Related Information by Segment

Insurance Operations

The following table provides quantitative information for analyzing the combined ratio:

Insurance Operations Results:

Less:

Combined Ratios:

Dividends to policyholders ratio 0.1 0.2 (0.1) 0.1 0.1

The 12% NPW growth in 2022 compared to 2021 reflected (i) overall renewal pure price increases, and (ii) higher direct new business, as shown in the following table:

Renewal pure price increases on NPW 5.1 % 4.9 4.3

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

The increase in NPE in 2022 compared to 2021 resulted from the same impacts to NPW described above.

Loss and Loss Expenses

The loss and loss expense ratio increased 2.6 points in 2022 compared to 2021, primarily due to the following:

Net catastrophe losses in 2022 were lower than losses in 2021 and 2020; however, 2022 did include gross losses from Winter Storm Elliott of $135.0 million, or net losses of approximately $46.1 million, or 1.6 points. This storm impacted 37 states, 26 of which are in our Standard Commercial Lines footprint, and primarily included property losses from damage to commercial businesses and personal homes. Including the impact of reinstatement premium of $11.7 million for this event, the total impact to the overall combined ratio was 1.7 points.

Net catastrophe losses of 5.4 points in 2021 were higher than our longer-term net catastrophe loss averages. Catastrophe losses in 2021 included gross losses of $53 million from Hurricane Ida, or net losses of approximately $41 million, or 1.4 points. The majority of the Hurricane Ida losses, which included meaningful property losses from damage to personal and commercial automobiles, occurred in New Jersey and the surrounding states.

Details of the prior year casualty reserve development were as follows:

(Favorable)/Unfavorable Prior Year Casualty Reserve Development

Businessowners' policies (11.0) (2.0) —

Bonds (10.0) — —

Total Standard Commercial Lines (81.0) (74.0) (85.0)

Homeowners — — —

Personal automobile — — —

Total Standard Personal Lines — — —

Total (favorable) prior year casualty reserve development $ (86.0) (81.0) (85.0)

(Favorable) impact on loss ratio (2.5) pts (2.7) (3.2)

In addition to the prior year casualty reserve development, current year casualty loss costs increased 0.7 points in 2022 compared to 2021, primarily driven by a higher estimated loss trend.

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For additional qualitative discussion on prior year reserve development, current year casualty loss costs, and non-catastrophe property loss and loss expenses, refer to the insurance segment sections below.

Standard Commercial Lines Segment

Insurance Segments Results:

Less:

Combined Ratios:

Dividends to policyholders ratio 0.2 0.2 — 0.2 —

NPW growth of 12% in 2022 compared to 2021 reflected (i) renewal pure price increases, (ii) higher direct new business, and (iii) strong retention as shown in the table below. In addition, NPW growth in 2022 benefited from exposure growth.

For the Year Ended December 31,

Direct new business premiums $ 512.5 $ 469.9

Renewal pure price increases on NPW 5.4 5.3

The increase in NPE in 2022 compared to 2021 resulted from the same impacts to NPW described above.

The 3.1-point increase in the loss and loss expense ratio in 2022 compared to 2021 was primarily driven by the following:

Our loss and loss expenses in 2022 compared to 2021 included (i) elevated non-catastrophe property loss and loss expenses, primarily due to increased severities resulting from inflationary pressures on labor and material costs, and (ii) lower net catastrophe losses, as discussed below and in the "Insurance Operations" section above.

Our 2022 catastrophe losses were impacted by 48 events designated as catastrophes by Property Claims Services ("PCS"), an internationally recognized authority on insured catastrophe property losses, including (i) several wind and thunderstorm events that occurred throughout the second quarter of 2022, and (ii) Winter Storm Elliott, a cross-country storm that impacted 26 of our footprint states in December 2022. Catastrophe losses in 2021 were impacted by 46 events that PCS designed as catastrophes, including two severe thunderstorms accompanied by wind and hail, Hurricane Ida, and a series of severe tornadoes.

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

The loss and loss expense ratio increase in 2022 also included an increase in current year casualty loss costs of 0.9 points in 2022 compared to 2021, primarily driven by a higher estimated loss trend.

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

General Liability

Renewal pure price increases 4.5 4.4 n/a 3.9 n/a

% of total Standard Commercial Lines NPW 33 33 32

1n/a: not applicable.

NPW growth of 12% in 2022 compared to 2021 benefited from exposure growth, strong retention, renewal pure price increases, and direct new business.

The combined ratio increased 3.7 points in 2022 compared to 2021, primarily driven by less favorable prior year casualty reserve development, as follows:

($ in millions) (Favorable) Prior Year Casualty Reserve Development

The favorable prior year casualty reserve development in 2022 was primarily attributable to favorable inception-to-date claim frequencies in accident years 2021 and 2020. The 2021 favorable prior year casualty reserve development was primarily attributable to improved loss severities in accident years 2018 and prior.

The combined ratio increase in 2022 also included an increase in current year casualty loss costs of 1.1 points in 2022 compared to 2021, primarily driven by (i) higher estimated loss trend for this line, and (ii) an increase in ceded casualty reinstatement premium principally due to development on one large loss from the 2018 treaty year and two large losses from the 2020 treaty year. This line is exposed to changes in economic and social trends, including litigation propensity and outcomes, and changes in state laws, such as those that extend the statute of limitations or open windows for previously time-barred actions.

Commercial Automobile

Renewal pure price increases 8.1 8.3 n/a 8.1 n/a

% of total Standard Commercial Lines NPW 30 30 30

1n/a: not applicable.

NPW growth of 12% in 2022 compared to 2021 benefited from renewal pure price increases, higher direct new business, and strong retention. NPW also benefited from 5% growth of in-force vehicle counts as of December 31, 2022, compared to December 31, 2021.

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The combined ratio increased 4.6 points in 2022 compared to 2021, primarily driven by the following:

Loss and loss expenses in 2022 compared to 2021 experienced (i) lower net catastrophe losses, as discussed in the "Insurance Operations" section above, and (ii) elevated non-catastrophe property loss and loss expenses, primarily due to higher severities from inflationary and supply chain impacts that have increased labor, material, and replacement vehicle costs, as well as the duration of claims, which impacts vehicle rental days.

The unfavorable prior year casualty reserve development in 2022 was primarily due to increased severities in the 2021 accident year. The 2021 unfavorable prior year casualty reserve development was primarily attributable to unfavorable reserve development on loss severities in accident years 2016 through 2019.

In addition, the combined ratio was impacted by a 1.9-point increase in current year casualty loss costs in 2022 compared to 2021, due to (i) an expected increase in claim frequencies from a more normalized amount of miles driven as COVID-19-related impacts continue to lessen, and (ii) increased loss severity expectations following the unfavorable development for the 2021 accident year.

This line of business remains an area of focus for us and most of the industry, as profitability challenges continue to generate combined ratios higher than targets. We will continue to actively seek price increases on this line and execute on targeted underwriting and claims actions to improve the mix of business and claim outcomes.

Commercial Property

Renewal pure price increases 6.2 6.0 n/a 4.6 n/a

% of total Standard Commercial Lines NPW 18 18 19

1n/a: not applicable.

NPW growth of 14% in 2022 compared to 2021 benefited from renewal pure price increases, exposure growth, strong retention, and higher direct new business.

The combined ratio increased 3.8 points in 2022 compared to 2021, primarily driven by the following:

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Loss and loss expenses in 2022 compared to 2021 experienced (i) lower net catastrophe losses, as discussed in the "Insurance Operations" section above, and (ii) elevated non-catastrophe property loss and loss expenses. The elevated non-catastrophe property loss and loss expenses was primarily due to increased severity compared to 2021 reflecting inflationary pressures on building material and labor costs.

As profitability challenges continue to generate combined ratios higher than targets, we will continue to actively seek price increases on this line and execute on targeted underwriting and claims actions to improve the mix of business and claim outcomes.

Workers Compensation

Renewal pure price increases (decreases) (0.5) 0.1 n/a (2.0) n/a

% of total Standard Commercial Lines NPW 12 12 12

1n/a: not applicable.

NPW increased 7% in 2022 compared to 2021 due to exposure growth, strong retention, and higher direct new business.

The combined ratio decreased 1.5 points in 2022 compared to 2021, primarily driven by favorable prior year casualty reserve development:

The favorable prior year casualty reserve development in 2022 was primarily due to continued favorable medical trends in accident years 2020 and prior, and favorable inception-to-date claim frequencies in accident year 2020. The favorable prior year casualty reserve development in 2021 was primarily due to continued favorable medical trends in accident years 2019 and prior. Due to the length of time injured workers can receive related medical treatment, decreases in medical inflation can cause favorable loss development across an extended number of accident years.

Standard Personal Lines Segment

Insurance Segments Results:

Less:

Combined Ratios:

NPW increased 9% in 2022 compared to 2021, primarily due to (i) higher direct new business, (ii) stronger retention, (iii) higher homeowner coverage amounts due to inflation adjustments, and (iv) higher average policy sizes from our mass affluent market strategy. In the third quarter of 2021, we transitioned our personal lines strategy to targeting customers in the mass affluent market where we believe our strong coverage and servicing capabilities will be more competitive.

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Direct new business premiums1 $ 62.9 $ 40.9

Renewal pure price increases on NPW 0.7 1.0

1Excludes our flood direct premiums written, which is 100% ceded to the NFIP and therefore, has no impact on our NPW.

The increase in NPE in 2022 compared to 2021 resulted from the same impacts to NPW discussed above.

The loss and loss expense ratio increased 5.0 points in 2022 compared to 2021, driven by the following:

Our 2022 catastrophe losses were impacted by 43 events designated as catastrophes by PCS, including (i) several wind and thunderstorm events that occurred throughout the second quarter of 2022, and (ii) Winter Storm Elliott in December 2022. Our 2021 catastrophe losses were impacted by 44 events designated as catastrophes by PCS, including two severe thunderstorms accompanied by wind and hail, Hurricane Ida, and a series of severe tornadoes.

In addition, we experienced elevated non-catastrophe property loss and loss expenses in 2022 compared to 2021, driven by higher personal automobile physical damage losses. These higher losses resulted from (i) higher frequencies from increased miles driven, and (ii) greater severities from inflationary and supply chain impacts that have increased labor, material, and replacement vehicle costs, and the duration of claims, which impacts vehicle rental days. The likely continuation of elevated non-catastrophe property loss and loss expenses, coupled with renewal pure price increases below loss trend, will put pressure on this segment's profitability in the near-term. To alleviate pressure on profitability in our homeowners line of business, we have and continue to apply valuation inflationary adjustments at renewal, and file rate increases to mitigate these inflationary impacts. Additionally, the personal automobile line of business remains an area of focus for us and most of the industry, as profitability challenges continue to generate combined ratios higher than targets. We will continue to actively seek price increases on this line and execute on targeted underwriting and claims actions to improve the mix of business and claim outcomes.

The underwriting expense ratio decreased 1.2 points in 2022 compared to 2021, primarily due to a decrease in labor expenses.

E&S Lines Segment

Insurance Segments Results:

Less:

Combined Ratios:

Loss and loss expense ratio 58.8 % 62.6 (3.8) pts 65.5 % (2.9) pts

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NPW growth of 16% in 2022 compared to 2021 reflected renewal pure price increases and higher direct new business as shown in the table below. In addition, NPW growth in 2022 benefited from exposure growth driven by favorable E&S Lines marketplace conditions.

Direct new business premiums $ 156.3 137.7

Renewal pure price increases on NPW 7.3 % 6.5

The increase in NPE in 2022 compared to 2021 resulted from the same impacts to NPW discussed above.

The loss and loss expense ratio decreased 3.8 points in 2022 compared to 2021, primarily driven by the following:

We experienced lower net catastrophe losses in 2022 compared 2021. Our 2022 catastrophe losses were impacted by 44 events that PCS designated as catastrophes, including severe weather affecting Midwestern states. Winter Storm Elliott did not have a meaningful impact on our E&S Lines segment. Our 2021 losses were impacted by 50 events that PCS designated as catastrophes, including Winter Storm Uri affecting Texas, a series of large storms affecting Southern and Midwestern states, and Hurricane Ida.

We experienced elevated non-catastrophe property loss and loss expenses in 2022 compared to 2021, primarily due to increased severity reflecting inflationary pressures on labor and material costs, and the normal period-to-period volatility of our property lines of business in this segment.

The favorable prior year casualty reserve development in 2022 was primarily attributable to favorable inception-to-date claim frequencies and lower loss severities in accident years 2021 and 2020. The favorable prior year casualty reserve development in 2021 was primarily attributable to lower loss severities in accident years 2016 and prior.

In addition, the loss and loss expense ratio was favorably impacted by a 1.3-point decrease in current year casualty loss costs in 2022 compared to 2021. Our E&S casualty lines results have improved over recent years after benefiting from several underwriting and claims initiatives and strong rate increases. The decrease in current year casualty loss costs reflects the impacts of these actions.

Reinsurance

We use reinsurance to protect our capital resources and insure against losses on property and casualty risks that we underwrite in excess of the amount that we are prepared to accept. We use two main reinsurance vehicles: (i) a reinsurance pooling agreement among our Insurance Subsidiaries through which each company agrees to share in premiums and losses based on certain specified percentages; and (ii) reinsurance contracts and arrangements with third parties that cover various policies that we issue to our customers.

Reinsurance Pooling Agreement

The primary purposes of the Insurance Subsidiaries' reinsurance pooling agreement are to:

•Pool or share proportionately the underwriting profit and loss results of property and casualty insurance underwriting operations through reinsurance;

•Reduce administration expenses; and

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•Permit all the Insurance Subsidiaries to obtain a uniform rating from AM Best Company ("AM Best").

The following illustrates the pooling percentages by Insurance Subsidiary as of December 31, 2022:

Insurance Subsidiary Pooling Percentage

Selective Insurance Company of America ("SICA") 32.0%

Selective Way Insurance Company ("SWIC") 21.0%

Selective Insurance Company of South Carolina ("SICSC") 9.0%

Selective Insurance Company of the Southeast ("SICSE") 7.0%

Selective Insurance Company of New York ("SICNY") 7.0%

Selective Casualty Insurance Company ("SCIC") 7.0%

Selective Auto Insurance Company of New Jersey ("SAICNJ") 6.0%

Mesa Underwriters Specialty Insurance Company ("MUSIC") 5.0%

Selective Insurance Company of New England ("SICNE") 3.0%

Selective Fire and Casualty Insurance Company ("SFCIC") 3.0%

Reinsurance Treaties and Arrangements

By entering into reinsurance treaties and arrangements, we can increase our underwriting capacity, accepting larger individual risks and aggregations of risks without directly increasing our capital or statutory surplus. Under our reinsurance treaties, we cede to our reinsurers a portion of our incurred losses from an individual policy or group of policies in exchange for a portion of the premium on those policies. Amounts not reinsured below a specified dollar threshold are known as retention. Reinsurance does not legally discharge us from liability under the terms and limits of our policies, but it does make our reinsurers liable to us for the amount of liability we cede to them. Our reinsurers often rely on their own reinsurance programs, or retrocessions, to manage their large loss exposures. The size of the global reinsurance community is relatively small. If our reinsurers are unable to collect on their retrocessional programs, it may impair their ability to pay us for the amounts we cede to them.

Consequently, our reinsurers present us with direct, indirect, and contingent counterparty credit risk. We attempt to mitigate this credit risk by (i) pursuing relationships with reinsurers rated “A-” or higher by AM Best and/or (ii) obtaining collateral to secure reinsurance obligations. Some of our reinsurance treaties permit us to terminate or commute them – or require the reinsurer to post collateral if the reinsurer's financial condition or rating deteriorates. We monitor our reinsurers' financial condition, and we review the quality of reinsurance recoverables and reserves for uncollectible reinsurance. For additional information regarding our reinsurance counterparty credit risk, see Note 9. "Reinsurance" in Item 8. "Financial Statements and Supplementary Data." of this Form 10-K.

We have reinsurance contracts that separately cover our property and casualty insurance business that can be segregated into the following key categories:

•Property Reinsurance, which includes our (i) property excess of loss treaties purchased for protection against large individual property losses and (ii) property catastrophe treaties purchased to provide protection for the overall property portfolio against severe catastrophic events. We also purchase a limited amount of facultative reinsurance, primarily for large individual property risks greater than our property excess of loss treaty capacity.

•Casualty Reinsurance, which provides protection for both individual large casualty losses and catastrophic casualty losses involving multiple claimants or insureds. We also may use facultative reinsurance, primarily for large individual casualty risks in excess of our treaty capacity. We may also purchase quota share capacity for certain new or higher severity casualty lines of business.

•Terrorism Reinsurance, which provides a federal reinsurance backstop, behind the protection built into our property and casualty reinsurance treaties, for terrorism losses covered under the Terrorism Risk Insurance Program Reauthorization Act (“TRIPRA”). For further information about TRIPRA, see Item 1A. “Risk Factors.” of this Form 10-K.

•Flood Reinsurance, for which all of the premiums and losses related to our participation in the WYO (for which we also receive a servicing fee) are 100% ceded to the federal government.

Property Reinsurance

We renewed our main property catastrophe treaty, which covers both our standard market and E&S business, effective January 1, 2023. For this treaty, we increased our treaty limit by $100 million and increased our treaty retention by $20 million to

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respond to our growing property portfolio. As a result, the coverage was extended to $915 million in excess of the $60 million retention with higher co-participations in certain layers as our overall net purchased limits increased to $810 million from $776 million. A hardening reinsurance pricing environment was also characterized by significant efforts on the part of reinsurers to impose restrictions on cedents' terms and conditions, particularly with respect to coverage for non-modeled/under-modeled perils, such as terrorism, strike, riot, civil unrest, severe convective storms, and the systemic perils of communicable disease and cyber. Consequently, the property catastrophe program excludes coverage for communicable disease, but retains limited reinsurance coverage for terrorism, strike, riot, civil unrest, severe convective storms, and cybersecurity risks. Despite these limitations, coverage for other traditionally covered property perils was largely maintained. Additionally, we made the decision to not purchase our expiring E&S Lines $30 million in excess of $10 million treaty, which covered all 50 states and the District of Columbia, due to challenging market conditions and our assessment of the projected reinsurance spend relative to expected covered losses.

We seek to minimize reinsurance credit risk by transacting with highly-rated reinsurance partners and purchasing collateralized reinsurance products, particularly for high-severity, low-probability events, if feasible. Our current reinsurance program includes $216 million in collateralized limit in the top layer of the catastrophe program, compared to $259 million in collateralized limit under the prior year's reinsurance program.

Overall, ceded premium for our property catastrophe reinsurance treaty will increase considerably in 2023 due to three factors: (i) increases in underlying property exposures in line with our growing property insurance portfolio; (ii) the addition of $100 million of coverage purchased to maintain stability in our net risk profile; and (iii) significant risk-adjusted price increases due to a severely hardening reinsurance market driven by such dynamics as elevated inflation-driven demand for reinsurance capacity, reinsurer investment losses, exchange rate impacts, poor reinsurance profitability over the past six years, limited supply of retrocessional capacity, and reinsurer and investor concerns over climate change and un-modeled/under-modeled perils.

We model various catastrophic perils, and hurricane risk continues to be our portfolio's most significant natural catastrophe peril because of the geographic location of the risks we insure. The table below illustrates the impact of the five largest hurricane losses we have experienced in the last 35 years:

Hurricane Name

1This amount represents reported and unreported gross losses estimated as of December 31, 2022.

2Net loss does not include reinstatement premiums, taxes, or flood claims handling fees.

We review our exposure to hurricane risk by examining third-party vendor models and conducting our own proprietary analysis. The third-party vendor models provide a long-term view that closely relates modeled event frequency to historical hurricane activity, adjusting to reflect certain non-modeled cost assumptions, such as the impact of loss expenses, residual market assessments, and automobile-related losses. We believe that modeled estimates provide a range of potential outcomes, and we review multiple estimates to understand our catastrophic risk.

Our established catastrophic risk tolerance requires that no more than 10% of stockholders’ equity is exposed to a loss from a hurricane event at a 99.6% confidence level (1-in-250 year event or 0.4% probability) on a net of reinsurance and after-tax basis. In addition to the 1-in-250 year modeled event, we evaluate the impact of a number of other scenarios on stockholders’ equity.

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The table below shows the gross and net losses modeled results for (i) hurricane peril in our underwriting property portfolio, and (ii) the gross and net of reinsurance hurricane losses from the following scenarios:

•Recasts of two large hurricanes that impacted our geographic footprint:

◦1938 New England Hurricane, one of the largest hurricanes to impact the Northeast United States; and

◦Hurricane Hazel, a Category 4 storm that made landfall near the border between North Carolina and South Carolina in 1954; and

•Realistic disaster scenarios (“RDS”) for significant potential storms in the Northeast and the Carolinas based on Lloyds of London methodology.

Occurrence Exceedance Probability Hurricane

($ in thousands) GrossLosses1 Net Losses2 Net Losses % of Equity3

1Gross losses include uncertainty associated with damage/loss estimation, demand and storm surge, and assumptions for certain un-modeled costs, such as the impact of loss expenses, residual market assessments, and automobile-related losses, which collectively increase our gross losses by approximately 13%.

2Net losses are after-tax losses net of catastrophe reinsurance including reinstatement premiums based on the treaty structure effective January 1, 2023.

3GAAP stockholders' equity as of December 31, 2022.

As reflected in the table above, we are well within our established tolerance for catastrophic risk. Our current catastrophe reinsurance program exhausts at an approximately 1-in-220 year return period, or events with 0.5% probability, based on a multi-model view of hurricane risk. Our actual gross and net losses incurred from hurricanes making U.S.-landfall will vary, perhaps materially, from our estimated modeled losses.

In addition to hurricane peril, the table below shows gross and net losses modeled by other wind and earthquake perils in our underwriting property portfolio.

Occurrence Exceedance Probability Other Wind Earthquake

2Net losses are after-tax losses net of catastrophe reinsurance including reinstatement premiums based on the treaty structure effective January 1, 2023.

3GAAP stockholders' equity as of December 31, 2022.

As we currently do not write crop insurance, have minimal exposure to private flood, and have a small geographic footprint in the Western U.S., our exposures to perils, such as droughts, wildfires, and flooding, tend to be relatively modest. However, as our geographic expansion progresses, we continually evaluate how physical risks from these perils and others are considered in our strategic decision making.

In addition, we regularly experience property losses from winter storms, and while we utilize third-party vendor models to help us model and manage our exposure to this peril, we also evaluate our winter storm exposure based on our own historical experience, as winter storm third-party vendor models are currently less mature. As an example of the impact from a large and recent winter storm, we incurred $135.0 million in gross losses from Winter Storm Elliott which took place in late-December 2022, or $46.1 million net of reinsurance. In addition, we incurred $11.7 million in reinstatement premium from Winter Storm

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Elliott, resulting in a total impact of $57.8 million, pre-tax or $45.7 million after-tax. Despite the size of this event, our reinsurance strategy limited the impact on our full-year 2022 results to 1.8% of equity or a 1.7-point impact on our combined ratio. Based on our 2023 property catastrophe reinsurance program discussed above, if Winter Storm Elliott were to recur, the net impact to us would be more significant.

We renewed the property excess of loss treaty, which covers both our standard market and E&S business, on July 1, 2022, with a $10 million increase in coverage in the highest layer. The treaty is comprised of three layers, with the $20 million in excess of $40 million layer effective January 1, 2022, being cancelled effective July 1, 2022.

The following table summarizes of our property reinsurance treaties and arrangements covering our Insurance Subsidiaries:

PROPERTY REINSURANCE ON INSURANCE PRODUCTS

Treaty Name Reinsurance Coverage Terrorism Coverage

- 47% of losses in excess of $60 million up to $100 million;

- 100% of losses in excess of $100 million up to $225 million;

- 100% of losses in excess of $225 million up to $525 million; and

SIGI US Equity

SIGI · 10-K · period ended 2022-12-31

Item 1A. Risk Factors.

Item 1B. Unresolved Staff Comments.

Item 2. Properties.

Item 3. Legal Proceedings.

Item 4. Mine Safety Disclosures.

Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Item 6. Reserved.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

SIGI US Equity☆

SIGI · 10-K · period ended 2022-12-31

Item 1A. Risk Factors.

Item 1B. Unresolved Staff Comments.

Item 2. Properties.

Item 3. Legal Proceedings.

Item 4. Mine Safety Disclosures.

Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Item 6. Reserved.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

SIGI US Equity