Q3 2019 Earnings Call
Excuse me, ladies and gentlemen, this is your conference operator or conference call is scheduled to begin momentarily until that time airlines. So once again be placed on a musical. Thank you for your patience and please do not disconnect.
Ladies and gentlemen, thank you for standing by and welcome to <unk> third quarter 2019 earnings Conference call.
This time, all participants are in listen only mode.
After the speakers presentation, there will be a question and answer session. Taski question. During this session you wanting to press star one on your telephone.
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I'd now like to hand, the conference over to your speaker for today, Mr., Dennis Mcdaniel with Investor Relations Officer.
Thank you Sir please go ahead.
Hello. This is Dennis Mcdaniel at Cincinnati financial Thank you for joining us on our third quarter 2019 earnings Conference call.
Late yesterday, we issued a news release on our results along with our supplemental financial package, including our quarter end investment portfolio.
By copies of any of these documents please visit our investor web sites and Penn Dot Com slash investors.
Shortest route to the information is a quarterly results like navigation menu on the part about.
Oh this call your first hear from Steve Johnston, President and Chief Executive Officer, and then from Chief Financial Officer, Mike. So.
After their prepared remarks investors participating on the call me ask questions.
That time, some responses may be made by others in a room with us and creating chairman of the board, Ken Stecher, Chief Investment Officer, Marty Hollenbeck.
So for that insurance is cheap insurance officer, Steve Sprague, Chief claims officer, Marty Mullen, and senior Vice President Corporate Finance Teresa Hopper.
First please note the some of the matter should be discussed today are forward looking.
Forward looking statements involve certain risks and uncertainties with respect to these risks and uncertainties, we direct your attention to our news release add to our various filings with the FCC.
Also a reconciliation of non-GAAP measures must provide what the news release statutory accounting data is prepared in accordance with statutory accounting rules and therefore is not reconciled to GAAP.
Now I'll turn it over to call to Steve.
Thank you Dennis.
Good morning, Thank you for joining us today to hear more about our third quarter results.
Our operating performance was again strong.
And we're making steady progress on profitably growing our insurance business over time.
We believe our improving results reflect our winning strategy and dedication to executing it well.
Net income for the third quarter 2019 was very good although it did not match our results from a year ago when changes in the fair value of equity Securities represented nearly two thirds of the total.
non-GAAP operating income was up an impressive 31% and it's up 26% for the first nine months of this year.
Every segment of our business performed well and it was nice to see an underwriting profit and each of our property casualty operating units for both the third quarter and the first nine months of the year.
Our 94.2% third quarter 2019 property casualty combined ratio was 2.6 percentage points better than a year ago, and an improved 2.7 points on a year to date basis.
We continue to see benefits from work in recent years to diversify risk by product line and geography.
We also are pleased with results from ongoing segmentation of risks retaining more profitable accounts and getting better pricing on less profitable business.
That gives us increasing confidence to decline opportunities when we determine profit margins are and satisfactory.
We also benefit from having outstanding independent insurance agents, representing the company.
They understand how to communicate value to their clients and they continue to produce more premium revenues for us as we earn a larger share of their business.
Our consolidated property casualty net written premiums rose, 8%, including renewal price increases and healthy growth in new business written premiums.
The commercial line segments third quarter 2019 estimated average price increases were similar to the low single digit percentage increases of the second quarter.
The combined ratio for commercial lines was 2.5 percentage points better than third quarter, a year ago, and 1.8 points better on a year to date basis.
Our personal life segment also continued to experience average rate increases similar to the second quarter of 2019.
We're encouraged by two consecutive quarters with the personalize underwriting profit and believe we are well positioned for profitable growth in the future.
Our excess and surplus line segment continues to perform very well, including the third quarter combined ratio below 85% and net written premium growth of 25%.
Cincinnati re continues to perform as planned with a year to date combined ratio in the low nineties.
Cincinnati Global experienced a very profitable quarter <unk> and has a post acquisition combined ratio in the low eightys, including some favorable effects of purchase accounting for the first few periods following an acquisition.
Our life insurance subsidiary continued to grow its business with third quarter term life insurance premiums up 12% on an earned basis.
Well its net income contribution was not as strong as last year Cincinnati life provides valuable diversification to our insurance risks and our earnings more importantly agents appreciate the ability to add life insurance solutions for their clients all under the Cincinnati umbrella.
Our investment performance also continues to be outstanding investment income continues to grow in our equity portfolio. During the first three quarters of this year has outperformed the S&P 500.
I'll wrap up with our primary measure of long term financial performance the value creation ratio.
Improving operating results in favorable securities markets resulted in a third quarter bcr of 3.6% boosting the nine month measure to 22.8% well above our targeted annual average of 10% to 13%.
The contribution from our operations measured as net income before investment gains was 6.3% for the first nine months of 2019.
0.9 percentage points from a year ago.
Well, our equity portfolio supported our healthy VCR, we understand the risk of short term variability due to market effects.
We believe its potential for long term appreciation is important for creating value for shareholders overtime.
Now our Chief Financial Officer, Mike So what's your insights on other important areas of our financial results.
Thank you Steve Thanks to all of you for joining us today.
Investment income rose again up 5% for the third quarter of 2019 before income tax effects dividend growth from our equity portfolio was 11%.
As Dave into rates have increased for many of our holdings net purchases of stocks during the third quarter totaled $77 million.
Interest income from our bond portfolio declined slightly from the same quarter a year ago.
Pre tax average yield was 4.03% for the third quarter down 16 basis points from the third quarter of last year.
We continue to invest in bonds with third quarter net purchases of $208 million.
As we report our 10-Q, the average pretax yield for the total of purchase taxable and tax exempt bonds was roughly 60 basis points lower than the same period in 2018. So interest income may continue to be pressured.
Investment portfolio valuation changes for the third quarter of 2019 were again favorable for both our stock and bond portfolios. The overall net gain was $186 million before tax effects that included $89 million for equity portfolio and $99 million for us.
Bond portfolio.
We ended the quarter with net appreciated value, a $4.2 billion, including $3.6 billion and our equity portfolio.
Cash flow remains strong and fueled investment income growth cash flow from operating activities generated $880 million for the first nine months a 2019.
Up 7% were $54 million, even after paying $114 million more this year in catastrophe losses.
Another important area for management is bouncing expense controls with strategic investments to aid in the profitable growth of our business.
The third quarter 2019 property casualty underwriting expense ratio was 0.3 percentage points higher the last year's third quarter, but on a nine month basis. It matched the average a full years 2016 through 2018.
Regarding reserving doing so carefully is imperative we aim for a consistent approach as we target net amounts in the upper half of the Actuarially estimated range of net loss and loss expense reserves.
During the third quarter 2019.
Experience, a satisfactory amount of property casualty net favorable development on prior accident years.
Favourable reserve development for the quarter benefit our combined ratio by 3.7 percentage points.
On a year to date all lines basis by accident year. It included 33% for accident year 2018, 27% for accident year, 2017, and 40% for 2016, a prior accident years.
Regardless of whether the root cause of particular changes and lost control trends is from social inflation or other matters.
We do our best to establish adequate reserves.
For example, we've disclosed that since the end of 2015, we've increased our commercial casualty total loss reserves by $324 million were 26%.
The I'd be NR component of that total is up $220 million were 49%.
During the same period annualized earned premiums one way to estimate the change in insured exposure is up only 8%.
For commercial auto.
Total loss reserves are up 44% with the I'd be at our component up 158%.
Well earned premiums are up 25%.
Turning to cap managing capital another critical function for the company. Our approach remained stable our financial strength is excellent as is our financial flexibility.
As usual I'll add my prepared remarks, with a summary of the third quarter contributions to book value per share. They represent the main drivers of our value creation ratio.
Property casualty underwriting increased book value by 40 cents.
Life insurance operations added eight cents.
Investment income other their life insurance or reduced by Noninsurance items contributed 62 cents.
Net investment gains and losses for the fixed income portfolio increased book value per share by 48 cents.
Investment gains and losses for the equity portfolio increased book value by 43 cents and we declared 56 cents per share in dividends to shareholders. The net effect was a book value increase of $1.45 cents during the third quarter two a record high 50.
$7.37 per share.
Now I'll turn the call back over to Steve.
Thanks, Mike.
As we head into the last quarter of the year, we're committed to maintaining the momentum we've created so far in 2019, we're confident that Cincinnati financial was on the right track to deliver shareholder value far into the future.
We appreciate this opportunity to respond to your questions and also look forward to meeting in person with many of you during the remainder of the year.
As it remains as a reminder, with my can meet today are Steve spray, Marty Mullen, Marty Hollenbeck, Theresa Hoffer and Ken Stecher.
Catherine.
Please open the call for questions.
Ladies and gentlemen, if you'd like to ask a question at this time. Please press star and then the number one on your telephone keypad. Once again that is star and then one and we will pause for just a moment to compiled roster.
[noise].
First question comes from the line of Mike Zaremski with Credit Suisse.
Hey, good morning, everybody.
Good morning, Mike.
First question thanks for addressing.
The loss trend discussion.
If I look at.
Your year to date.
Losses paid versus incurred levels for a commercial casualty and a commercial auto.
They you know just the ratio does seem to be higher year over year, a cost I think our that could be wrong every year, but it's close to 100% how does that indicate the that you potentially are seeing.
A rise in and loss inflation trends.
Your view there are you guys seeing any changes that have some some of your competitors larger ones have said that they are seeing ER and increasing and trend and they also pointed out that there are getting more pricing. So maybe you could comment on on that.
Okay. Thanks, Mike and that does seem to be the question of this earnings season.
As we look at the paid to incurred ratios.
The paid as you mentioned the paid to incurred this year is a bit higher than last year, but last year was actually one of the lowest.
Paid to incurred that we've had so if we look at it more over the long term.
We think we've addressed our.
Reserving position in casualty commercial auto really all the lines very consistently over time and I think you know I'd break it down.
Going back to 2015 2016, as Mike pointed out in his conference call.
We look at inflation in total so social inflation or any other kind of inflation would be a part of that and we have a very talented actuarial team they use a very sophisticated.
Asking of techniques to come up with the estimate a one of them that they use as a multiple regression method that regresses not only over the accident years of development years, but also the calendar years and that regression over the calendar years makes an explicit.
Estimation of inflation effect.
So I thought it was important that Mike pointed out that while the total reserve has been increasing much more than the.
Earned premium or our proxy for exposure within that increase the IB and our was up significantly the IB an hour for casualty over that period of time was up 49%. The auto up 158%. If you think about it we like most people that I'd be NR component.
As a provision for both the development on a case incurred losses, which our claims department does a great job.
Of estimating and those are claims that have actually been reported and we put an estimate on it.
So within that I'd be nor there was a good bit of it for pure I'd be in our pure incurred but not reported claims and so I think a lot of the inflationary effects no matter, how we describe them.
I would be in those ones that we really don't know about yet the incurred but not reported and I think over the history of our company. We've just really done a good job of being prudent in terms of estimating.
The total reserve and I think this increase in IB nor that we've had over periods of time has put us really in a good position I think its manifested in now 29 years in a row that we've had our reserves developed favorably.
And we really just think our best estimate for our lines of business or are all in a good position right now so that's part of it that's.
The reserving part of your question I think in I think that.
That's an important part of it because you don't want to have to be.
[noise] paying for adverse development on prior year. So we feel we're in a good position in terms of our current reserves on the pricing side of it.
Again, and I might ask Steve the can can Steve spread to contribute a bit here too, but I think between where we estimate the loss cost trends and where where we think we're getting rate and when we throw in that rate, we really throw in the contribution to the segmentation that we're doing in terms of not treating every risk the same we really.
Differentiating segmenting treating each risk on its own merits and so we are you know we feel good about our position in the commercial casualty a if you take a just the overall commercial expense ratio of 32% and added to either our accident year ex cat loss.
Ratio or the calendar year.
You know were under Hunter and so we feel both on the reserve side and on the property and are on the pricing in.
Underwriting side, we're into good spot to [noise].
Okay, Great. That's that's helpful and I guess I think I've tried to assist in previous quarters, because there's a number of moving parts and that's it's.
Workers' comp in a meaningful.
Beneficiary and the to earnings a lot, but mostly from rate preserve releases.
But the top ones coming down a lot and the underlying.
Loss ratio as is deteriorating. So it is is that trend, mostly due to decreases in pricing and on the other hand.
Yeah, I, what's causing so much of.
So much reserve releases to come out as it is it both severity and frequency or are better is it mostly.
Yes, more recent accident years or are the older accident years, so any color helpful. Thanks.
Sure a this is Steve Johnson again on on the reserving side I'll touch on that and then Steve spray I'll touch on the pricing side, but on the reserving side.
However, we set these we said our reserves with certain assumptions.
As to.
Inflation.
Settlement practices and in all the data that we can we can look at and basically what's been happening what the workers compensation is I think it's a real team effort around here in terms of every.
Area of the company contributing a particularly our claims department, our underwriting department the pricing departments.
The actuals have just been coming in underneath.
What we said is our expectation for the for the reserve development. So it's just been a matter of a actuals.
Comparing favorable to what we put in in terms of the expectation then you have to be careful with setting those expectations I'm sure you know in that workers comp long tail line.
A lot of the trends have been favorable overtime.
But you have to be careful that to keep an eye out for eight turning points that there might be and again, we take a prudent approach to the reserving of all lines.
Steve you might want to comment on the on the pricing yeah, Mike steep spray on the pricing it's similar to the discussions we've had and in the prior few quarters.
NCC I base rate declines across states are having a compounding effect.
But I will tell you that I would concur completely with Steve it's been a total team effort here our field reps.
Our renewal underwriters are working with our agents.
On work comp pricing, making sure that our risk selections, where it needs to be that we're getting the right rate.
All of our lines commercial lines lines of business.
The new business, there's really only off in two lines workers' compensation and professional liability professional liability is a much smaller segment, but I think it shows the discipline, we had an risk selection.
And in pricing.
On the work comp book, just looking at the Steve talked about the segmentation.
Specifically to workers compensation, and we use the analytics and the tools that we have there we still feel good about our overall pricing of that book of business.
But it's no doubt the accident year results are under pressure.
From the from the from the base rate declines.
Okay, Great. That's helpful and just lastly on the excess and surplus line segment.
If you could remind us is this growth.
Sustainable is there something onetime or is it I know there is a low each acquisition, maybe that's in that segment too.
Yeah that the CG you the Lloyds acquisition would not have any impact on our CNS companies see issue.
I would say that I'd I feel that the the we feel that the growth there and see issue is sustainable I think it's it is.
It's showing what's going on in the marketplace, the submission counts and Rns company.
Our up considerably I would make note there too Mike that.
We've got to just a great experience team and they have been consistent and stable in their underwriting appetite the terms conditions.
And the pricing in the pricing is improving as well our value proposition for our agents is still extremely attractive I think we have more and more of our agencies turning to us and because of our value proposition with the in this company and I've I've talked about that in the in the past as well so.
We feel good about not only the profitability that we have there, but our growth trajectory too.
I guess I'm, just I I get asked us sometimes I don't have the best answer so just like you.
Usually any asked company it doesn't isn't a traditional commercial insurance company so what.
Why are you how are you able to to haven't hang out the analytics or capabilities to have any eskom in us companies. Since you are more of a the traditional commercial and sure theres something unique there.
Yeah, I think one we've just.
We've built a tremendous amount of expertise on the team of for Ns underwriting.
The majority of that book about 88% of it is really traditional.
Casualty business, albeit a little tougher all right and so it might be a it might be well inherently it's going to be a risk that is not.
Eligible for the admitted market as an example, you might have a bar tavern that he admitted market doesn't feel that it can get the proper terms and conditions or pricing. So that would end up in the N.S. market.
Well I think our differences and why we are outperforming.
The industry on Cardenas operation as we've stuck to our knitting like I said before the underwriters the entire team.
Has been consistent and their appetite terms conditions in the pricing and the value proposition, we have for our agents and the policyholders and their community is different the traditional Ns route is for a retail agent to go to the wholesale market and then the wholesale market go to the broader DNS carriers.
We formed our own brokerage our underwriters our employees of the brokerage our agents have direct access to the decision makers in or any of this company.
The other big thing is that there's a several of them, but we give our agents I think more confidence on that DNS business, because we use all the local resources, the Cincinnati insurance company to bear with our SNS company as well most importantly, our claims operation. So our agents have a relationship with that local claims adjuster that will he.
Handle both he admitted market business as well as the non admitted we run our brokerage lean and mean, we can return more of the of the commission to our agents.
And on top of that we include the premium and losses from our Ns company into the Cincinnati Insurance company overall profit sharing arrangement. So we're aligned with our agents that they send us business that they feel is going to perform better.
Then maybe.
Maybe some other CNS might.
Hi, that's very helpful. Thank you very much.
Thank you Mike.
Your next question comes from the line of Paul Newsome with Sandler O'neill.
Yeah. Good morning, that's on the quarter.
Thanks.
Come up with the calls so far has been most companies have reported.
Incrementally stronger price increases.
Third quarter in the second it but I think you said that you really weren't seeing that.
Not.
Surely bad but.
Could you know could you maybe I think I know the answer is but could you maybe talk about.
Why this might be the keys that you maybe you're not see quite the same dynamic is some other companies.
Commercial insurance room.
Well the.
Paul This is Steve spray, let me try to tackle that.
Let me try to tackle from commercial personal and N.S.. We have had consistent average net rate change that we've reported over the last several quarters, but that doesn't tell the full story, but we're really trying to execute and I think we're doing a great job in all segments at the underwriting level working with our age.
It is focused on segmentation, we're really focused on.
On retaining the most profitable business of the business that we feel we have an opportunity to to have a better margin.
We are really focused on getting a larger rate that's needed on that business that we feel is less apt to to drive a profit for us.
And our retention spreads look really good there as well so we're retaining more of that.
More profitable business, where either getting rate or we're losing.
Some of that business to the market and we're comfortable with that is changing our mix and I think it's you're seeing it in our results now that's.
Primarily what I'm talking about there's commercial lines. The same story is going on in personal lines.
You can see in our auto results.
We continue to.
Improve our sophistication on pricing both on the auto and home that continues to evolve. It's good now, but it's going to continue to get better.
And as everybody is reporting you're seeing better personal auto results and we're seeing that as well, but there's certainly some variability and volatility going on in the homeowner book and we've seen that as well and the good news. There is we feel like we're in a positive rate environment.
On homeowner and we think the runway is is long and and we'll continue that will serve everybody wells to and its and its needed. Our Ns company has considered as continued to get low single digit rate, even with the the levels of profit that they've generated they've gotten low single digit rate quarter over quarter over.
In order for quite awhile so.
That really sums up the way we look at rate in the way we look at execution away, we work day to day with our agents.
Paul.
Thanks.
Paul I'm. Paul This is Steve I might just had one just I agree with 100% with everything so Steve said.
With the commercial casualty and it's more of a Q comment than we've put in the press release or the scripts.
We are getting a little bit more on the commercial casualty still in that.
Same range that we that we.
That we put out but as it is a little bit higher than it's been in the second quarter on average and Steve points about segmentation talk to the distribution about that average.
Great. Thank you.
Could you hold me to answered.
New commercial auto business.
Be with your business as well as you perceptions of argued that seems to be the.
Most notable segment.
The people are focusing on across the industry.
Yes, sure Paul and prior to the role I mean, now when I was leading commercial lines I lived this how real time, so like I think I can speak to it this is Steve spray.
We really saw back in 2000, Sixteen's, where we really took a sense of urgency and started ticking series action on the commercial auto book.
And again it goes to what I mentioned before we really focused on the segmentation.
Piece of it and risk selection, but just from a pricing standpoint, we really got aggressive.
Starting in 2016, and I I really believe that we were out in front of this this issue.
And the reason I can led the way a measure that is we have such a close relationship with our agents. We have so few of them you know our distribution model, but we on a daily basis, we're delivering a necessary auto rate change back starting in 2016, we were causing considerable paying them, we heard pretty regularly that we were.
Quote unquote, an outlier from our agents as far as how hard we were pushing.
Well fast forward to fourth quarter, 18, really beginning a 19 that that pain has really.
Kind of gone away and I think it's because.
Others really started noticing it started taking similar action so.
You look at our X cat accident year on the commercial auto it is continuing to improve.
We haven't cross the finish line that loss ratio isn't where we wanted to be but.
And tell you we feel really good about the trajectory and and where we're heading with that.
Great. Thank you very much.
Thanks, Paul.
Your next question comes from the line of Josh Shanker with Deutsche Bank.
Yes, good morning, everyone another great quarter congratulations.
Thanks, Josh and good morning.
Good morning, So I got to.
A question. This morning somebody wanting to know just how well you're doing the high net worth individual market and I started trying to build the time series I.
I noticed that Youve talked about overtime your growth rate differently. Some years, you've talked about it in terms of most recently how much premium you're getting that business, sometimes you've talked about it in the new business generated some of the tend to change in new business generated.
In terms of going forward. This has been a good growth you're talking about in terms of total premium are you planning embracing the south into its own segment, given the clarity of the disclosure.
[noise] Justice as Mike. So we're not play on breaking that out that would still be a part of the the personal lines now whether or not we give additional information within some.
Charts, and so forth but.
It would not qualify as a separate segment on its own under the GAAP rules.
Josh This is Steve.
Go ahead go ahead.
Go ahead Josh.
Well I was wondering maybe if we've been talking about the relative margin high net worth first personal lines the whole, whether it's a more profit business or about the same level profitability and to whether we can talk about rate and high net worth versus rate in the.
Personal lines business more broadly.
Sure Josh This is Steve spray, let me first start with I think some some numbers I can give you on high net worth its right now it's about 28%.
Of our total personal lines book is that we would break out high net worth when we started really focusing on high net worth being deliberate about it a little over five years ago. Our book was at about 100 million.
And it's now.
Approaching $400 million.
Written premium this year's up over 30% new business was up about 25% to give you a little flavor. There I will tell you that.
We've got an experienced team will then and Hoover leads personal leads all personal lines came to US with 25 years of high net worth experience has brought nearly 40 people with him who had many years of high net worth experience as well. So overnight. We became a 25 year high net worth experienced company, we were deliberate to get into that business because.
Overtime.
Historically, it has outperformed the broader personal lines market.
Plus we like the value, we bring as a company through claims and our coverage forms and all that so it was a natural progression for US there I will tell you that.
On the homeowner front from the very beginning as we were growing this business, we fully expected quarter to quarter variability. We're writing larger risks. They can have larger losses. They also bring larger premiums with them, but we have experienced some of the inherent.
Variability, we did in the third quarter this year with some larger losses on high net worth homes as well we've dug into each one of those we don't see any trend on geography by agency.
You name. It. So we think it's again, it's just inherent variability from quarter to quarter. Its expected we expected to.
Continue on that front going forward as well I think if you look at the industry. We're seeing a mini the competitors are reporting some pain in the high net worth homeowner area as well and that kind of goes to.
What I was saying earlier as we think the runway for rate will remain positive there and it's going to benefit.
Benefit us as well.
And you can correct me, if I'm wrong, but just strategy not big for any of the reason I think it's just where you started is concentrated in the New York Tristate area more so than other places can you talk about the scaling that nationally and whether or not.
The geographic concentration something we're sticking with or should we expect in five years that you're you're writing as robustly on the West Coast and you are in a in New York.
Yes, well know and.
It's a great question, Josh Let me, let me clear that up as well it's not centered.
Just into the northeast we've rolled out our high net worth product across the country.
Believe now we're in 41 states a 42 states excuse me active where we have agents appointed we're running high net worth across the country with all of our agents.
Now.
Candidly.
You know a lot of those that a lot of that clientele is on the coast and we are growing New York in the northeast and we're also growing in California, Our California growth has slowed some of that's been by design.
That market is I would say influx from the 17 and 18 wildfire losses.
We were undersized there that we've talked about that in the past in our our loss experience was up.
We experienced losses, we didn't experience any total fire losses, either and we actually avoided Levin excuse me 11.
Total losses on risks that we had declines we think our underwriting there's real solid.
As well so.
California has slowed a bit but we are still.
Completely committed to California, our agents there we think it's a good opportunity and.
We'll continue to grow that too does that answer the question Josh.
That's great and then in terms of the enough market can you talk about a little bit <unk> on where you think business came from the past year to extend that.
That you were taking it from.
The company admitted market from competitors, who are well trained trench within your agencies.
And as next year happens do you expect.
That there will be easier market to pull business. We have right. It's never easy of course, but does seem like there was a lot of business looking for that for home in 2019.
Yeah.
Great question, I think that it's kind of come up from a little bit of everywhere, Josh I think there certainly is an element to it.
Admitted market companies, taking a kind of retrenching and some of that business that flows back and forth between Ns and admitted market based on the cycle is flowing back into the CNS company. That's a that's a big chunk of what they're writing I still think our value proposition.
The words still continues to get out we just continue to drip on our agents.
And they continue to send more and more business our way the key there, though Josh for US I think is that Nick key point is that our underwriting appetite and.
Assistance and approach terms conditions and pricing have stayed have remained stable they stuck to their knitting and.
Just getting more opportunities because of the market a little bit influx.
Well good luck with it as it goes it's already been a great window for you guys.
Thanks, Josh.
Your next question comes from the line of Mark to Valley with RBC.
Yeah good morning.
Thanks, a lot of the ground has already been covered but.
Maybe just asked us to two other questions that I don't think we've hit on first one.
For Mike.
Just within the investment portfolio.
As interest rates, having declined or anything that you're doing there.
Deferred or.
Strategically for positioning and if you could just remind me there kind of what portion of that portfolio.
Yeah, typically is up for reinvestment in in any given year.
Sure Mark as Marty Hollenbeck.
We generally don't do a lot different in the.
Fixed income portfolio the exception in last couple of years being.
Skewed more favoring taxable versus tax exempt bonds.
There's really two kind of two variables as to what determines our interest income.
That would be the cause of yields on purchase.
Which with the 10 year Treasury in 100 basis points year to date, that's been certainly seeing some pressure on that front.
The other handed I've mentioned in prior calls bonds that we have lost through maturities recalls.
Those yields were very high but a lot of corporate bonds tenure not call paper during in the aftermath of the financial crisis.
So we've been leading fairly good <unk> out the back door on yields loss that seems to be abating now the worst of that we feel confident is over.
So we can get the 10 year Treasury for example up to that say the 2.5% to 3% range, we think you'd get some give some traction on interest income.
Grow.
So again, we typically will choose the point on the yield curve, that's got to pose risk adjusted tax adjusted.
Okay.
And kind of go at that so.
In short answer is we're not really doing anything much different.
Okay.
That's helpful. There.
Second question and it's probably too soon to have any particular, but.
Obviously that the devastating tornadoes in Dallas, that's traditionally been a big market for you.
Is that is that a a loss event that you would expect to have some fairly substantial exposure to.
Hi, This is Steve and it is too early to really comment on that work. We've obviously seen that we're getting our claims people on the ground, but don't really have specifics for you at this point in time.
Okay.
Understood I'll stop there thanks.
Great questions Mark.
Ladies and gentlemen, just as a reminder, if you'd like to ask a question. Please press star and then that number one on your telephone keypad.
And your next question comes from the line of Mayor Shields KBW.
Great. Thanks, good morning.
I'm going there, we could get right sorry, Hello.
I Wonder if we get a breakdown of the year 18 reserve releases by line of business.
Yes, we have that Mike is pulling it up accident year 18 18.
Yes, so on a year to date basis.
Or if there is what you asked for me.
Yes, whatever that so.
Yes, so for the reserve development for 2018.
So if we can drill down on any of these so for commercial lines. It was a 4.7 personal lines 1.6.
Since he really we actually had.
That was.
3.7.
And for the surplus lines 12.6. So overall it was a 3.4 and those were all percent those are all percents, that's exactly right and there was when I said the 1.6 for personal lines that was strengthening there.
So just in total in terms of dollars there was 68 million.
Okay.
That is aggressive.
For the whole thing for the whole thing.
Right understood. Okay. If we can jump in if I think I two other quick questions. When I look at workers compensation line and I'm asking that in the light of your comment.
About recognizing that.
We're seeing trend a few years go in casual are you seeing something in workers' compensation, that's what that.
The year over year higher loss pick or is this just anticipating that.
Favorable trend may not continue.
I think it's the latter there you just.
With the long tail line like that it pays to be prudent with your picks and that if you know just to.
A small movement in medical inflation, Conns can turn that number and the big way so.
Typical with our prudent approach, we don't want to get too aggressive there.
Okay. That's helpful. And then finally, you mentioned that the.
You know book is predominantly casualty and wondering if that by design do you want less property because.
I would've thought that the submission flow would have increased their earlier than casualty.
Yeah, it's been by design a mirror on on the casualty side and just to give you a flavor of what the book looks like.
It's our average premium size for for the general liability on.
CNS is just a little over $6000. So certainly on the small in our limits profile there.
80% of our limits, our 3 million or less so kind of gives you a feel for that to the other thing that.
I would add there is about.
Between 40, and 50% of the time when we right.
And Ns say casualty line Cincinnati insurance company is picking up the other lines of business on the admitted side. So it might be a manufacturing concern as an example that hasn't really tough product liability exposure, where our ANS company can underwrite it term condition and price it appropriately.
And then Cincinnati insurance will write the property right. The premise this liability the auto workers compensation, so that happens 40% to 50% of the time, so that's driving.
US more towards casualty as well.
Okay, great. Thank you so much.
So.
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Thank you Catherine well done and thanks to all of you for joining US today, we look forward to speaking with you again on our fourth quarter call have a great day.
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