Ladies and gentlemen, thank you for standing by, and welcome to the third quarter 2019 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. If you require any further assistance, please press star zero. I would 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. To find copies of any of these documents, please visit our investor website, cinfin.com/investors. The shortest route to the information is the quarterly results link in the navigation menu on the far left. On this call, you'll first hear from Steve Johnston, President and Chief Executive Officer, and then from Chief Financial Officer, Mike Sewell. After their prepared remarks, investors participating on the call may ask questions.
At that time, some responses may be made by others in the room with us, including Chairman of the Board, Ken Stecher, Chief Investment Officer, Marty Hollenbeck, and Cincinnati Insurance's Chief Insurance Officer, Steve Spray, Chief Claims Officer, Marty Mullen, and Senior Vice President of Corporate Finance, Theresa Hoffer. Please note that some of the matters to be discussed today are forward-looking. These forward-looking statements involve certain risks and uncertainties. With respect to these risks and uncertainties, we direct your attention to our news release and to our various filings with the SEC. Our reconciliation of non-GAAP measures was provided with the news release. Statutory accounting data is prepared in accordance with statutory accounting rules and therefore is not reconciled to GAAP. I'll turn over the 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, 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 of 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%, it's up 26% for the first nine months of this year. Every segment of our business performed well, it was nice to see an underwriting profit in 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 it improved 2.7 points on a year-to-date basis. We continue to see benefits from work in recent years to diversify risks 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 unsatisfactory. 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 segment's 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 the third quarter a year ago, and 1.8 points better on a year-to-date basis. Our personal line segment also continued to experience average rate increases similar to the second quarter of 2019. We're encouraged by two consecutive quarters with the personal lines 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 a 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 90s.
Cincinnati Global experienced a very profitable quarter and has a post-acquisition combined ratio in the low 80s, 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. While 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 VCR of 3.6%, boosting the nine-month measure to 22.8%, well above our targeted annual average of 10%-13%. The contribution from our operations, measured as net income before investment gains, was 6.3% for the first nine months of 2019, up 0.9 percentage points from a year ago. While 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 over time. Now, our Chief Financial Officer, Mike Sewell, will share insights on other important areas of our financial results.
Thank you, Steve. Thanks to all of you for joining us today. Our 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 dividend 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. The pretax 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 in our 10-Q, the average pretax yield for the total of purchased taxable and tax-exempt bonds was roughly 60 basis points lower than the same period in 2018. 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 our equity portfolio and $99 million for our bond portfolio. We ended the quarter with net appreciated value of $4.2 billion, including $3.6 billion in 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 of 2019, up 7%, or $54 million, even after paying $114 million more this year in catastrophe losses. Another important area for management is balancing 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 than last year's third quarter. On a nine-month basis, it matched the average of 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 of 2019, we experienced a satisfactory amount of property casualty net favorable development on prior accident years. Favorable reserve development for the quarter benefited 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 and prior accident years.
Regardless of whether the root cause of particular changes in loss 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 or 26%. The IBNR component of that total is up $220 million or 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 IBNR component up 158%. Earned premiums are up 25%. Turning to managing capital, another critical function for the company, our approach remains stable. Our financial strength is excellent, as is our financial flexibility. As usual, I'll end 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 $0.40. Life insurance operations added $0.08. Investment income other than life insurance and reduced by non-insurance items contributed $0.62. Net investment gains and losses for the fixed income portfolio increased book value per share by $0.48. Net investment gains and losses for the equity portfolio increased book value by $0.43. We declared $0.56 per share in dividends to shareholders. The net effect was a book value increase of $1.45 during the third quarter to a record high $57.37 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 are confident that Cincinnati Financial is 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 a reminder, with Mike and me 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 the number one. We will pause for just a moment to compile the roster. Your first question comes from the line of Michael 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 commercial casualty and commercial auto, just the ratio does seem to be higher year-over-year, I think, or I could be wrong year-over-year, but it's close to 100%. Does that indicate that you potentially are seeing a rise in loss inflation trends? I don't know your view there. Are you guys seeing any changes? Some of your competitors, the larger ones, have said that they are seeing an increase in trend, and they also have pointed out that they're getting more pricing. Maybe you could comment on that.
Okay. Thanks, Mike. That does seem to be the question of this earnings season. As we look at the paid to incurred ratios, 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 incurreds that we've had. If we look at it more over the long term, we think we've addressed our reserving position in casualty, commercial auto, and really all the lines very consistently over time. I think, I break it down, going back to 2015, 2016, as Mike pointed out in his conference call, we look at inflation in total. 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 basket of techniques to come up with the estimate.
One of them that they use is a multiple regression method that regresses not only over the accident years, the development years, but also the calendar years. That regression over the calendar years makes an explicit estimation of inflation effects. 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 IBNR was up significantly. The IBNR for casualty over that period of time was up 49%, the auto up 158%. If you think about it, we, like most people, that IBNR component has a provision for both the development on 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.
Within that IBNR, there's a good bit of it for pure IBNR, pure incurred, but not reported claims. I think a lot of the inflationary effects, no matter how we describe them, would be in those ones that we really don't know about yet, the incurred but not reported. 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, I think this increase in IBNR that we've had over periods of time has put us really in a good position. I think it's manifested in now 29 years in a row that we've had our reserves develop favorably, and we really just think our best estimate for our lines of business are all in a good position right now. That's part of it.
That's the reserving part of your question, I think. I think that's an important part of it because you don't want to have to be paying for adverse development on prior years. We feel we're in a good position in terms of our current reserves. On the pricing side of it, I might ask Stephen M. Spray to contribute a bit here too. I think between where we estimate the loss cost trends and where we think we're getting rate. 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're really differentiating, segmenting, treating each risk on its own merits. We feel good about our position in commercial casualty.
If you take just the overall commercial expense ratio of 32% and add it to either our accident year X CAT loss ratio or the calendar year, we're under 100, we feel both on the reserve side and on the pricing and underwriting side, we're in a good spot too.
Okay, great. That's helpful. I guess, I think I've tried to ask this in previous quarters, just because there's a number of moving parts. Workers' Comp's been a meaningful beneficiary to earnings mostly from reserve releases. The top line's coming down a lot and the underlying loss ratio is deteriorating. Is that trend mostly due to decreases in pricing? On the other hand, what's causing so much reserve releases to come out? Is it both severity and frequency are better? Is it mostly more recent accident years or are the older accident years? Any color would be helpful. Thanks.
Sure. This is Steve Johnston again. On the reserving side, I'll touch on that and then Steve Spray will touch on the pricing side. On the reserving side, whenever we set these, we set our reserves with certain assumptions as to inflation, settlement practices, and all the data that we can look at. And basically what's been happening with the workers' compensation is, and I think it's a real team effort around here in terms of every area of the company contributing, particularly our claims department, our underwriting department, the pricing department. The actuals have just been coming in underneath what we set as our expectation for the reserve development. So it's just been a matter of actuals comparing favorable to what we put in terms of the expectation. And you have to be careful with setting those expectations.
I'm sure you know in the workers' comp long tail line, a lot of the trends have been favorable over time. You have to be careful to keep an eye out for any turning points that there might be. And again, we take a prudent approach to the reserving of all lines. And Steve, you might want to comment on the pricing.
Yeah, Mike, Steve Spray. On the pricing, it's similar to the discussions we've had in the prior few quarters. NCCI base rate declines across states are having a compounding effect. I will tell you, I 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 selection's where it needs to be, that we're getting the right rate. Of all of our lines, commercial lines of business, the new business is 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 have in risk selection and in pricing on the work comp book.
Just looking at, as 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. It's no doubt the accident year results are under pressure from the base rate declines.
Okay, great. That's helpful. Just lastly, on the excess and surplus lines segment, if you can remind us, is this growth sustainable? Is there something one-time or is it? I know there was a Lloyd's acquisition, maybe that's in that segment too.
Yeah. The CGU, the Lloyd's acquisition would not have any impact on our E&S company, CSU. I would say that we feel that the growth there in CSU is sustainable. I think it's showing what's going on in the marketplace. The submission counts in our E&S company are up considerably. I would make a note there too, Mike, that we've got just a great experienced team and they have been consistent and stable in their underwriting appetite, the terms, conditions, and the pricing. 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 because of our value proposition with the E&S company, and I've talked about that in the past as well. We feel good about not only the profitability that we have there, but our growth trajectory too.
I guess, I get asked this sometimes, and I don't have the best answer. Just usually an E&S company isn't a traditional commercial insurance company. How are you able to have the analytics or capabilities to have an E&S company since you are more of a traditional commercial insurer? Is there something unique there?
Yeah, I think, one, we've built a tremendous amount of expertise on the team for E&S underwriting. The majority of that book, about 88% of it, is really traditional casualty business, albeit a little tougher. All right? Inherently, it's going to be a risk that is not eligible for the admitted market. As an example, you might have a bar or tavern that the admitted market doesn't feel that it can get the proper terms and conditions or pricing. That would end up in the E&S market. Where I think our difference is and why we are outperforming the industry on our E&S operation is we've stuck to our knitting. Like I said before, the underwriters, the entire team has been consistent in their appetite, terms, conditions, and the pricing. The value proposition we have for our agents and the policyholders in their community is different.
The traditional E&S route is for a retail agent to go to the wholesale market, then the wholesale market go to the broader E&S carriers. We formed our own brokerage. Our underwriters are employees of the brokerage. Our agents have direct access to the decision-makers in our E&S company. The other big thing is, there's several of them, but we give our agents, I think, more confidence on that E&S business because we use all the local resources of The Cincinnati Insurance Company to bear with our E&S company as well, most importantly, our claims operation. Our agents have a relationship with that local claims adjuster that will handle both the admitted market business as well as the non-admitted. We run our brokerage lean and mean. We can return more of the commission to our agents.
On top of that, we include the premium and losses from our E&S company into The Cincinnati Insurance Company overall profit-sharing arrangement. We're aligned with our agents that they send us business that they feel is going to perform better than maybe some other E&S might.
All right. 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.
Hey, good morning. Congrats on the quarter.
Thank you.
One of the things that's come up with the call so far has been most companies have reported incrementally stronger price increases in the third quarter than the second. I think you said that you really weren't seeing that. It was more flat. Not that it's terribly bad, but could you maybe, I think I know what the answer is, but could you maybe talk about why this might be the case, that maybe you're not seeing quite the same dynamic as some other companies in the commercial insurance world?
Well, Paul, this is Steve Spray. Let me try to tackle that. Let me try to tackle it from commercial, personal, and E&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. What 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 agents, is focused on segmentation. We're really focused on retaining the most profitable business or the business that we feel we have an opportunity 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 drive a profit for us. Our retention spreads look really good there as well. We're retaining more of that more profitable business.
We're either getting rate or we're losing some of that business to the market, and we're comfortable with that. It's changing our mix, and I think you're seeing it in our results. Now, that's primarily what I'm talking about there is commercial lines. The same story is going on in personal lines. You can see it 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. As everybody's reporting, you're seeing better personal auto results, and we're seeing that as well. There's certainly some variability and volatility going on in the homeowner book, and we've seen that as well.
The good news there is we feel like we're in a positive rate environment on homeowner, and we think the runway is long and will continue. That will serve everybody well as to, and it's needed. Our E&S company has continued to get low single-digit rate. Even with the levels of profit that they've generated, they've gotten low single-digit rate quarter over quarter over quarter for quite a while. That really sums up the way we look at rate and the way we look at execution, the way we work day to day with our agents, Paul.
Thank you.
Paul, this is Steve. I might just add one. I agree 100% with everything Steve said. With the commercial casualty, it's more of a Q comment than we put in the press release or the scripts, that we are getting a little bit more on the commercial casualty. Still in that same range that we
That we put out, it is a little bit higher than it's been in the second quarter on average. Steve's points about segmentation talk to the distribution about that average.
Thank you. Could you home in on your commercial auto business and what's happening with your business as well as your perception of the market? That seems to be the most notable segment that people are focusing on across the industry.
Yeah, sure. Paul, prior to the role I'm in now, when I was leading commercial lines, I lived this real time, I think I can speak to it. This is Steve Spray. We really saw back in 2016 is where we really took a sense of urgency and started taking serious action on the commercial auto book. Again, it goes to what I mentioned before. We really focused on the segmentation piece of it and risk selection. Just from a pricing standpoint, we really got aggressive starting in 2016. I really believe that we are out in front of this issue. The way I measure that is we have such a close relationship with our agents. We have so few of them, you know our distribution model. We, on a daily basis, we're delivering necessary auto rate change back starting in 2016.
We were causing considerable pain. We heard pretty regularly that we were "an outlier" from our agents as far as how hard we were pushing. Fast-forward to fourth quarter 2018, really beginning in 2019, that pain has really kind of gone away. I think it's because others really started noticing it and started taking similar action. If you look at our X CAT accident year on the commercial auto, it is continuing to improve. We haven't crossed the finish line. That loss ratio isn't where we want it to be, but I can tell you we feel really good about the trajectory and where we're heading with that.
Great. Thank you very much.
Thanks, Paul.
Your next question comes from the line of Joshua Shanker with Deutsche Bank.
Good morning, everyone. Another great quarter. Congratulations.
Thanks, Josh. Good morning.
Good morning. I got a question this morning. Somebody wanted to know just how well you're doing in the high net worth individual market. I started trying to build a time series. I noticed that you've talked about, over time, your growth rate differently. Some years you talked about it in terms of most recently how much premium you're giving that business. Sometimes you've talked about it in the new business generated, some in the change in new business generated. In terms of going forward, this has been a good growth year, and you're talking about in terms of total premium, are you planning on breaking this out into its own segment given the clarity of the disclosure?
Josh, this is Mike Sewell. We are not planning on breaking that out. That would still be a part of the personal lines. 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.
Yep. Go ahead.
Go ahead, Josh.
Well, I was wondering maybe if we can talk about the relative margin in high net worth versus personal lines as a whole, whether it's a more profitable business or about the same level of profitability. Two, whether we can talk about rate in 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 numbers I can give you on high net worth. Right now it's about 28% of our total personal lines book is how 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 is up over 30%, and 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 Van Den Heuvel leads all of 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.
Overnight, we became a 25-year high net worth experience company. We were deliberate to get into that business because, over time, historically, it has outperformed the broader personal lines market. We like the value we bring as a company through claims and our coverage forms and all of that. 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. We have experienced some of that 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.
We think it's, again, it's just inherent variability from quarter to quarter. It's expected. We expect it to continue on that front going forward as well. I think if you look at the industry, we're seeing many of the competitors are reporting some pain in the high net worth homeowner area as well. That goes to what I was saying earlier, is we think the runway for rate will remain positive there, and it's going to benefit us as well.
You can correct me if I'm wrong, but your strategy, not for any of the reasons, I think it's just where you started, is concentrated in the New York tri-state area more so than other places. Can we talk about the scaling that nationally and whether or not the geographic concentration is something you're sticking with, or should we be expecting five years that you're writing it as robustly on the West Coast as you are in New York?
Well, no. It's a great question, Josh. 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. I believe now we're in 41 states, 42 states, excuse me, active, where we have agents appointed. We're writing high net worth across the country with all of our agents. Candidly, a lot of that clientele is on the coast, and we are growing New York and the Northeast. We're also growing in California. Our California growth has slowed some, and that's been by design. That market is, I would say, in flux from the 2017 and 2018 wildfire losses. We were undersized there, and we've talked about that in the past, and our loss experience was, we experienced losses.
We didn't experience any total fire losses either. We actually avoided 11 total losses on risks that we had declined. We think our underwriting there is real solid as well. 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. Then, in terms of the E&S market, can you talk about a little bit on where you think the business came from the past year to the extent that you were taking it from the admitted market, from competitors who were well entrenched within your agencies? As next year happens, do you expect that there'll be as easy a market to pull business away from. It's never easy, of course, but it does seem like there was a lot of business looking for a home in 2019.
It's a great question. I think that it's kind of coming from a little bit of everywhere, Josh. I think there certainly is an element to admitted market companies retrenching and some of that business that flows back and forth between E&S and admitted market based on the cycle is flowing back into the E&S company. That's a big chunk of what they're writing. I still think our value proposition, the word 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, a key point is that our underwriting appetite and consistency and approach, terms, conditions, and pricing have remained stable. They've stuck to their knitting and just getting more opportunities because of a market a little bit in flux.
Well, good luck with it as it goes. It's already been a great winter for you guys.
Thanks, Josh.
Your next question comes from the line of Mark Dwelle with RBC.
Yeah, good morning. I think a lot of the ground has already been covered, let me just ask two other questions that I don't think we've hit on. First one, for Mike. Just within the investment portfolio, with interest rates having declined, or anything that you're doing there different or strategically for positioning. If you could just remind me there, kind of what portion of that portfolio typically is up for reinvestment in any given year.
Sure. Mark, this is Marty Hollenbeck. We generally don't do a lot different in the fixed income portfolio. The exception in the last couple of years being skewed more favoring taxable versus tax-exempt bonds. There's really two variables as to what determines our interest income. That'd be the yields on purchase, which with the 10-year treasury and 100 basis points year to date, we've been certainly seeing some pressure on that front. On the other hand, and I've mentioned in prior calls, bonds that we have lost through maturities or calls, those yields were very high. We bought a lot of corporate bonds, 10-year non-call paper during and in the aftermath of the financial crisis. We've been bleeding fairly good out the back door on yields lost. That seems to be abating now. The worst of that, we feel confident, is over.
If we could get the 10-year treasury, for example, up to, let's say, the 2.5%-3% range, we think we'd get some traction on interest income growth. Again, we typically will choose the point on the yield curve that's got the most risk-adjusted, tax-adjusted yield and go with that. The short answer is we're not really doing anything much different.
Okay. That's helpful there. A second question, it's probably too soon to have any particular, obviously the devastating tornadoes in Dallas, that's traditionally been a big market for you. Is that a loss event that you would expect to have some fairly substantial exposure to?
This is Steve. It is too early to really comment on that. We've obviously seen that. We're getting our claims people on the ground, 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 the number one on your telephone keypad. Your next question comes from the line of Meyer Shields with KBW.
Great, thanks. Good morning.
Good morning.
I was wondering if we could get a break. Oh, sorry. Hello. I was wondering if we could get a breakdown of the accident year 2018 reserve releases by line of business.
Yes, we have that, and Mike is pulling it up.
Accident year 2018?
'18.
Yeah. on the year-to-date basis?
a third quarter.
Is what you asked for, Meyer?
Yeah, whatever time, be it year-to-date or third quarter.
Yeah. For the reserve development for 2018, we can drill down on any of these. For commercial lines, it was 4.7. Personal lines, 1.6. Cincinnati Re, that was 3.7. For the surplus lines, 12.6. Overall, it was a 3.4.
Those are all %?
Those are all %. That's exactly right. When I said the 1.6 for personal lines, that was strengthening there.
Just in total, in terms of dollars, Meyer, it was $68 million.
Okay. That is the whole.
For the whole thing.
For the whole thing.
Right. Understood. Okay. Yeah, we can chop that up, I think. Two other quick questions. When I look at the workers' compensation line, and I'm asking this in the light of your comments about recognizing worsening trends a few years ago in casualty, are you seeing something in workers' compensation that supports that the year-over-year higher loss picks, or is this just anticipating that favorable trends may not continue?
I think it's the latter there. With the long tail line like that, it pays to be prudent with your picks and that if just a small movement in medical inflation can turn that number in a big way. Typical with our prudent approach, we don't want to get too aggressive there.
Okay. No, that's helpful. Finally, you mentioned that the E&S book is predominantly casualty, and I'm wondering, is that by design? Do you want less property? Because I would've thought that the submission flow would've increased there earlier than casualty.
It's been by design, Meyer, on the casualty side. Just to give you a little flavor of what the book looks like, our average premium size for the general liability on E&S is just a little over $6,000, so certainly on the small end. Our limits profile there, 80% of our limits are $3 million or less, so kind of gives you a feel for that too. The other thing that I would add there is about between 40%-50% of the time when we write an E&S, say, casualty line, The Cincinnati Insurance Company is picking up the other lines of business on the admitted side.
It might be a manufacturing concern, as an example, that has a really tough product liability exposure, where our E&S company can underwrite it, term, condition, and price it appropriately, and then The Cincinnati Insurance Company will write the property, will write the premises liability, the auto workers' compensation. That happens 40%-50% of the time. That's driving us more towards casualty as well.
Okay, great. Thank you so much.
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Thank you, Catherine. Well done. 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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