Good day, everyone. Welcome to Selective Insurance Group's Third Quarter 2019 Earnings Call. At this time, for opening remarks and introductions, I would like to turn the call over to Senior Vice President, Investor Relations and Treasurer, Rohan Pai. You may now begin.

Good morning everyone and welcome. This call is being simulcast on our website and the replay will be available through December 2, 2019. A supplemental investor package, which includes GAAP reconciliations of non-GAAP financial measures referred to on this call is available on the Investors Page of our website, www.selective.com. Certain GAAP financial measures will be stated in the call that also are included in our previously filed Annual Report on Form 10-K and Quarterly Form 10-Q reports. To analyze trends in our operations, we use non-GAAP operating income, which is net income excluding the after-tax impact of net realized gains or losses on investments, unrealized gains or losses on equity securities, and debt retirement costs related to our early redemption of debt securities in the first quarter. We believe that providing this non-GAAP measure makes it easier for investors to evaluate our insurance business. As a reminder, some of the statements and projections made during this call are forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties. We refer you to Selective's Annual Report on Form 10-K, and any subsequent Form 10-Qs filed with the U.S. Securities and Exchange Commission for a detailed discussion of these risks and uncertainties. Please note that Selective undertakes no obligation to update or revise any forward-looking statement. Joining today on the call are the following members of Selective's executive management team; Greg Murphy, Chief Executive Officer; John Marchioni, President and Chief Operating Officer; and Mark Wilcox, Chief Financial Officer. With that I'll open it to Greg.

Thank you, Rohan, and good morning. After 20 years as Chief Executive Officer at the Best Super Regional Company in the Country, I am extremely pleased to announce the well-developed transition plan that appoints John Marchioni as Chief Executive Officer, effective February 1, 2020 when I become Executive Chair for a one-year period. John has been President and Chief Operating Officer since 2013 and is fully prepared and capable to assume the Chief Executive Officer role. I could not be more happy for him and the ongoing success of the company. I'll make some introductory remarks and then focus on some high-level themes and initiatives that enhance our strategy and position us for continued outperformance. Mark will then discuss our financial results and John will review our insurance operations in more detail, providing additional color on key underwriting and strategic initiatives. Our third quarter results were solid, reflecting continued strong execution across our underwriting and investment functions. For the quarter, our combined ratio was 95.2% and after-tax net investment income was up 6% to $45 million. We generated non-GAAP fully diluted operating earnings per share of $0.97 and an annualized operating ROE of 11.2%. Our third quarter results were impacted by; one, higher than expected levels of non-cat property losses of $5 million after tax or $0.09 per diluted share and $3 million of employee severance-related costs, which were split between underwriting and corporate expenses that accounted for $0.05 per share. On a year-to-date basis, our non-cat property losses are within our expected range. In addition, we remain focused on generating renewable pure price increases that for the quarter were 3.7% in line with our expected claim trend as well as driving ongoing underwriting and claim improvements. We expect new and renewal pricing will continue their upward momentum that will…

Thank you, Greg, and good morning. For the quarter, we reported $0.93 of fully diluted earnings per share and $0.97 of non-GAAP operating earnings per share. We generated an annualized ROE of 10.7% and a non-GAAP operating ROE of 11.2%. Through, the first nine months, our annualized non-GAAP operating ROE of 12.3% is above our 2019 ROE target of 12%. Consolidated net premiums written increased 4% in the quarter with continued solid 6% growth in outstanding commercial lines segment, driven by strong new business growth and accelerating pure renewal rate increases, partially offset by premium declines in Personal Lines and E&S. Underwriting profitability remained strong with a third quarter combined ratio of 95.2%, on an underlying basis or excluding catastrophe losses and prior year casualty reserve development, our combined ratio was 93.6% with a 1.6 percentage point comparative quarter increase, principally driven by higher non-cat property losses and an increase in the expense ratio, which I'll touch on shortly. For the first nine months of the year consolidated net premiums written increased 6% with strong contributions from outstanding commercial lines and E&S segment. Our reported combined ratio was a profitable 94.3% and our underlying combined ratio was 92.5%, which reflects 60 basis points of underlying margin improvement thus far in 2019. For the quarter, catastrophe losses added 3.7 points to the combined ratio and included exposures to a series of smaller hailstorm storms and tornadoes as well as a $3.7 million estimate for Hurricane Dorian. Non-cat property losses of 16.7 percentage points were about a point higher than expected and put some pressure on our actual and underlying combined ratios compared to the comparative quarter. Year-to-date, our non-cat property losses accounted for 16.1 points on the combined ratio, down by just over a point from the same period in 2018…

Thanks, Mark, and good morning. I want to start by thanking Greg and the Board for the opportunity to become the next CEO of this very special company. As has been the case throughout his tenure, Greg's primary focus has been to do what's in the best interest of our employees, our customers, and our shareholders, and his approach to this transition has been no different, and for that I'm truly grateful. I'll begin with the nine-month results of our operations by segment and then provide an overview of some of our strategic initiatives. Our standard commercial line segment, which represents approximately 80% of premiums, generated net premiums written growth of 7% for the first nine months, continuing a consistent track record of strong and profitable growth. The segment generated new business growth of 9%, stable retention of 83%, renewal pure price increases of 3.3%, and an excellent combined ratio of 93.9% or 93.3% on an underlying basis. Commercial lines renewal pure prices increased 3.5% in the third quarter, up sequentially from 3.1% in the second quarter as general liability and commercial auto contributed to the improvement. While the direction of market pricing is certainly a positive, the level of increases has been so far more muted in the small and mid-market commercial lines space than it has been for large accounts or high hazard E&S, on our highest quality standard commercial lines accounts, which represented 49% of our commercial lines premiums, we achieve renewal pure rate of 1 9% and point of renewal retention of 91%. On the lower quality accounts, which represented 11% of premium, we achieved renewal pure rate of 7.9% while retaining 79% at point of renewal. Our ability to analyze the risk and return characteristics of each piece of business at an extremely granular level…

Thank you [Operator Instructions] Our first question on queue, it will be coming in from Mike Zaremski of Credit Suisse. Your line is now open.

Hi guys, good morning. Congrats to Greg and John. This is actually Charlie on for Mike. I know you touched on it briefly, but it was notable that you guys were released reserves in the GL line this quarter and have done so consistently this year, given that some other carriers have been talking about a rising loss trend. Can you talk about what you're seeing in that line and other casualty lines?

Got it. So this is John, I'll start. And I guess what I would do, at the outset is bring you back to the comments that both Greg and Mark had in the prepared remarks, relative to the discipline, not just around our planning process that leads to our loss ratio selections, but also the reserving process that we have as an organization and based on those inputs we feel very good about where we are relative to general liability in particular and all lines on an overall basis, but I would also again point to the fact that has been reiterated here this morning and over the last several years, which is if you look at our history over the last 10 years and just assume a loss trend of about 3%. We've generated pure price increases, net of exposure change, at or above that level over that 10-year period and that's also embedded in each of those accident years, when you think about trends that might be developing going forward. So you combine that with our position to execute our pricing strategy and manage retentions on a very granular basis and you put that all together, that to explain why we feel solid based on where we are today.

And Mike, this is Greg. Let me just add a little couple of point. First of all, again one size does not fit all, okay? So when we start thinking trend and we start thinking price. I'd like you to start to contemplate the fact that type of business that we write, we are, our average account size of 12,000 and the fact that 87% of our casualty policies are written at $1 million below, the fact that we have a reinsurance program on attached to $2 million. So a lot of the inflationary aspects of that get pushed into the reinsurance market. I think put a different profile on it. And then I think when you really just even go back over the last five-year period and you look at where our rate level is and just look at our rate level relative to clips. We were at like 3.2% renewal pure rate and in CLIPS for all in, everything small, medium, and large accounts is not even at 2%. So that consistent outperformance and like John mentioned were in account underwriter, so where are those increases going? They're going NGL, they're going in other lines of business to build up what we feel we need is the right price for that exposure. So, there is a lot in all of that answer, but I think it's important when people start applying those one rule or it's like if you find one rule to rate increases, your head is going to pop off because you got companies now talking about rate with exposure or no. Let me put take exposure out, let me take comp out, let me put comp in and let me – so when you think about it like that, our rate that we disclose is renewal pure price, no exposure rated and if we were to amp it up for exposure, if we take our rate level for the first nine months of the year, almost up six points to give you a sense of the difference between what we report and what you may hear in the market relative to what rate is. So again, I know that, there is a lot in all of that, but I think it's important to understand all that when you look at the performance of the company like Selective.

Got it. That's very helpful. And then on the personal auto side, can you provide more color on what you're seeing there as far as the most pronounced competition?

Yes. Charlie, this is John. I guess, what we continue to see is, our hit ratios remain under pressure, which is the best way to measure where the competitive environment is. And we understand our price increases, based on our view of profitability in that line has been higher than the market, broadly and that continues to hurt our competitive positions. Now we are starting to see an increase in commentary from some of the bigger players that maybe there is some change in loss trends relative to personal auto, which may start to change that pricing environment, we haven't seen that yet. But that's really how we've seen the impact on our new business and as we said earlier, that new business impact in our competitive positioning for auto also impacts the whole line because we do write a lot of continued business with the Auto and Home.

Great, thanks guys.

Thank you for that question. Our next question will be coming in from the line of Scott Heleniak of RBC Capital Markets. Your line is now open.

Hey, good morning.

Good morning, Scott.

Good morning.

Congratulations to John and congratulations to Greg. Very, very exciting.

Thank you.

Wanted to ask about the – first, I wanted to ask where was just the E&S premiums they – you were down a little bit. They have been growing at a nice clip for quite a while now and the margins have really turned around and improved there. So I know you mentioned for Q4 the discontinuing of program but wondering if you could talk a little bit more about kind of what you're seeing there, in terms of rates and terms and conditions? Obviously, the commentary hear from other people in E&S is constructive. So just wondering, kind of what your, what you guys are seeing across your book of business there?

Yes. Scott, I appreciate the question. This is John. I'll start and then anybody else to follow on. We continue to see pressure. When you look at the year-over-year comparisons, as I mentioned previously, relative to the on-boarding of a significantly large relationship in the Q3 of last year, which impacts the year-over-year comparisons in this quarter and then, I mentioned also that we expect a little bit of pressure in the Q4 because of exiting – a small but volatile book of business around snow removal. I would say what you hear in the broad market relative to E&S pricing movement, you really have to break it down into different segments and again recognize that which way is in the small-end of the market. Our average premium size is about $3,000 are predominant business is considered small binding authority business in your general run of the mill segments. I think where the pricing has really moved and moved somewhat aggressively in E&S is going to be on the higher hazard business, larger accounts, and property in particular, we're not a significant property player. It's about 25% of our book. But it's not a coastal and wind exposed property book and that's what I would say is more of a driver that you are hearing about in the marketplace. I would say our – the business that we write, you probably think about from a pricing trend perspective, more of what we see in our standard market, in the small and middle market space in terms of how prices moving for GL in particular.

And Scott, here Greg, I just think that, again, this gets into the different profile business, when we sure it's good for everybody. We write a mostly contract binding authority business. John mentioned it's smaller, it's smaller Style accounts. We're not big coastal writer on property and where we are seeing some rate movement is in the habitation risk, particularly in the high levels and the hotel area. We see a lot of that business. Exiting the primary market, coming back to us and we're writing that at fairly healthy levels. We've also seen a lot of improvement in our pricing, particularly in the contracting segmentation and I think with all the changes that that team is made on under Johns' direction, we feel good about where we are price wise and now want to see it a little bit more into a growth mode. But as we've always said to you we want to start with, where are the right levels is for pricing and we'll always the top line grow or shrink based on how the market is accepting that. We actually see a little bit more business flowing into us. We've opened up some new relationships as well that we feel very good about, and would like to see the core contracting business start to pick up as we move into next year. But as John mentioned, we want to clearly foreshadow that snow book coming off in the fourth quarter.

All right. Okay, that's fair and definitely makes sense, sounds like it's more of a mix issue compared to what everyone else is seeing and talking about. I wanted to ask you about, most of your calls you guys thought you had bucket out your risks into highest rated versus the lowest-rated and it's – it was 49%. I think it's been that level kind of the high – the highest performance for a while now versus 11% lowest performing. Do you expect that to change as the market firms and loss trends changes in terms of where the rate disparity is between the lowest performing versus the highest performing, I think it's about 8% versus 2%. Do you expect that to widen and the definition of change of what's highest versus the lowest?

Yes, this is John. That's a segmentation that happens on a regular basis and over time, you're essentially fitting your entire book of business into those buckets. So, when you would expect to see is the combined ratio differential between your best and worst will start to tighten over time. Because you're managing, your pricing fairly aggressively on that worst 10% and you're getting a little bit less pricing on the best 50%. So when you think about that pricing curve, you anticipated flattening over time, but there is also a bit of a force distribution there. So there is always going to be a worst 10% that we're going to be targeting and targeting aggressively, but over time, and this does happen over time, you will see that combined ratio curve flattened out a little bit and then ideally your pricing will follow with that.

And again this is just – this is a byproduct of the fact that we compete in the market that has a whole consortium of different players with different levels of sophistication and this is where, if everything was price to the perfect information curve, all the combined ratios of that segmentation would be the exact same, that they're not because of the miss and because of the lack of knowledge out in the marketplace and what you need to compete with. And as John mentioned, somehow we want to make sure that we're writing the right account for the right agent, and we're balancing our book overall but yet this is a – an ongoing issue that your question to be answered would be, we would need a really hard, hard market to fix that slope of that curve significantly. I would say we take efforts, our best efforts, every year to improve that and try to reduce the slope of the line. But that would need a hard like back in a –when I first started in the 80s in this business, we would need like an 80s style hard market to really fix a lot of that in the marketplace but we are working on it every year.

Yes, got it. And just the last one is on the investment side, some of the, it look like there is some repositioning going on in the fixed income side, a $1 billion shift or so into one year to five year securities fixed income maturities from the five years to ten years, was that the floating rate securities that you're referencing before? Is that most of the shift out of that or is there something else going on?

This is Mark here. Thanks for the question, Scott, I'd say, when you think about the investment portfolio it remained very consistent from Q2 to Q3. The biggest repositioning we did was really on the rest of the asset side, where we felt public equities where we're getting into a very healthy valuation. So we really dialed back the public equity allocation and so you saw, as I mentioned, the risk asset allocation went down to one of the lowest levels we've had in some time, just below 7% or 6.9% compared to closer to 8% where we've been the floating rate securities bucket has been that one year or less for the most part of one year less category, but no real intentional shift between the one year to five year or the five year to ten year category that was just normal transfer of, between no major changes as it relates to the maturities out there.

Another way to think about it is if you look at the duration, the duration is down a little bit in the 3.3 years. That's probably the lowest duration with patent quite some time. And the other statistic we look at to think about the maturity of the book is really outweighed average life and that was pretty consistent for the quarter, at just on the five years.

All right, thanks for the answers. Good luck.

Thank you.

Thank you. Our next question will be coming in from the line of Jamie Inglis of Philo Smith & Company. Your line is now open.

Good morning, Jamie.

Good morning. Good morning, Greg, I want to say, appreciate your great work building this company over this time, really do. And John, I look forward to your success, really do.

Thank you.

I've got a question about the, two questions. One about the E&S segment, if you think about it – so I'll ask me going on in this business for you guys. But do you think is sort of same-store or same distribution or same territory sort of segmentation, if you can. Is this business going where you want it to be. I mean, you're getting the rates that you want to be and you're growing as fast as you'd like to be, growing.

Yes, this is John. I think it's a great question. I would say the answer is yes. On an overall basis, our core business is that core binding authority, small binding authority business, predominantly contractors, habitation all other mercantile and service business. And if you strip out all of the sub-segmentation noise in the quarter, we got a little bit of growth relative to our core binding authority business. As we cited last year as part of our profitability improvement initiatives, we had a couple of small– more volatile, small premium more volatile segments, like snow removal and like liquor liability that was attached to restaurants, bars, and taverns that we've exited over the course of this year and we'll continue to exit into the fourth quarter. So that is causing some of the noise in terms of the top line. What do we think is generally or has definitely contributed so the bottom line improvement. So there has been some repositioning of the portfolio, but within that repositioning, the focus on the core binding authority space continues to be where our focus is. And we think we're well positioned to grow on that front.

And this is Greg. Yes, and obviously the brokerage side, which I want to make sure, when we say the brokerage side, we're not talking large brokerage accounts. These are accounts that we generally rise in the market, day in and day out. It's just that they don't meet our standards from a primary standpoint, but yes, they do from an E&S standpoint. And I think – this is a track that we could run a lot faster on as a growth opportunity in addition to the CBA business that John referred to earlier. So we'd like to see, and we're getting more aggressive in some staff, and we've got some nice system improvements coming online, that is going to improve our capability moving forward, and so we feel that there is where I think we've got an opportunity to capture – the average contract binding authority account is like $3,000 and so. And the other part of it's amazing, the amount of price sensitivity there is then a $3,000 account but that – in some cases, there is. So we feel on the brokerage side, the average account is much higher than that, it's a multiple of that. And we've got an opportunity to expand that business.

Okay, great. And then to shift over. If you think about your new stage, new territories, is this a good time to be growing those given sort of the general market seems to be tightening and it's different lines have been place but as a general rule, the market appears to be tightening. Is this a good time to be growing in this – in those new areas? Is there potential for adverse selection against you guys in this market? What are your thoughts about timing in this expansion?

So I would say that, we didn't really think about market timing in terms of the pricing environment. We made a decision to open up these new markets, which started over about four years ago, when you think about the initial launch of that effort. And part of it is because we think we've built an underwriting operation that will perform throughout market cycles. And if you look over the last 10 years in terms of our ability to generate margin improvement and consistent profitability and manage pricing, we've demonstrated an ability to manage profitability throughout the pricing cycles. So I think that's a consideration one, we enter those states with the same underwriting tools that we've had in existence for our entire portfolio. We talk a lot about the renewal inventory management but those same pricing and risk selection tools are used on a real time basis by our new business underwriters. So, we knew going into these markets that we had those tools available which was going to prevent us from being in an any potential adverse selection situation, so that's point number one. Point number two is, we went ahead with the same field underwriting philosophy, the same underwriting appetite, and the same agency management philosophy, so we spent about a year prospecting agents and to put it in perspective, our average agency count by state is in the low teens, we opened up Arizona with about 15 and the other states with about 10 agency partnerships, which was a fairly diligence selection process. So I would say the flow of new business, which has been strong and within our underwriting appetite is coming from agents that knew us in many cases they had regional or national relationships with us and understood what our appetite was coming in. So, I think we feel really good about the disciplined, approach that we use to answer those states, and while the market shifts, I think broadly across our existing footprint and our new states will provide more opportunity for us as pricing starts to move. We don't necessarily think differently about the new states versus our legacy states.

And Jamie, I would just add to that. The part of the strategy is obviously doing a greenfield versus an acquisition for us, Greenfield was the right way to go because of everything John mentioned people, agency, technology, and culture that we wanted to establish all foods that. Well, you pick up the geo-diversification, which I think is a critical part for us to help balance some of our East Coast exposure. So again, you are in some cases trading different types of exposures in terms of catastrophic activity, but it does better level load that and less than some of our catastrophe reinsurance costs Countrywide, but also then it starts as John mentioned, opens up opportunity as we expand to get bigger. We would expect that our share of wallet expectations will go higher because there are a number of accounts that our agents write, that have properties outside of our footprint, that now we will have access to write, because our ultimate goal is 50 state capable, that's is going to take a while, but we're not going to be the full boots on the ground in every state. But we will, we do want to ultimate will become more capable throughout the country to write accounts.

Okay. Right. It sounds good. Good luck, guys.

Thank you.

Thank you. Our next question will be coming in from the line of Chris Campbell of KBW. Your line is now open.

Hi, good morning, gentlemen.

Good morning, Chris.

I guess, my first question is on workers' comp. And I apologize I joined the call late in case this was already covered. But the loss ratio was up about 800 bps year-over-year. But then you still had reserve releases. I guess just where are you guys booking your core loss ratios is in that line versus where you were at a year ago?

I mean we're – right now we have a very healthy process and when we establish and how we record our expectation for 2019, in terms of free expectations around frequency severity and the reserve release of you're asking what accident years it came from, it was prior to accidents – it's 2017 and prior in terms of where it – where that came from. It's principally severity focused and more so on the medical side than on the indemnity side.

And just to add to that, Chris, just from a reserve development perspective this year in this – in Q3 if you're referring to the quarter-over-quarter change versus the year-over-year change, although they are – the percentages are pretty similar, we had $13 million of favorable development go through that line item. So that was a 17.2% benefit on the workers' comp line. A year ago we had $20 million of favorable development. So it's 45.4 percentage point benefit. That's really, I think the difference you're referring to. So a year ago, we had a little bit more favorable claims emergence in the quarter. And then we reflected in Q3 of 2019.

But the accident years are pretty similar, when you look at the 2019 accident year versus the 2018 accident year, maybe a slight improvement, but not much though.

Okay, got it. That makes sense because I think the favorable development explains most of it. Okay and then just a question on commercial auto like the big drop in the loss ratio there. What's the dynamic happening there because I would expect that to be a little bit higher given all like to high severity trends, but just trying to understand that a little bit more of the crosswalk between the two year-over-year loss ratio in commercial auto?

Let me get started and Greg and John can jump in as well. But suffice to say commercial auto is not meeting expectations coming into a 108 combined for the quarter is not where we want to be from a target combined ratio perspective. The good news, though, is that we are having a little bit more stability in the claims trends when you think about frequency and severity in commercial auto. So last year we saw some pretty significant pressure on both the prior accident years as well as the current accident year in the commercial auto line of business and in Q3 2018, we booked $10 million of adverse development, which was about eight points on the loss ratio for commercial auto. We were $25 million year-to-date through 9.30 which was about 6.8 points on the loss ratio. The other piece to the puzzle there is last year, we're also starting to feel, particularly when we went into the third quarter, an elevated level of claim counts to put pressure on frequency and we increase the current accident year, pretty significantly, that was $16 million year-to-date through 9.30 but most of that happened in the third quarter of 2018. So we had a $13 million increase in the current accident year about seven points on the loss ratio in Q3, so those are the moving parts. It's still not where we want to be, but I think have settled down and in commercial auto. John talked about the rate increases year-to-date is that – got some 0.4 percentage points. So things are starting to stabilize and hopefully we'll start to see to margin improvement and that line of business going into 2020.

So, Chris, I think the easiest way to look at this and to take all the noise out is just look at our underlying combined ratio. And if you looked at – your question was what are you seeing, but let's focus on the underlying for a second. So our underlying combined ratio for the nine months of 2018 is what's called above 550 for the nine months of 2019, it's about 650. So we're up 100 basis points. So to answer your question, we're seeing an increase in the underlying combined ratio of 100 basis points, in spite of increasing rate 7.5% this year, 7.5% last year. And I think what you – so you are seeing an element of year-on-year, a modest increase in that. I would just call that mostly noise and some of that is the fact that this line of business has the highest loss trend in than any other of our lines of business and that was true in the expectation, in the 2019 year as well as that we'll carry somewhat into 2020 as we sweat through all of those projections as we move forward, but we are starting to see a little bit of the apex of what we view as claim frequency relative to either – if you want to look at relative to power units or look at it relative to on-level premium. We are starting to see that level out and kind of flatten out and not continue the upward trend that we saw up to 2018, call it.

Okay. And then you're saying, 0.4% rate increases in commercial auto, so can we assume and you're expecting margin expansion. So are you guys assuming like 6% or less loss cost inflation going forward?

We're not going to get into the specificity by line. I'd like to keep our loss trend overall because it does bounce around line-by-line, but I would say that when you think about the lines that will be weighted higher, it would be the half. So the margin improvement will come from our rate level relative to our expected loss trend. And we expect that to have an improvement as well as all the things we're doing from an underwriting standpoint, you would, John answered earlier, John a question about, above-average low medium long, that's why we're doing a lot of our heavy lifting to improve profitability and some of that comes squarely into the commercial auto segmentation.

And then just one last one on the net investment income. How should we be thinking about modeling that going into 2020? Given the recent interest rate declines?

Yes, good question, Chris.

Wait one quarter, Chris, you'll have it. I will make your life easier. How about this? One more quarter you will actually have the number.

The countdown is on. In 90 days time, we'll give you the – our best estimate for 2020. This year, we're expecting outgrowth in net investment income after-tax a $180 million despite the much lower interest rate environment where we are today versus where we started the year, where we're able to maintain the guidance and in fact to increase it by $5 million earlier in the year given the strong performance in the alternative portfolio. I'd say going into 2020, clearly there's going to be some pressure on the book yield in our core fixed income portfolio, offsetting that is going to be continued strong cash flow. Greg referenced the 22% cash flow from operations as a percentage of NPW in the quarter and 15% year-to-date. Our investment portfolio has experienced about 10% growth in invested assets thus far in 2019. So I think we could – we're not going to – we're not ready quite yet so to put out the number for 2020. But we feel pretty good overall about generating good continued strong net investment income for the portfolio going into 2020 despite the low interest rate environment. One thing, just to state the obvious, I sort of alluded to it earlier. Given the lower interest and rate environment strategy around managing the investment portfolio, we'll remain the same, which will be to stay up in quality at this point, say on the low end of duration from an interest rate perspective and with risk assets being a fairly frothy valuation. If you look at high-yield credit spreads or public equity valuations will probably continue to remain underway from a risk asset perspective. So staying in the course and being – maintaining that conservative investment philosophy going into next year, we're not going to stretch of reach of the yield at this point.

Okay, great. Well, thanks for all the answers and best of luck in the fourth quarter.

Thank you, Chris.

Thank you. [Operator Instructions] Our next question will be coming in from the line of Tom Shim of Sandler O'Neill. Your line is now open.

Hi, good morning, guys.

Good morning, Tom.

Just a quick question, can you walk through the drivers of the reserve increase in the personal auto line?

Like we said here, it's not a big increase overall. It's just a minor movement. I think from an actuarial standpoint, it just reflects where we are and a little bit of a upward movement, but a $2 million in a reserve inventory like that, it's hard to sit there and talk about that with great specificity. It's general – I would characterize to be frankly, it sounds as a general noise and on the quarter-to-quarter basis.

Okay. And then just one more question, you had a large insurer last week talking about the worsening tort environment. I was wondering if you guys could add any commentary regarding that.

Yes, Tom, this is John. And I guess I would also call back to the prepared commentary that we have, which is our disciplined process around planning and reserving and how we look at frequency as in varying trends and changes in frequency and severity trends, has as well positioned to see any changes in the environment and from a pricing perspective react quickly to them, our disciplined history around pricing relative to a consistent loss trend, future loss trends expectations over the last 10 years has us feeling good about our current position. We haven't really seen in our own portfolio, any significant change from a severity perspective that has us alarmed, but we're also mindful of the commentary in the industry. I will also say and we've talked about a couple of different topics on this front. But it's – and not that lower limit business is completely immune from a changing tort environment. I think some of that, it will certainly be in the mega awards focused on the bigger insurers. But there will be some potential bleed over into smaller accounts. And just to remind you, our casualty book of business is about 87% limits of $1 million and under. And then another 7% or so of limits between $1 million to $2 million, so about 95% of our business has limits of $2 million and less. And then we have our casualty excess of loss treaty that kicks in at $2 million. So you also want to keep in mind the limits profile and the hazard profile, which is also more heavily tilted towards low and medium hazard classifications on the casualty side.

And I think the other thing you can look at, to kind of to still all that from what's really happening in the marketplace. As you look at some of these carriers and you look at the rhetoric relative to trend, but then look at where their price increases are by segment and then that really tells you something because when you look at it that way, you'll see that there is much higher price movement on the larger end of their account structure but yet when you go into some of their smaller end segments, there is still balancing in the 1%, 2% range, which then stacks up to our 320, 330, 350 and that because – and that's – so that kind of does – it ties together with generally the type of business that we write. And also when you start to disaggregate their performance and what they're doing rate wise, it allows you to get a little bit of a lens into what they're trying to fix and it seems like the fix is more on where a lot of attorneys are going reptile on different insureds but that has a tendency to be larger style insureds more not trophy, but I would say higher exposure type accounts, where you're starting to see that. And as John mentioned, you got to expect a little bit of that to come down into our – throughout the entire portfolio, but we're well prepared for that and well schooled for it.

Great, thank you. That’s very helpful.

Thank you. At this time speakers, we do not have questions on queue. Please proceed.

Well, thank you very much for participating in today's call. If you have any follow-up, Mark and Rohan are clearly available for any additional questions that you have. And I must say these were great questions today. So we truly appreciate it. Thank you.

And that concludes today's conference. Thank you all for joining. You may now disconnect.