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•	Second-quarter 2018 net income of $217 million, or $1.32 per share, compared with $100 million, or 60 cents per share, in the second quarter of 2017, after recognizing an $80 million increase in the fair value of equity securities still held that prior to 2018 would have been reported in other comprehensive income instead of net income.

•	$26 million or 24 percent increase in non-GAAP operating income* to $133 million, or 81 cents per share, compared with $107 million, or 64 cents per share, in the second quarter of last year.

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$117 million increase in second-quarter 2018 net income, reflecting the after-tax net effect of a $91 million increase in net investment gains, a $16 million increase in after-tax investment income and a $13 million increase in after-tax property casualty underwriting income. Included in the $91 million increase in net investment gains was an increase of $4 million in net gains of securities sold, in addition to the $80 million noted above.

•	$48.68 book value per share at June 30, 2018, down $1.61 or 3.2 percent since year-end.

•	Negative 1.1 percent value creation ratio for the first six months of 2018, compared with positive 7.0 percent for the same period of 2017.

*	The Definitions of Non-GAAP Information and Reconciliation to Comparable GAAP Measures defines and reconciles measures presented in this release that are not based on U.S. Generally Accepted Accounting Principles.

**	Forward-looking statements and related assumptions are subject to the risks outlined in the company’s safe harbor statement.

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•	97.2 percent second-quarter 2018 property casualty combined ratio, down from 98.3 percent for the second quarter of 2017.

•	6 percent growth in second-quarter net written premiums, reflecting price increases and premium growth initiatives.

•	$181 million second-quarter 2018 property casualty new business written premiums, up 10 percent. Agencies appointed since the beginning of 2017 contributed $17 million or 9 percent of total new business written premiums.

•	$17 million of life insurance subsidiary net income, up $5 million from second-quarter 2017, and 7 percent growth in second-quarter 2018 term life insurance earned premiums.

•	2 percent or $3 million increase in second-quarter 2018 pretax investment income, including a 5 percent increase for stock portfolio dividends and a 1 percent increase for bond interest income.

•	Three-month increase of 1 percent in fair value of total investments at June 30, 2018, including a 2 percent increase for the stock portfolio and an increase of 1 percent for the bond portfolio.

•	$2.509 billion parent company cash and marketable securities at June 30, 2018, down $2 million from year-end 2017.

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•	$78 million or 6 percent growth of second-quarter 2018 property casualty net written premiums, and six-month growth of 4 percent, largely due to premium growth initiatives and price increases.

•	$16 million or 10 percent increase in second-quarter 2018 new business premiums written by agencies and six-month growth of 7 percent. The second-quarter increase included a $12 million increase in standard market property casualty production from agencies appointed since the beginning of 2017.

•	80 new agency appointments in the first six months of 2018, including 37 that market only our personal lines products.

•	1.1 percentage-point decrease in the second-quarter 2018 combined ratio and a 1.5 percentage-point decrease for the six-month period, including a second-quarter decrease of 2.7 points and a six-month decrease of 3.7 points for losses from natural catastrophes. The six-month combined ratio included an increase of 1.2 points for losses from noncatastrophe weather-related losses.

•	2.6 percentage-point second-quarter 2018 benefit from favorable prior accident year reserve development of $31 million, compared with 3.2 points or $38 million for second-quarter 2017.

•	3.3 percentage-point six-month 2018 benefit from favorable prior accident year reserve development, matching the 2017 period.

•	2.5 percentage-point increase, to 63.5 percent, for the six-month 2018 ratio of current accident year losses and loss expenses before catastrophes, including an increase of 0.2 points in the ratio for current accident year losses of $1 million or more per claim, and with higher noncatastrophe weather-related losses representing approximately half of the increase.

•	31.2 percent first-half 2018 underwriting expense ratio matched the same period of 2017.

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•	$43 million or 5 percent increase in second-quarter 2018 commercial lines net written premiums, including higher renewal and new business written premiums. Two percent increase in six-month net written premiums.

•	$29 million or 4 percent rise in second-quarter renewal written premiums, with commercial lines average renewal pricing increases in the low-single-digit percent range, and including commercial auto increases in the high-single-digit range.

•	$19 million or 19 percent increase in second-quarter 2018 new business written by agencies, reflecting growth for each major line of business. For the six-month period, the increase was 10 percent.

•	2.9 and 2.6 percentage-point second-quarter and six-month 2018 combined ratio improvement, including decreases of 2.0 and 3.4 points for losses from natural catastrophes. The six-month decrease in the catastrophe loss ratio was partially offset by an increase of 1.5 points for losses from noncatastrophe weather-related losses.

•	5.2 percentage-point second-quarter 2018 benefit from favorable prior accident year reserve development of $42 million, compared with 3.2 points or $26 million for second-quarter 2017.

•	4.8 percentage-point six-month 2018 benefit from favorable prior accident year reserve development, compared with 2.2 points for the 2017 period.

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•	$24 million or 7 percent increase in second-quarter 2018 personal lines net written premiums, driven by higher renewal written premiums that benefited from rate increases averaging near the high end of the mid-single-digit percent range, including personal auto increases near the high end of the high-single-digit range. Eight percent increase in six-month net written premiums.

•	$1 million or 2 percent growth in second-quarter new business written by agencies and 8 percent growth for the first six months of 2018, primarily from expanding our share of business from agencies’ high net worth clients.

•	1.7 percentage-point second-quarter 2018 combined ratio increase and a six-month decrease of 0.3 points, including decreases of 5.2 and 5.9 points for losses from natural catastrophes. The six-month decrease in the catastrophe loss ratio was partially offset by an increase of 0.8 points for noncatastrophe weather-related losses.

•	4.9 percentage-point second-quarter 2018 unfavorable prior accident year reserve development of $17 million, primarily from our homeowner line of business, compared with 1.3 points or $3 million of favorable development for second-quarter 2017.

•	2.4 percentage-point six-month 2018 unfavorable prior accident year reserve development, compared with 2.2 points of favorable development for the 2017 period.

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•	$3 million or 5 percent increase in second-quarter 2018 excess and surplus lines net written premiums, due to higher renewal written premiums that benefited from rate increases averaging in the low-single-digit percent range. Ten percent increase in six-month net written premiums.

•	$4 million decrease in second-quarter new business written by agencies and $4 million decrease for the first six months of 2018, reflecting a highly competitive market particularly for larger policies.

•	11.4 and 9.0 percentage-point second-quarter and six-month 2018 combined ratio increases, largely due to less favorable prior accident year reserve development.

•	9.4 percentage-point second-quarter 2018 benefit from favorable prior accident year reserve development of $4 million, compared with 16.6 points or $9 million for second-quarter 2017.

•	13.2 percentage-point six-month 2018 benefit from favorable prior accident year reserve development, compared with 22.0 points for the 2017 period.

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•	$4 million or 7 percent increase in second-quarter 2018 earned premiums. Growth was largely due to a 7 percent second-quarter 2018 increase and an 8 percent six-month increase for term life insurance, our largest life insurance product line.

•	$5 million or 20 percent improvement in six-month 2018 life insurance subsidiary net income, primarily driven by decreased income taxes as a result of tax reform.

•	$50 million or 5 percent six-month 2018 decrease to $1.054 billion in GAAP shareholders’ equity for the life insurance subsidiary, primarily from a decrease in unrealized investment gains.

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•	$3 million or 2 percent rise in second-quarter 2018 pretax investment income, including 5 percent growth in equity portfolio dividends and 1 percent growth in interest income.

•	$25 million second-quarter 2018 pretax total investment gains, summarized on the table below. Changes in unrealized gains or losses reported in other comprehensive income, in addition to investment gains and losses reported in net income, are useful for evaluating total investment performance over time and are major components of changes in book value and the value creation ratio.

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•	$17.465 billion in consolidated cash and total investments at June 30, 2018, down 1 percent from $17.708 billion at year-end 2017.

•	$10.636 billion bond portfolio at June 30, 2018, with an average rating of A2/A. Fair value increased $108 million during the second quarter of 2018, including $226 million in net purchases of fixed-maturity securities.

•	$6.200 billion equity portfolio was 36.6 percent of total investments, including $3.002 billion in appreciated value before taxes at June 30, 2018. Second-quarter 2018 increase in fair value of $114 million or 2 percent.

•	$5.030 billion of statutory surplus for the property casualty insurance group at June 30, 2018, down $64 million from $5.094 billion at year-end 2017, after declaring $200 million in dividends to the parent company. For the 12 months ended June 30, 2018, the ratio of net written premiums to surplus was 1.0-to-1, matching year-end 2017.

•	$0.26 three-month 2018 increase in book value per share, including additions of $0.82 from net income before investment gains and $0.13 from investment portfolio net investment gains or changes in unrealized gains for fixed-maturity securities and a reduction of $0.16 for other items, partially offset by a deduction of $0.53 from dividends declared to shareholders.

•	Value creation ratio of negative 1.1 percent for the first six months of 2018, including positive 3.1 percent from net income before investment gains, which includes underwriting and investment income, and negative 3.7 percent from investment portfolio net investment losses or changes in unrealized gains for fixed-maturity securities.

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•	Unusually high levels of catastrophe losses due to risk concentrations, changes in weather patterns, environmental events, terrorism incidents or other causes

•	Increased frequency and/or severity of claims or development of claims that are unforeseen at the time of policy issuance

•	Inadequate estimates, assumptions or reliance on third-party data used for critical accounting estimates

•	Declines in overall stock market values negatively affecting the company’s equity portfolio and book value

•	Prolonged low interest rate environment or other factors that limit the company’s ability to generate growth in investment income or interest rate fluctuations that result in declining values of fixed-maturity investments, including declines in accounts in which we hold bank-owned life insurance contract assets

•	Domestic and global events resulting in capital market or credit market uncertainty, followed by prolonged periods of economic instability or recession, that lead to:

◦	Significant or prolonged decline in the fair value of a particular security or group of securities and impairment of the asset(s)

◦	Significant decline in investment income due to reduced or eliminated dividend payouts from a particular security or group of securities

◦	Significant rise in losses from surety and director and officer policies written for financial institutions or other insured entities

•	Recession or other economic conditions resulting in lower demand for insurance products or increased payment delinquencies

•	Difficulties with technology or data security breaches, including cyberattacks, that could negatively affect our ability to conduct business; disrupt our relationships with agents, policyholders and others; cause reputational damage, mitigation expenses and data loss and expose us to liability under federal and state laws

•	Disruption of the insurance market caused by technology innovations such as driverless cars that could decrease consumer demand for insurance products

•	Delays, inadequate data developed internally or from third parties, or performance inadequacies from ongoing development and implementation of underwriting and pricing methods, including telematics and other usage-based insurance methods, or technology projects and enhancements expected to increase our pricing accuracy, underwriting profit and competitiveness

•	Increased competition that could result in a significant reduction in the company’s premium volume

•	Changing consumer insurance-buying habits and consolidation of independent insurance agencies that could alter our competitive advantages

•	Inability to obtain adequate ceded reinsurance on acceptable terms, amount of reinsurance coverage purchased, financial strength of reinsurers and the potential for nonpayment or delay in payment by reinsurers

•	Inability to defer policy acquisition costs for any business segment if pricing and loss trends would lead management to conclude that segment could not achieve sustainable profitability

•	Inability of our subsidiaries to pay dividends consistent with current or past levels

•	Events or conditions that could weaken or harm the company’s relationships with its independent agencies and hamper opportunities to add new agencies, resulting in limitations on the company’s opportunities for growth, such as:

◦	Downgrades of the company’s financial strength ratings

◦	Concerns that doing business with the company is too difficult

◦	Perceptions that the company’s level of service, particularly claims service, is no longer a distinguishing characteristic in the marketplace

◦	Inability or unwillingness to nimbly develop and introduce coverage product updates and innovations that our competitors offer and consumers expect to find in the marketplace

•	Actions of insurance departments, state attorneys general or other regulatory agencies, including a change to a federal system of regulation from a state-based system, that:

◦	Impose new obligations on us that increase our expenses or change the assumptions underlying our critical accounting estimates

◦	Place the insurance industry under greater regulatory scrutiny or result in new statutes, rules and regulations

◦	Restrict our ability to exit or reduce writings of unprofitable coverages or lines of business

◦	Add assessments for guaranty funds, other insurance‑related assessments or mandatory reinsurance arrangements; or that impair our ability to recover such assessments through future surcharges or other rate changes

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◦	Increase our provision for federal income taxes due to changes in tax law

◦	Increase our other expenses

◦	Limit our ability to set fair, adequate and reasonable rates

◦	Place us at a disadvantage in the marketplace

◦	Restrict our ability to execute our business model, including the way we compensate agents

•	Adverse outcomes from litigation or administrative proceedings

•	Events or actions, including unauthorized intentional circumvention of controls, that reduce the company’s future ability to maintain effective internal control over financial reporting under the Sarbanes-Oxley Act of 2002

•	Unforeseen departure of certain executive officers or other key employees due to retirement, health or other causes that could interrupt progress toward important strategic goals or diminish the effectiveness of certain longstanding relationships with insurance agents and others

•	Events, such as an epidemic, natural catastrophe or terrorism, that could hamper our ability to assemble our workforce at our headquarters location

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Non-GAAP operating income: Non-GAAP operating income is calculated by excluding investment gains and losses (defined as investment gains and losses after applicable federal and state income taxes) and other significant non-recurring items from net income. Management evaluates non-GAAP operating income to measure the success of pricing, rate and underwriting strategies. While investment gains (or losses) are integral to the company’s insurance operations over the long term, the determination to realize investment gains or losses on fixed-maturity securities sold in any period may be subject to management’s discretion and is independent of the insurance underwriting process. Also, under applicable GAAP accounting requirements, gains and losses are recognized from certain changes in market values of securities without actual realization. Management believes that the level of investment gains or losses for any particular period, while it may be material, may not fully indicate the performance of ongoing underlying business operations in that period.

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Consolidated property casualty insurance results: To supplement reporting segment disclosures related to our property casualty insurance operations, we also evaluate results for those operations on a basis that includes results for our property casualty insurance and brokerage services subsidiaries. That is the total of our commercial lines, personal lines and our excess and surplus lines segment plus our reinsurance assumed operations.

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Life insurance subsidiary results: To supplement life insurance reporting segment disclosures related to our life insurance operation, we also evaluate results for that operation on a basis that includes life insurance subsidiary investment income, or investment income plus investment gains and losses, that are also included in our investments reporting segment. We recognize that assets under management, capital appreciation and investment income are integral to evaluating the success of the life insurance segment because of the long duration of life products.

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Value creation ratio: This is a measure of shareholder value creation that management believes captures the contribution of the company’s insurance operations, the success of its investment strategy and the importance placed on paying cash dividends to shareholders. The value creation ratio measure is made up of two primary components: (1) rate of growth in book value per share plus (2) the ratio of dividends declared per share to beginning book value per share. Management believes this measure is useful, providing a meaningful measure of long-term progress in creating shareholder value. It is intended to be all-inclusive regarding changes in book value per share, and uses originally reported book value per share in cases where book value per share has been adjusted, such as adoption of Accounting Standards Updates with a cumulative effect of a change in accounting.

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Statutory accounting rules: For public reporting, insurance companies prepare financial statements in accordance with GAAP. However, insurers also must calculate certain data according to statutory accounting rules as defined in the NAIC’s Accounting Practices and Procedures Manual, which may be, and has been, modified by various state insurance departments and differ from GAAP. Statutory data is publicly available, and various organizations use it to calculate aggregate industry data, study industry trends and compare insurance companies.

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Written premium: Under statutory accounting rules, property casualty written premium is the amount recorded for policies issued and recognized on an annualized basis at the effective date of the policy. Management analyzes trends in written premium to assess business efforts. Earned premium, used in both statutory and GAAP accounting, is calculated ratably over the policy term. The difference between written and earned premium is unearned premium.

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Non-GAAP operating income: Non-GAAP operating income is calculated by excluding investment gains and losses (defined as investment gains and losses after applicable federal and state income taxes) and other significant non-recurring items from net income. Management evaluates non-GAAP operating income to measure the success of pricing, rate and underwriting strategies. While investment gains (or losses) are integral to the company’s insurance operations over the long term, the determination to realize investment gains or losses on fixed-maturity securities sold in any period may be subject to management’s discretion and is independent of the insurance underwriting process. Also, under applicable GAAP accounting requirements, gains and losses are recognized from certain changes in market values of securities without actual realization. Management believes that the level of investment gains or losses for any particular period, while it may be material, may not fully indicate the performance of ongoing underlying business operations in that period.

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Consolidated property casualty insurance results: To supplement reporting segment disclosures related to our property casualty insurance operations, we also evaluate results for those operations on a basis that includes results for our property casualty insurance and brokerage services subsidiaries. That is the total of our commercial lines, personal lines and our excess and surplus lines segment plus our reinsurance assumed operations.

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Life insurance subsidiary results: To supplement life insurance reporting segment disclosures related to our life insurance operation, we also evaluate results for that operation on a basis that includes life insurance subsidiary investment income, or investment income plus investment gains and losses, that are also included in our investments reporting segment. We recognize that assets under management, capital appreciation and investment income are integral to evaluating the success of the life insurance segment because of the long duration of life products.

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Value creation ratio: This is a measure of shareholder value creation that management believes captures the contribution of the company’s insurance operations, the success of its investment strategy and the importance placed on paying cash dividends to shareholders. The value creation ratio measure is made up of two primary components: (1) rate of growth in book value per share plus (2) the ratio of dividends declared per share to beginning book value per share. Management believes this measure is useful, providing a meaningful measure of long-term progress in creating shareholder value. It is intended to be all-inclusive regarding changes in book value per share, and uses originally reported book value per share in cases where book value per share has been adjusted, such as adoption of Accounting Standards Updates with a cumulative effect of a change in accounting.

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Statutory accounting rules: For public reporting, insurance companies prepare financial statements in accordance with GAAP. However, insurers also must calculate certain data according to statutory accounting rules as defined in the NAIC’s Accounting Practices and Procedures Manual, which may be, and has been, modified by various state insurance departments and differ from GAAP. Statutory data is publicly available, and various organizations use it to calculate aggregate industry data, study industry trends and compare insurance companies.

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Written premium: Under statutory accounting rules, property casualty written premium is the amount recorded for policies issued and recognized on an annualized basis at the effective date of the policy. Management analyzes trends in written premium to assess business efforts. Earned premium, used in both statutory and GAAP accounting, is calculated ratably over the policy term. The difference between written and earned premium is unearned premium.

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