Release Date: October 25, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Cincinnati Financial Corp (CINF, Financial) reported strong premium growth, with consolidated property casualty net written premiums growing 17% for the quarter.
• The company achieved a 9.0% value creation ratio for the third quarter, contributing to a nine-month total of 17.8%.
• Cincinnati Financial Corp (CINF) maintained a strong financial position with a record high book value of $88.32 per share and nearly $14 billion of GAAP consolidated shareholders' equity.
• Investment income grew by 15% for the third quarter, supported by a 21% increase in bond interest income.
• The company continues to expand its agency network, identifying appropriate expansion opportunities and maintaining strong relationships with agents.

Negative Points

• The property casualty combined ratio increased by 3.0 percentage points to 97.4% compared to the previous year, driven by higher catastrophe losses.
• Non-GAAP operating income decreased by $37 million from the previous year, impacted by an $86 million increase in after-tax catastrophe losses.
• The personal lines segment experienced a 10.4 percentage point increase in its combined ratio, reaching 110.3%, due to higher catastrophe losses.
• Cincinnati Financial Corp (CINF) reported unfavorable reserve development in its excess and surplus lines due to higher catastrophe losses and modest unfavorable reserve development on prior accident years.
• Dividend income decreased by 1% due to net sales of equity securities, reflecting portfolio rebalancing activities.

Q & A Highlights

Q: Can you explain the increase in the commercial casualty loss pick and what's driving it? A: Michael Sewell, CFO, explained that the increase is due to prudent reserve additions in response to higher-than-expected loss payments and case reserves. The increase is more about severity than frequency, and they are adding to IBNR reserves due to industry uncertainties like social inflation and legal system abuse.

Q: What is driving the strong premium growth in commercial casualty despite the higher loss ratio? A: Stephen Spray, CEO, noted that the strong premium growth is due to robust pricing and underwriting practices. They are leveraging sophisticated pricing tools and focusing on risk segmentation, which allows them to maintain strong pricing even amid uncertainties.

Q: Is there a change in investment strategy due to the recent large sell-down in the investment portfolio? A: Stephen Spray, CEO, confirmed there is no change in investment philosophy due to new leadership. Steve Soloria, CIO, added that the sell-down was a strategic move to capitalize on a strong equity market and to reinvest in bonds amid high interest rates, maintaining a balanced portfolio approach.

Q: Can you elaborate on the growth potential in the excess and surplus lines segment? A: Stephen Spray, CEO, stated that they see significant growth potential in the E&S segment due to expanding expertise, team, and product offerings. They are also increasing agency appointments, which enhances their ability to capture more business in this space.

Q: How is the company managing new business growth in personal lines, especially with the current market opportunities? A: Stephen Spray, CEO, emphasized that they are leveraging their strong agency relationships and sophisticated pricing models to capitalize on market opportunities in personal lines. They are focusing on both middle-market and high-net-worth segments, ensuring they write each risk at the right rate.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.