• Net Income (Q4 2024): $405 million, including a $107 million after-tax decrease in fair value of equity securities.
• Net Income (Full Year 2024): Increased by 24%.
• Non-GAAP Operating Income (Q4 2024): Increased 38% to $497 million.
• Non-GAAP Operating Income (Full Year 2024): Rose 26%.
• Combined Ratio (Q4 2024): 84.7%, improved by 2.8 percentage points from the previous year.
• Combined Ratio (Full Year 2024): 93.4%, improved by 1.5 points from 2023.
• Net Written Premiums Growth (Q4 2024): 17%, with 15% growth in agency renewal premiums and 23% in new business premiums.
• Commercial Lines Net Written Premiums Growth (Full Year 2024): 8%, with a combined ratio improvement of 3 percentage points to 93.2%.
• Personal Lines Net Written Premiums Growth (Full Year 2024): 30%, with a combined ratio improvement of 2.9 percentage points to 97.5%.
• Excess and Surplus Lines Net Written Premiums Growth (Full Year 2024): 15%, with a combined ratio of 94.0%.
• Investment Income (Full Year 2024): Reached $1 billion, growing 17% for Q4 and 15% for the full year.
• Cash Flow from Operating Activities (Full Year 2024): $2.6 billion, up 29% from last year.
• Property Casualty Underwriting Expense Ratio (Full Year 2024): 29.9%, in line with 2023.
• Capital Returned to Shareholders (Full Year 2024): $490 million in dividends and share repurchases.
• Book Value Per Share (End of Q4 2024): Record high of $89.11.

• Warning! GuruFocus has detected 2 Warning Sign with CINF.

Release Date: February 11, 2025

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

Positive Points

• Cincinnati Financial Corp (NASDAQ:CINF) reported strong operating performance for the fourth quarter and full year 2024, with improvements in key areas.
• The company achieved a 24% increase in net income for the year and a 38% increase in non-GAAP operating income for the fourth quarter.
• CINF's property casualty combined ratio improved to 93.4% for the full year, reflecting better underwriting performance.
• The company experienced strong premium growth, with a 17% increase in net written premiums for the quarter.
• Investment income reached $1 billion for the year, contributing significantly to improved operating performance.

Negative Points

• Cincinnati Financial Corp (NASDAQ:CINF) faced a significant unfavorable swing of $931 million in the fair value of equity securities compared to the previous year.
• The company estimated first quarter 2025 pretax catastrophe losses of approximately $450 million to $525 million due to California wildfires.
• Dividend income decreased by 4% in the fourth quarter, driven by sales of equity securities.
• The valuation changes in the investment portfolio were unfavorable, with a net loss of $136 million for the equity portfolio and $350 million for the bond portfolio.
• The company experienced reserve strengthening in personal auto and excess and surplus lines due to higher than expected case incurred losses.

Q & A Highlights

Q: How does Cincinnati Financial view the reinsurance market following the California wildfires, and what are the expectations for Cincinnati Re in 2025? A: Stephen Spray, President and CEO, noted that the reinsurance market has shown underwriting profit, which is healthy for the industry. Cincinnati Financial values long-term relationships with reinsurers and expects to pay all losses plus the reinsurer's margin over time. Cincinnati Re plans to stay the course, as their losses from the California wildfires were within expectations, and they will proceed with their 2025 plan unchanged.

Q: Can you provide more details on the umbrella exposure and any concerns regarding claims in the excess layers? A: Stephen Spray explained that umbrella exposure, both commercial and personal, is a severity line with inherent volatility. The company examines large losses for trends but does not see any concerning trends in their commercial or personal lines umbrella books.

Q: What is the estimated financial impact of the California wildfires, and how does it affect Cincinnati Financial's reinsurance program? A: Stephen Spray stated that the estimated net pretax catastrophe losses are between $450 million to $525 million. The company is not ready to provide a gross loss number due to ongoing assessments. Cincinnati Financial has reinstated applicable layers of their primary property catastrophe reinsurance treaty coverage.

Q: How is Cincinnati Financial addressing the challenging insurance market in California, especially regarding rate adjustments for fire risk? A: Stephen Spray mentioned that 77% of their homeowner premiums in California are on a non-admitted basis. The company is focused on supporting agents and policyholders and will conduct a thorough review to determine any strategic changes needed post-catastrophe.

Q: What are the current trends in commercial lines pricing, and how does Cincinnati Financial approach multi-year policies? A: Stephen Spray noted that commercial property, general liability, and auto are seeing high single-digit rate increases, while work comp is down in the mid-single digits. The company uses pricing tools for risk segmentation and expects rate increases to continue earning into the book throughout 2025.

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