Q4 2019 Earnings Call

Good morning, Ladies and gentlemen. This is your conference operator Your conference call is scheduled to begin momentarily until that time. Your line. So once again be placed kind of musical.

Thank you for your patience and please do not disconnect.

[music].

Ladies and gentlemen, thank you for standing by welcome to the fourth.

Fourth quarter and full year 2019 earnings conference call.

This time all participants are in listen only mode. After the speakers presentation, there will be a question and answer session.

Good question. During this session you want me to press Star one on your telephone.

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I'd now like to hand, the conference over to your speaker for today Mr., Dennis Mcdaniel, Cincinnati financials Investor Relations Officer. Thank you Sir Please go ahead.

Hello, This is Dennis Mcdaniel at Cincinnati financial.

Thank you for joining us for fourth quarter and for your 29.

In earnings Conference call.

Like yesterday, we issued a news release on our results a lot or supplemental financial package, including our year end investment portfolio.

To find copies of any of these documents. Please visit our investor website sent and dotcom slash investors.

As short as route to the information that's a quarterly results link.

And navigation menu on the far left.

Let us call. Your first hear from Steve Johnston, President and Chief Executive Officer, and then from Chief Financial Officer, Mike. So.

After their prepared remarks investors participating on the call may ask questions.

At that time, some responses may be made by others in a room without.

Excluding chairman of the Board, Ken Stecher, Chief Investment Officer, Marty Hollenbeck, that's that's what I assurances cheap insurance officer, Steve spray.

Claims officer, Marty Mullen, and senior Vice President Corporate Finance Theresa Hoffer.

First please note the some of the matters to be discussed today are forward looking these forward looking.

First of all certain risks and uncertainties with respect to these risks and uncertainties, we direct your attention to our news release into our various filings with the FCC.

Also a reconciliation of non-GAAP measures was provided what the news release statutory accounting data is prepared in accordance with statutory accounting rules and airport is not reconciled.

Yes.

Now I'll turn over to call to Steve.

Good morning.

Thank you for joining us today to hear more about our 2019 result.

Operating result in overall financial performance for the fourth quarter full year were excellent.

And we also see reasons for confidence regarding future.

Formats due to our proven strategy and demonstrated experienced an execution.

Net income for the fourth quarter rose nearly $1.1 billion, including more than $1 billion for changes in the fair value of equity securities.

Non-GAAP operating.

Operating income improved 28% for the quarter.

For your basis, it was 26% higher than 2018.

Strong 2019 operating performance for both the fourth quarter and for the year again reflected efforts to carefully underwrite and price policies provide outstanding.

A new service to our agencies and manage investments well.

We also continue to benefit from risk diversification by product line and geography.

Our fourth quarter Knight, our fourth quarter, 91.6% combined ratio help lower full year 2019 to 93 point.

8% 2.6 points better than 2018.

More favorable catastrophe weather effects contributed slightly more than one full percentage point for the year.

While improved underwriting was reflected in various underlying measures.

We continue to further segment our.

All in new business opportunities.

Racing precision and risk selection decisions that combined data models and underwriter expertise on a policy by policy basis are benefiting our underwriting results.

We believe we can successfully balance prudent underwriting and business growth to.

Maintain or improve on the 2019 combined ratio before catastrophe effects for 2020, GAAP combined ratio in the low to mid 90% range.

We also believe our 2020 property casualty premium growth rate can be 6% or.

Sure.

We recognize that whether it's significant changes in industry market conditions that influence in insurance policy pricing trends or some of the variables that will affect the property casualty result, we ultimately report.

In 2019, we again managed our business to healthy.

Levels of policy retention with average renewal price increases for each of our property casualty segments.

Policy retention rates for both commercial and personal lives were similar to a year ago, continuing near the high end of the mid 80% range.

Part of our strategy for long.

Term growth is a pretty more agencies in areas, where we are underrepresented well taking care to preserve relationships with established agencies in the franchise like benefit they value.

In 2019, we appointed 187, new independent agencies in 2020, we.

Plan to appoint approximately 125 additional agencies that will offer most if not all of our property casualty insurance products and another 35 that market only a personalized products primarily ones with a high net worth focus.

We continue to earn business the right.

Agencies from a combination of superior service and expansion of insurance products for clients of those agencies for full year 2019, New business written premium growth was strong and overall prep or property casualty net written premiums grew 10%.

[noise] for.

All business commercialize estimated average price increases for the fourth quarter, where again in the low single digit percentage rate range in the second half of the year was higher than the first half.

The 2019 combined ratio for our commercial lines segment improved by 2.5 percentage points for the year.

92.9% with about half of the improvement due to lower catastrophe losses.

Our personalized segment continued to experience average rate increases in the mid single digit range.

With the fourth quarter 2019, similar to the third quarter. The personalize combined ratio was profitable.

For both the quarter and year and we're working towards further improvement.

Our excess and surplus line segments had another excellent year, excluding gross and net written premium exceeding 20% and a 2019 combined ratio of 81.5%.

Cincinnati re.

Continued to grow as planned the fourth quarter combined ratio below 100% and full year 2019 in the low nineties.

Cincinnati Global.

At another profitable quarter and as opposed to acquisition combined ratio in the low eightys.

Our life insurance subsidiary again grew.

Term life insurance premiums its largest product line with fourth quarter on premium growth of 4% in full year 2019 growth at 8%.

It's a matti life produced $39 million, a full year net income and supports account retention for our agents well contributing to earnings with less.

Correlation to weather that our property casualty business.

On January 1st of this year, we again renewed each of our primary property casualty treaties the transfer part of our risk to reinsurers.

For both our purpose treaties and our property catastrophe treaty terms and conditions for 2020 were mostly.

Similar to 2019, except for not renewing our cat bond instead, we added approximately $90 million a broader coverage through our property catastrophe treaty plus up to $60 million of coverage on top of that for earthquake events.

Race for our casualty treaty.

They were nearly flat.

Race were somewhat higher for our property treaties, but we expect the total amount of 2020 ceded premiums to be fairly similar to 2019.

I'll conclude with the value creation ratio our primary measure of long term financial performance reflects an outstanding here.

Improved operating results and favorable securities markets resulted in a fourth quarter 2019, VCR of 6.5% and they VCR, 30.5% for the year, which is well above our targeted annual average 10% to 13%.

The contribution from our operations.

Measured as net income before investment gains was up 8.9% for the year up 1.5 percentage points from year ago.

Well our equity portfolio benefited DCR. This year, we understand the risk of short term variability due to market effects. We continue to believe is.

Essential for long term appreciation dividend income growth is important for creating value for shareholders over time.

Our confidence is also reflected in the recent decision by our board of directors to reward shareholders with a 7.1% increase the regular cash dividend declared last month.

Next our Chief Financial Officer, Mike. So, we'll highlight some important aspects of our financial performance.

Great. Thank you Stephen Thanks to.

Yes today investment income growth continued at 4% for both the fourth quarter and full year 2019, doubling the growth rate we.

For the previous year.

Dividends from our equity portfolio again drove the growth of 10% during the fourth quarter of 2019 and 11% for the year.

Interest income from our bond portfolio was essentially flat for the here the pre tax average yield was four point.

One 2% for the fourth quarter 2019 down nine basis points from 2018 fourth quarter.

We continue to invest in bonds, including $399 million and that purchases for the year.

Taxable bonds purchased during 2019.

Team had an average pretax yield of 4.31% 17 basis points lower than we experienced a year ago.

Tax exempt bonds purchased averaged 3.31% down 38 basis points from a year ago.

Investment portfolio by.

I wish and changes for the fourth quarter of 2019 were again favorable primarily for our stock portfolio.

The overall net gain was $539 million before tax effects, including $541 million for equity portfolio.

Well.

We ended the quarter with net appreciated value of nearly $4.8 billion, including almost $4.2 billion and our equity portfolio.

Cash flow from operating activities continues to benefit investment income.

Funds generated from net operating cash.

Cash flows for the full year 2019 exceeded $1.2 billion.

Expense management as always important to us while we continue to make strategic investments in our business. Our full year 2019 property casualty underwriting expense ratio remained within one.

10th of a percentage point of last year's ratio.

Loss reserves are another important area and we intend to maintain a consistent approach as we target net amounts in the upper half of the Actuarially estimated range of net loss and loss expense reserves.

Well again.

Parents property casualty net favorable development on prior accident years in 2019 on both a fourth quarter and full year basis.

2019 marked or 30 onest consecutive year of net favorable reserve development.

Full year 2019 favorable reserve development.

And that benefited our combined ratio by 4.7 percentage points, roughly a point better than the annual average during the past five years.

Most of our major lines of business experienced favorable reserve development on an all lines basis by accident year. It included 30.

86% for accident year 2018, 24% for accident year, 2017, and 40% for 2016, a prior accident years.

Regarding capital management, our approach and financial strength remains stable.

We continue to have outstanding.

Antrel flexibility, including your ran holding company cash and marketable securities that rose, 34% from a year ago.

During the fourth quarter, we repurchased a total of nearly 554000 shares at an average price per share of $111 a 94 cents.

Sense.

Steve note a good underwriting results for since I global since we acquired.

Integration has gone well, we remain confident in future prospects for its profitable growth.

I'll conclude my prepared remarks, with the usual summary of fourth quarter contributions to.

Book value per share they represent the main drivers of our value creation ratio.

Property casualty underwriting increased book value by 58 cents.

Life insurance operations added six cents investment income other than life insurance from reduced by Noninsurance items contributed 46.

What's.

Net investment gains and losses for the fixed income portfolio increased book value per share by two cents.

Net investment gains and losses for the equity portfolio increased book value by $2.62.

And we declared 50.

That's a share in dividends to shareholders.

The net effect was a book value increase of $3.18 during the fourth quarter to a record high $60.55 per share.

And now I'll turn the call back over to Steve.

Thanks, Mike.

It was a good.

Border in 2019 overall was a great year, we see improving trends in several areas that give us confidence in the future for Cincinnati financial.

Last week am best recognized our capital strength and up with operating trends by affirming our a plus financial strength rating and raising our issuer.

Our credit rating to it little a from a little a minus.

At the same time best upgraded the financial strength rating of the Cincinnati Life insurance company to an a plus superior rating to match the rest of the Cincinnati companies all ratings have a stable outlook.

We know our strategy works.

And we'll continue to execute it as we target profitable growth, while providing great service to our appointed agencies that should benefit all stakeholders of the company, creating shareholder value overtime.

We appreciate this opportunity to report respond to your questions. It also look forward to meeting in.

And with many of you during the remainder of the year.

As a reminder, with my can meet today, our Ken Stecher, Steve spray, Marty Mullen, Marty Hollenbeck and Theresa Hoffer.

Catherine Please open the call for questions.

Yes, Sir ladies and gentlemen at this time, if you'd like to ask a question.

Please press star and the number one on your telephone keypad.

Again that a star and the number one and we will pause for just a moment.

My first question comes from the line of Mike Censky with credit Suisse.

Hey, good morning, gentlemen.

Good morning, Mike.

First question I believe the language in the earnings release was about commercial PNC pricing was.

Low low single digits, which doesn't seem like a change from last quarter. It.

Feels like based on the surveys and and some of EUR of your competitors Cliff.

Released earnings today, it seems to be some pricing momentum what do you say that.

That you just you know you don't need to take as much price given the results are all right good or maybe has to deal with.

Your book being a little bit more a multiyear weighted but any color there be it'd be great.

Yeah. Thanks, Mike This is Steve spray Great question, one I believe certainly worked some further discussion.

I'd tell you of course, we certainly witness the disruption that you mentioned large rate increases capacity.

And that you're hearing about the industry.

However, I think it's a little more complex than that I don't think you can simply paid to the entire industry with a broad brush I think it wants appealing the layers back a little bit and I think from our perspective, the best way to do that is by line of business.

I think commercial auto.

Is still a probably the best example, the entire line struggling to make money in the struggle seems to be rather universal across the industry.

But the point is even within commercial auto we see segments under more pressure or more and more stress and others large sleep with heavy gross vehicle way trucks.

Long haul transportation rates seem to be really under pressure both from a rate in a capacity standpoint I.

I think in commercial property it seems to be experiencing more disruption with a higher hazard risks larger limit.

Industrial properties Habitational on anything coastal.

Those would be just a.

Few examples.

On the casualty front it feels like it's in a similar position as property high hazard casualty risks such as manufacturers with tough product exposures.

Residential contractors that are in states, where maybe construction defect jurisdictions are a little.

Shopper.

Professional liability even for us on skilled nursing home facilities really really.

Tough I would say in the casualty segment, though the thing that we've seen probably the weather has been the most dislocation or disruption.

Isn't them in umbrella and excess liability.

And quite frankly on tougher risk as I mentioned before and the auto.

And on the casualty.

Now I think I make that point and saying about the industry for from a broad brush standpoint, while we certainly have risks.

And those types of business, it's not what we do.

On a day to day basis is not the lions share of our book our average commercial account size.

It's $11000 an annual premium.

The the marketplace for these risks.

From our perspective is certainly different.

And the biggest thing I think to get to your questions.

I don't think that average rate increases tell the full story they at least not for the strategy that we're trying to execute Cincinnati.

And I would say it all starts day to day work with our agents our field underwriters are field marketing reps, who handle all new commercial lines business and then the headquarters underwriters.

Who are.

Working on renewals.

We're taking a risk by risk approach trying to balance the art and science of underwriting.

We just don't believe that that job from our perspective to the rising tide raising all boats is sustainable strategy.

And we're confident going forward that we've got the data.

And the professional underwriters to execute a honest segmentation strategy like we had been and get the appropriate risk or excuse me the appropriate price on the appropriate risk on a risk adjusted basis.

You know.

On the business that we field is most adequately priced Mike we.

We are we are really focused on retaining that business then on the segments, where we feel that maybe the pricing isn't quite as adequate or would that our opportunity for our profit. There we're really pushing the rates and we're seeing the rate increases on that segment.

Really.

At a much higher level, obviously than the business that we feel is most adequately priced or if we're pushing really hard led business, sometimes we're losing it.

So it's changing the mix.

Of our entire book and you know I think.

It's showing up in our results you know anytime you have good results I don't think it.

Any it's ever any just one thing, but from my perspective being with me here for 28 years.

The pricing sophistication that we've been executing on over the last several years is certainly have an impact and I think thats. You know commercialize. This is just completed eight years of underwriting profit and I.

Tickets by any accident I think it's that pricing segmentation strategy that we're going to continue to execute so probably a bit of a long winded answer, but I I, it's a big topic and I were executing well on it I think it's worthwhile having a discussion.

Yeah, that's that's helpful and I guess.

Couple of things that might.

Dovetail with those comments it so.

Do you feel like <unk> or the industry like pricing should be biased higher just given the interest rate headwinds. The industry is facing like you or maybe you can I feel you don't you don't need that an in your book and I guess separately.

Were there any.

Any some companies have said that loss cost inflation on the casualty, that's kinda inched up a little bit a quarter over quarter.

Year over year or are you guys seeing any changes in your trends sounds two separate questions.

This is Steve Johnston, Mike really good questions I agree 100%.

With the answers the just gave terms of the interest rates Oh, we certainly do consider them. There. It's really just low I mean, there. They are bouncing around here you know 50 basis points are little bit more from time to time, but wherever they are and where they settle it's really low against historic norms in.

We recognize that in that we do have to make an underwriting profit.

And the good when every year just as Steve mentioned, a eight years in a row now that we've put in underwriting profits I think in terms of the trends.

I guess my main point is and this is it buttresses, what Steve said.

As we do have a very sophisticated pricing models and we look at them in the result on a policy by policy basis, we aggregate them up.

Everything that we're seeing from our pricing Motors would show that were more adequately priced today than we were a year ago in those trends look.

Such that we feel.

It will be more adequately priced next year, hence the comment in my prepared remarks that we feel that our combined ratio. We can perform next year to their match or exceed where we are today.

In terms of the inflation, we've always a measured inflation, we do that explicitly in our reserving.

In models.

I do think and I'd like to there's I'd like to talk a little bit about the size of policies. Steve mentioned, our average policy is.

About a $11000 for see issue, it's about $6000, a 93% of our commercial GL policies have occurrence limits vermillion or.

S 92% of our umbrella excess policies have limits of 5 million or less so we don't feel that insulate us from inflation or if you want to call social inflation. However.

We do believe the effects on those companies that right to smaller limits would be less a in actuarial circles.

If we kind of refer to that as the leveraged.

The leveraged effective inflation.

Basically wait if you would look at it to give a simple example, I'm picking the number out there to say, let's say, 10% since it's a round number not suggesting we see 10% inflation, but just pick a number that you have a million dollar limits.

If you had a claim.

And last year that was over $910000.

You'd had it again this year that would hit the limit and would not be a 10% increase it would be held down.

By the limit and also.

It would go over the million dollar limit and.

Compound the inflation in the next layer up so that's the leverage effective inflation and so we do think and we do not think that it would insulate us from what we're seeing an inflation, but we do think for those of us that right lower limits due to this leveraged effects of inflation is going to have.

Less of an impact on us we.

We haven't seen any surprises I mean, we talked about that in our and our last call in terms of seeing a back in 2015, an up tick in inflation, we increased our reserves on the casualty side by 27%. Since then the IB bizarre I'd.

And our portion of that is up 50% and that's against over that period of time about a 12%.

Increase in earned premiums on the commercial auto side.

Our reserves since 2015 up 44% or total reserves I'd be NR component it up 140%, while the earned premiums have been up 26%.

So we're not being surprised by anything we believe in our models.

We think we understand the impact of inflation on us and we really feel confident.

That our pricing is adequate and improving and we throw in with that all the good work, that's going on and just old fashioned underwriting loss.

Control claims everybody's chipping in and that's why we feel confident in saying that that we're going to give.

Information that we think our combined ratio next year, we'll be at least as good as it is this year.

Little bit long winded, but I think that's the essence of where a lot other questions are coming.

Mike, Yes, no great great color. Thank you for the answers.

Your next question comes from the line of <unk> Kumar from Buckingham Research.

Thanks, and good morning.

Maybe I'll follow up Mikes question in a different manner, so staying on the discussion on.

I guess the guidance and maybe let's start with commercial lines I would have imagined with all the discussion that's going on.

You know your your guidance.

Probably would have gotten better than what you suggested and maybe what to look at this in a different manner.

What number are you just kind of picking our tanking for loss cost inflation versus Andre.

Well you know, we feel with our rate that it is above what we see in the loss cost inflation, we've talked about for commercial lines are.

Average rate being in the low single digit so it's going to be a little bit less than that and again I think to Steve's point. It has to do is segmentation of when we look at lost cost trends, it's not historic <unk>. When we look at lost cost trends its prospective rate making.

From an.

Active as rate is perspective, so you always want to try to be projecting.

How much will loss costs increase into the prospective policy period and that is impacted by the great segmentation that Steve and his people are doing as we move the book away from.

Those policies with the.

Less profit potential to those with the highest profit potential one so it's a matter of every company, having a different mix a different position different geography, <unk> everything is different and we can't look at our premium as.

Our total commercial premium as if it's one policy and it gets that rate increase its thousands of policies all being treated individually by local underwriters that can go out and put the decision at the intersection of the art and science signs of underwriting to see risks to meet management teams and we really feel.

Confident as our results would show that.

We are doing a good job in that respect.

So as a follow up to that question you know when you look at the buckets of different you know.

Policies et cetera, or sub segments. If you will you.

You know many companies will talk about it there is.

A bucket Joe business, but still needs right now and then there's a bucket which is adequate and other you guys. Obviously benefiting from hardening and you sort of talk about you know even in a broader sense you know there buckets and Youre Buck you know in your overall.

Which.

Hi.

Definitely use more rate acceleration from here and maybe what percent is set of adequately priced here.

Sure it's not so much buckets, we do summarize to groupings, but it's it's looked at with each single policy. It's the is the.

Oh Gee, it's the.

Skill that we have now and we're not the only one than in the industry in this position, but is it by by long shot it's.

Looking at each policy on its overall merits and I do think we had in addition to the science that we bring to the table, which I think is substantial we bring.

People on the.

<unk> working from their homes living in the communities with the agency to go out to see the risks.

Meet the management teams.

And so.

We have worked the.

Percentage of those that are we believe.

Those with the most profit potential.

To be the substantial part of the book.

Okay <unk>. The other question I had was.

Distinct thing of the topic was pushed inflation and I was looking at.

The claim count data and.

That's probably close claim count data.

Maybe you can talk about your on book.

And if you look at it over the past 369, 12 24 month.

Have you seen any pressure or noticeable pressure from social inflation.

In terms of attorney involvement et cetera.

You talked about how the small in size of the book until they tend to create extent.

Et cetera, and your cognizant of the changes, but in your book are you noticing trends that you're like okay that is interesting and that is exactly what they thought it would be or maybe in pockets, where it's coming in better than what you expected.

We this is Steve Johnston again, we.

Have seen trends over a period of years, it's nothing that just jumped up here in the last six months and surprise. This I think if we go back to 2015.

We did see US movement, there, we did you'd have to have good memory, but.

We did.

As I just gave the numbers increase our reserve over the last few years.

Took some adverse development back then.

Feel that that puts us in a very strong position. We you know we just said back then that.

For somebody who wants to have 31 years of favorable development.

You have to react to trends as soon as you see them.

We saw them, we reacted and we feel good about our position I think it's.

The answer would be it's just been more of a stable look at inflation over the last several years rather than something that we've seen jump up in the last six months.

[laughter].

That's helpful last question on all the Ethernet segment, you know, obviously, we've seen good growth and and I was sort of.

Wondering when you look at the different businesses and.

Rates versus retirements, how we're thinking about capital allocation now you know for 2020.

Clearly E N S is where.

A lot of freight moment is happening and submission activity. It's happening I was just wondering on I mean, we've seen great growth in the past few quarters is that.

Tangible or are you, saying, okay. You know what this is where we want to be in our broader Pie chart, maybe just how about that thanks.

Sure. This is Steve Johnston again, and maybe Steve Spurrier I want to chime in but what we preach is that the next policy we right.

We want to be adequately priced on a risk adjusted basis in the N.S. face a under the leadership of Dawn dwell they've just been doing a fantastic job I mean over the last day of increase raise in the.

The mid single digit range 413 straight quarters I mean, that's.

Nine half years every quarter and so we're going to continue to allow them on a policy by policy basis too.

Pick the risks that they think our best we think that business model that we.

I have with our excess and surplus lines a company. It gives us a great advantage in work. So we're going to continue to ask them to do that policy by policy.

Sometimes loath to demand you know matching this year's growth rate or.

I actually wanted to that high.

Because it might put pressure to accept risks that have less profit potential. So we just want them to be on the agents offices, which they do a tremendous job doing look at every policy on its merits right. The ones that we think that we can right at the very a profitable levels that they've been doing over the years.

Yes.

This is.

Yeah. This is Steve I'm sorry.

Oh I'm sorry go ahead no. This is this is Steve spray I would just to the other part of your question too I just for Twentytwenty anyway, we still feel the submission counts are up.

We don't we don't see any change in the marketplace that would think that we kick.

Continue to grow the the in this business.

Steve wrote me a note correcting that is 113 months not 113 quarters I had to nine half your [laughter].

Thanks, so much and.

Good luck for the future.

Thank you.

Your next question comes from the line of major shifts with KBW.

Great. Thanks, good morning.

Moving there we're seeing.

Good morning, I'm, sorry, I think that's on the pricing sophistication and im trying to get a handle.

On.

Continued potential upside so they're saying the question this way.

Is there any quantification or description of let's say the current.

Profitability gap between the best and worst 10%.

Your book and what that looked like three years ago.

Yes, we have all that detail I don't think we're in a in a position to make a.

Those are on it but it has made a really substantial improvement over that period of time.

Okay fair enough.

And then to really smaller questions first are you seeing any increase in workers' compensation severity, we see medical costs go up and maybe wages going up I'm wondering how that's running to the book.

We look at the lost cost pretty much in total it has been a mix of increasing inflation I don't know that I would say that its.

Picked up or spiked, it's been just a pretty steady inflationary increase our frequency.

And again I think it has to do with the SEC segmentation. So.

It is still continued to be.

Down.

And over the last many years is down by a substantial amount. So we look at that the total loss cost trend and.

That is one line, where we feel we're losing some ground to that.

In terms of.

Where we are with the rate, but we're losing that like much of the industry from a very profitable position and you don't want to do anything race that would.

Run off good profitable business, we've got a real long term long term focus.

Okay that makes perfect sense.

And then finally I think you did a great job explaining the whole.

All in place and leverage, but I'm wondering whether their social inflation phenomenon that we're hearing a lot about is that more pronounced.

At accounts that have higher limits in other words is there a deep pockets phenomenon also.

You don't have wondered about that you know not just by size a limit.

By geography, as well you know if you're going to have increased attorney involvement they're going to I would think seek.

Deep pockets they would see jurisdictions, maybe where they think they might have a higher likelihood of success, but at this point. It's just you kind of a thought experiment more than.

Anything were seen in the data.

Okay. That's it thanks so much.

Thank you Mary.

And 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, let's see I'm going to start and then number one.

Well take the next question from Mark Delaney with RBC capital markets.

Yeah good morning.

I think my esteemed colleagues have already are exhausted quite a lot of questions I'd hope to ask but a couple others to hit on.

Any any given the.

Pricing trends and things that you're seeing hey, do you contemplate any changes in business appetite a in either Cincinnati re or Cincinnati global maybe while you're at a just a little bit of an update on how those businesses are performing and then what's your thoughts are there.

Ah yes.

It's it's pretty much steady go to the course with both.

They're just doing a.

Great job I mean from what we you can see in the numbers there the combined ratio for Cincinnati re for the year came in it.

And the low ninetys or the growth 44%.

I think they're doing a disciplined fashion the submission flow for the fourth quarter was up 31% from where it was a year ago.

And the hit ratio went down this actually accepting.

Less than 20% of those that are submitted to them and that's very consistent with what we wanted to do from the beginning which was have an allocated capital.

Model, we didn't set up a company and put capital in there to assess what they would feel compelled to grow maybe recklessly against that capital we want them to just look at each of the contracts that they are faced with and.

You know make good decisions there they've really staffed.

<unk> up with some very very skilled underwriters actuaries technicians, it's it's actually but you know without that being the plan been quite steady over time.

On inception date inception to to now basis, the property premiums have been about 33% the.

Casualty, 54% to specialty 13% for this year. It was 30 to 51 and 17. So you know very consistent with.

The way they've been operating and so we're happy there and we encourage them.

You know as Mark has changed to look at opportunities.

The Cincinnati global.

Couldn't be more happy with the way that that started out we know there will be volatility there and in Cincinnati re but we had done an acquisition for for many many years and it's always a better has started off on the right foot and then in loss position a they've had good growth they've come in in the low eightys with their combined ratio.

One thing I.

I can say, there's as they filed their business plan with Lloyds its for good growth, they're going to add.

Two new lines or whatever that is going to be a terrorism. The other ones going to be political risk into they've already hired season, the underwriters to two start to write those lines.

Business and take advantage of.

What we think to be a.

Affirming Oh and trade credit I'm, sorry, so stare terrorism political risks and trade credit. So there's a higher experienced underwriters in those two areas, they're going to I think take it.

Advantage of affirming market over there at Lloyds.

That's helpful. Appreciate the update and then the other question I had probably for Marty just with you know equity markets at kind of record levels and.

Bond yields I don't know thrashing around in the ones eating you're doing differently from.

Ah portfolio management perspective, just to bounce exposures and and so forth.

No not nothing dramatic we always look <unk> opportunity in the yield curve, where we see it yeah, we might put a little more money.

Short term.

Maybe try to wait out a little.

We try to get to a surgeon yields that kind of thing, but not not a lot.

Yeah, we're getting the dividend increases which have been very healthy last couple of years, so that that protects us a little bit so.

Nothing on a scale that would be particularly meaningful.

Anything on the equity side harvesting gains or otherwise.

Hi, there.

I'm not not too much no we're kind of staying the course, there as well I'm not seen as you might expect as you alluded to a whole lot of values out there, but uh huh.

Yes.

We had out there so.

We generally don't make big macro calls.

And really.

Well the run a whole lot so fairly steady.

Okay.

Thanks for those questions and I appreciate the update thanks.

Thank you Mark.

And with no further questions at this time I'd like to turn the call back over to Mr., Steve Johnson for any closing remarks.

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Thank you Catherine and thanks, everyone for joining US today, we look forward to speaking with you again on our first quarter 2020 call. Thank you very much and have a great day.

Ladies and gentlemen, this does conclude today's conference call. Thank you.

For your participation you may now disconnect.

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