Q3 2021 Cincinnati Financial Corp Earnings Call

October 28, 2021

Excuse me. This is the operator todays conference is scheduled to begin shortly please standby and thank you Sir.

Once again this is the operator today's conference is scheduled to begin shortly please could you just stand by and thank you for your patience.

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Good day, and thank you for standing by and welcome to the third quarter due south and finding one earnings conference call. At this time all participants are in a listen only mode. After the Speakers' remarks, there will be a question and answer session to answer questions. During the session you will need to press Star then the number one on your telephone and if you require any further assistance.

Please press star and three of them I don't know like the hand, the call over to your speaker today, Mr. Dennis Mcdaniel Investor relation officer, Sir you May proceed.

Hmm.

Hello. This is Dennis Mcdaniel Investor Relations Officer at Cincinnati financial Thank you for joining us for our third quarter 2021 earnings Conference call.

Late yesterday, we issued a news release on our results along with our supplemental financial package, including our quarter end investment portfolio to.

To find copies of any of these documents. Please visit our investor website, <unk> Dot com slash investors. The shortest route to the information is the quarterly results link in the navigation menu on the far left.

On this call you'll first hear from Chairman, President and Chief Executive Officer, Steve Johnston, and then from Chief Financial Officer, Microsoft.

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

At that time, some responses may be made by others in the room with us, including Chief investment Officer, Marty Hollenbeck.

Cincinnati Insurance's, Chief Insurance Officer, Steve Spray, Chief claims officer, Mark Shambaugh, and senior Vice President of corporate Finance Theresa Hoffer.

First please note that some of the matters to be discussed today are forward looking these forward looking statements involve certain risks and uncertainties with respect to these risks and uncertainties, we direct your attention to our news release and to our various filings with the SEC.

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

Now I'll turn it over to call to Steve.

Thank you Dennis.

Good morning, and thank you for joining us today to hear more about our third quarter results. Overall it was another good quarter, while weather related catastrophes were lower than a year ago communities across our country were impacted by hail wind flooding and fire.

As we send our field claims associates into these communities they shine, providing excellent service and reassuring affected families and businesses.

Okay.

Net income for the third quarter of 2021 fell $331 million compared with the third quarter of last year due to $457 million less benefit on an after tax basis in the fair value of securities held in our equity portfolio.

Equity portfolio fair value changes have caused significant earnings volatility for several quarters recently and net income increased $1 $3 billion for the first nine months of 2021 compared with a year ago.

Despite the third quarter decrease.

Non-GAAP operating income for the third quarter of 2021 more than tripled up $146 million or 232% versus a year ago with lower catastrophe losses on an after tax basis contributing $31 million of the increase.

Our 92, 6% third quarter 2021 property casualty combined ratio was 11 percentage points better than last year with decreased catastrophe losses. This year, representing 4.1 points of the improvement.

Our current accident year combined ratio before catastrophe loss effects also continued to improve and was 2.5 percentage points better than the first nine months of 2020.

Premium growth continued at a nice pace during the quarter as a strengthening economy and great relationships, we enjoy with our agents helped us grow ahead of industry estimates.

Consolidated property casualty net written premiums rose, 10% in the third quarter of 2021, we continue to focus on risk segmentation, giving our underwriters the tools they need to retain and write more profitable accounts, while walking away from opportunities when we determine pricing is.

Isn't adequate.

Renewal pricing during the third quarter continued to be ahead of our estimate for perspective loss cost trends for each property casualty segment.

Our commercial lines insurance segment again experienced mid single digit percentage range estimated average renewal price increases down slightly from the second quarter.

Our third quarter personal lines segment average renewal price increases slowed a little compared with the second quarter, including personal auto in the low single digit range, while the excess and surplus lines insurance segment continued in the high single digit range.

Yeah.

Our commercial lines segment had an outstanding quarter with this 86% combined ratio improving by 21, eight percentage points compared with the third quarter, a year ago and growing net written premiums by 10%.

For our personal lines segment third quarter net written premiums grew 7% as it continued to benefit from planned expansion of high net worth business produced by our agencies.

Its third quarter 2021, combined ratio was higher than a year ago, largely due to driving patterns moving towards pre pandemic levels, increasing our personal auto loss ratio.

Personal auto still produced a small underwriting profit for the third quarter and for the first nine months of 2021 our personal lines segment in total had an underwriting profit.

Our excess and surplus lines segment produced a sub 95% combined ratio for the third quarter and the first nine months of the year and grew third quarter net written premiums by 30%.

Cincinnati re and Cincinnati Global each grew net written premiums in the third quarter of 2021, well both experienced significant losses from hurricane Ida leading to underwriting losses for the quarter, we werent surprised by the level of loss. We saw for an event of this magnitude based on our models.

Our life insurance subsidiary produced third quarter 2021 net income of $11 million and grew term life insurance earned premiums by 8%.

I'll conclude with the value creation ratio, our primary measure of long term financial performance.

Strong operating results measured as net income before investment gains were the largest component of our VCR for both the third quarter and the first nine months of the year.

D. C are through September 30, 2021 was 12.4% already reaching our annual average target range of 10% to 13%.

Now, our Chief Financial Officer, Mike Sewell will add perspective on some other areas of our financial performance.

Thank you, Steve and thanks to all of you for joining us today.

Best friend income grew nicely during the third quarter of 2021 up 7% compared with the same period a year ago.

Third quarter dividend income was up 11% and net purchases for the equity portfolio totaled $153 million for the first nine months of the year.

Interest income from our bond portfolio grew 7% and the pretax average yield was 4.06% up three basis points from the third quarter a year ago.

The average pretax yield for the total of purchase taxable and tax exempt bonds during the third quarter of 2021 was 3.43%.

Investing in the fixed maturity portfolio continues to be a priority with net purchases during the first nine months of the year totaling $694 million.

Valuation changes for our investment portfolio portfolio during the third quarter of 2021 were modestly unfavorable for both our stock and bond portfolios the.

The overall third quarter net loss was $158 million before tax effects, including $105 million for equity holdings and $80 million for our bond holdings.

At the end of the third quarter total investment portfolio portfolio net appreciated value was approximately $6 $7 billion, including $5.8 billion for equity securities.

Cash flow was very strong in the third quarter as it has been all year. It contributes to investment income and was a major factor in the 7% increase in interest income we reported for the third quarter.

Cash flow from operating activities for the first nine months of 2021 generate $1 $5 billion, a 36% increase compared with a year ago period.

Expense management is another area, we focus always trying to optimize the balance of strategic business investments and expense controls.

Third quarter 2021 property casualty underwriting expense ratio was 0.9 percentage points higher than last years third quarter, including 1.2 points due to higher accruals for profit sharing commissions for agencies.

Moving on to loss reserves, our approach to reserving remains consistent and the aim for net amounts in the upper half of the Actuarially estimated range of net loss and loss expense reserves as we do each quarter, we consider new information such as paid losses in case reserves.

And then updated estimated ultimate losses and loss expenses by accident year and line of business.

During the third quarter 2021, we experienced a $102 million of property casualty net favorable development on prior accident years.

It favorably contributed to the combined ratio by six 4% for the quarter.

On an all lines basis by accident year net reserve development for the first nine months of the year was favorable by $225 million for 2020 $46 million for 2019 $39 million for 2018 and $21 million in aggregate for all.

All accident years prior to 2018.

Regarding capital management, we also follow a consistent approach, including share repurchases as part of our maintenance intended to offset issuance of shares through equity compensation plans.

We believe that our quarter end financial strength was in good shape and provides plenty of financial flexibility.

During the third quarter, we repurchased approximately 100000 shares.

Average price per share of $119 three.

I'll conclude my prepared remarks, as I typically do with a summary of third quarter contributions to the book value per share.

I represent the main drivers of our value creation ratio.

Property casualty underwriting increased book value by 59 cents life.

Life insurance operations increased book value five cents.

Investment income other than life insurance and net of non insurance items added 81 cents.

Net investment gains and losses for the fixed income portfolio decreased book value per share by 39.

Net investment gains and losses for the equity portfolio decreased book value by 51.

And we declared a <unk> 63 per share in dividends to shareholders.

The net effect was a book value decrease of eight cents per share during the third quarter to $73.49 per share.

Now I'll turn the call back over to Steve.

Thank you Mike.

COVID-19 epidemic pandemic has continued to make good may and flexibility in how we accomplish our day to day tasks. However by staying focused on the steady execution of our long term initiatives. We are able to keep producing these strong results. We have the people the technology and the drive.

To continue delivering strong value for shareholders for years to come.

As a reminder, with Mike and me today are Steve spray Mark Shambo.

Arty Hollenbeck and Theresa Hoffer Grace please open the call for questions.

Absolutely. That's a reminder to ask a question you will need to press Star then the number one on your telephone keypad again Beth Let me start then the number one on your telephone keypad.

The first question comes from the line of Paul Newsome from Piper Sandler Your line is open.

Good morning.

Curious as to whether or not you are seeing any of the same issues that some others have reported in personal lines with trying to get.

Great Hey, getting pushback from the regulators because.

Obviously, there was kind of a.

Secondly, a windfall last year, but.

That's.

I think obviously temporary but it doesn't really go into the math of how how.

How do you file rate.

Any thoughts on that in the east or you see some of the same issues at some others are seeing.

Well I would say our relationships with our regulators are good debt.

You know as a general statement that we are.

Doing fine in getting rate increases.

Or.

Just.

Changes to our rate structure approved there are obviously some states that are tougher than others, but I think overall again with good relationships with the regulators.

We're in a good position vis vis getting.

Adjustments to our rating plans approved.

Right.

Yeah.

Broad question I think on inflation trend.

Some of your peers have talked about the potential for.

A little bit higher inflation, particularly in the commercial lines side.

As we see.

Maybe a resumption of.

Pieces coming through the courts and.

Maybe perhaps a lag effect with some of the inflation that we've seen early on.

Home and.

In audio showing up in the commercial line side of the house.

Any thoughts on that do you think that's it.

A reasonable assumption.

Does it show up in any way.

In your own numbers.

We certainly see the prospect you know their social inflation, there's the inflation of the cost in goods that we use to settle claims, but you know for cars for houses the supply chain issues.

You know there there could be lags in the court system and so forth.

We build this all into our models and as.

As we look at.

What we see to be lost cost trends, we tried to be very perspective, and I look forward into what we think loss costs will be in the prospective policy period that we will be ensuring in.

Feel comfortable that we're getting right that.

Is ahead of those loss cost trends in each of our segments.

Great Congrats on the quarter.

I appreciate your insights.

Thank you Paul.

Thank you next up we have Mike Zaremski from Wolfe Research Your line is open.

Hey, guys. This is actually Charlie letter on for Mike Good morning.

Charlie So for my first question can you talk about the sustainability of the strong underlying margins.

Are there any notable like current year reserve development that benefited it.

We feel good Charlie about the sustainability of our results as we you know.

We look forward with our estimates of loss cost trends in pricing and you.

You know feel comfortable in making our best estimates of our reserves in.

We're very optimistic for the future performance of the the underwriting of the company.

Okay. Thanks, and then.

I know you mentioned the on the reserve releases by.

By accident year could you give any color around their releases them, particularly from that that recent accident years.

Yeah, Charlie this is Mike Sewell so yeah.

Related to you know as I mentioned for the quarterly it was six four points.

Oh there was.

Certain areas that were more on the current more recent accident years, which is probably no surprise. When you think about the short tail lines, which would be commercial property commercial auto.

All of the personal lines.

So mainly those developments.

We're favorable in accident year 2020.

But even with that.

Be cautious with Theres a lot of uncertainty.

The pandemic and the other things.

Going on around there if I look at the workers' compensation.

One of our longest.

Tails.

We have.

That one has favorable development that I would say goes over several accident years back a few years so.

Youre seeing favorable development there.

Claims frequency seems to have declined a little bit, but we've put a lot of cost control measures in over the years.

That has really been benefiting.

The workers' comp line of business.

And then lastly commercial casualty.

Really they're looking at the paid loss case reserve data over time are important factors for how that.

How those develop those have been favorable and some of the more recent accident years.

Last couple of not just the last one.

But you know as we look at in total for the property casualty.

You look at paid losses.

As a percent to incurred it.

It was up slightly for year to date.

'twenty one versus last year.

But it's a it is below the 2017 through 2019 averages so you'll you'll see that in our supplement.

Alright, thanks, guys.

Thanks, Charlie.

Your next question comes from the line of Mark Dwelle from RBC capital markets. Your line is open.

Yeah. Good morning, just a couple of questions.

First on the E&S unit.

It wasn't very much in dollar terms, but there was a reserve addition, there I was wondering if you could talk about that in a little more detail.

Or sort of rare.

I just think as we look at the environment, Mark we see a little bit maybe.

But.

I don't know if you call it but a slowdown in the.

Settlement rate there as we have them.

No claims that are taking a little bit longer to settle and so in terms of coming up with our best estimate there we want to recognize that and that's what you're seeing.

Okay.

The second question I wanted to ask and yet you had a pretty strong.

Pretty strong growth in new business.

Certainly over over last year, but pretty good quarter for new business.

What we're seeing in terms of the.

The type of customers that you're winning or geographic spread of where you're winning.

Just a little bit of color on where the new stuff is coming from.

Yeah, Mark this is Steve spray.

We're seeing it across our entire footprint and I think it.

As you as you mentioned there was a little bit of an easier comp from the pandemic.

Year last year, but I just think again, it's it is execution of our agency focused strategy doing business locally.

Faced with our agents building deep relationships underwriting and pricing every.

Every single account policy by policy.

Out there.

We're aggressively trying to help our agents write business solve problems our field reps our field underwriters, we use that interchangeably have the same pricing tools that our renewal underwriters have here. So we feel good about the pricing of the new business that we're writing.

It just.

I think it's just continued solid execution.

The credit quite frankly across all of our segments from the new business front and it goes to those deep relationships, we have with our agents.

Thanks for color on that and then one other question I also kind of relating mainly to renewables.

And the extent that Youre getting.

Premium audits that are flattering results a little bit can you just talk about kind of exposure unit growth and to what degree that impacted the overall premium growth in the quarter.

Sure so for commercial lines, all in I would say that.

For the premium increase about it's about half right and about half exposure.

Okay.

Thank you.

Once again in order to ask a question. Please press Star then the number one on your telephone keypad.

<unk> Star then the number one on your telephone keypad.

Your next question comes from the line of James back from Keybanc. Your line is open.

Thank you Steve.

You mentioned that the percent of paid losses incurred with Bob and I just wanted to see if you could give a little more detail on.

Negative 35 or that was reported for commercial lines in the quarter, just kind of some more detail on that.

But I think our actuaries do they look at a variety of them.

Of methodologies they use several methods they look at a lot.

A lot of different data points. In addition to paid losses they'll look at case reserves.

Incurred losses try to get an estimate for what.

What we're seeing in terms of the inflationary factors and.

Set the best estimate that we can every quarter and I think you know it's been a good track record now with 31 or 32 years in a row now where we've had favorable development.

So we're very confident it's an experienced team that hasnt changed.

Changed over the years and.

I feel comfortable with the estimates that theyre, making.

Alright, great.

Thank you James.

Thank you there are no further questions at this time I will turn the call over back to Mr. Steven Johnson for any closing remarks, Sir.

Thank you. Thank you Grace excellent job with the call.

Thanks to all of you for joining US today, we look forward to speaking you with you again on our fourth quarter call have a great day.

Thank you presenters. This concludes today's conference call. Thank you all for joining you may now disconnect.

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Good day and thank you for standing by welcome to the third quarter. This often final earnings conference call. At this time all participants are in a listen only mode. After the Speakers' remarks, there will be a question and answer session to ask a question. During this session you will need to press Star then the number one on your telephone.

If you require any further assistance please press star zero.

I would now like to hand, the call over to your speaker today, Mr. Dennis Mcdaniel Investor Relations Officer, Sir you May proceed.

Hello. This is Dennis Mcdaniel Investor Relations Officer at Cincinnati financial Thank you for joining us for our third quarter 2021 earnings Conference call.

Late yesterday, we issued a news release on our results along with our supplemental financial package, including our quarter end investment portfolio to.

To find copies of any of these documents. Please visit our investor Web site <unk> Dot com slash investors. The shortest route to the information is the quarterly results link in the navigation menu on the far left.

August call, you'll first hear from Chairman, President and Chief Executive Officer, Steve Johnson, and then from Chief Financial Officer, Microsoft.

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

At that time, some responses may be made by others in the room with us, including Chief investment Officer, Marty Hollenbeck.

Cincinnati Insurance's, Chief Insurance Officer, Steve Spray, Chief claims officer, Mark Shambaugh, and senior Vice President of corporate Finance Theresa Hoffer.

Thank you Dennis.

As we send our field claims associates into these communities they shine, providing excellent service and reassuring affected families and businesses.

Okay.

Despite the third quarter decrease.

Our 92, 6% third quarter 2021 property casualty combined ratio was 11 percentage points better than last year with decreased catastrophe losses. This year, representing four one points of the improvement.

Our current accident year combined ratio before catastrophe loss effects also continued to improve and was two five percentage points better than the first nine months of 2020.

Premium growth continued at a nice pace during the quarter as a strengthening economy and great relationships, we enjoy with our agents helped us grow ahead of industry estimates.

Isn't adequate.

Renewal pricing during the third quarter continued to be ahead of our estimate for perspective loss cost trends for each property casualty segment.

Our commercial lines insurance segment again experienced mid single digit percentage range estimated average renewal price increases down slightly from the second quarter.

Okay.

Our commercial lines segment had an outstanding quarter with its 86% combined ratio improving by 21, eight percentage points compared with the third quarter a year ago.

And growing net written premiums by 10%.

For our personal lines segment third quarter net written premiums grew 7% as it continued to benefit from planned expansion of high net worth business produced by our agencies.

Its third quarter 2021, combined ratio was higher than a year ago, largely due to driving patterns moving towards pre pandemic levels, increasing our personal auto loss ratio.

Personal auto still produced a small underwriting profit for the third quarter and for the first nine months of 2021, our personal lines segment in total had an underwriting profit.

Our excess and surplus lines segment produced a sub 95% combined ratio for the third quarter and the first nine months of the year and grew third quarter net written premiums by 30%.

Cincinnati re and Cincinnati Global each grew net written premiums in the third quarter of 2021, while both experienced significant losses from hurricane Ida leading to underwriting losses for the quarter, we werent surprised by the level of loss. We saw for an event of this magnitude based on our models.

Our life insurance subsidiary produced third quarter 2021, net income of $11 million and grew term life insurance earned premiums by 8%.

I'll conclude with the value creation ratio, our primary measure of long term financial performance.

Strong operating results measured as net income before investment gains were the largest component of our VCR for both the third quarter and the first nine months of the year.

<unk> through September 32021 was 12, 4% already reaching our annual average target range of 10% to 13%.

Now, our Chief Financial Officer, Mike Sewell will add perspective on some other areas of our financial performance.

Thank you, Steve and thanks to all of you for joining us today.

<unk> income grew nicely during the third quarter of 2021 up 7% compared with the same period a year ago.

Third quarter dividend income was up 11% and net purchases for the equity portfolio totaled $153 million for the first nine months of the year.

Interest income from our bond portfolio grew 7% and the pretax average yield was 4.06% up three basis points from the third quarter a year ago.

The average pre tax yield for the total of purchase taxable and tax exempt bonds. During the third quarter of 2021 was 343%.

Investing in the fixed maturity portfolio continues to be a priority with net purchases during the first nine months of the year totaling $694 million.

Valuation changes for our investment portfolio portfolio during the third quarter of 2021 were modestly unfavorable for both our stock and bond portfolios the.

The overall third quarter net loss was $158 million before tax effects, including $105 million for our equity holdings and $80 million for our bond holdings.

At the end of the third quarter total investment portfolio portfolio net appreciated value was approximately $6 7 billion.

Including five $8 billion for equity Securities.

Cash flow from operating activities for the first nine months of 2021 generate $1 5 billion.

A 36% increase compared with a year ago period.

Expense management is another area, we focus always trying to optimize the balance of strategic business investments and expense controls.

Moving on to loss reserves, our approach to reserving remains consistent and the aim for net amounts in the upper half of the Actuarially estimated range of net loss and loss expense reserves as.

As we do each quarter, we consider new information such as paid losses in case reserves, and then updated estimated ultimate losses and loss expenses by accident year and line of business.

During the third quarter of 2021, we experienced $102 million of property casualty net favorable development on prior accident years.

If favorably contributed to the combined ratio by six 4% for the quarter.

On an all lines basis by accident year net reserve development for the first nine months of the year was favorable by $225 million for 2020 $46 million for <unk>.

2019, $39 million for 2018 and $21 million in aggregate for all accident years prior to 2018.

Regarding capital management, we also follow a consistent approach, including share repurchases as part of our maintenance intended to offset issuance of shares through equity compensation plans.

We believe that our quarter end financial strength was in good shape and provides plenty of financial flexibility.

During the third quarter, we repurchased approximately 100000 shares.

Average price per share of a $119 three.

I'll conclude my prepared remarks, as I typically do with a summary of third quarter contributions to book value per share.

They represent the main drivers of our value creation ratio.

Property casualty underwriting increased book value by 59.

Life insurance operations increased book value <unk>.

Investment income other than life insurance and net of non insurance items added 81.

Net investment gains and losses for the fixed income portfolio decreased book value per share by 39.

Net investment gains and losses for the equity portfolio decreased book value by 51.

And we declared <unk> 63 per share in dividends to shareholders.

The net effect was a book value decrease of eight <unk> per share during the third quarter to $73 49 per share.

Now I'll turn the call back over to Steve.

Thank you Mike.

The COVID-19 pandemic has continued to meet demand flexibility in how we accomplish our day to day tasks. However by staying focused on the steady execution of our long term initiatives. We are able to keep producing these strong results. We have the people the technology and the drive.

To continue delivering strong value for shareholders for years to come.

As a reminder, with Mike and me today are Steve spray Marty Shambo.

Arty Hollenbeck and Theresa Hoffer Grace please open the call for questions.

Absolutely as a reminder to ask a question you will need to press Star then the number one on your telephone keypad again that will be star then the number one on your telephone keypad.

The first question comes from the line of Paul Newsome from Piper Sandler Your line is open.

Good morning.

Curious as to whether or not you are seeing any of the same issues that some others have reported in personal lines with trying to get.

Great Hey, getting pushback from the regulators because.

Obviously, there was kind of a.

Secondly, a windfall last year, but.

Yes.

I think obviously temporary but it doesn't really go into the math of how that.

Your file rate.

Any thoughts on that.

You see some of the same issues that some others are seeing.

Well I would say our relationships with our regulators are good debt.

As a general statement.

We are.

Doing fine in getting rate increases.

Sure.

Just.

Changes to our rate structure approved there are obviously some states that are tougher than others, but I think overall again with good relationships with the regulators we're in a good position vis vis getting.

Adjustments to our rating plans approved.

Great.

A broad question I think on inflation trend.

Some of your peers had talked about the potential for.

A little bit higher inflation, particularly in the commercial lines side.

We see.

Maybe a resumption of.

Keith is coming through the courts.

Maybe perhaps a lag effect with some of the inflation that we see early on.

Home and.

An audio showing up in the commercialized side of the house.

Any thoughts on the FTC.

Reasonable assumption.

Does it show up in any way.

In your own numbers.

We certainly see the prospect you know their social inflation, there's the inflation of the costs.

Cost of goods that we use to settle claims for cars for houses the supply chain issues.

You know there could be lags in the court system and so forth.

We build this all into our models.

As we look at.

What we see to be loss cost trends, we tried to be very prospective and I look forward into what we think loss cost will be in the prospective policy period that we will be ensuring in.

Feel comfortable that we're getting right that.

Is ahead of those loss cost trends in each of our segments.

Great Congrats on the quarter.

I appreciate your insights.

Thank you Paul.

Thank you next up we have Mike Zaremski from Wolfe Research Your line is open.

Hey, guys. This is actually Charlie letter on for Mike Good morning.

Thanks, Charlie.

My first question can you talk about the sustainability of the strong underlying margins.

Were there any notable like current year reserve development that benefited it.

We feel good Charlie about the sustainability of our results as we look forward with estimates of loss cost trends in pricing and.

Feel comfortable in making our best estimates of our reserves in.

We're very optimistic for the future performance of the <unk>.

Alright and of the company.

Okay. Thanks, and then.

I know you mentioned the on the reserve releases.

By accident year could you give any color around their releases, particularly from that recent accident years.

Yes, Charlie this is Mike Sewell so yes.

Related to as I mentioned for the quarterly it was six four points.

There was.

Certain areas that were more on the current more recent accident years, which is probably no surprise. When you think about the short tail lines, which would be commercial property commercial auto.

All of the personal lines.

So mainly those developments.

We're favorable in accident year 2020.

But even with that.

Be cautious with Theres a lot of uncertainty.

With the pandemic and the other things.

Going on around there if I look at the workers' compensation.

One of our longest.

Tails.

We have that one has favorable development that I would say goes over several accident years back a few years so.

You have seen favorable development there.

The claims frequency seems to have declined a little bit, but we've put a lot of cost control measures in over the years.

That has really been benefiting.

The workers' comp line of business.

And then lastly commercial casualty.

Really they're looking at the paid loss case reserve data over time are important factors for how that.

How those develop those have been favorable and some of the more recent accident years.

Last couple of not just the last one.

But as we look at in total for the property casualty.

Business, you look at paid losses.

As a percent to incurred.

It was up slightly for year to date.

2021 versus last year.

But it's it is below the 2017 through 2019 averages so you'll you'll see that in our supplement.

Alright, thanks, guys.

Thanks, Charlie.

Your next question comes from the line of Mark Dwelle from RBC capital markets. Your line is open.

Yes, good morning, just a couple of questions.

First on the E&S unit there was.

It wasn't very much in dollar terms, but there was a reserve addition, there I was wondering if you could talk about that in a little more detail.

Sort of rare.

I just think as we look at the environment, Mark we see a little bit maybe.

I don't know if you call it but a slowdown in the.

Settlement rate there as we have.

Claims that are taking a little bit longer to settle and so in terms of coming up with our best estimate there.

To recognize that and that's what you're seeing.

Okay.

The second question I wanted to ask.

Yeah, you had a pretty strong.

Pretty strong growth in new business.

Certainly over over last year, but pretty good quarter for new business.

We are seeing in terms of.

The type of customers that you're winning or geographic spread of where you are winning.

A little bit of color on where the new stuff is coming from.

Yes, Mark this is Steve spray.

We're seeing it across our entire footprint and I think it.

As you as you mentioned, there's a little bit of an easier comp from the pandemic.

Year last year, but I just think again, it's it is execution of our agency focused strategy doing business locally face to face with our agents building deep relationships underwriting and pricing.

Every single account policy by policy.

Out there.

It just.

I think it's just continued solid execution.

The credit quite frankly across all of our segments on the new business front and it goes to those deep relationships, we have with our agents.

Thanks for color on that and then one other question I also kind of relating mainly to renewals.

<unk>.

And the extent that Youre getting.

Premium audits that are flattering results a little bit can you just talk about kind of exposure unit growth and to what degree that increase in <unk>.

The overall premium growth in the quarter.

Sure so on.

For commercial lines, all in I would say that.

For the premium increase about it's about half right and about half exposure.

Yeah.

Thank you.

Once again in order to ask a question. Please press Star then the number one on your telephone keypad again that will be star then the number one on the telephone keypad.

Your next question comes from the line of James back from Keybanc. Your line is open.

Thank you.

You mentioned that the percent of paid losses do with Cardinal and.

And I just wanted to see if you could give a little more detail on <unk>.

Negative 35, and <unk> that was recorded FERC commercial lines on the quarter, just kind of some more detail on that.

But I think our actuaries they look at a variety of.

Of methodologies they use several methods they look at a lot of different.

Data points. In addition to paid losses, they'll look at case reserves.

Incurred losses try to get an estimate for.

What we're seeing in terms of inflationary factors and.

Set the best estimate that we can every quarter and I think it's been a good track record now with 31 or 32 years in a row now where we've had favorable development.

So we're very confident it's an experienced team that hasnt changed.

Changed over the years and.

I feel comfortable with the estimates that theyre, making.

Yes.

Alright. Thanks.

Thank you James.

Thank you there are no further question at this time I will turn the call over backwards CEO, Mr. Steven Johnson for any closing remarks, Sir.

Thank you. Thank you Grace excellent job with the call.

Thanks to all of you for joining US today, we look forward to speaking you with you again on our fourth quarter call have a great day.

Thank you presenters. This concludes today's conference call. Thank you all for joining you may now disconnect.

Q3 2021 Cincinnati Financial Corp Earnings Call

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