Q2 2023 Cincinnati Financial Corporation Earnings Call

July 28, 2023

[music].

Good morning, ladies and gentlemen, and go to the Derby Cincinnati Financial Corporation second quarter 2020 earnings Conference call all participants will be in a listen only mode.

Do you need it.

Signal a conference specialist by pressing Star then Peel.

After todays presentation, there will be an opportunity to ask question to ask a question you May Press Star then one on a touchtone phone.

Draw. Your question. Please press Star then two please.

Please note. This event is being recorded I would now like to turn conference over to Dennis Mcdaniel Investor Relations Officer. Please go ahead Sir.

Hello, This is Dennis Mcdaniel at Cincinnati financial.

Thank you for joining us for our second quarter 2023 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 find copies of any of these documents. Please visit our investor website centre in 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 and Chief Executive Officer, Steve Johnston.

And then from executive Vice President and Chief Financial Officer, Mike Sewell.

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 President Steve spray.

<unk> investment officer, Steve, So lauria and Saturday Insurance's, 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.

<unk> accounting data is prepared in accordance with statutory accounting rules and therefore is not reconciled to GAAP.

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

Good morning, and thank you for joining us today to hear more about our results.

Net income of $534 million for the second quarter of 2023 was quite a change from the net loss of more than $800 million for last year's second quarter.

As we've noted in the past large income swings can occur as gains and losses from securities still held in our equity portfolio run through net income.

Last year, we saw a reduction in portfolio of fair value and this year, we recognized a significant investment gain.

We believe the value of our equity portfolio, we will continue to grow over the long term as of June 30th It had $6 $1 billion and appreciated value increasing 8% since the end of the first quarter.

non-GAAP operating income of $191 million for the quarter more than doubled the $94 million from a year ago. Despite.

Despite catastrophe losses that were $11 million higher on an after tax basis.

Our 97, 6% second quarter 2023 property casualty combined ratio was five six percentage points better than last year's second quarter, including a decrease of 0.4 points for catastrophe losses.

The 94% ex cat accident year combined ratio for the second quarter was two four percentage points better than the same period, a year ago and there is another important indicator of improved performance.

Despite the increase in catastrophe losses, and ongoing elevated inflation effects. We continued to see reasons for confidence about performance for the second half of the year.

Pricing continued to accelerate during the second quarter of this year and we also worked to address inflation in other ways such as changing factors that adjust premiums to account for rising property costs.

We reported improved underwriting performance ratios and just about every major line of business compared with the first quarter of this year.

On a current accident year basis measured at June 30th before catastrophe losses, our 2023 consolidated property casualty loss and loss expense ratio improved from 2022 by four five percentage points on a case incurred basis, which included 0.6 point improvement on a.

Paid basis.

For the same period, we increased the incurred but not reported or <unk> component.

The ratio by four seven points as we continued to recognize uncertainty regarding ultimate losses remain prudent in our reserve estimates until longer term loss cost trends become more clear.

Similar to the first quarter, we earned a small underwriting profit for our commercial umbrella lines in the second quarter and our commercial casualty line of business in total had an estimated combined ratio of approximately 90%.

Our underwriters continue to do an excellent job in risk selection and pricing importantly agents appointed by Cincinnati insurance continue to produce profitable business for us in an outstanding fashion.

Underwriters emphasize retention of profitable accounts addressing ones that we determined have inadequate pricing, while also seeking profitable new business.

The estimated average renewal price increases for the second quarter were higher than the first quarter for each of our major lines of business our.

Our commercial lines insurance segment averaged a near the low end of the high single digit percentage range.

Our excess and surplus lines insurance segment moved higher in the high single digit range.

Personal lines for the second quarter included auto in the high single digit range and homeowner in the mid single digit range.

In terms of net written premiums consolidated property casualty growth was 9% for the second quarter of 2023.

That included a 11% increase in second quarter renewal written premiums with a significant portion from higher levels of insurance exposures as we factor in elevated inflation.

Next I'll briefly highlight premium growth and profitability by insurance segment.

Commercial lines grew second quarter 2023, net written premiums, 3%, reflecting disciplined particularly for commercial umbrella risks.

Its combined ratio was nine four percentage points better than a year ago, including one five points from lower catastrophe losses.

We see the second quarter, 10% reduction in new business written premiums as an expected result of pricing and underwriting discipline.

Personal lines grew net written premiums, 23% with growth in middle market accounts. In addition to Cincinnati private client business for the high net worth clients and our agencies it.

<unk> combined ratio was four five percentage points better than a year ago. Despite an increase of 0.6 points from catastrophe losses.

Excess and surplus lines had a combined ratio of 92, 2% and net written premiums grew 16% is combined ratio was seven one percentage points higher than a year ago, including a $9 nine point increase in the IBM our component.

Both Cincinnati re and Cincinnati Global continued to enhance our profitability Cincinnati re had a strong 73, 7% combined ratio for the second quarter of 2023.

<unk> net written premiums essentially matched last year's second quarter.

Casualty premiums decreased as a result of fewer attractive opportunities in certain segments of the market property net written premiums increased by 27% largely due to a combination of higher pricing and market opportunities.

Cincinnati Global's combined ratio was 88, 3% with net written premiums continuing strong growth at 19%.

Our life insurance subsidiary continued to report excellent results in the second quarter with net income up 91% from last year in term life insurance earned premium growth of 4%.

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

Our second quarter 2023, VCR was 4.0% another strong result.

Net income before investment gains or losses contributed one 8% while favorable valuation of our investment portfolio added another two 2%.

Now, our Chief Financial Officer, Mike Sewell will highlight other important factors about our financial performance.

Thank you, Steve and thanks for all of you for joining US today investment income continued at a strong pace of 13% for the second quarter 2023 versus last year's second quarter.

As expected dividend income decreased 3% for the quarter due to two items, we touched on last quarter.

First we are seeing dividend rates increase more slowly.

In last year's second quarter, we received a $5 million special dividend from one of our stockholding that didn't repeat this year.

Net equity security purchases for the first half of 2023 totaled $93 million.

Interest income rose, 19% in the second quarter compared with the second quarter of 2022.

We added more fixed maturity securities to our investment portfolio with a net purchases totaling $732 million for the first six months of the year.

The second quarter pretax average yield of 434% for the fixed maturity portfolio was 34 basis points higher than a year ago.

The average pre tax yield for the total of purchase taxable and tax exempt bonds during the second quarter of 2023.

It was 5.88%.

Valuation changes in aggregate for our equity portfolio during the second quarter 2023 were favorable.

Unfavorable for the bond portfolio.

Before tax effects, the net gain for the equity portfolio was $459 million, while the net loss for the bond portfolio was $158 million.

At the end of the quarter total investment portfolio net appreciated value was approximately $5 $3 billion.

The equity portfolio was in a net gain position of $6 1 billion, while the fixed maturity portfolio was in a net loss position of $838 million.

Strong cash flow again contributed to investment income growth. In addition to rising bond yields boosting interest income.

Cash flow from operating activities for the first six months of 2023 was $825 million up 9% from a year ago.

We continue to emphasize expense management.

With a balance between controlling expenses and making strategic investments in our business.

The second quarter 2023 property casualty underwriting expense ratio was two percentage points lower than last year as premium growth outpaced growth in total expenses.

Next I'll comment on our loss reserves, we continue to use a consistent approach that targets net amounts in the upper half of the Actuarially estimated range of net loss and loss expense reserves.

As we do each quarter, we considered new information such as paid losses and in case reserves and then updated estimated ultimate losses and loss expenses.

Second year and line of business.

For the first half of 2023, our net increase in property casualty loss and loss expense reserves was $452 million, including $358 million for the <unk> portion.

During the second quarter, we experienced a $101 million of property casualty net favorable reserve development on prior accident years that benefited the combined ratio by five five percentage points.

On an all lines basis by accident year.

Net reserve development for the first six months of 2023 included favorable $99 million for 2022 unfavorable $5 million for 2021.

Favorable $49 million for 2020, and a favorable $17 million in aggregate for accident years prior to 2020.

Regarding capital management, our approach remains consistent as we pay dividends to shareholders and repurchased shares that include maintenance intended to offset shares issued through equity compensation plans.

We still believe our financial flexibility is outstanding and that our financial strength is in excellent shape.

During the second quarter of 2023, we repurchased approximately 398000 shares at an average price per share of a $104 48.

We also paid $117 million in dividends to shareholders during the quarter.

As usual I'll conclude with a summary of second quarter contributions to book value per share. They represent the main drivers of our value creation ratio.

Property casualty underwriting increased book value by 'twenty four.

Life insurance operations increased book value 15th.

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

<unk> 86.

Net investment gains and losses for the fixed income portfolio decreased book value by 81.

Net investment gains and losses for the equity portfolio increased book value by $2 31.

And we declared a <unk> 75 per share in dividends to shareholders.

The net effect was a book value increase of $2 per share during the second quarter to $70 and <unk> 33 per share.

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

Thanks, Mike.

In a challenging insurance market and I am proud of the way our associates are navigating. It. We believe we are taking the necessary actions to continue delivering profitable growth through all insurance cycles in the last month to third party organizations agreed S&P affirmed our high financial strength ratings and we were all.

Also again included on the Ward's 50 list, recognizing our growth profitability and shareholder return.

We are one of only four companies named 32 times to the property Casualty Awards 50 since the analysis began in 1991.

As a reminder, with Mike and me today are Steve spray, Steve So lauria, Mark Shambo and Theresa Hoffer.

I should Avi please open the call for questions.

Thank you we will now begin the question and answer the question you ask a question you May Press Star then one on your question.

Using a speakerphone please pick up your handset before pressing the keys.

Is that any time. Your question has been answered and you would like to withdraw your question. Please.

Thank you.

Finally, we will pause momentarily to assemble our roster.

Yeah.

Our first question comes from Paul Newsome with Piper Sandler. Please go ahead.

Good morning, congrats on the quarter.

Thanks wanted to ask.

Maybe a little detail on the stores.

Competition.

And hampering.

New business production and commercial.

No.

<unk> means, but if you give us a sense of just kind of what kind of company.

But some of the products et cetera.

TPU.

We're disciplined.

Yeah.

Paul Steve spray.

I would reiterate what Steve said Darrin is closing prepared remarks just.

It's a challenging market.

This business as I've said in the past it's local.

You get various competitors in different states that just have a different view of risk I think from my perspective.

It's been more about our underwriters and our field reps just continuing to execute working with our agents on disciplined pricing and underwriting its profit first here.

We're segmenting the business, but from time to time, you'll see carriers that maybe have a different view of the risk and.

We've just got the tools today that we didn't have in the past to be able to be disciplined about it and.

Just couldnt be more proud of the team both on the new business front, our field reps in our renewal underwriters and the way they are the way they are executing and I will.

Would add that it's a dynamic market, we're seeing it change on a daily basis.

<unk>.

At the end of the second quarter, we did see I would say the market coming more to us on the on the pricing side and some new business. It's one month.

Of an end of a quarter. So it may not make a trend, but we did see.

Some improvement in new business towards the tail end of the second quarter hopefully that answers your question Paul.

Definitely getting here.

Maybe a little bit nitpicking, but I was kind of going through the supplement.

<unk> commercial business.

There is a little bit less loss <unk>.

Booked up.

In the quarter anything anomalous there.

You want to call out.

Yes.

Hello, This is Steve.

Sure. Paul This is Steven actually on a dollar basis, our IV in our did increase our premium increased.

A little bit faster and I think last year's second quarter of last year I think we've.

I think we've.

Seeing the situation with inflation and recognize the leveraged effect of inflation on.

Higher limits and umbrella in particular and more.

Strong to address that last year, so I think again.

We still had more dollars added to <unk> this quarter, just slightly less on <unk>.

As a ratio of earned premium.

Great. Thank you as always for all the help I appreciate it.

Thank you Paul.

The next question comes from Greg Peters.

James Please go ahead.

Well good morning, everyone.

So Greg I guess.

I'm going to focus on.

First question would be in the commercial casualty component of your.

Financial supplement.

And.

If you look at the total loss and loss expense ratio.

Really big.

Began to show some nice improvement in the second quarter, and obviously, it's a longer tailed line of business.

And.

Just curious.

It seems like now with the.

The loss ratio, having improved this would be a time to perhaps.

Start writing more of that business and yet we see it moving in the opposite direction. So maybe you could I know you've provided some previous comments on them, maybe you could just give us some added context.

Yes.

Good question, Greg and I think the two are kind of related I think the improvement is a re.

The result of the discipline that we're showing in pricing and underwriting in particular, particularly in our umbrella line of business.

Other side of that as Steve mentioned as we are more disciplined in the market.

Yeah.

It makes us a little bit harder to compete on a price basis with with some others that don't have that same view of risk. So I think the two go together and.

Really just.

I can't add much to steves.

Earlier response in terms of how we're handling that competitive market.

Right.

Thanks.

Wanted to pivot just on property, whether it's inside the commercial or in the personal lines space because I feel like rate is.

Combination of factors, including insured to value.

Numbers being reset.

And so I'm, we're not like for example in your personal lines net written premium in homeowners up 27%.

In the second quarter.

Im wondering how much of that is pure rate versus actual.

Getting the insured to value numbers, right or maybe I'm looking at this wrong way I don't know.

Seems like a valid question, though.

Yes, Greg Steve spray on specifically on commercial property.

And personal property in homeowner, it's about two thirds exposure about a third right.

It'd be a good way to look at it.

Okay.

That's helpful.

I guess the.

Final question I have recognized that others are going to want and ask questions, but just be.

Before you had previously mapped out sort of an expectation for the combined ratio for the year I'm just wondering how you're thinking about that range in the context of the second quarter results as we think about the second half of the year and that's my last question.

Okay. Greg This is Steve Johnston and I think we're still where we were at that when we first came out with it at the first quarter.

We don't think it's.

We think it's reasonable that we would be able to be in the low to mid <unk>.

<unk>.

Combined ratio 8% growth.

But we have those caveat that the weather and.

And the market conditions are volatile.

And.

And that will play out over the second half I think the key point is as we are just very confident in the movement of the ex cat core portion of the book.

It's improving nicely and.

And that's really our focus at this point, but again I think we're still where we were.

With the information that we gave in the first quarter.

Excellent.

Thanks for the answers.

Thank you.

The next question comes from Mike Zaremski with BMO. Please go ahead.

Hey.

Good afternoon.

Curious any any insight 10-Q.

Pricing power in Q July and also just curious.

Have you guys been a bit surprised at some of the pricing power that you've experienced.

Okay.

Given the strong interest rate tailwind that are a good guy or.

Does it make sense that we're seeing kind of broader industry pricing.

And flat accelerate a bit.

This is this is Steve Johnston and it is.

Just as an execution of our business model that makes us feel feel good and that we are.

Have great relationships with our agents, we tend to communicate and tried to to communicate where we are a risk by risk early in the process of a renewal and just just feel the execution that makes us so proud of our field people as they are out in the field balancing discipline with b.

And responsive to our agents needs.

Boded, well for us and we see it.

Continuing to do so as we go into the second half.

Yeah.

Okay.

You mentioned that E I think in the prepared remarks.

Product components.

Of your portfolio kind of that you've got a small underwriting profit just curious umbrella given kind of what.

You've known that we've experienced over the last year or two or more.

Maybe more maybe its more also just prone to social inflation is.

As umbrella.

You're kind of targeting.

Ah.

<unk>.

Combined ratio for that versus the broader segment.

Yes over I think over the last.

20 to the end of 'twenty two and prior.

Mike again, this is Steve spray, our combined ratio and umbrella was running around 80.

The last like you said last couple of years have been challenging.

It's it's jurisdictional it could be state by state its risk by risk.

And that loss ratio like Steve said in the prepared remarks, we've been profitable here for the for the first half and obviously in the second quarter.

We've been very deliberate.

About <unk>.

Improving that line of business and I would say, yes, we.

Expect that loss ratio to improve from where it is today.

I'll give you maybe a little bit more color on that too in the second quarter. Our commercial umbrella net written premium was down nine points, which contributed.

Two point drag on the overall commercial lines net written premium.

So.

It's been deliberate like Steve said, we got out early and often with our agents to make sure that theres no surprises and work with them on pricing terms conditions, reducing limits in some specific jurisdictions or specific.

Risks that we think we.

Had been challenging for us.

Okay. That's helpful and then lastly.

Switching gears to personal lines.

Yes, I think on last quarter's call you talked about.

Maybe wasn't a call, but I think you guys have talked about you being one of the now the debt.

Biggest writers in terms of new business and for example, the state of California as others have had.

I have been retrenching, maybe you can kind of give us an update on an on.

What youre seeing in terms of kind of industry dynamics competitive wise in personal lines and why you feel good about growing into some of these states where.

Where some competitors have had trouble kind of getting the pricing they need to keep up with loss inflation in February .

From the standpoint of understanding you have a very profitable personal lines book.

Yes, Thanks, Mike Steve spray again.

Yes, we feel really good and are bullish about personal lines. Both on the high net worth and then the middle market business. The high net worth now or what we would say private client has become about 55%.

Of our business I would start with the fact that the team we have.

The amount of expertise that we have selectively had.

<unk> joined from the outside and then the long term associates, we have had in building out that expertise not only on product, but on marketing on claims.

I think we have been very well received across the country by by our agents.

And specifically growing it in and states that you mentioned, where there's been quite a bit of industry disruption and we have definitely seen.

Quite a bit of disruption, especially for the high net worth business.

And as an example, one way we were able to deal with that as.

As we were able to pivot in California as a specific example, and move to writing homeowner business on an excess and surplus lines basis.

And I.

I think it's true to Cincinnati over time, as we've been able to be there for our agents be there for the policyholders and their community provide.

We think measured capacity we are in this high net worth business for the long term, we look at everything we do over the long term and.

Feel like we're positioned really well to continue to to grow that business and grow. It profitably. We have some work to do inflation has impacted the entire book, but we are confident in the underwriting and especially the pricing actions we've taken.

To improve those results.

Thank you.

Okay.

Yeah.

Thank you Mike.

We will take our next question if we have one.

Okay.

The next question is from Nielsen.

Yes.

Yeah.

Great. Thanks.

Morning, everyone.

Good morning Mayor.

Hi, a couple of quick questions I guess.

Steve you talked about pricing accelerating pretty much every line of business sequentially was there any change in your internal view of trend from first quarter to second quarter.

Yes Mayor this is Steve I don't really think so I think we're seeing it's very granular we look at it by line by state and so forth and so youll see some movement in directions at a very detailed level, but.

For the most part I think we're seeing a similar view of trends first the second quarter.

Okay perfect.

I'm not 100% sure. This is a good question, but when you look at the loss ratio detail.

Most of the higher provisions described in personal lines than commercial lines and I was wondering is that a function of just bad weather or something else driving that.

I think probably mayor it's the growth as much as anything there is faster growth in the personal line space right now.

Oh, Okay, perfect that makes sense.

And one last question if I can it's a little more detail or more detailed but.

Have you disclosed which lines of business saw the reserve release from accident year 2002.

That has not been part of our disclosure mayor.

Okay.

Sure enough.

The next question comes from Chris Carter with.

Bank of America. Please go ahead.

Hi, everyone.

Good morning, Greg.

Looking at the commercial property underlying loss ratio that experienced quite a delavan isn't that both sequentially and year over year, obviously that line can be really volatile, but I was just curious the extent to which that was may be impacted by that classification.

Cat versus non cat in the quarter and pricing flowing through and just the extent to which we should extrapolate that going forward. Thanks.

I can grace, Steve spray I can take a shot at that.

<unk>.

Have individual state plans, both for all lines for all lines and segments, but in commercialized specifically in <unk>.

First thing we look at it I think at every state is just the cat profile. We do believe you can underwrite and price for cat you have to.

And I would think.

Think terms conditions.

Percentage deductibles for Cat, we've got the tools to to understand what the.

Average annual loss looks like we price to that.

So I think youre seeing improvement.

Just because.

<unk> of the discipline that we've put both in the cat and non cat I don't know if anybody else wants to add anything as far as.

Members.

Okay. Thank you handled quite well see.

Okay. Thank you and I guess looking at the our workers comp underlying loss ratio that ticked up a bit versus what we're used to seeing I was curious if there is anything kind of one off or if you've seen them.

The change in loss trends or if thats, just the accumulated impact.

Lower pricing in that line over time.

Grace's, Steve Johnston I do think that that just the accumulation of the lower pricing over time.

Yes.

Ed.

This does have a compounding effect, we've been very disciplined as you can see there have been a decrease in our writings there as we've maintained discipline.

Over a period of time, so that we feel particularly as an account underwriter that we're in a good spot overall.

Thank you and then I guess finally, just talking about commercial casualty it pretty broadly.

Umbrella and not I mean, the underlying loss ratio there.

Improvement.

Well as a pretty favorable impacts from reserve releases I'm, just trying to square that versus some of the commentary that we've heard over the past few quarters ever be pretty cautious and that part of the business you will get any new information in the quarter regarding loss cost trends that gives you some more confidant regarding where that line.

Is going or is this just kind of that the impact of the actions that you've taken in that book over the past several quarters. Thank you.

I think I think your last point is what it is it's been the action over the last several quarters and trying to get out early in.

And start to address the inflation in the leveraged effect of inflation.

Thank you.

Again, if you have a question. Please press star then one to the giant into the queue.

Our next question comes from Fred Nelson, a private Investor. Please go ahead.

Yes, two things.

Is that or really all of you that are on the call. It worked for the company you need to know.

Philosophy.

Rising dividends.

Integrity and honesty.

I can tell you the number of people have told me that it allows them to do things in their lives with their kids or grandkids.

Dream possible.

I wanted to say thank you to all of you for the follow up.

Really really important in our country.

The thing that I would like to move the number.

Shares outstanding at the end of the period.

Shareholders' equity.

Number of shares out there.

Book value.

And I would appreciate it if you could tell me how many shares are outstanding at the end of the period to get the book value.

Well. Thank you Fred this is Steve Johnston.

And first off I really want to thank you for your comments. It just really makes my day. It makes all of our days you are talking to everybody here at the company and we really appreciate your comments.

Absolutely.

I believe the number of shares outstanding is $158 6 million at the end of the period.

At the end of period.

Sure.

How many shares.

I think it was 158 six.

If you divide that into the.

Shareholder.

Equity value of $11 billion or $370 33.

I believe that's right.

Okay.

Troy.

I may have may have transposed it I think it's 156 eight 950.

I was going from memory.

Just going from memory and standby slipped a piece of paper to me here. So I apologize for the transfer transposed into shares I. Appreciate what you just said because that's the figure I got my own math.

Okay.

Right.

The old math is always the best read one of my one of my people.

<unk>, Thank you God.

Gary.

Okay very good. Thank you. Thank you so much.

All of it.

Thank you bye bye thank you bye.

This concludes our call.

And answer your question I would like to turn the conference back over to Pete.

Steve Johnston for any.

Thank you Mike.

Thank you <unk> and thank you all for joining US today, we look forward to speaking with you again on our third quarter call.

Okay.

The conference has now concluded. Thank you for attending today's presentation you may all now disconnect.

[music].

Good morning, ladies and gentlemen, and welcome to the Cincinnati Financial Corporation second quarter 2020 earnings Conference call. All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing Star then deal.

After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on a touchtone phone to withdraw your question. Please press Star then two please.

Please note. This event is being recorded I would now like to turn conference over to Dennis Mcdaniel Investor Relations Officer. Please go ahead Sir.

Hello, This is Dennis Mcdaniel at Cincinnati financial.

Thank you for joining us for our second quarter 2023 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 find copies of any of these documents. Please visit our investor website, Santana 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.

First year from Chairman and Chief Executive Officer, Steve Johnson.

And then from executive Vice President and Chief Financial Officer, Mike Sewell.

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 President Steve spray.

<unk> investment officer, Steve, So lauria and Saturday Insurance's, 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.

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 the call to Steve.

Good morning, and thank you for joining us today to hear more about our results.

Net income of $534 million for the second quarter of 2023 was quite a change from the net loss of more than $800 million for last year's second quarter.

As we've noted in the past large income swings can occur as gains and losses from securities still held in our equity portfolio run through net income.

Last year, we saw a reduction in portfolio fair value and this year, we recognized a significant investment gain.

We believe the value of our equity portfolio, we will continue to grow over the long term.

As of June 30th it had $6 $1 billion and appreciated value increasing 8% since the end of the first quarter.

non-GAAP operating income of $191 million for the quarter more than doubled the $94 million from a year ago. Despite catastrophe losses that were $11 million higher on an after tax basis.

Our 97, 6% second quarter 2023 property casualty combined ratio was five six percentage points better than last year's second quarter, including a decrease of 0.4 points for catastrophe losses.

Despite the increase in catastrophe losses, and ongoing elevated inflation effects. We can continue to see reasons for confidence about performance for the second half of the year.

We reported improved underwriting performance ratios and just about every major line of business compared with the first quarter of this year.

On a paid basis for it.

The same period, we increased the incurred but not reported or <unk> component of the ratio by four seven points as we continued to recognize uncertainty regarding ultimate losses remain prudent in our reserve estimates until longer term loss cost trends become more clear.

Underwriters emphasized retention of profitable accounts addressing ones that we determined have inadequate pricing, while also seeking profitable new business.

Estimated average renewal price increases for the second quarter were higher than the first quarter for each of our major lines of business.

Our commercial lines insurance segment averaged a near the low end of the high single digit percentage range.

Our excess and surplus lines insurance segment moved higher in the high single digit range.

Personal lines for the second quarter included auto in the high single digit range and homeowner in the mid single digit range.

In terms of net written premiums consolidated property casualty growth was 9% for the second quarter of 2023.

That included 11% increase in second quarter renewal written premiums with a significant portion from higher levels of insurance exposures as we factor in elevated inflation.

Next I'll briefly highlight premium growth and profitability by insurance segment.

Commercial lines grew second quarter 2023, net written premiums, 3%, reflecting disciplined particularly for commercial umbrella risks it's.

Its combined ratio was nine four percentage points better than a year ago, including one five points from lower catastrophe losses.

We see the second quarter, a 10% reduction in new business written premiums as an expected result of pricing and underwriting discipline.

Personal lines grew net written premiums, 23% with growth in middle market accounts. In addition to Cincinnati private client business for the high net worth clients and our agencies.

Its combined ratio was four five percentage points better than a year ago. Despite an increase of 0.6 points from catastrophe losses.

Excess and surplus lines had a combined ratio of 92, 2% and net written premiums grew 16% as combined ratio was seven one percentage points higher than a year ago, including a $9 nine point increase in the IBM our component.

Both Cincinnati re and Cincinnati Global continue to enhance our profitability Cincinnati re had a strong 73, 7% combined ratio for the second quarter of 2023.