Q2 2024 Cincinnati Financial Corp Earnings Call
Speaker Change: Pardon me, everyone. The Cincinnati Financial call will begin in two minutes. We thank you for your patience.
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Speaker Change: [inaudible]
Unknown Executive: Pardon me, everyone. Coal will begin in two minutes. We thank you for your patience. & Inc. & Inc. & Inc.... [inaudible] Good morning and welcome to the Cincinnati Financial second quarter 2024. All participants will be in listen only mode. Need assistance?
Speaker Change: Good morning and welcome to the Cincinnati Financial second quarter 2024 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's remarks, there will be an opportunity to ask questions.
Unknown Executive: Please signal a conference specialist by pressing the star key followed by the star key. After today's remarks, there will be an opportunity for questions to be put in the Q&A box. If you have any questions, please feel free to ask. You may press star then 1 on your touch-tone phone to withdraw your request. Please note this.
Speaker Change: To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I'd now like to turn the conference over to Dennis McDaniel, Investor Relations Officer. Please go ahead.
Dennis E. McDaniel: And I'd like to turn... Investor Relations Officer, Hello, this is Dennis McDaniel at Cincinnati Financial. Thank you for joining us for our second quarter 2024 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, CINFIN.com slash investors.
Dennis E. McDaniel: 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 President and Chief Executive Officer Steve Spray. 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 Executive Chairman Steve Johnston, Chief Investment Officer Steve Celoria, Cincinnati Insurance's Chief Claims Officer Mark Shambo, and Senior Vice President of Corporate Finance Teresa Hoppe.
Speaker Change: Hello, this is Dennis McDaniel at Cincinnati Financial.
Speaker Change: Thank you for joining us for our second quarter 2024 earnings conference call.
Speaker Change: Late yesterday, we issued a news release on our results, along with our supplemental financial package, including our quarter-end investment portfolio.
Speaker Change: To find copies of any of these documents, please visit our investor website, ZenFen.com slash investors.
Speaker Change: The shortest route to the information is the quarterly results link in the navigation menu on the far left.
Speaker Change: On this call, you'll first hear from President and Chief Executive Officer Steve Spray and then from Executive Vice President and Chief Financial Officer Mike Sewell. After their prepared remarks, investors participating on the call may ask questions.
Speaker Change: At that time, some responses may be made by others in the room with us, including Executive Chairman Steve Johnston, Chief Investment Officer Steve Celoria, and Cincinnati Insurance's Chief Claims Officer Mark Shambo, and Senior Vice President of Corporate Finance, Teresa Hopper.
Dennis E. McDaniel: Please note that some of these matters to be discussed today are forward-looking, and before elected statements include 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 FCC. 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 has not reconciled the gap.
Speaker Change: Please note that some of these matters to be discussed today are forward-looking. These forward-looking statements include certain risks and uncertainties.
Speaker Change: With respect to these risks and uncertainties, we direct your attention to our news release and to our various filings with the SEC.
Speaker Change: Also, a reconciliation of non-GAAP measures was provided with the news release.
Speaker Change: Statutory accounting data is prepared in accordance with statutory accounting rules and therefore has not reconciled the gap.
Stephen Michael Spray: Now I'll turn the call over to Steve. Good morning, and thank you for joining us today to hear more about our results. We had a good quarter and first half of the year. In addition to our strong financial performance, recent travel to meet with agents reinforced my excitement about the future. Agents are quite enthusiastic about doing business with us, expressing our responsiveness as we answer the call both literally and figuratively to help them navigate this challenging insurance market.
Speaker Change: Now, I'll turn over the call to Steve.
Steven Justus Johnston: Good morning and thank you for joining us today to hear more about our results.
Steven Justus Johnston: We had a good quarter and first half of the year. In addition to our strong financial performance, recent travel to meet with agents reinforced my excitement about the future.
Steven Justus Johnston: Agents are quite enthusiastic about doing business with us, citing our responsiveness as we answer the call, both literally and figuratively, to help them navigate this challenging insurance market.
Stephen Michael Spray: While picking up the phone is part of our culture, the confidence we have in our expertise in Cincinnati's financial strength lets us continue growing profitably, delivering insurance solutions for our agents and their best clients. Net income of $312 million for the second quarter of 2024 included recognition of $112 million on an after-tax basis for the increase in fair value of equity securities still held. Non-GAAP operating income of $204 million for the second quarter was up $13 million from a year ago.
Steven Justus Johnston: While picking up the phone is part of our culture, the confidence we have in our expertise in Cincinnati's financial strength lets us continue growing profitably, delivering insurance solutions for our agents and their best clients.
Speaker Change: Net income of $312 million for the second quarter of 2024 included recognition of $112 million on an after-tax basis for the increase in fair value of equity securities still held.
Speaker Change: non-GAAP operating income of $204 million for the second quarter was up $13 million from a year ago.
Stephen Michael Spray: Investment income continued to grow nicely and contributed $17 million of the increase. The 98.5% second quarter 2024 property casualty combined ratio was 0.9 percentage points higher than the second quarter of last year and included a decrease of 0.8 points for catastrophe. That brought the first half combined ratio to 96.1%, a nice place to be as we head into the second half of the year.
Speaker Change: Investment income continued to grow nicely and contributed $17 million of the increase.
Speaker Change: The 98.5% second quarter 2024 property casualty combined ratio was 0.9 percentage points higher than the second quarter of last year and included a decrease of 0.8 points for catastrophe losses.
Speaker Change: That brought the first half combined ratio to 96.1%. A nice place to be as we head into the second half of the year.
Stephen Michael Spray: Typically, the end of the year tends to be better than the beginning, in part due to the catastrophe loss ratio averaging about two points better in the second half based on the past 10 years. For example, our 88.2% accident year 2024 combined ratio before catastrophe losses improved by 2.2 percentage points, compared with accident year 2023 for the second quarter, and was 0.7 points better on a six-month basis. Once again, overall reserve development for prior accident years was favorable, although it was 3.6 points lower than a year ago, as we continue to consider uncertainty regarding ultimate losses and remain prudent in our reserve estimates until longer-term loss cost trends become more clear.
Speaker Change: Typically, the end of the year tends to be better than the beginning, in part, due to the catastrophe loss ratio averaging about two points better in the second half based on the past ten years.
Speaker Change: Our 88.2% accident year 2024 combined ratio before catastrophe losses improved by 2.2 percentage points.
Speaker Change: Compared with Accident Year 2023 for the second quarter.
Speaker Change: and was 0.7 points better on a six-month basis.
Speaker Change: Once again, overall reserve development of prior acts in the years was favorable.
Speaker Change: Although it was 3.6 points lower than a year ago, as we continue to consider uncertainty regarding ultimate losses and remain prudent in our reserve estimates until longer term loss cost trends become more clear.
Stephen Michael Spray: We are entering the second half of the year with confidence and optimism, in addition to improved action in your results and an overall combined ratio for the first half of 2024 that was better than last year's first half. We are pleased with the measures, with other measures, regarding our operating profit. We have strong second quarter premium growth and believe it is profitable. We continue to use pricing segmentation by risk, plus average price increases, along with careful risk selection, to help improve our underwriting profitability. Those efforts, plus others, are bolstering our progress in managing elevated inflation effects on insured losses.
Speaker Change: We are entering the second half of the year with confidence and optimism. In addition to improved accident year results and an overall combined ratio for the first half of 2024 that was better than last year's first half,
Speaker Change: We are pleased with measures, with other measures, regarding our operating performance.
Speaker Change: We have strong second quarter premium growth and believe it is profitable growth.
Speaker Change: We continue to use pricing segmentation by risk, plus average price increases, along with careful risk selection to help improve our underwriting profitability.
Speaker Change: Those efforts, plus others, are bolstering our progress in managing elevated inflation effects on insured losses.
Stephen Michael Spray: Agencies representing Cincinnati Insurance produced another quarter of profitable business for us, and we continue to appoint additional agencies where we see appropriate expansion opportunities. Our underwriters continue to do excellent work as they emphasize retaining profitable accounts and managing ones that we determine have inadequate pricing based on our risk selection and pricing expertise. Estimated average renewal price increases for the second quarter were again at healthy levels, with commercial lines near the low end of the high single-digit percentage range. Access and Surplus Lines in the High Single-Digit Range, Personal Auto in the Low Double-Digit Range, and Homeover in the high single-digit range.
Speaker Change: Agencies representing Cincinnati Insurance produced another quarter of profitable business for us, and we continue to appoint additional agencies where we see appropriate expansion opportunities.
Speaker Change: Our underwriters continue to do excellent work as they emphasize retaining profitable accounts and managing ones that we determine have inadequate pricing based on our risk selection and pricing expertise.
Speaker Change: Estimated average renewal price increases for the second quarter were again at healthy levels with commercial lines near the low end of the high single-digit percentage range.
Speaker Change: Access and surplus lines in the high single-digit range, personal auto in the low double-digit range, and homeowner in the high single-digit range.
Stephen Michael Spray: Our consolidated property casualty net written premiums grew 14% for the quarter, including 12% growth in agency renewal premiums and 34% in new business. Next, I'll briefly highlight operating performance by insurance segment, focusing on second quarter premium growth and underwriting profitability compared with a year ago. Commercial lines grew net written premium 7% for the second quarter with a 99.1% combined ratio that increased by 2.2 percentage points and included prior accident year reserve development that was less favorable by 2.9%. Personal lines grew net written premiums 30%, including growth in middle market accounts. In addition to Cincinnati private client business for our agency's high network, its combined ratio was 106.9%.
Speaker Change: Our consolidated property casualty net written premiums grew 14% for the quarter, including 12% growth in agency renewal premiums and 34% in new business premiums.
Speaker Change: Next, I'll briefly highlight operating performance by insurance segment focusing on second quarter premium growth and underwriting profitability compared with a year ago.
Speaker Change: Commercial lines through net written premium 7% for the second quarter with a 99.1% combined ratio that increased by 2.2 percentage points and included prior accident year reserve development that was less favorable by 2.9 points.
Speaker Change: Personalize grew net written premiums 30%, including growth in middle market accounts in addition to Cincinnati private client business for our agency's high net worth clients.
Speaker Change: Its combined ratio was a hundred and six point nine percent.
Stephen Michael Spray: 0.7% percentage points better than last year. Despite an increase of 1.2 points from higher catastrophe losses, Access and Surplus Lines grew net written premiums by 15% and was also profitable with a combined ratio of 95.4%. Up 3.2 percentage points from the second quarter a year ago due to unfavorable reserve development. Both Cincinnati REIT and Cincinnati Global were again very profitable and continue to reflect our efforts to diversify risk and further improve income stability. Cincinnati REITs combined ratio for the second quarter of 2024 was an excellent 70.1%.
Speaker Change: 0.7 percentage points better than last year.
Speaker Change: Despite an increase of 1.2 points from higher catastrophe losses.
Speaker Change: Access and surplus lines grew net written premiums 15% and was also profitable with a combined ratio of 95.4%.
Speaker Change: Up 3.2 percentage points from second quarter a year ago due to unfavorable reserve development.
Speaker Change: Both Cincinnati REIT and Cincinnati Global were again very profitable and continue to reflect our efforts to diversify risk and further improve income stability.
Speaker Change: Cincinnati REITs combined ratio for the second quarter of 2024 was an excellent 70.1 percent.
Stephen Michael Spray: It grew net written premiums by 17%, bringing the overall six-month written premium for 2024 in line with 2023. Cincinnati Global's combined ratio was also excellent at 63.2%. However, while it grew net written premiums 2% for the first half of the year, second quarter premiums were down 18%, reflecting pricing discipline in a very competitive market.
Speaker Change: It grew net written premiums by 17%, bringing the overall six-month written premium for 2024 in line with 2023.
Speaker Change: Global. Cincinnati Global's combined ratio was also excellent at 63.2%.
Speaker Change: While it grew net written premiums 2% for the first half of the year, second quarter premiums were down 18%, reflecting pricing discipline in a very competitive market.
Stephen Michael Spray: Our life insurance subsidiary had an outstanding quarter, including net income of $24 million and operating income growth of 26%. Term life insurance earned premiums grew 2%. I'll conclude with our primary measure of long-term financial performance, the value-creation ratio. Our second-quarter 2024 VCR was 2.2%. Net income before investment gains or losses for the quarter contributed 1.6%.
Speaker Change: Our life insurance subsidiary had an outstanding quarter, including net income of $24 million and operating income growth of 26%.
Speaker Change: Journal Life Insurance earned premiums grew 2%.
Speaker Change: I'll conclude with our primary measure of long-term financial performance, the value creation ratio.
Speaker Change: Our second quarter, 2024 VCR, was 2.2%. Net income before investment gains or losses for the quarter contributed 1.6%.
Speaker Change: Higher overall valuation of our investment portfolio and other items contributed 0.6%.
Michael James Sewell: Higher overall valuation of our investment portfolio and other items contributed 0.6%. Now, Chief Financial Officer Mike Sewell will add his comments to highlight other parts of our financial performance. Thank you, Steve. And thanks to all of you for joining us today. Investment income continued to grow by 10% for the second quarter of 2024 compared with the same quarter in 2023. Dividend income was down 1% or $1 million for the quarter, primarily due to two unusual items that totaled approximately $2 million.
Michael James Sewell: Now Chief Financial Officer Mike Sewell will add his comments to highlight other parts of our financial performance.
Michael James Sewell: One was a holding with a June X dividend date in 2023 that moved to July 1st in 2024. The other was a holding that reduced its dividend rate by 53% after a spinoff transaction. Bond interest income grew 18% for the second quarter of this year. We again added fixed materials securities to our investment portfolio with net purchases totaling $771 million for the first six months of the year. The second quarter pre-tax average yield of 4.64% for the fixed maturity portfolio was up 30 basis points compared with last year. The average pre-tax yield for the total of purchased taxable and tax-exempt bonds during the second quarter of 2024 was 6.06%.
Michael James Sewell: Thank you, Steve, and thanks to all of you for joining us today. Investment income continued to grow, up 10% for the second quarter of 2024, compared with the same quarter in 2023.
Michael James Sewell: Dividend income was down 1% or $1 million for the quarter, primarily due to two unusual items that totaled approximately $2 million.
Michael James Sewell: One was a holding with a June ex-dividend date in 2023 that moved to July 1st in 2024.
Michael James Sewell: The other was a holding that reduced its dividend rate by 53% after a spinoff transaction.
Michael James Sewell: Bond interest income grew 18% for the second quarter of this year. We again added fixed maturity securities to our investment portfolio with net purchases totaling $771 million for the first six months of the year.
Michael James Sewell: The second quarter pre-tax average yield of 4.64% for the fixed maturity portfolio was up 30 basis points compared with last year.
Michael James Sewell: The average pre-tax yield for the total of purchased taxable and tax-exempt bonds during the second quarter of 2024 was 6.06 percent.
Michael James Sewell: Valuation changes in aggregate for the second quarter of 2024 were favorable for our equity portfolio and unfavorable for our bond portfolio. Before tax effects, the net gain was $149 million for the equity portfolio, partially offset by a net loss of $93 million for the bond portfolio. At the end of the quarter, the total investment portfolio net appreciated value was approximately $6.7 billion. The equity portfolio was in a net gain position of $7.4 billion, while the fixed maturity portfolio was in a net loss position of $700 million.
Michael James Sewell: Valuation changes in aggregate for the second quarter of 2024 were favorable for our equity portfolio and unfavorable for our bond portfolio.
Michael James Sewell: Before tax effects, the net gain was $149 million for the equity portfolio, partially offset by a net loss of $93 million for the bond portfolio.
Michael James Sewell: At the end of the quarter, total investment portfolio net appreciated value was approximately $6.7 billion.
Michael James Sewell: The equity portfolio was in a net gain position of $7.4 billion, while the fixed maturity portfolio was in a net loss position of $700 million.
Michael James Sewell: Cashflow continues to benefit from investment income in addition to higher bond yields. Cash flow from operating activities for the first six months of 2024 was $1.1 billion, up 33% from a year ago. I'll move on to expense management, where we always work to balance controlling expenses with making strategic investments in our business. The second quarter 2024 property casualty underwriting expense ratio was 0.5 points higher than last year.
Michael James Sewell: Cash will continue to benefit investment income in addition to higher bond yields.
Michael James Sewell: Cash flow from operating activities for the first 6 months of 2024 was $1.1 billion, up 33% from a year ago.
Michael James Sewell: I'll move on to expense management.
Michael James Sewell: Where we always work to balance controlling expenses with making strategic investments in our business.
Michael James Sewell: The second quarter of 2024, property casualty underwriting expense ratio was 0.5 percent points higher than last year, reflecting higher levels of profit-sharing commissions for agencies and employee-related expenses.
Michael James Sewell: Reflecting higher levels of profit sharing commissions for agencies on employee-related expenses. Next, let me comment on lost reserves, where our approach remains consistent and aims for net amounts in the upper half of the actuarially estimated range of net loss and lost expense reserves. As we do each quarter, we consider new information such as paid losses and case reserves. Then we update estimated ultimate losses and loss expenses by accident year and line of business.
Michael James Sewell: Next, let me comment on loss reserves, where our approach remains consistent and aims for net amounts in the upper half of the actuarially estimated range of net loss and loss expense reserves.
Michael James Sewell: As we do each quarter, we consider new information, such as paid losses and case reserves.
Michael James Sewell: Then, we updated estimated ultimate losses and loss expenses by accident year and line of business.
Michael James Sewell: For the first six months of 2024, our net addition to property casualty loss loss expense reserves was $578 million, including $506 million for the IB&R portion. During the second quarter, we experienced $40 million of property casualty net favorable reserve development on prior accident years that benefited the combined ratio by 1.9 percentage points. The commercial line segment saw overall favorable reserve development of $29 million.
Michael James Sewell: For the first six months of 2024, our net addition to property casualty loss loss expense reserves was $578 million, including $506 million for the IDNR portion.
Michael James Sewell: During the second quarter, we experienced $40 million of property casualty net favorable reserve development on prior accident years that benefited the combined ratio by 1.9 percentage points.
Michael James Sewell: The commercial line segment saw overall favorable reserve development of $29 million, driven by workers' compensation and commercial property, which more than offset the unfavorable development in commercial casualty.
Michael James Sewell: Although driven by workers' compensation and commercial property, which more than offset the unfavorable development in commercial casualty, commercial casualty was again the line of business having the largest amount of unfavorable reserve development, with a total of $28 million for the quarter, for less than 1% of that line's year-end 2023 reserve balance. We released reserves in some recent accident years and added reserves totaling $51 million in aggregate for accident years prior to 2021, including $30 million for 2018 through 2020.
Michael James Sewell: Commercial Casualty was again the line of business having the largest amount of unfavorable reserve development.
Michael James Sewell: With a total of $28 million for the quarter, or less than 1% of that line's year-end 2023 reserve balance.
Michael James Sewell: We released reserves in some recent accident years and added reserves totaling 51 million dollars in aggregate.
Michael James Sewell: for accident years prior to 2021, including $30 million for 2018 through 2020.
Michael James Sewell: Due to case incurred losses emerging at amounts higher than we expected. The unfavorable amounts reflects our slowing the release of IV&R reserves for some of those older accident years while adding to others, on an all lines basis by exiting year, net reserve development for the first six months of 2024 included favorable $269 million for 2023, favorable $36 million for 2022, favorable $17 million for 2021 and an unfavorable $182 million in aggregate for accident years prior to 2021 with commercial casualty, representing $167 million of the unfavorable $182 million.
Michael James Sewell: Due to case incurred losses emerging at amounts higher than we expected.
Michael James Sewell: The unfavorable amounts reflects our slowing the release of IVNR reserves for some of those older accident years while adding to others.
Michael James Sewell: On an all-lines basis by exiting year, net reserve development for the first six months of 2024 included
Michael James Sewell: favorable 269 million dollars for 2023
Michael James Sewell: Favorable $36 million for 2022.
Michael James Sewell: Favorable $17 million for 2021 and an unfavorable $182 million in aggregate.
Michael James Sewell: for accident years prior to 2021.
Michael James Sewell: With commercial casualty representing $167 million of the unfavorable $182 million.
Michael James Sewell: I'll conclude my comments with capital management highlights another area where we have a consistent long-term approach. We paid $125 million in dividends to shareholders during the second quarter of 2024. We also repurchased 395,000 shares at an average price per share of $116.33.
Michael James Sewell: I'll conclude my comments with the capital management highlights, another area where we have a consistent long-term approach.
Michael James Sewell: We paid $125 million in dividends to shareholders during the second quarter of 2024. We also repurchased 395,000 shares at an average price per share of $116.33.
Stephen Michael Spray: We think our financial flexibility and our financial strength are both in excellent shape; parent company cash and marketable securities at quarter end were nearly $5 billion, debt to total capital contributed continued to be under 10%, and our quarter end book value was at a record high $81.79 per share, with $12.8 billion of GAAP Consolidated Shareholders Equity, providing plenty of capacity for profitable growth of our insurance operation. Now I'll turn the call back over to you.
Michael James Sewell: We think our financial flexibility and our financial strength are both in excellent shape.
Michael James Sewell: Parent company cash and marketable securities at quarter end was nearly $5 billion. Debt to total capital contributed continued to be under 10%.
Michael James Sewell: And our quarter-end book value.
Michael James Sewell: was at a record high, $81.79 per share, with $12.8 billion of GAAP consolidated shareholders equity providing plenty of capacity.
Michael James Sewell: for profitable growth of our insurance operations.
Stephen Michael Spray: Thanks, Mike. Before we move on to questions, I'd like to share some additional observations based on my first few months as CEO. I've spoken with many of our agents and associates, and they share my high level of confidence in the future of this company. In the first six months of this year, we achieved a combined ratio of 96.1%.
Michael James Sewell: Now, I'll turn the call back over to Steve.
Steven Justus Johnston: Thanks Mike. Before we move on to questions, I'd like to share some additional observations based on my first few months as CEO .
Speaker Change: I've spoken with many of our agents and associates, and they share my high level of confidence in the future of this company. In the first six months of this year, we've achieved a combined ratio of 96.1%. That makes 12 and a half consecutive years of underwriting profit.
Stephen Michael Spray: That makes 12 and a half consecutive years of underwriting profit, a Core Loss Ratio that continues to improve, growth in net written premiums of 14%, with investment income up 13%. We've set the stage for 64 years of increasing dividends to shareholders.
Speaker Change: A core loss ratio that continues to improve, growth in net written premiums of 14% with investment income up 13%.
Speaker Change: We've set the stage for 64 years of increasing dividends to shareholders.
Stephen Michael Spray: In the most challenging market of my career, our balance sheet allows us to lean in and grow with our agents, and I'm really excited about where we're headed. As a reminder, with Mike and me today are Steve Johnston, Steve Saloria, Mark Shambo, and Theresa Hart. Jason, please open the call for questions. Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone.
Speaker Change: In the most challenging market of my career, our balance sheet allows us to lean in and grow with our agents, and I'm really excited about where we're headed.
Speaker Change: As a reminder, with Mike and me today are Steve Johnston, Steve Saloria, Mark Shambo, and Teresa Hoffer. Jason, please open the call for questions.
Speaker Change: Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we'll pause momentarily to assemble a roster.
Unknown Executive: University. To withdraw your question, please press the star. Time will pause.
Michael Wayne Phillips: The first question comes from Michael Phillips from Oppenheimer. Please go ahead. Thank you. Good morning.
Speaker Change: The first question comes from Michael Phillips from Oppenheimer. Please go ahead.
Michael James Sewell: I want to make sure, Mike, on your comments. I guess it flowed pretty quickly. I want to make sure I got the Accenture stuff right. It wasn't clear. The commercial capacity, when you were talking about releasing the recent Accenture and adding 51 for 2021 and prior, was that commercial capacity? Was that all on?
Speaker Change: Thank you. Good morning. I want to make sure, Mike, on your comments.
Michael Wayne Phillips: I guess it flowed pretty quickly. I want to make sure I got the Accenture stuff right. I wasn't clear. The commercial casualty, when you were talking about releases in recent Accenture years and added 51 for 2021 and prior, was that commercial casualty or was that all lines?
Michael James Sewell: That was for, thank you for the question; that was for commercial casualty only. Okay, okay, so your ad sounds like it's more for those 2020-2021 and prior, correct? That is exactly correct.
Speaker Change: That was for, thank you for the question, that was for commercial casualty only.
Speaker Change: Okay, okay, so your ad sounds like it's more for those 2020-2021 and prior, correct, for that line.
Stephen Michael Spray: Okay, and that's similar, I think, in 4Q, you took a bigger charge for the same, I don't know the exact same accuracy, but again, for the prior years, not so much for the, That's correct. Okay, so it sounds like then you're, so I guess you're not seeing so far or maybe you don't think you ever will kind of what we're seeing from some others so far this quarter of 2020 is starting to become a problem.
Speaker Change: That is exactly correct.
Speaker Change: Okay and that's similar I think in 4Q you took a bigger charge for the same vaccine, I don't know the exact same vaccines, but again for the for the prior years not so much for the recent ones.
Speaker Change: That's correct.
Speaker Change: Okay, so it sounds like then you're so I guess you're you're not seeing so far or maybe you don't think you ever will Kind of what we're seeing from some others so far this quarter of you know 2020 subsequent is starting to become a problem. You're not seeing that and maybe tell us Why you think you won't control it?
Stephen Michael Spray: You're not seeing that, and maybe you could tell us why you think you won't control it. Well, this is Steve, Mike, you know, I. First of all, I would just say, from my perspective, overall, there always seems to be movement in prior action here.
Steven Justus Johnston: Well, you know, this is Steve, Mike, you know, I, first of all, I would just say, from my perspective, overall, there always seems to be movement in prior accident year losses.
Stephen Michael Spray: Some develop better than expected, sometimes higher than expected, as you know. It can be different by segment, line of business, and certainly accident years. It's, as you know, reserving is not a perfect science. That being said,
Steven Justus Johnston: Some develop better than expected, sometimes higher than expected, as you know.
Speaker Change: It can be different by segment, line of business, and certainly accident years. As you know, reserving is not a perfect science. That being said...
Stephen Michael Spray: I couldn't be more confident in our process and the experienced team that we have that is setting those reserves and taking the approach that we do, comfortable with management's best estimate of ultimate losses here at the end of the second quarter. We've always had a track record, a long history of overall favorable development.
Speaker Change: I couldn't be more confident in our process and the experienced team that we have that are setting those reserves and taking the approach that we do.
Speaker Change: Comfortable with management's best estimate of ultimate losses here at the end of the second quarter. We've always had a track record, a long history of overall favorable development.
Stephen Michael Spray: Online Space, and in these most recent years of accident years. In any recent action here, I feel like we've always been very prudent and and realized there was there's not as much data there and just recognizing the uncertainty. And I think that uncertainty is still there. It's always gonna be there in those most recent accident years, but I think our actuaries... They look at that, and they take it into account, and I think one of the other benefits is that we're all here in one building.
Speaker Change: All Line Spaces.
Speaker Change: And in these most recent accident years.
Speaker Change: In any most recent action here, I feel like we've always been very prudent in realizing there's not as much data there.
Speaker Change: Just recognizing the uncertainty. And I think that uncertainty is still there, it's always going to be there in those most recent accident years, but I think our actuaries...
Speaker Change: They look at that, and they take it into account, and I think one of the other benefits is that we're all here in one building. I think that's something that sometimes gets underestimated, is that we are all here, and we are talking literally multiple times a day with pricing actuaries, with the reserving actuaries, and then...
Stephen Michael Spray: I think that's something that sometimes gets underestimated. We are all here and we talk literally multiple times a day with pricing actuaries, with the reserving actuaries, and then with the business, and I think we're quick to act on things that we see in reserving and we're just as quick to act when we see things in underwriting. You know, commercial umbrella.
Speaker Change: What the business is.
Speaker Change: and I think we're quick to act to things that we see on reserving and we're just as quick to act when we see things in underwriting. You know, commercial umbrella.
Stephen Michael Spray: I'm really peeling it back here now, Mike, but, you know, commercial umbrella, we noticed in the second quarter of 22, if you recall, just some unfavorable results there. Our actuaries were quick to act and take the appropriate action on the reserves. And then our underwriting was just as quick to act as well. And We reduced limits, we took terms and conditions action based on the complete size, let's say on the auto. Certain classes of business and certain jurisdictions.
Speaker Change: I'm really peeling it back here now, Mike, but, you know, commercial umbrella, we noticed in the second quarter of 22, if you recall, just some unfavorable results there. Our actuaries were quick to act.
Speaker Change: and take the appropriate action on the reserves. And then our underwriting was just as quick to act as well. And...
Speaker Change: We reduced limits, we took terms and conditions action based on
Speaker Change: the fleet size let's say on the auto
Stephen Michael Spray: And I think we jumped all over that. And now, through six months of this year, commercial umbrella is running in the mid 90s, and things are looking very favorable there. Okay. Steve, thank you for all that.
Speaker Change: Certain classes of business, certain jurisdictions.
Speaker Change: And I think we jumped all over that. And now through six months of this year, commercial umbrella is running in the mid 90s, and things are looking very favorable there as well.
Stephen Michael Spray: That's helpful. I guess the second question then is staying with commercial casualty. It looks like your comments on kind of the renewal pricing for that line from 1Q to 2Q are about the same. I think you said around high single digits.
Speaker Change: Okay, Steve, thank you for all that. That's helpful. Um, I guess the second question then is staying with commercial casualty. It looks like your comments on
Speaker Change: We cover the renewal pricing for that line from 1Q to 2Q, or about the same, like you said, around high single digits. I want to confirm that, and maybe anything you want to share, kind of directionally for commercial casualty in the recent quarters, how things might be moving around?
Stephen Michael Spray: I want to confirm that and maybe anything you want to share on kind of directionally for commercial casualty in the recent quarters, how things might be moving around. Yeah, Mike. Yeah, the high single digit on commercial casualty is correct. That was consistent from the first quarter. I would say the commercial marketplace, you know, we're a package writer, and the commercial marketplace, I would say, is rational and orderly. But my view is we still see runway for increased rates in the commercial markets.
Speaker Change: Yeah, the high single digit on commercial casualty is correct, and that was consistent from the first quarter. I would say the commercial marketplace, you know, we're a package writer, and the commercial marketplace, I would say, is rational and orderly.
Speaker Change: But my view is we still see runway for increased rate in the commercial marketplace.
Stephen Michael Spray: Now, the other thing I always have a caveat about is what we're really focusing on and focusing here at the company in Cincinnati is segmentation and pricing these risks, risk by risk, and just the tools that we have. The predictive analytics we use to price the product is, you know, the average just doesn't tell the full story, as you can understand, and just the underwriting teams are just executing excellently on our segmentation strategy. Okay, Steve, thank you. Congratulations on your first quarter at the helm.
Speaker Change: The predictive analytics we use to price the product is, you know, the average just doesn't tell the full story, as you can understand, and just the underwriting teams are just executing excellent on our segmentation strategy.
Speaker Change: Okay Steve, thank you, congrats and congrats on your first quarter at the helm. I appreciate it.
Stephen Michael Spray: I appreciate it. Yeah, thank you, Mike. Much appreciated. The next question comes from Gregory Peters from Raymond James. Please go ahead. Well, good morning, everyone.
Steven Justus Johnston: Yeah, thank you, Mike. Much appreciated.
Speaker Change: The next question comes from Gregory Peters from Raymond James. Please go ahead.
Charles Gregory Peters: I guess sort of building about how you view your competitive positioning from a price perspective in a broader commercial book of business. It seems like growth. Moderator.
Charles Gregory Peters: Well, good morning, everyone. I guess sort of building on the commentary on pricing and casualty,
Charles Gregory Peters: Curious about how you view your competitive positioning from a price perspective in a broader commercial book of business.
Speaker Change: It seems like the growth rates are beginning or have moderated except for perhaps property. So any added perspective on that would be insightful.
Stephen Michael Spray: Yeah, you know, I think, again, Greg Weed, I think I've got this right on your question, but insurance, from our perspective, is a local business, and it varies by state. It varies by the size of the account. Like I said, we're a package underwriter. We compete with national carriers. We compete with the smaller regional mutuals, and where our real focus is is just focusing on what we do and building those deep relationships with those local agents.
Speaker Change: Yeah, you know, I think, again,
Greg Lee: Greg Lee
Speaker Change: I think I've got this right on your question but you know insurance from our perspective is a local business and it it varies by state it varies by size of account like I said we're a package underwriter we compete with national carriers we compete with the smaller regional mutuals
Speaker Change: And where our real focus is, is just focusing on what we do and building those deep relationships with those local agents. And when we're showing up, and like I said, my opening remarks, when we answer the call,
Stephen Michael Spray: And when we show up, and like I said in my opening remarks, when we answer the call, we're confident in our risk selection, confident in our ability to price that product. And we're confident in the relationships we have with our agents, because we've built those deep relationships that I just don't worry about growth. We're continuing to hire.
Speaker Change: We're confident in our risk selection, confident in our ability to price that product, and we're confident in the relationships we have with our agents because we've built those deep relationships that I just don't worry about.
Stephen Michael Spray: New agencies across the country, like I said, when we see opportunity, we'll continue to do that going forward. But you know, it's all about the discipline and the risk selection and the pricing. And then we let it come to us.
Speaker Change: Growth. We're continuing to appoint...
Speaker Change: New agencies across the country, like I said, when we see opportunity, we'll continue to do that going forward.
Stephen Michael Spray: You know, look, if you look at new business and commercial lines, through the first half of this year, we were up over 30%. You know, the first half of last year, we were down considerably; our risk selection and our pricing have not changed. What's changed is the environment that we're operating in, and those risks came to us. We didn't change our pricing discipline one bit, and the beauty is that we can see that risk by risk. Line by line.
Speaker Change: But, you know, it's all about the discipline and the risk selection and the pricing, and then we let it come to us. If you look at new business and commercial lines through the first half, up over 30 percent.
Speaker Change: You know, the first half of last year, we were down considerably. Our risk selection and our pricing has not changed.
Speaker Change: What's changed is the environment that we're operating in, and those risks came to us. We didn't change our pricing discipline one bit, and the beauty is, is we can see that risk by risk.
Michael James Sewell: Yeah, fair enough. I'll pivot to, and I know you provided some detail in your opening remarks. I'm focused on the expense ratio. You know, it was up, I think there were some commission pressures, or maybe you can just go back and talk to us about the moving parts inside the expense ratio and, you know, the current level, maybe on a six-month basis, sort of the run... (inaudible) Greg, this is Mike. Thanks for the question.
Speaker Change: Line by line.
Speaker Change: Yeah, fair enough. I pivot to, and I know you provided some detail in your opening remarks. I'm focused on the expense ratio.
Speaker Change: Knows Up. I think there are some commission pressures or maybe you can just go back and talk to us about
Speaker Change: The Moving Parts Inside the Expense Ratio.
Speaker Change: And, you know, are, at the current level, maybe on a six-month basis, sort of the run rate we should think about going forward, or are there some unusual non-recurring items inside there that we should exclude?
Michael James Sewell: On a year-to-date basis, as I mentioned, it did go up a little bit. Our combined ratio for the year was down a little bit, so the profit-sharing commissions for the agencies did go up. As we do invest for the future with hiring folks and so forth and other items, employee-related expenses are up a little bit. But when I look down the line, I do see where total dollars are going up, but the rate of our earned premiums is outpacing the expenses as they increase, which is what I'm trying to do, what we're trying to do. So I think we're making good progress. I look at some of the expense categories, and actually they're down a little bit in percentage, even though total dollars are up.
Speaker Change: Greg, this is Mike. Thanks for the question. You know, on a year-to-date basis,
Greg Lee: As I mentioned, it did go up a little bit. Our combined ratio for the year was down a little bit, so the profit-sharing commissions for the agencies...
Greg Lee: It does go up.
Greg Lee: You know, as we do invest for the future, you know, with hiring folks and so forth and
Greg Lee: Other items, employee related expenses is up a little bit. But when I look down the line I do see where total dollars are going up. But the the rate of our earn empréndives are out pacing.
Speaker Change: The expenses as he increased, which is what I'm trying to do, or we're trying to do.
Greg Lee: So I think we're making good progress. I look at some of the expense categories and actually they're down a little bit on a percentage.
Michael James Sewell: So seeing it right now at 30.1 on a year-to-date basis, as we've been saying over the years, we've been trying to get below a 30, and so we're going to keep doing that. But right now, it's a little bit elevated probably from where I'd like it to be for all the right reasons of really paying the commissions to the agency. Okay, makes sense. Thanks for the answers.
Greg Lee: Even though total dollars are up. So, you know, seeing it right now with the 30.1 on a year to date basis.
Greg Lee: As we've been saying over the years, we've been trying to get below a 30, and so we're going to keep doing that, but right now it's a little bit elevated probably from where I'd like it to be for all the right reasons of really paying the commissions to the agencies.
Unknown Executive: Congratulations on your first quarter. Out of the gate. Thank you very much, Greg. I really appreciate it.
Steven Justus Johnston: Okay, makes sense. Thanks for the answers. Congratulations on your first quarter. Out of the gate, Steve.
Charles Lederer: The next question comes from Charles Lederer from Citigroup; please go ahead. Okay, thanks. Good morning. Excuse me.
Steven Justus Johnston: Thank you very much, Greg. I really appreciate it.
Speaker Change: The next question comes from Charles Lederer from Citigroup. Please go ahead.
Charles Lederer: Hey, thanks. Good morning. Excuse me.
Charles Lederer: I guess, can you talk about how mature those pre-2021 accident years for general liability are at this point? Can you repeat that question again, please? Yeah, I guess how mature are those accident years, like the 2018 to 20 accident years in your guys' view? If you could give some color around that.
Charles Lederer: I guess, can you talk about how mature those pre-2021 accident years for general liability are at this point?
Charles Lederer: Can you repeat that question again, please? Yeah, I guess. How mature are those accident years, like the 2018 to 20 accident years, in your guys' view, if you could give color around that?
Michael James Sewell: You know, I think we feel really good about the reserves and, you know, first of all, the overall reserves with where we're at, but it was the 2020 to 2018 years that I mentioned, $30 million that was unfavorable versus the more recent accident years. You know, if I think about the commercial casualty reserves, some of the things that actually make me feel pretty good about it. When you look at the first six months of this year, we have been increasing our IV&R ratio, which I think we've kind of indicated, about what we're adding for IV&R.
Speaker Change: Yeah, I think we feel really good about the about the reserves and the
Speaker Change: First of all, the overall reserves with where we're at.
Speaker Change: But it was the 2020 to 2018.
Speaker Change: News, and the other two years that I mentioned, 30 million that was unfavorable versus the more recent accident years. If I think about the commercial casualty reserves,
Speaker Change: If some of the things that...
Speaker Change: Actually makes me feel pretty good about it.
Speaker Change: When you look at the first six months of this year, we have been increasing our IV&R ratio.
Speaker Change: which I think we've kind of indicated. And so for commercial casualty, we're about 10 percentage points.
Michael James Sewell: Currently, then when we were at the pre-pandemic full years of 2017 through 2019, so just having the extra 10 percentage points, I think that's paying off for us. If I do look at through the end of the second quarter, our incurred loss, and loss adjustment expense ratio, you know, on average, if I take the 22-23 year for commercial casualty, those picks are a little bit higher than those pre-pandemic years of 2017 through 2019. So I think our ultimate picks are better.
Speaker Change: of what we're adding for IV&R.
Speaker Change: currently than when we were at the pre-pandemic full years of 2017 through 2019. So just having the extra 10 percentage points, I think that's paying off for us.
Speaker Change: If I do look at through the end of the second quarter, our incurred loss, loss adjustment expense ratio, you know, on average, if I take the 22-23 year for commercial casualty,
Speaker Change: Bank. Those pics
Speaker Change: are a little bit higher than those pre-pandemic years of 2017 through 2019.
Michael James Sewell: And then, you know, I think Steve mentioned it, you know, with the confidence that I think that we all have, you know, with our processes and so forth. If I look back over the last 15 years, I probably could have kept going; I think my spreadsheet was running out, but there were only two commercial casualty accident years that did not develop favorably during that time period from the original estimated ultimate picks at 12 months.
Speaker Change: So, I think our ultimate picks are higher, and then, you know, I think Steve mentioned it, you know, with the confidence I think that we all have.
Steven Justus Johnston: You know, with our process and so forth. If I look back over the last 15 years, I probably could have kept going. I think my spreadsheet was running out, but there was only two commercial casualty accident years that have not developed favorably.
Speaker Change: during that time period from the original estimated ultimate picks at 12 months. So
Michael James Sewell: So I'm very confident in our, as Steve is, with our process, the people doing it, you know, et cetera, et cetera. That's helpful. When you talked about the 10 points higher for IVNR, is that for all lines? Just want to make sure I understand. Not all lines, all accident years. That is actually, that is for the commercial casualty when I'm looking at it by accident year or calendar year. Okay, yeah, so for all you accent ears, okay.
Steven Justus Johnston: I'm very confident with our, as Steve is, with our process, the people doing it, you know, et cetera, et cetera. So I hope that's the color that you're looking for.
Speaker Change: That's helpful. When you talked about the 10 points higher of IVNR, is that that's for all lines? Just want to make sure I understand. Not all lines, all accident years?
Speaker Change: That is actually, that is for the commercial casualty when I'm looking at that by accident year or calendar year.
Charles Lederer: I guess on the personal line side, can you talk about, I guess, the divergence and, I guess, new business? Or is there, or can you bifurcate the new business trend and personal lines between middle market and net worth? I know both were strong, but there's a lot of great stuff there. So just just curious.
Speaker Change: Okay. Yeah. So for all X in years.
Speaker Change: I guess, on the personal line side, can you talk about, I guess, the divergence in, I guess, new business, or can you bifurcate the new business trend and personal lines between middle market and net worth? I know both were strong, but there's a lot of weight.
Stephen Michael Spray: Yeah, it moves around a little bit, Charlie. But right now, both are growing, as you can see; both are growing in a very healthy manner. Right now, the middle markets are outpacing high net worth a little bit, and private client a little bit. That bounces around from quarter to quarter. We're also growing our E&S personal lines opportunity. I think the real key, from my perspective, and from all of our perspectives, is that, you know, we have become, for our agents, a premier rider of purse lines, both in the middle market and in private client or high net worth. And that just gives our agents a tremendous amount of confidence.
Speaker Change: There, so just curious.
Speaker Change: Yes, it moves around.
Speaker Change: A little bit, Charlie, but right now, both are growing, as you can see, both are growing.
Speaker Change: in a very healthy manner. Right now, middle markets is outpacing high net worth a little bit or the private client a little bit. That bounces around from quarter to quarter. We're also growing our E&S personal lines opportunity. I think the real key
Speaker Change: From my perspective, and from all of our perspectives, is that
Stephen Michael Spray: We can We can be a solution for a bigger percentage of their business. We've got the sophisticated pricing that we need in the middle market. You know, for the comparative radar world, and then we've got the expertise in the private client; now you add an ENS up, where we can provide capacity for our agents and the insureds in their communities. And I've never seen a personalized market like this. I think it's generational.
Speaker Change: You know, we have become, for our agents, a premier...
Speaker Change: Writer of Purse Lines, both in middle market and in private client or high net worth.
Speaker Change: And that just gives our agents a tremendous amount of confidence. We can be a solution for a bigger percentage of their business. We've got the sophisticated pricing that we need in the middle market.
Speaker Change: You know, for the comparative radar world, and then we've got the expertise in the private client. Now you add an ENS option.
Speaker Change: that where we can provide capacity for our agents and the insureds in their communities.
Speaker Change: I've never seen a personalized market like this. I think it's generational, and I think we are really taking advantage of the opportunity to, again, help our agents.
Stephen Michael Spray: And I think we are really taking advantage of the opportunity to, again, help our agents and help the policyholders in their community. We are open for business. We're confident in our pricing on a prospective basis, which is the way we always look at it. A great leadership team.
Speaker Change: Help the policyholders and their community. We are open for business. We're confident in our pricing On a prospective basis, which is the way we always look at it
Stephen Michael Spray: We've got tremendous expertise throughout the organization. So I really believe that the purse line right now is transformational for Cincinnati Insurance. Great, thank you.
Speaker Change: Insurance. We've got a great leadership team. We've got tremendous expertise throughout the organization. So I really believe that the purse lines right now is transformational for Cincinnati Insurance.
Speaker Change: Great, thank you.
Michael Zaremski: Thank you. The next question comes from Mike Zaremski from BMO. Hey, thanks. I'm sticking with personal lines, and hopefully, you'll appreciate it.
Speaker Change: Thank you.
Speaker Change: The next question comes from Mike Zaremski from BMO. Please go ahead.
Michael Zaremski: I'm an analyst. I focus on more of the negative than the positive sometimes, but a personal auto, [inaudible] There was some, you know, PYB there, and anything notable in personal auto we should think about? Mike, thanks for the question. I've always found you to be extremely positive.
Michael Zaremski: Thanks. I'm sticking with personal lines and hopefully you appreciate it. I'm an analyst, so I focus on more of the negative than positive sometimes. But personal auto,
Speaker Change: the margins,
Michael Zaremski: There was some, you know, PYD there. Anything notable that's in personal auto we should think about?
Speaker Change: Mike, thanks for the question. I've always found you to be extremely positive.
Stephen Michael Spray: Yeah, that, you know, obviously, personal auto, short tail line, the adverse development that you're seeing there is all in bodily injury or physical damage in personal autos is performing very well. The, I will say again, Sertel Line, the vast majority of that adverse development is in the actual year 2023, and there's a little bit in the 2022. And, you know, if you think about this as well, we are a market for the middle market and high net worth, like I was saying.
Speaker Change: Unknown Speaker Yeah, that, you know, obviously, personal auto short tail line, the adverse development that you're seeing there is all in bodily injury, or physical damage in personal autos is
Speaker Change: Performing very well.
Speaker Change: I will tell you again, the short-tail line, the vast majority of that adverse development is in accident year 2023, and there's a little bit in 2022.
Speaker Change: And, you know, if you think about this as well, you know, we are a market for middle market and high net worth, like I was saying, but as our high net worth book continues to grow and be a bigger portion of our overall personalized business, we're getting all kinds of diversification.
Stephen Michael Spray: But as our high net worth book continues to grow and be a bigger portion of our overall personalized business, we're getting all kinds of diversification, positive effects from that. And one of those is in personal auto. When you have a high net worth, it's driven by property, and less so by the middle market, which is more driven by auto, and less in the property piece. So that mix is shifting as well.
Speaker Change: Positive effects from that. And one of those is in, you know, in personal auto. When you have high net worth, it's driven by property and less so by auto. Middle market, more driven by auto and less in the
Speaker Change: in the property piece. So that mix is shifting as well. And I think you're seeing that in a favorable way in our overall results.
Stephen Michael Spray: And I think you're seeing that in a favorable way in our overall result. We continue to get rate earnings into that book, that personal auto book, for quite some time now, and that continues into 2024. And I don't see an end in sight to rate earnings coming into that book either.
Speaker Change: We continue to get, we've had great.
Speaker Change: earning into that book, that personal auto book, for quite some time now, and that continues into 2024. And I don't see an end in sight of rate coming into that book either.
Michael Zaremski: That's helpful. Now, switching gears to workers' comp. Unknown Attendee, Unknown Speaker, Unknown Speaker, Unknown Speaker, Pricing Perspective, but what would you be waiting for, maybe patiently, to say like we want to maybe start?
Speaker Change: That's helpful. Switching gears to workers' comp.
Speaker Change: We can see that Cincy is underweight, Tom, and probably for a couple of reasons. I don't think we have to elaborate on it, but the results are...
Speaker Change: Unknown Speaker ...fairly tremendous. I don't know if you want to comment on what's going on there this quarter, or this year to date, actually. But I know the market is soft from a ...
Tom: Pricing perspective but you know what what are you what would you be waiting for maybe patiently that to say like we want to maybe start leaning in to workers comp
Stephen Michael Spray: leaning in to workers comp in a growth way. Yeah, we, Yeah, thanks, Mike. You know, we have a strong appetite for workers' comp. 10 or 12 years ago, we really got serious about all levels of comp, claims, loss control, risk selection, especially pricing. We are looking to grow comp when we think that we can get the right rate on a risk-adjusted basis. And you're right. I thought that this deterioration in the rate would show up more in the results, quite frankly, several years ago, and it hasn't. But I think it's such a long tailwind, and it historically has such volatility to it.
Tom: in a growth way.
Tom: Yeah, we...
Speaker Change: Yeah thanks Mike. You know we have a we have a strong appetite for workers comp. You know 10 or 12 years ago we really got serious about
Speaker Change: All levels of comp, claims, loss control, risk selection, especially pricing. We are looking to grow comp when we think that we can get the right rate on a risk-adjusted basis. And you're right. I thought that this deterioration in the rate would show up more so in the results.
Speaker Change: Quite frankly, several years ago, and it hasn't, but I think it's such a long tail line and it historically has such volatility to it.
Stephen Michael Spray: We just think being prudent in our risk selection and in our pricing there and not chasing that is a prudent thing to do for the long term. And when we can write work comp at the right rate today on business that we like, we write it. And we're looking for it, and we're talking to our agents about it. It's just, we don't, we just don't see the rate environment right now as attractive. Again, I understand it's performing well on a calendar year basis. But we just think of the long pole; being extra vigilant on workers' compensation is proven. I got it.
Speaker Change: We just think being prudent in our risk selection and our pricing there and not to chase that is a prudent thing to do for the long term.
Speaker Change: and when we can write work comp at the right rate today on business that we like, we're writing it.
Speaker Change: And we're looking for it, and we're talking to our agents about it.
Speaker Change: It's just, we don't, we just don't see the rate environment right now as attractive. Again, I understand it's performing well on a calendar year basis.
Speaker Change: We just think over the long pole, being extra vigilant on workers' compensation is prudent.
Michael Zaremski: And maybe sticking quickly on comp, and one of your peers who also has a disproportionate amount of kind of trade construction exposure, I know different regions, but I know you all have very strong practice there too, has said that they're seeing a bit of a change in comp frequency. I don't know, just curious throwing it out there if you all are seeing any of that as well in your portfolio. No, Mike, I can't say that we've seen that it's been pretty stable on that.
Speaker Change: Got it. And maybe sticking quickly in comp.
Speaker Change: And one of your peers, who also has a disproportionate amount of kind of trade construction exposure in different regions, but you all have a very strong practice there too, has said that there
Speaker Change: a bit of a change in comp frequency. I don't know, I'm just curious throwing it out there if you all are seeing any of that as well, in your portfolio.
Speaker Change: No, Mike, I can't say that we've, we've seen that it's been pretty stable on that front.
Michael Zaremski: Okay, and I guess just lastly, you might have covered some of this, but on just the overall commercial line. Marketplace Competitive, you know, I know pricing has been kind of flattish. University, in a corridor, for a number of quarters now.
Speaker Change: Okay, and I guess just lastly, you might have covered some of this, but on just the overall commercial lines.
Speaker Change: Marketplace competitiveness. You know I know pricing was kind of has been flattish in a quarter or for a number of quarters now.
Michael Zaremski: Q, do you all sense that... Marketplace is kind of stable at current rates, or do you sense there's kind of a bit of an upwards momentum? [inaudible] Yeah, no, Mike, as far as the rate environment, you know, we've been stacking quarter on quarter on quarter of additional rates throughout every major line in commercial lines, except for workers' compensation. But I would say that the commercial market, and again, it all depends on the size of the account. It depends on the state that you're in.
Speaker Change: Do you all sense that the marketplace is kind of stable at current rates? Or do you sense there's kind of a bit of an upwards trajectory to the kind of the pricing environment? Transcribed by https://otter.ai
Speaker Change: University, or downwards.
Speaker Change: Yeah, no, Mike, as far as the rate environment, you know, we are, we've been stacking quarter on quarter on quarter of additional rate throughout every major line in commercial lines, except for workers' compensation.
Speaker Change: But I would say that the commercial market, and again, it all depends on the size of the account. It depends on the state that you're in, but just generally speaking,
Stephen Michael Spray: But, just generally speaking, I would characterize the commercial marketplace as responsible and orderly. There are moving parts, You see it in other carriers' reports. There's uncertainty out there. And I think that uncertainty has certainly promoted the continued, good growth that you're seeing across, you know, across all lines and commercial lines. And I don't I don't see a market, a softening market in commercial lines. You'll hear little pockets of different things, different lines of business, different, maybe a different class here and there, but just generally speaking. All lines, all classes, countrywide.
Speaker Change: I would characterize the commercial marketplace as
Speaker Change: Aspiring, As Responsible, and Orderly. There are moving parts. You see it in other carriers' reports. There's uncertainty out there, and I think that uncertainty has certainly promoted a continued growth.
Speaker Change: great that you're seeing across, you know, across all lines and commercial on. And I I don't
Speaker Change: I don't see a market, a softening market, in commercial lines. You'll hear little pockets of different things, different lines of business, different, maybe a different class here and there, but just generally speaking
Michael Zaremski: I think from Cincinnati's perspective, it's orderly and right. Yeah, my pleasure. The next question comes from Grace Carter from Bank of America. Please go ahead. Hi, good morning.
Speaker Change: All lines, all classes, countrywide. I think from Cincinnati's perspective, it's orderly and rational.
Speaker Change: Thank you.
Grace Helen Carter: Looking at the commercial auto line for the past few quarters in a row, there's been a favorable year-over-year change in the underlying loss ratio as well as modest reserve releases. I was just wondering where y'all think that line stands since it's been such a difficult line for the industry over the past several years and if you feel like the worst of the challenges are in the past now and just trying to consider any sort of maybe differences in experience in the primary auto liability versus maybe what you've seen in the umbrella lines. Thank you, Grace, and good morning.
Speaker Change: Yeah, my pleasure.
Speaker Change: The next question comes from Grace Carter from Bank of America. Please go ahead.
Grace Helen Carter: Hi, good morning. Looking at the commercial auto line for the past few quarters in a row, there's been
Speaker Change: A favorable year-over-year change in the underlying loss ratio, as well as a
Grace Helen Carter: Modest Reserve Releases. I was just wondering where y'all think that line stands since it's been such a difficult line for the industry over the past several years and if you feel like the worst of the challenges are in the past now and just trying to consider any sort of maybe differences in experience in the the primary auto liability versus maybe what you've seen in the umbrella lines. Thank you.
Stephen Michael Spray: Yeah, commercial auto has, we feel, again, really good about where we are there. You know, you look back into 2016 and 2017, and we were having some real challenges in commercial auto. It's kind of the same story I was talking about with Umbrella earlier.
Speaker Change: Thank you, Grace, and good morning. Yeah, commercial auto has, we feel, again, feel really good about where we are there. You know, you look back into 2016 and 2017, and we were having some real challenges in commercial auto. It's kind of the same story I was talking about with Umbrella earlier.
Stephen Michael Spray: We recognized it, our actuaries acted upon it quickly, and then we acted very quickly. I think, personally, I think we were maybe a little ahead of the market on commercial auto. We got it in a good spot, but then we hit the pandemic, and inflation did what it did. And so we had to, you know, we had to get some more rates in that book to keep up with inflation. But that book was in, that commercial auto book was in good shape.
Speaker Change: We recognize it. Our actuaries acted upon it quickly, and then we acted very quickly. I think, personally, I think I may be a little ahead of the market on commercial auto.
Speaker Change: We got it in a good spot, but then we hit the pandemic and inflation did what it did. And so we had to, you know, we had to get some more rate in that book to keep up with inflation. But that book was in, that commercial auto book was in good shape.
Stephen Michael Spray: Quite frankly, from the actions we took in 2016 and 2017, and I think it also, to really answer your question, to kind of peel that back, is if you look at the mix that we write at Cincinnati, you know, one of the analysts just a minute ago mentioned, you know, it's it's, there's a construction book, we've got manufacturing, retail, wholesale. We are not big into trucking or transportation risks. I think you see a lot more volatility there.
Speaker Change: Quite frankly, from the actions we took in 2016 and 2017. And I think it also, to really answer your question too, kind of peel that back.
Speaker Change: is, if you look at the mix that we write at Cincinnati, you know, one of the analysts just a minute ago mentioned, you know, it's, it's, there's a construction book, we've got a manufacturing, retail, wholesale.
Speaker Change: We are not big into trucking or transportation risks. I think you see a lot more volatility there.
Stephen Michael Spray: We've just managed that book, I think, really well, and feel really good about where we are with it today. So I think it's risk selection. I think it's just the makeup of our book. We're a package writer. We don't write monoline auto. We don't write trucking or transportation.
Speaker Change: We've just managed that book, I think, really well and feel really good about where we are with it today. So I think it's risk selection. I think it's just the makeup of our book. We're a package writer. We don't write in monoline auto. We don't write trucking or transportation. And I think that's what you're seeing.
Stephen Michael Spray: And I think that's what's going on. Thank you. And Cynthia Tenku, I think the walk year over year for the ENS underlying loss ratio mentioned a decrease in the contribution from IBNR and an increase in the case incurred. I think that that's a bit different than what we've seen in the other segments. Could you go over maybe what's going on there and why it would look different than the other segments? Grace, I'm sorry you were coming in and out here.
Cynthia Tenku: Thank you. And Cynthia Tenku, I think the walk year over year for the EMS underlying loss ratio mentioned a decrease in the contribution from IBNR and an increase in the case incurred. I think that that's a bit different than what we've seen in the other segments. Could you go over maybe what's going on there and why it would look different than the other segments? Thank you.
Speaker Change: Hey Grace, I'm sorry you were coming in and out there. I apologize. Could you restate that?
Grace Helen Carter: I apologize. Could you restate that? Yeah, sure. In the TINQ, when it talks about the walk and the underlying loss ratio in ENS, year over year, it mentions a decrease in IBNR and an increase in case incurred. I think that that was different than what it mentioned for the other segments. Could you just go over some of the elements as to why that looks different relative to the other segments?
Grace Helen Carter: Yeah, sure. In the in the TINQ, when it talks about the the walk and the underlying loss ratio in E&S, year over year, it mentions a decrease in IBNR and increase in case incurred. I think that that was different than the
Speaker Change: out what it mentioned for the other segments. Could you just go over kind of the elements as to why that looks different relative to the other segments? Thank you.
Stephen Michael Spray: I think, Grace, if I'm answering your question correctly here, we're looking at all the data. We're looking at paid, we're looking at case. We're looking at things that are happening inside the book for management's view to the actuaries, and there's going to be noise quarter to quarter. I think looking at it over a longer period, 12 months, or maybe even a little longer, will probably be more instructive. And I hope I, I hope I answered. Reporter, Thank you. Thank you, Grace.
Speaker Change: I think, Grace, what I think, if I'm answering your question, I think it's important to understand
Speaker Change: Incorrectly here is we're looking at
Speaker Change: We're looking at all the data. We're looking at paid. We're looking at case.
Speaker Change: We're looking at things that are happening inside the book for management view to the actuaries and there's going to be noise quarter to quarter. I think looking at it.
Speaker Change: Over a longer period, 12 months or maybe even a little longer, we'll probably be more instructive.
Speaker Change: And I hope I answered that for you.
Speaker Change: You did. Thank you.
Meyer Shields: The next question comes from Meyer Shields from KBW. Please go ahead. Great, thanks. I'm going to apologize.
Chris: Thank you, Grace.
Chris: The next question comes from Meyer Shields from KBW. Please go ahead.
Stephen Michael Spray: Also, but by that I mean Exposure to Publicly Traded. Can you update us on the non-public regionals that you compete with are... Responding to elevated social inflation and elevated property losses and what opportunity that implies for growth? Yeah, yeah, thanks, Mayor. I would say... From my perspective, I just don't, this might sound kind of crazy. I just don't pay a lot of attention to what others are doing around us.
Meyer Shields: I'm going to apologize for being an analyst also, but by that I mean just like an overexposure to publicly traded companies.
Meyer Shields: Can you update us on.
Meyer Shields: How the non-public regionals that you compete with are responding to elevated social inflation and elevated property losses and what opportunity that implies for growth.
Meyer Shields: Yeah, uh, yeah, thanks, Mayor. I would say...
Meyer Shields: From my perspective, I just don't, and this might sound kind of crazy, I just don't pay a lot of attention to what others are doing around us. I'm more focused on what we're doing
Stephen Michael Spray: I'm more focused on what we're doing, risk by risk, town by town, agent by agent, and how we compete, and sometimes we run into situations where we lose this account, or we write this account. So I think it would be too broad to generalize.
Meyer Shields: Risk by risk.
Speaker Change: Town-by-Town, Agent-by-Agent, and How We Compete, and sometimes we run into situations where we lose this account or we write this account, so I think it would be too broad to generalize. I would say to you this on...
Stephen Michael Spray: I would say to you, Personal lines, we're seeing more, a tumultuous time for all those markets, particularly here in the Midwest. And I just think we're seeing more and more opportunities in the middle market purse line space, just on an exponential basis, just the number of quotes. And the opportunities that we're seeing are, It's just up considerably, and there's something, you know, there's something to that. And I think a big part of that is that we've got the balance sheet, like I mentioned in my comments earlier, we're showing up to the agencies with, you know, 12.7 billion of gap equity looking to grow, our doors are open, we're confident in the way we price that business.
Speaker Change: personal lines is probably foreseeing more
Speaker Change: A tumultuous time from all those markets.
Speaker Change: Particularly here in the Midwest, and we're seeing more and more opportunities in the middle market purse line space, just on an exponential basis, just the number of quotes.
Speaker Change: and the opportunities that we're seeing.
Speaker Change: is
Speaker Change: It's just up considerably and there's something, you know, there's something to that. And I think a big piece of that is that we've got the balance sheet, like I mentioned in my comments earlier, we're showing up to the agencies.
Speaker Change: with, you know, $12.7 billion of gap equity, looking to grow. Our doors are open. We're confident in the way we price that business. The terms and conditions that we're putting
Stephen Michael Spray: The terms and conditions that we're putting on Homeowner business are as strong today as I've ever seen them in my career. And I think that they'll stick, particularly, you know, wind and hail deductibles, roof schedules, to combat the continued severe convective storms. And I think those things, along with reinsurance, are putting pressure on some of those markets that you mentioned, and it's creating opportunity for Cincinnati.
Speaker Change: and Homeowner Business are as strong today as I've ever seen them in my career, and I think that they'll stick, particularly, you know, wind and hail deductibles, roof schedules.
Speaker Change: to combat the continued severe convective storms. And I think those things, along with reinsurance, are putting pressure on some of those markets that you mentioned, and it's creating opportunity for Cincinnati.
Meyer Shields: Related question. How did we think about the opportunity to appoint agents? eventually impacting the value that C and the brand. Is there a point where that becomes dilutive? I could thank you.
Speaker Change: Okay, fantastic. That's very helpful. Related question.
Speaker Change: How?
Speaker Change: Did we think about the opportunity to appoint agents eventually impacting the value that agents see in the brand? Is there a point where that becomes dilutive?
Stephen Michael Spray: [inaudible] I would say no. I would say the key and the key message that we're sending and that we're executing on, and we're doing an excellent job of this, is with Cincinnati. It's more about the quality of the agent and the professionalism of the local agent that we're doing business with than it is about the number. Now, we want to do business with as few agents as possible, but as many as necessary. We've got roughly 2,100 agency relationships across the country. By any measure, that is extremely exclusive as far as distribution goes. I'm not saying this is a good goal at all.
Speaker Change: That's it. Thank you.
Speaker Change: [inaudible]
Speaker Change: I would say no. I would say the key and the key message that we're that I'm sending and that we're executing on and we're doing an excellent job of this is with Cincinnati
Speaker Change: It's more about the quality of the agent and the professionalism of the local agent that we're doing business with than it is about the numbers. Now, we want to do business with as few agents as possible, but as many as necessary.
Speaker Change: We've got roughly 2,100 agency relationships across the country. By any measure, that is extremely exclusive as far as distribution goes. I'm not saying this is a goal at all, but if we doubled our distribution...
Stephen Michael Spray: But if we doubled our distribution... on a relative basis, we would still have an exclusive contract compared to any of our peers that I can see in the industry. And again, I'm not saying we're doubling our agency plan, but I am telling you that we have plenty of opportunity to continue to appoint professional agents across the country. And you'll see us continue to do that. I can show you some areas here in Ohio.
Speaker Change: On a relative basis, we would still have an exclusive contract compared to any of our peers that I can see in the industry. And again, I'm not saying we're doubling our agency plant, but I am telling you that we have plenty of opportunity to continue
Speaker Change: to appoint professional
Speaker Change: agents across the country, and you'll see us continue to do that. I can show you areas here in Ohio. If you looked at the number of agencies we have in the community, you would say it's diluted to franchise value. But
Stephen Michael Spray: If you look at the number of agencies we have in the community, you would say it's diluted to the franchise value. But, in essence, it's not, and we're continuing to grow with those agencies.
Speaker Change: But in essence, it's not, and we're continuing to grow with those agencies. Agencies run in different circles, policyholders. When we show up, our local field rep.
Stephen Michael Spray: Policyholders, when we show up, our local field rep just creates excitement when there's an ease of doing business. There's value to our contract. And, Yeah, so we will not dilute franchise value by the number of agents we appoint. But we would dilute it as if we started working with agencies that don't meet our, I'd say, professional standards. Again, if you have a question, please press the star then.
Speaker Change: It just creates excitement when there's an ease of doing business, there's a value to our contract.
Speaker Change: Yeah.
Speaker Change: We will not dilute franchise value by the number of agents we have put in. We would dilute it as if we started working with agencies that don't meet our, I would say, professional standards.
Speaker Change: Again, if you have a question, please press star, then 1.
Unknown Executive: Next question. Charles Lederer, Follow-up from Charles Lederer: Hey, thanks. I was just going to ask about the Cincinnati RE and Cincinnati Global commentary. I think you mentioned more competitiveness in Cincinnati Global. I'm just wondering what you're referencing. And I guess if you could give some color on the growth in Cincinnati RE and I guess how that book has maybe changed this year versus last year. Yeah, Charlie, Steve Spray again.
Speaker Change: Our next question comes from Charles Lederer, excuse me, the follow-up from Charles Lederer from Citigroup. Please go ahead.
Charles Lederer: Hey, thanks. I was just going to ask on the Cincinnati read and to say global commentary.
Charles Lederer: I think you mentioned more competitiveness in Cincinnati Global. I'm just wondering what you're referencing and I guess if you could give some color on the growth in Cincinnati RE and I guess how that book has maybe changed this year versus last year.
Stephen Michael Spray: You know, every line of business in CGU is growing except for direct, in fact, or what many would refer to as shared and layered. And I think you're hearing that out in the marketplace as well, there's just more capital that's come into that large property space. And it's putting pressure on CGU, they're remaining, you know, they're executing on the same underwriting and pricing discipline that we are here at Cincinnati Insurance. And they're just noticing the difficulty and finding the opportunities to grow that directed back business but every other line of business.
Charles Lederer: Yeah, Charlie, Steve Sprague again.
Charlie: You know, every every line of business.
Charlie: and CGU is growing except for direct-in-fact.
Charlie: or what many would refer to as shared and layered. And I think you're hearing that out in the marketplace as well, is there's just more capital that's come into that.
Charlie: Large Property space, and it's putting pressure on CGU. They're remaining, you know, they're executing on the same underwriting and pricing discipline that we are here at Cincinnati Insurance.
Charlie: They're just noticing the difficulty in finding the opportunities to grow that direct-in-fact business. But every other line of business.
Stephen Michael Spray: [inaudible] The first six months of the year in CGU is up. Now, Cincinnati REIT, you know, just to, you know, we think we're in an enviable position there as well, and that it's an allocated capital model, we did not set up a separate company, they do not have their own balance sheet, they're writing on Cincinnati insurance paper. What we ask of Cincinnati REIT is just to try to peg the capital that's needed for each risk that they write, and then that they get a hurdle rate on that, that is an attractive return on a risk adjusted basis for us, or they do not have to deploy the capital, there is no pressure in Cincinnati REIT to grow, but they are growing, you know, I think nicely, and we're looking at that more over the long pole, you know, they'll be more opportunistic in that arena than say maybe we can so much in Cincinnati insurance.
Charlie: Through
Charlie: The first six months of the year in CGU is up.
Charlie: So
Speaker Change: Reed. You know, just to, you know, we think we're in an enviable position there as well, and that it's an allocated capital model. We did not set up a separate company. They do not have their own balance sheet. They're writing on...
Speaker Change: Cincinnati Insurance Paper. What we ask of Cincinnati REIT is just to try to peg the capital that's needed for each risk that they write and then that they get a hurdle rate.
Speaker Change: Unknown Speaker on that, that is an attractive return on a risk adjusted basis for us, or they do not have to deploy the capital. There is no pressure in Cincinnati REIT to grow, but they are growing.
Speaker Change: I think nicely, and we're looking at that more over the long pole. They'll be more opportunistic in that arena than say maybe we can so much at Cincinnati Insurance.
Speaker Change: You look at the combined ratio there. It's been spectacular. They're profitable, inception to date, since we spun up. Cincinnati REITs, they've changed their mix.
Speaker Change: a bit over time, particularly in property cat, property retro. So they're able to react pretty quickly on these things.
Speaker Change: You know, I think our runway for growth with Cincinnati RE is very solid too.
Speaker Change #100: Thanks, guys.
Charlie: Thank you, Charlie.
Charlie: This concludes our question and answer session. I would like to turn the conference back over to Steve Spray for any closing remarks.
Stephen Michael Spray: Thank you, Jason. Thank you for joining us today. We look forward to speaking with all of you again on the third quarter call.
Speaker Change #102: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Speaker Change #103: , , , , , , , ,
Speaker Change #103: [inaudible]
Stephen Michael Spray: And, you look at the combined ratio there, it's been spectacular. They're, they're profitable from inception to date since we spun up Cincinnati REITs. They've changed their mix a bit over time, particularly in property cat property retro, so they're able to react pretty quickly on these things and I think our, I think our runway for growth with Cincinnati re is very solid too. Thanks, guys. Thank you, Charlie.
Speaker Change #104: Good morning and welcome to the Cincinnati Financial second quarter 2024 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
Speaker Change #104: After today's remarks, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I'd now like to turn the conference over to Dennis McDaniel, Investor Relations Officer. Please go ahead.
Stephen Michael Spray: This concludes our question and answer session. I would like to turn the conference back over to Steve Spray for any closing remarks. Thank you, Jason.
Stephen Michael Spray: Thank you for joining us today. We look forward to speaking with all of you again on the third quarter call. Conference is now, Thank you for attending today's presentation. ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? [inaudible] Good morning and welcome to the Cincinnati Financial second quarter 2024, All participants will be enlisted on only, Need assistance? Please signal a conference specialist by pressing the star key followed by the bell. After today's remarks, there will be an opportunity for questions. You may press star then 1 on your touch tone phone. To withdraw your question, please press star then 1.
Speaker Change #104: Hello, this is Dennis McDaniel at Cincinnati Financial.
Speaker Change #105: Thank you for joining us for our second quarter 2024 earnings conference call.
Dennis E. McDaniel: Please note this. I'd now like to turn the call over to our Investor Relations Officer, Dennis McDaniel at Cincinnati Financial. Thank you for joining us for our second quarter 2024 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, centenn.com slash investors.
Speaker Change #106: Late yesterday, we issued a news release on our results, along with our supplemental financial package, including our quarter-end investment portfolio.
Speaker Change #106: To find copies of any of these documents, please visit our investor website, ZenFen.com slash investors.
Dennis E. McDaniel: 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 President and Chief Executive Officer Steve Spray, and then from Executive Vice President and Chief Financial Officer Mike Sewell. After their prepared remarks, investors participating on the call may ask questions.
Speaker Change #106: The shortest route to the information is the quarterly results link in the navigation menu on the far left.
Speaker Change #107: On this call you'll first hear from President and Chief Executive Officer Steve Spray and then from Executive Vice President and Chief Financial Officer Mike Sewell. After their prepared remarks investors participating on the call may ask questions.
Stephen Michael Spray: At that time, some responses may be made by others in the room with us, including Executive Chairman Steve Johnston, Chief Investment Officer Steve Celoria, and Cincinnati Insurance's Chief Claims Officer Mark Shambo, and Senior Vice President of Corporate Finance Teresa Hopper. Please note that some of these matters to be discussed today are forward-looking, and before elected statements include 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.
Speaker Change #108: At that time, some responses may be made by others in the room with us, including Executive Chairman Steve Johnston, Chief Investment Officer Steve Celoria, and Cincinnati Insurance's Chief Claims Officer Mark Shambo, and Senior Vice President of Corporate Finance, Teresa Hopper.
Speaker Change #108: Please note that some of these matters to be discussed today are forward-looking. These forward-looking statements include certain risks and uncertainties.
Speaker Change #108: With respect to these risks and uncertainties, we direct your attention to our news release and to our various filings with the SEC.
Stephen Michael Spray: 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 has not reconciled the gap. Now I'll turn over the call to Steve.
Speaker Change #108: Also, a reconciliation of non-GAAP measures was provided with the news release.
Speaker Change #108: Statutory accounting data is prepared in accordance with statutory accounting rules and therefore has not reconciled the gap.
Stephen Michael Spray: Good morning, and thank you for joining us today to hear more about our results. We had a good quarter and first half of the year. In addition to our strong financial performance, recent travel to meet with agents reinforced my excitement about the future. Agents are quite enthusiastic about doing business with us, praising our responsiveness as we answer the call both literally and figuratively to help them navigate this challenging insurance market. While picking up the phone is part of our culture, the competence we have and our expertise in Cincinnati's financial strength let us continue growing profitably, delivering insurance solutions for our agents and their best
Speaker Change #108: Now I'll turn over the call to Steve.
Steve: Good morning and thank you for joining us today to hear more about our results.
Steve: We had a good quarter and first half of the year. In addition to our strong financial performance, recent travel to meet with agents reinforced my excitement about the future.
Steve: Agents are quite enthusiastic about doing business with us, citing our responsiveness as we answer the call, both literally and figuratively, to help them navigate this challenging insurance market.
Steve: While picking up the phone is part of our culture, the confidence we have in our expertise in Cincinnati's financial strength lets us continue growing profitably, delivering insurance solutions for our agents and their best clients.
Stephen Michael Spray: Net income of $312 million for the second quarter of 2024 included recognition of $112 million on an after-tax basis for the increase in fair value of equity securities still held. Non-GAAP operating income of $204 million for the second quarter was up $13 million from a year ago. Investment income continued to grow nicely and contributed $17 million of the increase.
Speaker Change #110: Net income of $312 million for the second quarter of 2024 included recognition of $112 million on an after-tax basis for the increase in fair value of equity securities still held.
Speaker Change #110: non-GAAP operating income of $204 million for the second quarter was up $13 million from a year ago.
Speaker Change #110: Investment income continued to grow nicely and contributed $17 million of the increase.
Stephen Michael Spray: The 98.5% second quarter 2024 property casualty combined ratio was 0.9 percentage points higher than the second quarter of last year and included a decrease of 0.8 points for catastrophe losses. That brought the first half combined ratio to 96.1%, a nice place to be as we head into the second half of the year.
Speaker Change #110: The 98.5% second quarter 2024 property casualty combined ratio was 0.9 percentage points higher than the second quarter of last year.
Speaker Change #110: and included a decrease of 0.8 points for catastrophe losses.
Speaker Change #110: That brought the first half combined ratio to 96.1 percent.
Stephen Michael Spray: Typically, the end of the year tends to be better than the beginning, in part due to the catastrophe loss ratio averaging about two points better in the second half, based on the past 10 years. Has the 88.2% accident year 2024 combined ratio before catastrophe losses improved by 2.2 percentage points? compared with accident year 2023 for the second quarter and was 0.7 points better on a six-month basis. Once again, overall reserve development of prior acts in the years was favorable, although it was 3.6 points lower than a year ago, as we continue to consider uncertainty regarding ultimate losses and remain prudent in our reserve estimates until longer-term loss cost trends become more clear.
Speaker Change #110: A nice place to be as we head into the second half of the year.
Speaker Change #110: Typically, the end of the year tends to be better than the beginning, in part, due to the catastrophe loss ratio averaging about two points better in the second half, based on the past ten years.
Speaker Change #110: Our 88.2% accident year 2024 combined ratio before catastrophe losses improved by 2.2 percentage points.
Speaker Change #110: Compared with accident year 2023 for the second quarter and was 0.7 points better on a six-month basis.
Speaker Change #110: Once again,
Speaker Change #110: Overall reserve development of prior acts in the years was favorable.
Speaker Change #110: Although it was 3.6 points lower than a year ago, as we continue to consider uncertainty regarding ultimate losses and remain prudent in our reserve estimates until longer term loss cost trends become more clear.
Stephen Michael Spray: We are entering the second half of the year with confidence and optimism, in addition to improved action in your results and an overall combined ratio for the first half of 2024 that was better than last year's first half. We are pleased with the measures, with other measures regarding our operating profit. We have strong second quarter premium growth and believe it is profitable. We continue to use pricing segmentation by risk, plus average price increases along with careful risk selection to help improve our underwriting profitability. Those efforts, plus others, are bolstering our progress and managing elevated inflation effects on insured losses. Agencies representing Cincinnati Insurance produced another quarter of profit.
Speaker Change #110: We are entering the second half of the year with confidence and optimism. In addition to improved accident year results and an overall combined ratio for the first half of 2024 that was better than last year's first half.
Speaker Change #110: We are pleased with other measures regarding our operating performance.
Speaker Change #110: We have strong second quarter premium growth and believe it is profitable growth.
Speaker Change #110: We continue to use pricing segmentation by risk, plus average price increases, along with careful risk selection to help improve our underwriting profitability.
Speaker Change #110: Those efforts, plus others, are bolstering our progress in managing elevated inflation effects on insured losses.