Q1 2025 Cincinnati Financial Corp Earnings Call
Operator: Good morning, ladies and gentlemen.
Good morning, ladies and gentlemen.
Operator: Thank you for standing by for the Cincinnati Financial Corporation first quarter 2025 earnings conference call. Please stay connected.
Speaker Change: Thank you for standing by for the Cincinnati Financial Corporation first quarter 2025 earnings Conference call.
Operator: This conference will begin in the next two minutes.
Please stay connected this conference will begin in the next two minutes.
Operator: Ladies and gentlemen, thank you for standing by for the Cincinnati Financial Corporation conference call.
Speaker Change: Ladies and gentlemen, thank you for standing by for the Cincinnati Financial Corporation Conference call. The conference is expected to begin at 11 O. Two thank you.
Operator: The conference is expected to begin at 11.02. Thank you.
Speaker Change: [music].
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Operator: Good day and welcome to the Cincinnati Financial Corporation first quarter 2025 earnings conference call. All participants will be in the listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
Speaker Change: Good day and welcome to the Cincinnati Financial Corporation first quarter 2025 earnings Conference call.
Speaker Change: All participants will be in the listen only mode.
Speaker Change: Should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad. to withdraw your question, please press star then two. Please note, this event is being recorded.
Speaker Change: After todays presentation, there will be an opportunity to ask questions.
Speaker Change: To ask a question you May press Star then one on your telephone keypad.
Speaker Change: To withdraw your question. Please press Star then two.
Speaker Change: Please note this event is being recorded.
Dennis Mcdaniel: I would now like to turn the conference over to Dennis McDaniel, Investor Relations Officer. Please go ahead.
Speaker Change: I would now like to turn the conference over to Dennis Mcdaniel Investor Relations Officer. Please go ahead.
Dennis Mcdaniel: Hello, this is Dennis McDaniel at Cincinnati Financial. Thank you for joining us for our first quarter 2025 earnings conference call. Like 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, investors.zimpen.com. The shortest route to the information is the quarterly results section near the middle of the investor overview page.
Speaker Change: Hello. This is Dennis Mcdaniel Cincinnati financial Thank you for joining us for our first quarter 2025 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: Copies of any of these documents please visit our investor website investors <unk> Dot com.
Speaker Change: The shortest rapidly information is the quarterly results section near the middle of the Investor overview page.
Dennis Mcdaniel: On this call, you'll first hear from President and Chief Executive Officer Steve Sprague, 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: 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.
Speaker Change: After their prepared remarks investors participating on the call may ask questions.
Dennis Mcdaniel: At that time, some responses may be made by others in the room with us, including Executive Chairman Steve Johnston, Chief Investment Officer Steve Soloria, and Cincinnati Insurance's Chief Claims Officer Mark Schambeau, and Senior Vice President of Corporate Finance Teresa Hopper.
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, So L'oreal and Cincinnati Insurance's, Chief claims officer, Mark Shambaugh, and senior Vice President of corporate Finance Theresa Hopper.
Dennis Mcdaniel: I think that the some of the matters to be discussed today are forward looking. These forward-looking statements involve certain risks and uncertainties. With respect to these risks and uncertainties, we direct your attention to our news release and to our various filings with the SEC. Also, a reconciliation of non-GAAP measures was provided with the news release. Statutory accounting data is prepared in accordance with statutory accounting rules and therefore is not reconciled to GAAP.
Speaker Change: Please note that some of the matters to be discussed today are forward looking.
Speaker Change: These forward looking statements involve certain risks and uncertainties with.
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 is not reconciled to GAAP.
Stephen Spray: Now I'll turn over the call to Steve. Good morning and thank you for joining us today to hear more about our results. The first quarter of 2025 had its share of challenges, from the wildfires in California to freezing and flooding across the plains to wind and water in the Midwest and East Coast. Almost every area of the country was impacted by a weather-related catastrophe this quarter. While catastrophe losses can dampen earnings on a short-term basis, we know they present an opportunity for our claims service to shine and reinforce the noble purpose of our business. Our claims professionals again demonstrated the value of a Cincinnati policy by helping policyholders recover from damaged homes and businesses.
Steve Spray: Now I'll turn it over the call to Steve.
Steve Spray: Good morning, and thank you for joining us today to hear more about our results.
Steve Spray: The first quarter of 2025 had its share of challenges from the wildfires in California to freezing and flooding across the plains to wind and water in the Midwest and East coast. Almost every area of the country was impacted by weather related catastrophe this quarter.
Steve Spray: While catastrophe losses can dampen earnings on a short term basis, we know they presented opportunity for claim service to shine and reinforced the noble purpose of our business.
Steve Spray: Our claims professionals again demonstrated the value of a Cincinnati policy by helping policyholders recover from damage to homes and businesses.
Stephen Spray: I'm proud of the way they have responded, with prompt and personal service in handling each claim with care and empathy. The effects of these catastrophes offset otherwise profitable results from our insurance operations and strong investment income that continue to grow at a double-digit percentage pay. As I look deeper into our results for the quarter, I see several areas of strong performance.
Steve Spray: Proud of the way they have responded with pulp and personal service and handling each claim with care and empathy.
Steve Spray: The effects of these catastrophes offset otherwise profitable results from our insurance operations and strong investment income that continues to grow at a double digit percentage pace.
Steve Spray: As I look deeper into our results for the quarter I see several areas of strong performance.
Stephen Spray: I remain confident in our long-term plans and our ability to execute on our proven strategy. In addition to growing investment income, property casualty premiums continued to increase at a nice pace and included strong renewal prices. Our Commercial Lines insurance segment produced a superb combined ratio of 91.9%, continuing its steady improvement over the past three years. Our excess and surplus lines also had an outstanding quarter, including a combined ratio below 90%.
Steve Spray: I remain confident in our long term plans and our ability to execute on our proven strategy.
Steve Spray: In addition to growing investment income property casualty premiums continued to increase at a nice pace.
Steve Spray: And included strong renewal pricing.
Steve Spray: Our commercial lines insurance segment produced a superb combined ratio of 91, 9%.
Steve Spray: Continuing its steady improvement over the past three years.
Steve Spray: Our excess and surplus lines also had an outstanding quarter, including a combined ratio below 90%.
Stephen Spray: In terms of consolidated results on our income statement, we reported a net loss of $90 million for the first quarter of 2025, including recognition of $56 million on an after-tax basis for the decrease in fair value of equity securities still held. It also included a non-GAAP operating loss of $37 million, a swing of $309 million from a year ago. The change was driven by a $356 million increase in after-tax catastrophe losses. Our 113.3% first quarter 2025 property casualty combined ratio was 19.7 percentage points higher than the first quarter of last year, including an increase of 19.1 points for catastrophe loss.
Steve Spray: In terms of consolidated results on our income statement, we reported a net loss of $90 million for the first quarter of 2025, including recognition of $56 million on an after tax basis for the decrease in fair value of equity Securities still held.
Steve Spray: It also included a non-GAAP operating loss of $37 million, a swing of $309 million from a year ago.
The change was driven by a $356 million increase in after tax catastrophe losses.
Steve Spray: Our 113, 3% first quarter 2025 property casualty combined ratio was 19 seven percentage points higher than the first quarter of last year.
Steve Spray: Including an increase of $19 one points for catastrophe losses.
Stephen Spray: Our 90.5% accident year 2025 combined ratio before catastrophe losses improved by 0.6 percentage points. compared with action at year 2024 for the first quarter. Without the effects of reduced premiums from reinstating reinsurance treaties. Related to the California wildfires, it would have improved an additional 2 percentage points. During the first quarter of 2025, our Catastrophe Reinsurance Program responded as intended for a large event. The estimated first quarter recovery from our primary property catastrophe reinsurance treaty for the wildfires was $429 million, based on our estimate of gross losses at the end of the quarter. Our consolidated property casualty net written premiums grew 11% for the quarter, including 14% growth in agency renewal premiums and 11% in new business premiums. We were satisfied with premium growth for the quarter, even with the unfavorable effect of the reinstatement premiums for our Property Catastrophe Reinsurance Treaty.
Steve Spray: Our 95% accident year 2025, combined ratio before catastrophe losses improved by 060 0.6 percentage points.
Steve Spray: Paired with accident year 2024 for the first quarter.
Steve Spray: Without the effects of reduced premiums from reinstating reinsurance treaties.
Steve Spray: Related to the California wildfires it would have improved an additional two percentage points.
Steve Spray: During the first quarter of 2025 architecture for your reinsurance program responded as intended for a large event.
Steve Spray: The estimated first quarter recovery from our primary property catastrophe reinsurance treaty for the wildfires was $429 million based on our estimate of gross losses at the end of the quarter.
Steve Spray: Our consolidated property casualty net written premiums grew 11% for the quarter, including 14% growth in agency renewal premiums and 11% in new business premiums.
Steve Spray: We were satisfied with premium growth for the quarter, even with the unfavorable effect of the reinstatement premiums for our property catastrophe reinsurance Treaty Rs.
Stephen Spray: Our estimate of the net effect of all reinstatement premiums reduced first quarter 2025 premiums by $52 million. Slowing growth of consolidated property casualty net written premiums by about 2 percentage point.
Steve Spray: Our estimate of the net effect of all these statement premiums reduced first quarter 2025 premiums by $52 million slowing growth of consolidated property casualty net written premiums by about two percentage points.
Stephen Spray: Our objective is profitable premium growth and it is supported by various efforts. Our underwriters focus on pricing and risk segmentation on a policy by policy basis. as they make risk selection decisions. Combining that with average price increases should help us continue to improve our underwriting profitability. Estimated average renewal price increases for most lines of business during the first quarter were slightly lower than the fourth quarter of 2024. Commercial lines in total remained near the low end of the high single-digit percentage range and excess and surplus lines remained near the high end of that range. Our Purse Line segment included both personal auto and homeowner in the low double-digit range with personal auto approaching the low end of that range.
Steve Spray: Our objective is profitable premium growth and it is supported by various efforts.
Steve Spray: Our underwriters focus on pricing and risk segmentation on a policy by policy basis.
Steve Spray: As they make risk selection decisions.
Steve Spray: Combining that with average price increases should help us continue to improve our underwriting profitability.
Estimated average renewal price increases for most lines of business during the first quarter were slightly lower than the fourth quarter of 2024.
Steve Spray: Commercial lines in total remained near the low end of the high single digit percentage range.
Steve Spray: And excess and surplus lines remain near the high end of that range.
Steve Spray: Our personal lines segment included both personal auto and homeowner in the low double digit range with personal auto approaching the low end of that range.
Stephen Spray: New business produced by agencies representing Cincinnati Insurance again contributed to premium growth. We continue the healthy pace of appointing agencies where we identify appropriate expansion opportunities consistent with our long-term growth strategy.
Steve Spray: New business produced by agencies represent representing Cincinnati insurance.
Steve Spray: Again contributed to premium growth, we continue to healthy pace of appointing agencies, where we identify appropriate expansion opportunities consistent with our long term growth strategy.
Stephen Spray: I'll briefly comment on performance by insurance segment, highlighting premium growth and underwriting profitability compared with a year ago. Commercial lines grew net written premiums 8% with an excellent 91.9% combined ratio that improved by 4.6 percentage points, including 2.6 points from lower catastrophe loss. Postal lines grew net written premiums 13%, including growth in middle market accounts and Cincinnati private clients.
Steve Spray: I'll briefly comment on performance by insurance segment, highlighting premium growth and underwriting profitability compared with a year ago.
Steve Spray: Commercial lines grew net written premiums, 8% with an excellent 91, 9% combined ratio improved by four six percentage points, including two six points from lower catastrophe losses.
Steve Spray: Personal lines grew net written premiums, 13%, including growth in middle market accounts and Cincinnati private client.
Stephen Spray: Its combined ratio was 151.3%, 57.4 percentage points higher than last year, primarily due to an increase of 49.9 points from higher catastrophe loss. In addition, the effect of reinstatement premiums added approximately 8 points to the combined ratio before catastrophe loss. The $64 million of reinstatement premiums included $63 million for our homeowner line of business and reduced personal line's premium growth by 11 full points. Excess and surplus lines grew net written premiums 15% with a very profitable combined ratio of 88.3%. An improvement of 3.6 percentage points compared with a year ago.
Steve Spray: Its combined ratio was $151.
Steve Spray: 3%.
Steve Spray: <unk> 57, four percentage points higher than last year, primarily due to an increase of 49 nine points from higher catastrophe losses.
Steve Spray: In addition, the effect of reinstatement premiums added approximately eight points to the combined ratio before catastrophe losses.
Steve Spray: The $64 million of reinstatement premiums included $63 million for our homeowner line of business and reduced personal lines premium growth by 11 four points.
Steve Spray: Excess and surplus lines grew net written premiums, 15% with a very profitable combined ratio of 88, 3%.
Steve Spray: An improvement of three six percentage points compared with a year ago.
Stephen Spray: Both Cincinnati REI and Cincinnati Global experienced significant impacts from the California wildfires this quarter. resulting in an underwriting loss for Cincinnati Re and reducing Cincinnati Global's underwriting profit. Cincinnati regroup first quarter 2025 net written premiums 26% including an estimated favorable six percentage points from the $12 million net effect of reinstatement premiums related to the wildfires. It had a 137.4% combined ratio, which included 63.9 percentage points from catastrophe loss. $103 million of catastrophe losses Cincinnati reported for the quarter included $104 million for the wildfire. Cincinnati Global's combined ratio was 95.8% for the first quarter, 26 percentage points higher than last year, driven by an increase of 23.4 points from higher catastrophe losses, including $20 million for the wildfire.
Steve Spray: Both Cincinnati re and Cincinnati global experienced significant impacts from the California wildfires this quarter.
Steve Spray: Resulting in an underwriting loss for Cincinnati re and reducing Cincinnati Global's underwriting profit.
Steve Spray: Cincinnati re grew first quarter 2025, net written premiums, 26%, including an estimated favorable six percentage points from the $12 million net effect of reinstatement premiums related to the wildfires.
Steve Spray: It had 137, 4% combined ratio, which included 63 nine percentage points from catastrophe losses.
Steve Spray: $103 million of catastrophe losses, Cincinnati re we reported for the quarter included $104 million for the wildfires.
Steve Spray: Cincinnati Global's combined ratio was 95, 8% for the first quarter 'twenty six percentage points higher than last year, driven by an increase of 23 four points from higher catastrophe losses, including $20 million for the wildfires.
Stephen Spray: Its net written premiums decreased 9% from a year ago due to lower direct and facultative property premiums reflecting underwriting discipline in the face of a softening market.
Steve Spray: It's net written premiums decreased 9% from a year ago due to lower direct and facultative property premiums, reflecting underwriting discipline in the face of a softening market.
Stephen Spray: Our life insurance subsidiary continued to help temper earnings volatility that can occur in the property casualty industry with its 11% improvement in net income while growing earned premiums by 1%.
Steve Spray: Our life insurance subsidiary continued to help temper earnings volatility that can occur in the property casualty industry with its 11% improvement in net income while growing earned premiums by 1%.
Stephen Spray: I'll conclude with our primary measure of long-term financial performance, the value creation ratio. Our first quarter 2025 VCR was negative 0.5%. While that is a disappointing short-term result, it's important to remember that we've always emphasized that performance over the long term is the main focus of this measure. Net income before investment gains or losses for the quarter contributed negative 0.3 percent. Slightly lower overall valuation of our investment portfolio and other items contributed negative 0.2%.
Steve Spray: I'll conclude with our primary measure of long term financial performance the value creation ratio.
Steve Spray: Our first quarter 2025, VCR was negative <unk>, 5%.
Steve Spray: Well that is a disappointing short term result, it's important to remember that we've always emphasized that performance over the long term is the main focus of this measure.
Steve Spray: Net income before investment gains or losses for the quarter contributed negative 0.3%.
Steve Spray: Slightly lower overall valuation of our investment portfolio and other items contributed negative 0.2%.
Michael Sewell: Next, Chief Financial Officer, Mike Sewell, will highlight some additional aspects of our financial performance. Thank you, Steve, and thanks to all of you for joining us today. Investment income growth continued this quarter, up 14 percent compared with the first quarter of 2004. Fund interest income grew 24%, and net purchases of fixed maturity securities totaled $220 million for the first three months of the year. The first quarter pre-tax average yield of 4.92% for the fixed maturity portfolio was up 27 basis points compared with last year. The average pre-tax yield for the total of purchased taxable and tax-exempt bonds during the first quarter of this year was 5.8 percent.
Steve Spray: Next Chief Financial Officer, Mike score well highlight some additional aspects of our financial performance.
Mike Sewell: Thank you, Steve and thanks to all of you for joining us today.
Mike Sewell: <unk> income growth continued this quarter up 14% compared with the first quarter of 'twenty four.
Mike Sewell: Bond interest income grew 24% and net purchases of fixed maturity securities totaled $220 million for the first three months of the year.
Mike Sewell: The first quarter pretax average yield of 492% for the fixed maturity portfolio was up 27 basis points compared with last year.
Mike Sewell: The average pre tax yield for the total of purchase taxable and tax exempt bonds. During the first quarter of this year was five 8%.
Michael Sewell: Dividend income was down 7%, reflecting previously disclosed rebalancing of our investment portfolio during 2024. Valuation changes in aggregate for the first quarter were unfavorable for our equity portfolio and favorable for the bond portfolio. Before tax effects, the net loss was $72 million for the equity portfolio, partially offset by a net gain of $65 million for the bond portfolio. At the end of the first quarter, the total investment portfolio net appreciated value was approximately $6.7 billion. The equity portfolio was in a net gain position of $7.2 billion, while the fixed maturity portfolio was in a net loss position of $486 million.
Mike Sewell: Dividend income was down 7%, reflecting previously disclosed rebalancing of our investment portfolio during 2024.
Mike Sewell: Valuation changes in aggregate for the first quarter were unfavorable for our equity portfolio and favorable for the bond portfolio.
Mike Sewell: For tax effects, the net loss was $72 million for the equity portfolio, partially offset by a net gain of $65 million for the bond portfolio.
Mike Sewell: At the end of the first quarter. The total investment portfolio net appreciated value was approximately $6 $7 billion. The equity portfolio was in a net gain position of $7 $2 billion, while the fixed maturity portfolio was in a net loss position of 400 and.
Mike Sewell: $86 million.
Michael Sewell: Cash flow, in addition to higher bond yields, again, boosted investment income growth.
Mike Sewell: Cash flow in addition to higher bond yields again boosted investment income growth.
Michael Sewell: Cash flow from operating activities for the first three months of 2025 was $310 million, even after paying for most of the largest catastrophe event in our history.
Mike Sewell: Cash flow from operating activities for the first three months of 2025 was $310 million, even after paying for most of the largest catastrophe event in our history.
Michael Sewell: I'll briefly touch on expense management and our efforts to balance expense control with strategic business investors. The first quarter of 2025 property-casualty-underwriting-expense-ratio increase of 0.2 percentage points was primarily due to the effect of reinstatement premiums that added 0.7 points. Regarding loss reserves, 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. As we do each quarter, we consider new information, such as paid losses and case reserves. We then updated estimated ultimate losses and loss expenses by accident year and line of business.
Mike Sewell: I'll briefly touch on expense management, and our efforts to balance expense control with strategic business investments.
Mike Sewell: The first quarter of 2025 property casualty underwriting expense ratio increase of 0.2 percentage points was primarily due to the effect of reinstatement premiums that added 0.7 points.
Mike Sewell: Regarding loss reserves, our approach remains consistent and aim for net amounts in the upper half of the Actuarially estimated range of net loss and loss expense reserves as.
Mike Sewell: As we do each quarter, we consider new information such as paid losses in case reserves.
We then updated estimated ultimate losses and loss expenses by accident year and line of business.
Michael Sewell: For the first three months of 2025, our net addition to property casualty loss and loss expense reserves was $488 million, including $454 million for the IB&R portion. During the first quarter, we experienced $91 million of property cash, a net favorable reserve development on prior accident years that benefited the combined ratio by 4 percentage points. For our commercial casualty line of business, there was no material reserve development for any prior accident year during the quarter. On an all lines basis by accident year, net reserve development for the first three months of 25 included, favorable $105 million for 24, favorable $9 million for 23, and an unfavorable $23 million in aggregate for accident years prior to 23.
Mike Sewell: For the first three months of 2025, our net addition to property casualty loss and loss expense reserves was $488 million, including $454 million for the <unk> portion.
Mike Sewell: During the first quarter, we experienced $91 million of property casualty net favorable reserve development on prior accident years that benefit the combined ratio by four percentage points.
Mike Sewell: For our commercial casualty line of business. There was no material reserve development for any prior accident year during the quarter.
Mike Sewell: On an all lines basis by accident year net reserve development for the first three months of 'twenty five included favorable $105 million for 'twenty four.
Mike Sewell: Favorable $9 million for 'twenty three.
Mike Sewell: And an unfavorable $23 million in aggregate for accident years prior to 'twenty three.
Michael Sewell: I'll conclude my comments with capital management highlights. We paid $125 million in dividends to shareholders during the first quarter of 2025. We also repurchased 300,000 shares at an average price per share of $139.96. We believe our financial flexibility and our financial strength are both in excellent shape. Parent company cash and marketable securities at quarter end was $5 billion. debt to total capital remained under 10%. And our quarter-end book value is $87.78 per share, with nearly $14 billion of GAAP-consolidated shareholders' equity, providing plenty of capacity for profitable growth of our insurance operation.
Mike Sewell: I'll conclude my comments with capital management highlights we.
Mike Sewell: We paid $125 million in dividends to shareholders during the first quarter of 2025.
Mike Sewell: We also repurchased 300000 shares at an average price per share of $139 96.
Mike Sewell: We believe our financial flexibility and our financial strength are both in excellent shape.
Parent company cash and marketable securities at quarter end was $5 billion.
Mike Sewell: Debt to total capital remains under 10%.
Mike Sewell: And our quarter end book value.
Mike Sewell: $7 78 per share.
Mike Sewell: With nearly $14 billion of GAAP consolidated shareholders' equity, providing plenty of capacity for profitable growth of our insurance operations now.
Stephen Spray: Now, I'll turn the call back over to Steve. Thanks, Mike. Despite a bumpy first quarter, we remain optimistic about the future of Cincinnati Financial. We're focused on our long-term strategies and are not swayed by short-term volatility. Looking beyond the catastrophes that impacted our business this quarter, we continue to see steady improvement in key metrics we use to evaluate the core of our book. Our confidence is reinforced by what we hear from our appointed agencies as we meet with them at our annual sales meetings around the country. Agents are enthusiastic about their business and how we partner with them to serve their clients for our mutual success.
Now I'll turn the call back over to Steve. Thanks.
Steve Spray: Thanks, Mike.
Speaker Change: Quite a bumpy first quarter, we remain optimistic about the future of let's say financial we're focused on our long term strategies and are not swayed by short term volatility.
Speaker Change: Looking beyond the catastrophes that impacted our business. This quarter, we continued to see steady improvement in key metrics, we use to evaluate the core of our book.
Speaker Change: Our confidence is reinforced by what we hear from our appointed agencies as we meet with them at our annual sales meetings around the country.
Speaker Change: Agents are enthusiastic about their business and how we partner with them to serve their clients for our mutual success.
Stephen Spray: We'll continue to focus on the execution of our proven strategy, seeking profitable growth and creating shareholder value over time.
Speaker Change: We'll continue to focus on the execution of our proven strategy seeking profitable growth and creating shareholder value over time.
Operator: As a reminder, with Mike and me today are Steve Johnston, Steve Soloria, Mark Shambo, and Teresa Hoffer.
Speaker Change: As a reminder.
Speaker Change: With Mike and me today are Steve Johnston, Steve So lauria, Mark Shambo, and Theresa Hoffer Dorwan. Please open the call for questions.
Operator: Dorwan, please open the call for questions. Certainly. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2.
Speaker Change: Certainly.
Speaker Change: We will now begin the question and answer session.
Speaker Change: To ask a question you May press Star then one on your telephone keypad.
Speaker Change: If youre using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
Operator: At this time, we will pause momentarily to assemble our roster.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Michael Phillips: The first question comes from Michael Phillips with Oppenheimer, please go ahead. Good morning. Thank you for the time.
Speaker Change: The first question comes from Michael Phillips with Oppenheimer. Please go ahead.
Michael Phillips: Good morning, Thank you for the time.
Michael Sewell: Mike, on your comments on the reserve movements, just to confirm, for commercial casualty, there wasn't any movements in between accident years, first off, and then I think that's the case. And then you mentioned lower emergence of known claims. I guess I just want to confirm, is that mainly property? Yeah, lower emergence, at least on the commercial casualty, yeah, it was one million a favorable development and really between the years there was nothing significant. Most of it came from actually year 24, but the other previous years it's kind of spread throughout.
Speaker Change: Mike on your comment on the reserve movements just to confirm for commercial casualty there wasn't any movements in between accident years.
Speaker Change: First off and then yes, I think that's the case and then you mentioned.
Speaker Change: Lower emergence on known claims I guess I just want to confirm is that mainly property.
Speaker Change: Lower emergence on at least on the commercial casualty, yes, it was $1 million of favorable development and really between the years. There was nothing significant most of it came from accident year 'twenty four but the other previous accident years, it's kind of spread spread.
Speaker Change: Spread throughout.
Michael Sewell: Okay, and that lower emergence was property, right? Yes. Okay, good. Thank you, Mike.
Speaker Change: Okay, and that lower margins with property right.
Speaker Change: Yes, okay. Good thank you Mike.
Michael Phillips: Second question would be on, I guess, California specifically, maybe broadly in your answer, if you could touch on it. Can you say how much of your California wildfire is still open claims and then how you think about that risk of those open claims given tariffs? And I guess more broadly, any comments on tariffs and the impact of your overall book?
Speaker Change: Second question would be on I guess, California, specifically, but maybe broadly in your answer if you could touch on it.
Speaker Change: Can you say how much of your California wildfire is still open claims and then how you think about that risk of those open claims given tariffs and I guess more broadly any comments on tariffs and the impact of your overall book and I do kind of want to focus a little bit more on the California fires. Thank you.
Michael Sewell: And I do kind of want to focus a little bit more on the California fires. Thank you. Yeah, no, that's a great question. So just kind of from a high level, you know, we had previously disclosed a range high, low, and then obviously, here, with the queue and the press release, we have tightened that up with our net loss from the California wildfires at the low end of that range, $449 million. Kind of if you look at that on a gross, I would probably at least our, what we're showing right now is that we've probably paid about 65% of the gross claims there.
Speaker Change: Yes, no. That's a great question and so just kind of from a high level. We had previously disclosed a range high low and then obviously here with.
Speaker Change: With the Q and the press release, we have tightened that up with our net.
Speaker Change: Loss from the California wildfires.
Speaker Change: The low end of that range $449 million kind of if you look at that on a gross I would probably at least are.
Speaker Change: What were showing right now is that we've probably paid about 65%.
Speaker Change: The gross claims there so we've paid about $488 million and this is really on the primary side. So excluding cincy re.
Michael Sewell: So we've paid about $488 million. And this is really on the primary side. So excluding Cincinnati, So gross losses $754 million paying $488 million. So we've got a large amount that we have paid, and we're collecting reinsurance on the rest.
Speaker Change: Type of thing so gross losses 754, paying about $488 million. So so we've got a large amount that we have paid and.
Speaker Change: We're collecting a reinsurance on the rest Mike.
Stephen Spray: Mike, this is Steve Spray. I might just add on that on the amount paid. Also, the feedback, you know, we obviously are in constant contact with our agents out there. And just As we would expect, but we never take it for granted, with the... The approach and the reaction and the way that our claims reps are handling these claims is just commendable. I mentioned noble business in my opening remarks, and that's what comes to mind when you think about how we're putting people's lives back together when things are at their worst. That's what we're in business for.
Speaker Change: Mike This is Steve spray I might just add on that on the amount paid also the feedback. We obviously are in constant contact with our agents out there and just.
Speaker Change: So as we would expect but we never take for granted.
Speaker Change: The.
Speaker Change: The approach and the reaction and the way that our claims reps are handling. These claims is commendable I mentioned noble business in my opening remarks, and Thats what comes to mind when you are.
Speaker Change: When you think about how were putting people's lives back together when things are at their worst that's what we're in business for.
Stephen Spray: You had mentioned the tariffs, and maybe I think I heard at the end there on California and then maybe just in general, and I could probably speak to ... I think they kind of both go hand in hand. As you know, and you've heard on other calls, you know, there's just a lot of moving parts and uncertainty when it comes to the tariffs. Obviously, we're monitoring very closely, not just for California, but just in general. One thing I would say is that I would maybe add to the tariff piece. is just, you know, one thing I've learned over here the first, maybe this first year in the in the role is that there's always, you know, macro pressures impacting our business environment.
Speaker Change: You had mentioned the tariffs maybe I think I heard at the end there on California, and then maybe just in general and I could probably speak to that I think they both go hand in hand.
Speaker Change: As you know and you've heard on other calls.
Speaker Change: There's.
Speaker Change: And just a lot of moving parts and uncertainty when it comes to the tariffs obviously, we're monitoring very closely not just for California, but just in general.
Speaker Change: The one thing I would say is that I would maybe add to the tariff piece.
Speaker Change: Is just one thing I have learned over here. The first maybe this first year in the in the role is that Theres always macro pressures impacting our business environment.
Stephen Spray: What I do know, what we do know is that Cincinnati is prepared to respond. We're all here on one campus. I think we're in a good position to act accordingly. We've got a history of prudent, conservative reserving. And then if you just look at the pricing tools, sophistication, the segmentation that we've been executing on it, I think we're in a really good position to respond to anything that, you know, any way that this ends up going. Okay. Yeah.
Speaker Change: What I do know what we do know is that Cincinnati is prepared to respond we're all here on one campus.
Speaker Change: I think we're in a good position to act Accordingly, we've got a history of.
Speaker Change: <unk>.
Speaker Change: Conservative reserving and then if you just look at the pricing tools sophistication the segmentation that we've been executing on and I think we're in a really good position to respond to.
Speaker Change: Anything that.
Speaker Change: Any way that this.
Speaker Change: Ends up going.
Mike Sewell: Okay, Yes, thank you Steve and thank you Mike appreciate it.
Michael Phillips: Thank you, Steve. And thank you, Mike. Appreciate it. I appreciate you, Mike.
Mike: I appreciate you Mike.
Michael Zaremski: Our next question comes from Mike Zaremski with BMO. Please go ahead. Hey, good morning.
Speaker Change: Our next question comes from Mike Zaremski with BMO. Please go ahead.
Speaker Change: Hey, good morning, just a quick follow up on the tariffs I know obviously complicated.
Michael Zaremski: Just a quick follow-up on the tariffs. I know, obviously, it's complicated and changes by the day.
Speaker Change: Changes by the day, but.
Stephen Spray: In terms of response, structurally, I know that one of your competitive advantages is having kind of a three-year contract, certain elements of commercial, so should we be thinking about that dynamic in terms of your response would maybe be a tiny bit slower if the tariffs do end up being impactful to commercial property inflation? I don't know if it would be any slower, Mike, but let me answer it this way. And I think you should be thinking about it. We are thinking about it. A couple of statistics around the three-year policy is that about 75% of our commercial lines premiums are adjusted annually.
Speaker Change: In terms of response.
Speaker Change: Is there.
Speaker Change: Structurally I know that one of your competitive advantages as having kind of a.
Speaker Change: Three year contracts that certain elements of commercial so what.
Speaker Change: Should we be thinking about that dynamic in terms of kind of your response would maybe be up.
Speaker Change: Tiny bit slower.
Speaker Change: If the tariffs do end up being impactful to commercial property inflation.
I don't know if it would be at any slower Mike, but let me answer. It. This way I think we should you should be thinking about it we are thinking about it.
Speaker Change: A couple of statistics around the three year policy is at about 75% of our commercial lines premiums.
Speaker Change: Our adjusted annually that's third of the book is renewing.
Stephen Spray: Part of the book is renewing, commercial auto doesn't have a three-year guarantee lock, umbrella doesn't have a three-year guarantee lock, and neither does workers' compensation. So that leaves you really with the property and general liability on the major lines of business. And the way I would think about it there is... We've got the tools today to segment and price that business better than we ever have. Our three-year package policies outperform a one-year policy. Intuitively, the underwriters know where to place that business. But again, peeling that back maybe a little bit more, one of the things that I think could, for lack of a better term, hedge our bet there and help us is that, you know, even inside a three-year policy where the rate is guaranteed for three years, your exposures are adjusted annually, which is a big deal on both property and on the casualty piece.
Speaker Change: Commercial auto doesn't have a three year guarantee lock.
Speaker Change: Umbrella doesn't have a three year guarantee lock and neither does workers' compensation. So.
Speaker Change: So that leaves you really with the property and general liability on the major lines of business and the way I would think about it there.
Speaker Change: We've got the tools today.
Speaker Change: Segment and price that business better than we ever have our three year package policies outperform one year policy intuitively, the underwriters know where to place that business.
Speaker Change: But again peeling that back maybe even a little bit more aware of the things that I think could for lack of better term hedge our bet there and help us.
Speaker Change: Is that.
Speaker Change: Even inside of the three year policy.
Speaker Change: Rate is guaranteed for three years. Your exposures are adjusted annually, which is a big deal on both property <unk>.
Speaker Change: And on the casualty piece so connect.
Stephen Spray: So it can act, you know, a bit as a proxy for rate or for pricing. Douglas Goldstein, CFP®, is the director of Profile Investment Services and the host You know, if the cost per square foot, you know, increases. By 5%, probably due to tariffs, then you're able to directionally get that 5% through even if there's a three-year lock.
Speaker Change: Bit of as a proxy for for right or for pricing.
Speaker Change: Got it that makes sense.
Speaker Change: Yes.
Speaker Change: So the exposure updated annually so in layman's terms there.
Speaker Change: In our FC.
Speaker Change: Cost per square foot.
Speaker Change: Increases.
Speaker Change: By 5%, partly due to tariffs than you are.
Speaker Change: You are able to directly get get that.
Speaker Change: 5% through even if theres a three year lock.
Stephen Spray: Yeah, let me make sure I'm real clear on that. What we do when we issue that policy is we charge for and put on what's called an inflation guard. So it's an escalator on the property values throughout the three-year term, and there's a premium charge for it. On the casualty, you know, we audit those premiums. So let's say on a construction account, let's say it's payroll or sales, that gets audited annually and gets adjusted accordingly. Okay, got it. All right. Sorry to harp on that. That's very helpful.
Speaker Change: Yes, let me make sure Im clear on that what we do when we issue the policies, we charge for and put on what's called an inflation guard. So it's a an escalator on the property values throughout the three year term and Theres a premium charge for it on the casualty.
Speaker Change: We audit those premiums so let's say on a construction account lets say its payroll or sales.
Speaker Change: That gets ordered annually and then gets adjusted accordingly.
Okay got it alright, sorry to harp on that that's very helpful.
Stephen Spray: Mike, real quick on that. Real quick, while I'm thinking about that, too, just so that... You know, if you, again, look at the tariffs and where we think, let's just cut it back to inflation. Let's just say that inflation were to pick up because of these macro events. We really think it's going to impact, you know, first and foremost, probably commercial and personal auto. And if you go to commercial lines with the one-year policy we have on commercial lines, we can be a little more responsive with that, with the prices. Got it. Makes sense.
Speaker Change: Mike No.
Speaker Change: Quick one real quick one thinking about that too is just so that.
Speaker Change: If you again look at the tariffs and where we think.
Let's just cut it back to inflation, let's just say that inflation were to pick up because of these macro events.
Speaker Change: Really think it's going to impact.
Speaker Change: First and foremost probably commercial and personal auto and if you go to commercialize with the one year policy. We have in commercial lines, we can be a little more responsive with that with the pricing.
Speaker Change: Got it makes sense.
Michael Zaremski: So switching gears to...
Speaker Change: Yes.
Speaker Change: Switching gears to.
Michael Zaremski: to a home a bit and just kind of overall catastrophes.
Speaker Change: Q.
Speaker Change: Home, a bit and just kind of overall.
Speaker Change: Catastrophes.
Michael Sewell: Given the significant size of the catastrophes early on in the year due to California, is CINCI considering buying additional reinsurance temporarily to protect itself through the remainder of the contract re-reinsurance terms? Well, we obviously, we had a reinstatement here after this first event. You know, when we actually, on a gross basis, Mike, we went through about, I'll say, half of our property cat reinsurance tower for 2025. So that's all been reinstated. And we don't have any plans right now to purchase anything additional. It's something that we always are looking at, you know, just as capital management and how to manage cat, something we think about and talk about regularly, but nothing to report on to you this morning.
Speaker Change: Given the significant size of the catastrophes early on in the year due to California.
Speaker Change: Since he considering buying additional reinsurance temporarily.
Speaker Change: To protect itself through through the remainder of.
Speaker Change: Of the contract re reinsurance terms.
Speaker Change: Well, we obviously, we had a reinstatement here after this first a bit.
Speaker Change: When we actually.
Speaker Change: On a gross basis, but we went through about let's say half of our property cat reinsurance tower for 2025, So that's all been reinstated.
Speaker Change: And we don't have any plans right now to.
Speaker Change: Purchased anything additional.
Speaker Change: It's something that we always are looking at just as far as capital management.
Speaker Change: And how the.
Speaker Change: Managed cat something we think about and talk about regularly but nothing to report on to you. This morning.
Michael Zaremski: Okay. Got it.
Speaker Change: Okay got it and just a follow up and not that not that we focus on top line growth profitable growth, but.
Michael Zaremski: And just a follow-up. You know, not that we focus on top-line growth, it's more about profitable growth, but, you know, now that folks have had more time to digest kind of the events in California, when we, you know, has your mood or outlook changed a bit in terms of the top-line growth trajectory in personal lines? I know a lot of that growth has emanated out of California. I think we can see if we adjust your 1Q numbers for some of the reinstatement stuff, it does look like there was a slowdown in potentially in top-line growth in personal lines as well this quarter.
Speaker Change: Now that folks have had more time to digest kind of the events in California.
Speaker Change: Okay.
Speaker Change: As Jim mood or outlook changed a bit in terms of.
Speaker Change: The top line growth trajectory in personal lines and a lot of that growth has emanated out of <unk>.
Speaker Change: <unk> I think we can see it.
Speaker Change: Can you just walk through numbers for some of the reinstatement stuff that looks like there was a slowdown in potentially in topline growth in personal lines as well this quarter and any any any thoughts there. Thanks.
Stephen Spray: Any thoughts there? Thanks. It's just getting to be a tougher comp year over year. On a pure new business dollar amount for purse lines, it's still very strong. Now specifically to California, yes, it's true. After the loss, as we're doing the deep dive and the lessons learned, we've been more conservative on new business and workers' compensation, excuse me, in California purse lines business here the first quarter, and that's put pressure on the new business growth. I think Mike hit on the net written premium and what the reinstatement premiums did there. That brought down purse lines net written premium growth by 11 full points in the quarter.
Speaker Change: Yes, I would tell you is zero dilution of enthusiasm for any of our lines of business countrywide.
Speaker Change: We have we've got a proven business model, Mike with our agency distribution we've got.
Speaker Change: The underwriting talent expertise, we've got pricing sophistication and segmentation, you've probably heard me talk in the past about a once in a lifetime opportunity in personal lines, we still think that that <unk>.
Speaker Change: <unk>.
Speaker Change: After every major cat event, we do a deep dive, California, obviously is no exception.
Speaker Change: We look for lessons learned and then we adjust our plan accordingly.
Speaker Change: We've got some lessons learned already in California, we've already taken a little bit of action.
Speaker Change: And that will continue to evolve and evolve excuse me ni.
Speaker Change: Im confident that Youll continue to see continued tweaks there as far as top line new business growth in personal lines is really being impacted by.
Speaker Change: Again this once in a lifetime opportunity that I've been talking about the last two or three years.
Speaker Change: It's just getting to be a tougher comp year over year on a pure new business dollar amount for personal lines. It is still very strong now specifically to California.
Speaker Change: Yes, it's true after the loss as we are doing the deep dive and lessons learned we've been more conservative on new business and workers compensation or excuse me in California.
Speaker Change: Personal lines business here, the first quarter and that has that.
Speaker Change: That has put pressure on the new business growth I think Mike hit on.
Speaker Change: The net written premium and what the reinstatement premiums did there that that brought down personal lines net written premium growth by 11 four points in the quarter.
Michael Zaremski: Thank you, Steve.
Steve Spray: Thank you Steve.
Speaker Change: Okay.
Joshua Shanker: Our next question comes from Josh.
Speaker Change: Our next question comes from Josh Shanker.
Speaker Change: Sure.
Joshua Shanker: Our next question comes from Josh Shanker with Bank of America. Please go ahead.
Speaker Change: Our next question comes from Josh Shanker with Bank of America. Please go ahead.
Joshua Shanker: Thank you for taking my question.
Josh Shanker: And thank you for taking my question.
Joshua Shanker: I think we've talked about this before, but I need an update on strategy a little bit. Over the past three quarters, you've taken about $180, $190 million of CAT losses in the reinsurance segment. You generate about $600 million in premium per year in that segment. Reinsurance was supposed to be a diversifier. Is it still a diversifier? Does it still make sense with the volatility that comes with it, especially as some people believe that property CAT pricing is going to be declining in the foreseeable future? How do you think about that?
Josh Shanker: I think we've talked about before but immediate update on strategy a little bit over the past three quarters, you've taken about 180 $190 million of cat losses in the reinsurance segment, we generated about $300 million $600 million in premium per year in that segment reinsurer.
Josh Shanker: <unk> was supposed to be a diversified.
Speaker Change: Is it still a diversify or is it still makes sense with the volatility that comes with it especially as some people believe that property cap rate youre going to be declining in.
Josh Shanker: In the foreseeable future how do you think about those things.
Stephen Spray: Yeah, thanks, Josh, for the question. Appreciate it.
Speaker Change: Yes, Thanks, Josh for the question appreciate it I can start out here and then Mike can jump in.
Stephen Spray: I can start out here and then Mike can jump in if he would like. Yes, we think that it is still It is still core to what we do. We are looking, and we've talked about this in the past, it's an assumed reinsurance operation. It doesn't have its own separate balance sheet. We are looking for non-correlated business. If you just look at the wildfires, you know, just kind of in general. The majority of the losses that Cincinnati really had in the wildfire business was on national programs that covered countrywide. So really what they would do is they would limit any correlation to high net worth that we would have in California.
If he would like yes, we are.
Speaker Change: We think that it is still.
Speaker Change: It is still core to what we do.
Speaker Change: We are looking at and we've talked about this in the past, it's a assumed reinsurance operation that have its own separate balance sheet. We are looking for non correlated business.
Speaker Change: And if you just look at the wildfires.
Speaker Change: Just kind of in the in general.
Speaker Change: Whereas the majority of the losses that Cincinnati re had in the wildfire.
Speaker Change: Well for our business was all national.
Speaker Change: <unk> programs.
Speaker Change: Covered countrywide.
Speaker Change: So really what they would what they would do is they would they would limit any correlation to high net worth that we would have in California.
Michael Sewell: You're right, it comes with volatility, but Inception to date, I believe, and Mike can check me on this, I believe Inception to date, our combined ratio in Cincinnati is 95.8. I think that's right. So it's got volatility with it.
Speaker Change: Youre right it comes with volatility, but inception to date I believe and Mike can check me on this I believe inception to date, our combined ratio in <unk> is 95 eight.
Speaker Change: I think thats right, so Scott volatility with it but.
Stephen Spray: Let's look at the balance sheet that we have and that we've continued to grow. And we think that it provides diversifying revenue and profit streams for us.
Speaker Change: Look at the balance sheet that we have and that we've continued to grow and we think that it provides diversifying revenue and profit streams for us.
Joshua Shanker: Okay, thank you.
Speaker Change: Okay. Thank you and.
Joshua Shanker: And, you know, I've covered the stock for a long time. I think when I first got involved in the story, John Schiff Jr. was passing the helm to Ken. And, you know, it really felt like a family operation, and maybe it still does.
Speaker Change: I covered the stock for a long time I think.
Speaker Change: First got involved in the story.
Speaker Change: John Schiff Junior was passing the helm Ken.
Speaker Change: And it really felt like a family operation and maybe it still does when I see that you appointed 134.
Joshua Shanker: When I see that you appointed 134 new agencies in the in the first quarter, congratulations on that, by the way.
Speaker Change: New agencies in the in the first quarter congratulations on that by the way, but how does that impact the culture of what Cincinnati financial.
Stephen Spray: But how does that impact the culture of what Cincinnati Financial is? Yeah, thanks, Josh. I've been here 33 years and I still look at it as a kept the family feel. Yeah, the key there, Josh, is that we appoint high-quality agencies that are aligned with Cincinnati, that we see value in the way they operate professionally in their community, and they see value in a company like Cincinnati that wants to make decisions locally, handle claims fast, fair, and personally. So when we see alignment... Appointing more agencies is really going to fuel the growth for the company into the future.
Speaker Change: Yeah. Thanks, Josh I've been here 33 years, and I still look at it as a.
Speaker Change: Got the family feel.
Speaker Change: Yes, the key there Josh is that we have point <unk>.
Speaker Change: High quality agencies that are aligned with Cincinnati that we see value in the way they operate professionally in their community and they see value in a company like Cincinnati that wants to make decisions locally handle claims fast fair and personally so when we see alignment.
Speaker Change: Appointing more agencies is really going to fuel the growth for the company.
Into the future.
Stephen Spray: And the way you do it and keep it as a family feel is that we're still a regional company. We build everything around a field marketing rep, a field marketing territory. So every single agent that we appoint, we talk about they need to get the Cincinnati experience. And that means our local presence, starting with that field rep who's in their office. who's promoting all aspects of Cincinnati insurance, but their primary function is to underwrite and price new commercialized business on the spot, that ease of doing business. the local claims rep, who's there, who builds a relationship, who handles those claims, fast, fair, and personal.
Speaker Change: And the way you do it and keep it as a family feel is that were still a regional company, we build everything around our field marketing field marketing territory. So every single agents that we appoint.
Speaker Change: We talk about they need to get the Cincinnati experience and that means our local presence starting with that field Rep, who zillow office.
Speaker Change: Who's promoting all aspects of Cincinnati insurance, but their primary function is to underwrite and price new commercial lines business on the spot that ease of doing business. The local claims rep who's there who builds a relationship who handles those claims fast fair and personal it's the same exact strategy that has served us well with too.
Stephen Spray: It's the same exact strategy that has served us well with 2,000 agents. It will serve us well as we continue to appoint more and more. And again, I can't emphasize enough.
Speaker Change: Agents.
Speaker Change: It will serve us well as we continue to point more and more and again I can't emphasize enough. It's not the number of agencies that we will have over time.
Stephen Spray: It's not the number of agencies that we'll have over time that defines franchise value, I guess. It's the quality of those agencies and the professionalism and the alignment that they have with Cincinnati. It's a long-winded answer, Josh, but we can continue to repeat what we do over and over again through expanded distribution.
Speaker Change: That defines franchise value I guess, it's the quality of those agencies and the professionalism and the alignment that they have with Cincinnati.
Josh Shanker: Long winded answer Josh, but we can continue to repeat what we do.
Speaker Change: Over and over again through expanded distribution.
Joshua Shanker: Thank you for the thorough answer. Yeah, thank you, Josh. Thank you.
Josh Shanker: Thank you for the thorough answers.
Speaker Change: Yes, Thank you Josh.
Speaker Change: Thank you.
Operator: Again, if you have a question, please press star, then 1.
Speaker Change: Again, if you have a question. Please press Star then one.
Paul Newsome: The next question comes from Paul Newsome with Piper Sandler, please go ahead. Hey, folks. Thanks for the call. Appreciate it. I was going to ask a question about topical issues this quarter. One was sort of a competitive environment sort of question. We've heard a lot about a larger account being more competitive incrementally, some of these special lines in particular. It really was even within the last quarter. I know Cincinnati is overwhelmingly a middle market commercial writer, but you have been moving up towards the larger end. Is that a similar experience that you're seeing some similar dynamics that other folks are, that kind of middle market's holding in?
Speaker Change: The next question comes from Paul Newsome with.
Speaker Change: Piper Sandler. Please go ahead.
Speaker Change: And folks thanks for the call appreciate it.
Speaker Change: I probably asked the question.
Speaker Change: <unk> about.
Speaker Change: Topical issues this quarter, one was sort of a competitive environment.
Speaker Change: Environment through question, we've heard a lot about.
Your account being more competitive incrementally.
Speaker Change: The specialty lines in particular.
Speaker Change: Even within the last quarter.
Speaker Change: It's overwhelmingly a middle market commercial.
Speaker Change: But you have been moving up.
Speaker Change: The larger end.
Speaker Change: Is it tied to your experience that you see some similar dynamics folks arent.
Speaker Change: In the middle market is holding in.
Stephen Spray: The larger you get, the more competitive it's been recently. Yeah, I think that's very fair, Paul. And you've described it well. I always like to say, especially I'll just specifically talk to commercial lines, I'd say it's still rational and orderly, as you can see, just by the pricing that we're getting. You know, I think what's driving that is just that, you know, the headwinds that are out there with CAT, legal system abuse or social inflation, however you want to look at that. I don't see, you know, I personally don't see an end. It'll get to an inflection point at some point, all things do.
Speaker Change: The larger you get the more competitive it's been.
Speaker Change: Yes, I think that's very fair, Paul and you've described it well I always like to say, especially I'll, just specifically talk to commercial lines I would say, it's still rational and orderly as you can see just by the pricing.
Speaker Change: That we're getting I think what's driving that.
Speaker Change: It's just that the headwinds that are out there with cat.
Speaker Change: Legal system abuse or social inflation. However, you want to look at that I don't see I personally don't see.
Speaker Change: And.
Speaker Change: It will get to an inflection point at some point all things do.
Stephen Spray: But that's still putting headwind pressure on underwriting and pricing. And so I'd say that the commercial market space is rational and orderly. When you get up into accounts, yeah, there's no doubt that the pressure or the competition increases there. But I would say when we call larger accounts for commercial lines, is it getting into that shared and layered, which we are experiencing with our Lloyds syndicate. Our Lloyds syndicate, CGU, does write a lot of direct or a fair amount of direct in fact or shared and layered, and that's what's driving their 9% written premiums down is that market has gotten soft, it's gotten competitive, and they're having to really show stringent underwriting discipline, and so it's putting pressure on that.
Speaker Change: But that's still putting.
Speaker Change: Headwind pressure on underwriting and pricing and so I'd say that the commercial market space is rational and orderly.
Speaker Change: When you get up into larger accounts.
Speaker Change: Yes, there's no doubt.
Speaker Change: The pressure or the competition increases there.
Speaker Change: But I would say when we call what we call larger accounts for commercial lines is it getting into that shared and layered.
Speaker Change: Which we are experiencing.
Speaker Change: With our Lloyd's syndicate, our Lloyd's Syndicate CPU does write a lot of direct or a fair amount of direct in fact or shared and layered and thats whats driving the 9% written premiums down as that market has gotten soft has gotten competitive and they're having to really show.
Speaker Change: Ringent underwriting discipline, and so it's putting pressure on that.
Stephen Spray: Personal lines. You didn't ask about personal lines, but I'd throw it out there. That market has not, I haven't seen any waning in that. That's under, it's still both middle market and high net worth, I think are both under a tremendous, tremendous amount of pressure. And we expect that pricing will continue to earn in there, and our growth throughout the rest of the year will be strong.
Speaker Change: Personal lines, you Didnt ask about personalized.
Speaker Change: Throw it out there that market has not I haven't seen any waning in that that's under its still both middle market and high net worth I think are both under a tremendous tremendous amount of pressure.
Speaker Change: We expect that pricing will continue to earn in there and our growth throughout the rest of the year will be strong.
Michael Sewell: Another hot button question for the quarter has been, you know, reserve issues, and you've talked a lot about cashing already. Could you maybe give us a few points on the other area that Commercial Auto Reserve issues and trends that seem to be kind of the other hot issue of the quarter, which is kind of what you're seeing, both from an internal as well as maybe from the perspective of the industry.
Speaker Change: Right.
Speaker Change: Question for the quarter has been.
Speaker Change: Reserve issues, you've talked a lot about cashing already.
Speaker Change: Could you maybe give us a few points on that.
Speaker Change: But.
Speaker Change: Commercial auto reserve issues.
Speaker Change: Trends clearly because of the other.
Speaker Change: Hi issue in the quarter, just kind of what you see.
Speaker Change: Both.
Speaker Change: Terminal as well as from the perspective of the industry.
Michael Sewell: Sure, Paul.
Speaker Change: Sure. Paul This is Mike. Thanks for the question and then maybe from a high level.
Michael Sewell: This is Mike, and thanks for that question. I mean, maybe from a high level, you know, our $91 million of favorable development, it really was spread out. Most of it was from, as I mentioned in my previous remarks, 2024. But yeah, you go back only, we did have $13 million was reserve strength. And if you go back a little further to 2021 and prior, so it's only $13 million that's spread out throughout the various years. Commercial, You know, commercial had favorable development of $43 million. The largest favorable development was commercial property at $35 million. The commercial auto, which is what you just, you know, mentioned there, so $7 million of reserve strengthening, you know, but you got to also think about that $7 million.
Speaker Change: Our $91 million of favorable development, it really was spread out most of it.
Speaker Change: From as I've mentioned in my previous remarks.
Speaker Change: 2024, but you go back only we did have $13 million.
Speaker Change: Reserve strengthening if you go back a little further to 2021 and prior so it's only $13 million that's spread out.
Speaker Change: Throughout the various years commercial.
Speaker Change: Commercial had favorable development of 43 million the largest favorable development was commercial property at $35 million the commercial auto which is what you just.
Speaker Change: You mentioned, there so $7 million.
Speaker Change: Reserve strengthening.
Speaker Change: You got to also think about that 7 million, our total reserve balance.
Michael Sewell: Our total reserve balance there is like $935 million. So it's a very small, under 1% of, you know, of reserve strengthening there. You know, and there, it was just really a little bit of a loss emergence that was higher than what we expected looking back at the years 2019 through 2021. The other years, didn't see much, and so that's where that was really focused on. But yeah, you go back, you look at total personal lines, I'll say Cincinnati Re, E&S, or Cincinnati Global, all of those developed favorably somewhere between almost $10 million to $20 million.
Speaker Change: There is like $935 million, so it's a very small under 1%.
Speaker Change: A reserve strengthening there.
Speaker Change: It was just really a little bit of loss emergence.
Speaker Change: That was higher than what we expected looking back at the years 2019 through 2021.
Speaker Change: The other years Didnt see much and so that's where that was.
Speaker Change: Really really focused on but you go back and you look at the total personal lines. So I'll say since you re E&S or.
Speaker Change: Since a global all of those.
Speaker Change: <unk> favorably somewhere between almost 10 million to $20 million.
Michael Sewell: So, you know, I think things were good. We're following a consistent process and, you know, we're really happy with where we're at.
Speaker Change: So.
Speaker Change: I think things were good were following a consistent process.
Speaker Change: We're really happy happy with where we're at.
Stephen Spray: I'll sneak one in, related to the first question about the competitive environment. Excellence in Circle Science has been obviously a great business for you guys. That's another hot button topic of competitive issues. Anything you're seeing in your book that would be notable, either individually from a competitive perspective or market-wise from a competitive perspective? Yeah, you know, Paul, I think it attracts what you're hearing with commercial lines, just the larger accounts you see more competitive pressure on. But our flow of business there, the new business opportunities has stayed strong. And as you can see, the growth and the profitability has stayed very consistent over time and just couldn't be more confident in that business too.
Speaker Change: Equally.
Speaker Change: Related to the first question about spending environment.
Speaker Change: And surplus lines, obviously big business for you guys.
Speaker Change: That's another hot button topic is competitive.
Speaker Change: Issues at <unk>.
Speaker Change: We're seeing the new book that would be notable individually.
Speaker Change: Perspective there.
Speaker Change: One is from a competitive perspective.
Speaker Change: Yes.
Speaker Change: Paul I think it attracts attracts what youre hearing with the commercial lines just the larger accounts you see more competitive pressure on but our our flow of business there.
Speaker Change: The new business opportunities has stayed strong.
Speaker Change: <unk>.
Speaker Change: As you probably as you can see the growth and the profitability has stayed very very consistent over time.
Speaker Change: Just couldn't be more confident in that business too.
Paul Newsome: Thank you very much, always appreciate the help a lot.
Speaker Change: Thank you very much always appreciate to help a lot.
Paul Newsome: Thank you, Paul. Appreciate it.
Speaker Change: Thank you Paul I appreciate it.
Meyer Shields: The next question comes from Meyer Shields with KVW, please go ahead. Great, thank you so much and good morning. Two, I hope, very quick questions. One, in industry-wide, like ISO fast-track data, we're seeing some reflection of an unusually large decrease in personal auto physical damage claim frequency, and I'm wondering whether that's yet.
Speaker Change: The next question comes from Meyer Shields with <unk>. Please go ahead.
Speaker Change: Great. Thanks, so much and good morning to I hope very quick questions.
Speaker Change: One in individualized ISO fast track data, we're seeing some reflection of.
Speaker Change: Unusually large decrease in personal auto physical damage frequency and I'm wondering whether there.
Okay.
Stephen Spray: Yeah, Mayor Steve Spray. Yeah, no, I can't say that we've I can't say we've seen any similar trend in the isophysical damage or maybe even, I don't have those numbers in front of me to match up with what we have. Okay, perfect, fair enough.
Speaker Change: Yes.
Speaker Change: Steve spray.
Speaker Change: Can't say that we have.
Speaker Change: Seemed any I can't say, we've seen any similar trend.
Speaker Change: <unk> trend in the ISO physical damage or maybe even I don't have those numbers in front of me to match up with what we have.
Speaker Change: Okay perfect fair enough.
Michael Sewell: Second question is on Cincinnati REITs. So you had solid growth, even excluding the REIT premiums. I was hoping you'd give us a sense in terms of whether that growth is more casualty or property-focused.
Speaker Change: Second question.
Josh Shanker: On the Cincinnati re so you had solid growth even excluding the reinstatement premiums I was hoping you give us a sense.
Speaker Change: More of that growth is more casualty.
Josh Shanker: Property focused.
Michael Sewell: Well, Mike can dig in here. I can tell you, we have kind of pared back over the last several years on the property piece. And since I leave, property is about 33% of what we do. Casualties, roughly 42%, and specialties, another 25%. There can be some seasonality or some noise there, too. Mayor with the Re with the premiums just based on the estimated primary seeding premium and then what we actually take in. Yeah, I would agree with that, Steve, and if I'm looking at, let's say, the earned premiums between property, casualty, specialty, for the first quarter, we were really about right on top of where we were at on a year-to-date basis for 2024 between those breakouts.
Speaker Change: Well, Mike can dig in here I can tell you we.
Mike: We have kind of pared back over the last several years on the property piece.
Speaker Change: Piece.
Speaker Change: Since eight property is about 33% of what we do casualties roughly 42% in specialty is another 25.
Speaker Change: Okay.
Speaker Change: While there can be some there can be some seasonality or some noise there too.
Speaker Change: More with the.
Speaker Change: Constantly re with the premiums just based on the estimated primary seat in premium and then what we actually.
Speaker Change: We've taken.
Speaker Change: Yes, I would agree with that Stephen if im looking at let's say the earned premiums between property casualty specialty for the first quarter. We were really right on top of where we were at on a year to date basis for 2024.
Speaker Change: Between those breakout so in the first quarter have not seen a drift from year to date 2024, when it comes to property casualty or specialty within since you re.
Michael Sewell: So in the first quarter, have not seen a drift from year-to-date 2024 when it comes to property, casualty, or specialty within Cincinnati.
Meyer Shields: Okay, fantastic. Thank you so much. Thank you, Mayor.
Speaker Change: Okay fantastic. Thank you so much.
Thank you Mary.
Yeah.
Michael Zaremski: The next question is a follow-up from Mike Zaremski with BMO, please go ahead. Thanks. You know, sorry to ask maybe what are perceived to be negative questions in the context of great overall results, but just curious, anything in personal lines, maybe Umbrella, other personal lines with large losses or anything that came through with the loss ratio there you'd like to call out? Yeah, sure, Mike. And good catch there. You know, it's, I would I would chalk it up as normal volatility severity. But if you look in the supplemental there on the on the other portion, in this case, it was one inland marine claim that is driving that.
Speaker Change: The next question is a follow up from Mike Zaremski with BMO. Please go ahead.
Mike Zaremski: Hey, thanks.
Speaker Change: Sorry to ask maybe a perceived to be at.
Speaker Change: The negative questions in the context of great overall results, but just curious anything in personal lines, maybe umbrella other personal lines with large losses or anything like that came through with that.
Speaker Change: The loss ratio, there I'd like to call out.
Speaker Change: Yes sure Mike.
Speaker Change: And good catch there.
Speaker Change: I would chalk it up as normal.
Speaker Change: Volatility severity.
Speaker Change: But if you look in the supplemental data on the on the other portion of it.
Speaker Change: Case, it was one inland marine claim that is driving that and its about 14 points of that current accident year ex cat.
Michael Sewell: And it's about 14 points of that current accident year x cap. And Lynn Marine, just thanks for the color, just to clarify, what type of policy is that? Yeah, it's a watercraft. Beyond that, I wouldn't want to go any deeper on an individual claim. Thank you so much.
Speaker Change: Inland Marine just thanks for the color just to clarify.
Speaker Change: Our policy is that.
Speaker Change: Yes, it's a watercraft moderate yet but beyond that.
Speaker Change: Beyond that I wouldn't go I wouldn't want to go any deeper on an individual claim.
Speaker Change: Okay, alright, thank you so much.
Speaker Change: Thank you.
Speaker Change: Okay.
Operator: This concludes our question and answer session.
Speaker Change: This concludes our question and answer session.
Stephen Spray: I would like to turn the conference back over to Steve Spray, CEO, for any closing remarks. Thank you, Darlene, and thank you all for joining us today. We hope to see some of you at our annual meeting of shareholders this Saturday, May 3rd, at the Cincinnati Art Museum. You're also welcome to listen to our webcast of the meeting, available at investors.sinfin.com. We also look forward to speaking with all of you again on our second quarter call.
Speaker Change: I would like to turn the conference back over to Steve spray CEO for any closing remarks.
Steve Spray: Thank you Don and thank you all for joining US today, we hope to see some of you at our annual meeting of shareholders. This Saturday may 3rd at the Cincinnati Art Museum.
Steve Spray: Also welcome to listen to our webcast of the meeting available at investors that Sinfin Dot Com. We also look forward to speaking with all of you again on our second quarter call have a great day.
Operator: Have a great day.
Operator: The conference has now concluded. Thank you for attending today's presentation.
Speaker Change: The conference has now concluded.
Speaker Change: Thank you for attending today's presentation you may now disconnect.
You may now disconnect.
Speaker Change: [music].
Speaker Change: Yeah.
[music].