Q2 2025 Cincinnati Financial Corp Earnings Call

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Operator: Ladies and gentlemen, good morning. You are connected to the Cincinnati Financial Corporation earnings conference call. We request that you please stay connected. This conference will begin within the next two minutes. We thank you for your patience.

Ladies and gentlemen, good morning. You are connected to the Cincinnati Financial corporation earnings conference call. We request that you please stay connected. This conference will begin within the next 2 minutes. We thank you for your patience.

Dennis Mcdaniel: Good day and welcome to the Cincinnati Financial Corporation second quarter 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. 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 2.

Good day and welcome to the Cincinnati Financial corporation, second quarter earnings conference call.

All participants will be in the listen-only mode. Should you need assistance? Please signal the conference specialist by pressing the star key followed by zero.

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,

Operator: Please note, this event is being recorded.

With your question. Please press star. Then 2

Please note, this event is being recorded.

Dennis Mcdaniel: I now like to turn the conference over to Dennis McDaniel, Investor Relations Officer. Please go ahead.

I 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 second 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.synthin.com. The shortest route to the information is the quarterly results section near the middle of the investor overview page.

Hello. This is Dennis McDaniel on Cincinnati Financial.

Thank you for joining us for our second quarter of 2025 earnings conference call.

Late yesterday, we issued a news release on our resolved, along with our supplemental Financial package, including our quarter and Investment Portfolio.

To find copies of any of these documents, please visit our investor website, investors.com.

Dennis Mcdaniel: 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 Johnson, Chief Investment Officer Steve Soloria, and Cincinnati Insurance's Chief Claims Officer Mark Shambo, and Senior Vice President of Corporate Finance Teresa Hopper.

The shortest route to the information is the quarterly results section near the middle of the investor overview page.

On this call, you will hear from President and Chief Executive Officer Stephen Spray, followed by Executive Vice President and Chief Financial Officer Mike Hsu.

They're 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 salora,

Dennis Mcdaniel: Please note that some of the matters to be discussed today are forward looking. These forward-looking statements involve certain risks and uncertainty. 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.

And since the night insurance is Chief claims officer, Mark Shambo and Senior vice president of corporate finance Teresa Hopper.

Please note that some of the matters to be discussed today are forward-looking

Please forward looking statements and call 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, our reconciliation of non-GAAP measures was provided with the news release.

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. I'm pleased to report strong operating performance. Because we are confident in the long-term direction and strategy of our insurance business, we didn't lose focus after the California wildfires early in the year. We stayed anchored to our agent-centered strategy, continuing to balance profitability and growth. We also continue to benefit from rebalancing our investment portfolio in the second half of last year and reported very strong investment income growth in the second quarter of this year.

Statutory accounting data is prepared in accordance with statutory accounting rules. Therefore, if not reconciled to GAAP,

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

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

I'm pleased to report strong operating performance because we are confident in the long-term direction and strategy of our insurance business. We didn't lose focus after the California wildfires. Early in the year, we stayed anchored to our agent-centered strategy, continuing to balance profitability and growth.

Stephen Spray: Our commercial lines and excess and surplus lines insurance segments again produce combined ratios below 93 percent. Second quarter 2025 results for Cincinnati REI and Cincinnati Global were also outstanding, each with a combined ratio below 85%. Spring and Summer Storms added 23.8 percentage points to our purse lines combined ratio, and its combined ratio was still just two percentage points shy of an underwriting profit for the quarter. The second half of the year is typically more profitable for our personalized business. Over the past five years, we've seen an average improvement of eight points in the second half of the year for that segment.

We also continue to benefit from rebalancing. Our investment portfolio in the second half of last year reported very strong investment income growth in the second quarter of this year.

Our commercial lines in excess and surplus, lines, Insurance segments. Again produced, combined, ratios below 93%.

Second quarter 2025 results for Cincinnati Reed, and Cincinnati Global were also outstanding each with a combined ratio below 85%.

Was still just 2 percentage points shy of an underwriting profit for the quarter.

The second half of the year is typically more profitable for our personalized business.

Over the past 5 years. We've seen an average Improvement of 8 points in the second half of the year for that segment.

Stephen Spray: Net income of $685 million for the second quarter of 2025 more than doubled our result from a year ago and included recognition of $380 million on an after-tax basis for the increase in fair value of equity securities still held. non-GAAP operating income of $311 million for the second quarter was up 52%. are 94.9% second quarter 2025 property casualty combined ratio improved by 3.6 percentage points compared with second quarter last year despite a one point increase in catastrophe loss. The 85.1% accident year 2025 combined ratio before catastrophe losses for the second quarter improved by 3.1 percentage points compared with accident year 2024.

Net income of 685 million for the second quarter of 2025 more than doubled. Our result from a year ago and included recognition of 380 million on an after tax basis for the increase. In fair value of equity Securities still held.

Non-gaap operating income of 311 million for the second quarter was up, 52%.

Our 94.9% second-quarter 2025 property casualty combined ratio improved by 3.6 percentage points compared with the second quarter last year, despite a 1-point increase in catastrophe losses.

The 85.1% accident year 2025 combined ratio before catastrophe losses for the second quarter improved by 3.1 percentage points compared with the accident year 2024.

Stephen Spray: Our consolidated property casualty net written premiums grew 11% for the quarter, including 16% growth in agency renewal premium. New business written premiums continue to grow in our commercial and excess and surplus line segment. However, they decreased by $22 million in our personal line segment, in part from a $13 million reduction in California as we slowed growth in some parts of that state. Steady premium growth and reinsurance market opportunities prompted us to add an additional layer of $300 million on top of our property catastrophe reinsurance program. Expanded coverage totaling $129 million, or 43% of the layer, was placed with reinsurers for an estimated seeded premium cost of less than $5 million.

Our Consolidated property, casualty net, written premiums, grew 11% for the quarter, including 16% growth in agency, renewal premiums.

New business, written premiums continued to grow in our commercial and excess and surplus line segments.

However, they decreased by 22 million in our personal line segment in part from a 13 million reduction in California as we slowed growth in some parts of that state.

Steady premium growth and reinsurance market opportunities prompted us to add an additional layer of $1 million on top of our property catastrophe reinsurance program.

Expanded coverage totaling 129 million or 43% of the layer was placed with reinsurers for an estimated seated Premium cost of less than 5 million.

Stephen Spray: We continue to focus on our profitable premium growth objectives that are supported by various efforts, including superior claim service and fostering relationships with the best independent insurance agents in our industry. Our underwriters excel in 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 second quarter were lower than the first quarter of 2025, but still at a level we believe was healthy. Commercial lines in total averaged increases near the high end of the mid-single-digit percentage range, and excess and surplus lines was again in the high single-digit range.

We continue to focus on our profitable premium growth objectives that are supported by various efforts, including superior claims service and fostering relationships with the best independent insurance agents in our industry.

Our Underwriters excel in 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 second quarter were lower than in the first quarter of 2025, but still at a level we believe was healthy.

Stephen Spray: Our personalized segment included homeowner in the low double-digit range and personal auto in the high single-digit range.

Commercial lines, in total, averaged increases near the high end of the mid-single-digit percentage range, and excess and surplus lines was again in the high single-digit range.

Our personal line segment included homeowner in the low, double digit, range, and personal Auto in the high single-digit range.

Stephen Spray: Moving on to highlight second quarter performance by insurance segment. I'll note premium growth and underwriting profitability compared with a year ago. Commercial lines grew net written premiums 9% with an excellent 92.9% combined ratio that improved by 6.2 percentage points, including 2.3 points from lower catastrophe loss. Personal lines grew net written premiums 20 percent, including growth in middle market accounts and Cincinnati private clients. Its combined ratio was 102%. 4.9 percentage points better than last year, despite an increase of 2.9 points from higher catastrophe loss. excess and surplus lines grew net written premiums 12% with a nice profit margin.

Moving on to highlight second quarter performance by Insurance segment, all note, premium growth and underwriting profitability compared with a year ago.

Commercial lines grew net written premiums by 9%, with an excellent 92.9% combined ratio, improving by 6.2 percentage points, including 2.3 points from lower catastrophe losses.

Personal lines, grew net, written premiums 20%, including growth and middle market accounts, and Cincinnati private clients.

It's combined ratio was 102%.

4.9 percentage points better than last year, despite an increase of 2.9 points from higher catastrophe losses.

Stephen Spray: That segment produced a combined ratio of 91.1%, an improvement of 4.3 percentage points. Cincinnati REI and Cincinnati Global each had an outstanding quarter and continue to reflect our efforts to diversify risk and further improve income stability. Cincinnati REITs second quarter 2025 net written premiums decreased by 21% reflecting pricing discipline or market conditions softened. It's combined ratio was 82.8%. Cincinnati Global's combined ratio was 78.4% along with premium growth of 45% as it continues to benefit from product expansion in recent years. Our life insurance subsidiary had another strong quarter, including 8% net income growth. In addition, term life insurance earned premiums grew 3%.

Excess and surplus lines grew net written premiums by 12%, with a nice profit margin.

That segment produced a combined ratio of 91.1% and Improvement of 4.3 percentage points.

Cincinnati Re and Cincinnati Global each had an outstanding quarter and continue to reflect our efforts to diversify risk and, further, improve income stability.

Cincinnati, Reed second quarter 2025 net, written premiums decreased by 21%, reflecting pricing discipline or market conditions. Softened, its combined ratio was 82.8%.

Recent years.

Our life insurance subsidiary, had another strong quarter, including 8%, net income growth in addition term, life, insurance earned, premiums grew, 3%.

Stephen Spray: I'll end my commentary with a summary of our primary measure of long-term financial performance, the value creation ratio. Our VCR was 5.2 percent for the second quarter of 2025. Net income before investment gains or losses for the quarter contributed 2.3%. Higher overall valuation of our investment portfolio and other items contributed 2.9%.

All in my commentary, with a summary of our primary measure of long-term financial performance, the value creation ratio.

Our VCR was 5.2% for the second quarter of 2025.

Net income before investment gains or losses for the quarter, contributed to 2.3%.

Michael Sewell: Now I'll turn it over to Chief Financial Officer Mike Sewell for additional insights regarding our financial performance. Thank you, Steve. And thanks to all of you for joining us today. We reported excellent 18% growth in investment income in the second quarter of 25, reflecting efforts during 2024 to rebalance our investment portfolio. bond interest income grew 24% and net purchases of fixed maturity securities totaled $492 million for the quarter and $712 million for the first six months of this year. The second quarter pre-tax average yield of 4.93% for the fixed maturity portfolio was up 29 basis points compared with last year.

Higher overall, evaluation of our Investment Portfolio and other items contributed to 2.9%.

Now, I'll turn it over to Chief Financial Officer Mike Sewell for additional insights regarding our financial performance.

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

We reported excellent 18% growth in investment income. In the second quarter of 2025, reflective efforts during 2024 to rebalance our investment portfolio bond interests resulted in income growth of 24%. Purchases of fixed maturity securities totaled $492 million for the quarter and $712 million for the first six months of this year.

Michael Sewell: The average pre-tax yield for the total of purchased taxable and tax-exempt bonds during the second quarter of this year was 5.82 percent. Dividend income was up 1%, and net purchases of equity securities totaled $56 million for the quarter and $61 million on a year-to-date basis. Valuation changes in aggregate for the second quarter were favorable for both our equity portfolio and our bond portfolio. Before tax effects, the net gain was $480 million for the equity portfolio and $16 million for the bond portfolio. At the end of the second quarter, the total investment portfolio net appreciated value was approximately $7.2 billion.

The second quarter pre-tax average yield of 4.93% for the fixed maturity portfolio was up 29 basis points compared with last year.

The average pre-tax yield for the total of purchase taxable and tax-exempt bonds during the second quarter of this year was 5.82%.

Dividend income was up 1% and that purchases of equity Securities, total 56 million for the quarter and 61 million on a year-to-date basis.

Valuation changes in aggregate for the second quarter were favorable for both our equity portfolio and our bond portfolio.

Before tax effects, the net gain was $480 million for the equity portfolio and $16 million for the bond portfolio.

Michael Sewell: The equity portfolio was in a net gain position of $7.6 billion, while the fixed maturity portfolio was in a net loss position of $458 million. Cash flow, in addition to higher bond yields, contributed to investment income growth. Cash flow from operating activities for the first six months of 2025 was $1.1 billion. That's down $44 million from a year ago due to paying $442 million more for catastrophe losses in the first half of this year.

At the end of the second quarter, the total investment portfolio net appreciated value was approximately $7.2 billion.

The equity portfolio was in a net gain position of 7.6 billion dollars. While the fixed maturity portfolio was in a net loss position of 458 million.

Cash flow, in addition to higher bond yields, contributed to investment income growth.

Cash flow from operating activities for the first six months of 2025 was $1.1 billion.

That's down 44 million from a year ago due to paying $442 million more for catastrophe losses in the first half of this year.

Michael Sewell: As usual, I'll briefly comment on expense management and our efforts to balance expense control with strategic business investment. The second quarter of 2025 property casualty underwriting expense ratio decreased by 1.8 percentage points, primarily due to growth in earned premiums outpacing the growth in expenses. The 28.6 expense ratio contributed to strong results for the quarter, but I don't expect it to remain that low in the short term. There are several factors, such as the magnitude and timing of various expenses that can cause variation between quarters.

As usual, a brief a briefly comment on expense management and our efforts to balance expense control with strategic business Investments.

The second quarter of 2025 property casual under eye and expense ratio decreased by 1.8 percentage points, primarily due to growth in earned premiums outpacing the growth in expenses.

The 28.6 expense ratio contributed to strong results for the quarter, but I don't expect it to remain that low in the short term.

Michael Sewell: 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. Then we updated estimated ultimate losses and loss expenses by accident year and line of business. For the first six months of 2025, our net addition to property casualty loss and loss expense reserves was $829 million, including $711 million for the IB&R portion. During the second quarter, we experienced $63 million of property casualty, net favorable reserve development on prior accident years that benefited the combined ratio by 2.6 percentage points.

There are several factors such as a magnitude and timing of various expenses that can cause variation between quarters.

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 in case reserves.

Then we updated estimated ultimate losses and loss expenses by accident year and line of business.

For the first six months of 2025, the net addition to property casualty loss and loss expense reserves was $829 million, including $711 million for the IBNR portion.

Michael Sewell: On an all lines basis by accident year, net favorable reserve development for the first six months of 25 totaled $154 million, including a favorable $183 million for 24, favorable $12 million for 23, and an unfavorable $41 million in aggregate for accident years prior to 23.

Percentage points.

On an all lines basis by accident year. Net, favorable Reserve development for the first 6 months of 25. Totaled, 154 million, including a favorable 183 million for 24.

Michael Sewell: I'll conclude my comments with Capital Management Highlights. We paid $133 million in dividends to shareholders during the second quarter of 2025. No shares were repurchased during the quarter. We believe both our financial flexibility and our financial strength are stellar. The parent company Cash and Marketable Securities at the end of the quarter was $5.1 billion. Debt to total capital remained under 10%. and our quarter end book value was a record high $91.46 per share with $14.3 billion of GAAP consolidated shareholders equity providing ample capacity for profitable growth of our insurance operation.

favorable 12 million, for 23 and an unfavorable 41 million in aggregate for accident years, prior to 23,

I'll conclude my comments with Capital Management highlights.

We paid 133 million in dividends to shareholders during the second quarter of 2025.

No shares were repurchased during the record uh during the quarter.

We believe both our financial flexibility and our financial strength are stellar.

The parent company cash and marketable, securities at the end of the quarter was 5.1 billion.

Debt to Total Capital remained under 10%.

And our quarter end Book value was a record high 91.46 cents, per share with 14.3 billion dollars of Gap.

Stephen Spray: Now, I'll turn the call back over to Steve. Thanks, Mike. We're continuing to follow the same bold vision our founders created 75 years ago, a company built for independent agents. Doing business face-to-face, handling claims fast, fair, and with empathy. have the expertise and financial strength to grow through all market cycles. It had value in 1950, it has value today, and I'm confident it will have value for decades to come. As we've been celebrating our anniversary, we've also been recognizing the many associates who've contributed to our success.

Consolidated shareholders Equity, providing ample capacity for profitable growth of our insurance operations.

Now I'll turn the call back over to Steve. Thanks Mike. We're continuing to follow the same bold Vision. Our Founders created 75 years ago, a company built for independent agents

Doing business face to face handling claims fast fair and with empathy.

Having the expertise and financial strength to grow through all market cycles. It had value in 1950, it has value today, and I'm confident it will have value for decades to come.

Stephen Spray: I want to take a moment to thank one of them now.

As we've been celebrating our anniversary, we've also been recognizing the many Associates who contributed to our success.

Stephen Spray: Teresa Hoffert will retire in September after 45 years of service. Her remarkable career includes joining our company as a clerical associate, earning an undergraduate and a graduate degree in the evenings, and then advancing through the finance ranks to become an executive officer and treasurer for some of our insurance subsidiaries. Her hard work and dedication have benefited all of us.

I want to take a moment to thank 1 of them now.

Teresa Hoffer will retire in September after 45 years of service.

Her remarkable career includes joining our company as a clerical associate, earning an undergraduate and a graduate degree in the evenings, and then advancing through the finance ranks to become an executive officer and treasurer for some of our insurance subsidiaries.

Stephen Spray: Thank you, Teresa, for your many years of leadership and friendship.

Her hard work and dedication have benefited all of us.

Stephen Spray: We wish you all the best in this next chapter of your life.

Dennis Mcdaniel: As a reminder, with Teresa, Mike, and me today are Steve Johnston, Steve Soloria, and Mark Shambo.

Thank you, Teresa, for your many years of leadership and friendship. We wish you all the best in this next chapter of your life.

Operator: Dorwan, please open the call for questions. Certainly. Thank you.

As a reminder, with Teresa, Mike, and me today are Steve Johnston, Steve Soloria, and Mark Shambo Dorwin. Please open the call for questions.

Operator: We will now begin the question and answer session. To ask a question, you may press star then one 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.

Certainly, thank you. 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 were using a speaker-phone, please pick up your handset before pressing the keys.

Operator: At this time, we will pause momentarily to assemble our roster.

If at any time your question has been addressed and you would like to withdraw your question, please press star, then 2.

At this time, we will pause momentarily to assemble our roster.

Michael Phillips: The first question comes from Michael Phillips with Morgan Stanley, please go ahead. Thanks, good morning.

The first question comes from Michael Phillips with Morgan Stanley. Please go ahead.

Michael Phillips: It's Mike Phillips from Oppenheimer. First question, I want to parse out some differences in your commentary on the commercial lines for real pricing, where, you know, in the press release, you give Commentary. You get a little more detail by line in the queue. In the queue, your commentary hasn't changed much. High single digit for commercial casualty, high single digit for commercial property, kind of mid-single digit for commercial auto. And that's no different than prior quarters, at least not last quarter.

Michael Phillips: This quarter, and Steve said it in your opening comments, you've moved from commercial reno pricing of high single digit to kind of mid-single digit.

Thanks, good morning. Uh, it's Mike, Phil Troper. Um, first question I wanted to part out some differences in your commentary on the commercial lines real pricing. Um, where, you know, in the press release, you give some commentary, you get a little more detail by the line in the quarter. And the quarterly commentary hasn't changed much: high single digits for commercial casualty, and I see more digital for commercial property, kind of mid single digits for commercial auto, and that's no different than prior quarters. At least not in a lot.

Michael Phillips: I guess understand the differences between those two commentaries, first off. And then it feels like maybe mid-single digit pricing for commercial might be kind of where loss trends are. I don't know if you agree with that or not.

Stephen Spray: And so if so, what does that mean for future margin expansion? Yeah, Mike, you're right. It's kind of nuanced there. What we're saying on commercial lines is that we've moved to the kind of the high end of the mid-single digit. So it's – I'm just trying to point out candidly that it just was down a bit from the first quarter just to – again, just for total transparency. One thing that I – a couple of things I would, I guess, maybe point out the way I'm looking at it is the net rate changes remain very strong in commercial lines.

Quarter this quarter and Steve said it in your opening comments you've moved from commercial Reno pricing of high single digits to kind of mid single digit, I guess understand the differences between those 2 commentaries um first off and then if she feels like maybe you know mid single digit pricing for commercial might be kind of where lost Trends are and if you agree with that or not. And so if so what does that mean for future? Uh margin expansion. Thank you.

Stephen Spray: To kind of answer the second part of your question, maybe other than workers' compensation, we believe that the rate is at least matching or outpacing loss costs. Now, again, that's perspective. You know, everything we do is perspective on the price. The other thing I would point out is if you just look at the results in commercial lines, and we've got now 13 and a half consecutive years of underwriting profit, the 92.9 here in the first six months. And, you know, in prior calls, you've heard me talk a lot about the pricing sophistication and the segmentation that our underwriters working with our agents have just been executing on beautifully.

Create changes remain very strong in commercial lines to kind of answer the second part of your question, maybe other than workers compensation? Uh, we believe that that rate is uh, at least matching our outpacing loss, uh, loss cost.

Now again, that's prospective. You know, everything we do is prospective on the pricing.

The other thing I would point out is if you just look at the results in commercial lines, and we've got now 13 and a half consecutive years of underwriting profit, the 929 here and 6. In the first 6 months,

And, you know, in prior calls, you've heard me talk a lot about.

Stephen Spray: And if you think about that book and the performance that we've had there, and moving towards more price adequacy, I think that's what's putting a little bit of pressure on the overall average net rate change. What I focus more on, though, again, is the segmentation. Are we retaining that business that's most adequately priced? And then are we being aggressive, working with our agents on the business that we feel needs the most RADAC.

The pricing sophistication and the segmentation that our underwriters, working with our agents, have just executed on beautifully.

And if you think about that book and the performance that we've had their

And moving towards more price adequacy. I think that's what's putting a little bit of pressure on the overall average. Net rate change.

When I focus more on though, again is the segmentation. Are we retaining that business? That's most adequately priced. And then are we being aggressive working with our agents on the business that we feel?

Needs the most rate action.

Michael Phillips: Okay, Steve, thank you. That's helpful.

Michael Zaremski: The second question is related to reserves and maybe specifically commercial casualty. I'm going to go back to year-end data, but kind of couple that with what we've seen so far this year, where year-end, you took some releases in GL in recent action years, and I think now you're taking a little bit more in the recent action years. Mike said 2024 favorable, 2023 favorable. I don't know what lines that was, but at least in GL, you've taken some favorable development in the recent action years. So I guess, could you give us comfort in how you Take those releases in the recent accident years for GL, and that might not be too soon.

Michael Zaremski: Are you moving things around by accident here? But just some comfort around those recent accident years for general liability.

Michael Zaremski: Thanks.

Okay, Steve, thank you. That that's helpful. Um, a second question that kind of is related to reserves and maybe specifically commercial casualty, um, I'm going to go back to year end data, but kind of couple that with what we've seen so far this year, um, where you know, a year end you, you took some releases in GL, uh, in recent accident years. And I think now you're, you're taking a little bit more in the recent action years. Um, Mike said, you know, 2024 favorable 2023 favorable. I don't know what lines that was, uh, but at least NGL you've taken some favor development in the recent accident here, so I guess just could you give us comfort in how you can take those releases in the recent accident years for GL? I know that might not be too soon. Are you moving some things around by accident here, but just some comfort around those recent accidents for general liability. Thank you.

Michael Sewell: Yeah, this is Mike Sewell. Thanks for the question. You know, I do gain, you know, first of all, a lot of comfort, you know, with our reserving process. It's a consistent approach with some of the same actuaries doing the work. And then when I look at the numbers, and I do see it by year, you know, we don't lay it all out exactly, but on the commercial casualty, as you noticed, it was 2 million favorable. If I'm looking at the actual years, the large piece of it, 14 million, was favorable for the 2024 year. But if I start to look down, 2023, it was basically flat, 22, 21, I'll call those, those two years were flat together.

Yeah, this is Mike. So thanks for the uh, question. You know, I, I do gain, you know, first of all, a lot of comfort. Um, you know, with our reserving process, it's a consistent approach with, uh, uh, some of the same, uh, actuaries doing the work and, and then when I look at the numbers and I do see it by, uh, by year, you know, we don't lay at all. All out, exactly. But on the commercial casualty, as you noticed, uh, it was 2 million favorable if I'm looking at the accident years, uh, the uh, large piece of it. 14 million was favorable for the 2024, uh, year. But if I start,

Michael Sewell: And, you know, going back to the years 2020 and prior, it was reserve strengthening of $10 million. So when you take a look at all that, the total reserves that are outstanding on that line, very, very little movement, but it's, it's a little bit across the board, but, but your observation is correct that there is a little bit more for this quarter that was coming from the most recent current accident year.

Stephen Spray: Hey, Mike, Steve Spray, I might just add, I agree, obviously, completely with what Mike Sewell just said, but from my seat, when I've been looking at this, you know, here's my last, my first year on the job, and even prior to that, is just And what I appreciate so much is that Mike said, the consistent process, the consistent team. And if you kind of just move up a layer, the way I've been looking at it is just the track record that we have as a company, you know, 30 plus years of overall favorable reserve development, commercial lines this year in total, we've got favorable reserve development, you know, every quarter, and I think I talked about this on the last quarter call, every quarter, in this line or that line, you're going to see some movement.

To look down 2023, it was basically flat at $2.221 billion. I'll call those, uh, those two years were flat together. And, you know, going back to the years 2020 and prior, it was a reserved strengthening of $10 million. So when you take a look at all that, the total reserves that are outstanding on that line, um, there was very, very little movement, but it's a little bit across the board. But, uh, your observation is correct that there is a little bit more for this quarter that was coming from the most recent, uh, current accident year.

Hey Mike, uh, Steve Spray. I might just add, I agree, obviously completely with what Mike Sewell just said. But from my seat.

well, I've been looking at this, you know, here this uh, my last, my first year on the job and even prior to that is just

And what I appreciate so much is that Mike said the consistent process, the consistent team, and if you kind of just move up a layer, the way I've been looking at it is just the track record that we have as a company: you know, 30 plus years of overall.

The favorable reserve development in commercial lines this year in total has been consistent. We've seen favorable reserve development every quarter, and I think I mentioned this on the last quarter call. Every quarter.

Stephen Spray: I guess that's the, you know, that's the nature of reserving. The thing I most appreciate is that our team here, the consistent team, follows that consistent process. And when they see something, they're quick to act. And I think that's what you're seeing. And the prudence that we are carrying with a lot of the uncertainty, both in saying casualty, and then in commercial auto, you can see the same thing.

And and this line, or that line, you're going to see some movement. I guess that's the, you know, that's the nature of reserving the thing. I most appreciate is that our team here, the consistent team, uh, follows that consistent process and when they see something, they're quick to act, and I think that's what you're seeing, uh,

And the prudence that we are carrying with a lot of the uncertainty, both in saying casualty and then in commercial auto, you can see the same thing.

Michael Zaremski: Okay, thanks guys. I'll stick to the two. Appreciate your comments. Thank you, Mike. Thank you.

Okay. Uh, thanks, guys. I'll stick to the 2 app, your comments.

Thank you, Mike.

Michael Zaremski: Our next question is from Mike Zaremski with BMO.

Michael Zaremski: Please go ahead. Hey, thanks. Good morning. On the expense ratio, which was much better than expected, I believe, Steven at Preparemark. You said that there were some one-time items. So just, I guess, is the, should we be still thinking that the guide on the expense ratio is kind of trying to get below 30, or is, or should we run rates some of this better than expected, or half of it, or just trying to see if there's anything really changed there. Thanks. Yeah, no, that's a great question, Mike, and I appreciate that. And so it was a little bit better than than what we were probably thinking.

Thank you. Our next question is from Mike Zamsky with BMO. Please go ahead.

Thanks. Um, good morning. Um, on the expense ratio, which was much better than expected, I believe. Um, Steve, in the prepared remarks.

Um, you said that, um, there were some one-time items, so just, uh, I guess should we still be thinking that the guide on the expense ratio is kind of try to get below 30? Or is there, should there be a run rate, some of this, um, um, better than expected, or half of it, or, um, just trying to see if there's anything really changed there. Thanks.

Michael Sewell: But again, there's, there is some timing for some actual expenses. But really, the large piece of it was, and we've been trying to do this is we've been trying to grow premium growth faster than expense growth and expenses are going to, they're going to go up. And so We watch that very carefully. But in between quarters, you know, you may have certain expenses that might hit here or there. But I would say as a run rate, we're trying to be below 30 on an ongoing basis. And, you know, once we're there, and I think we're kind of right there, I'm going to set my targets on a 29 or below.

Yeah, no, that's a great question, Mike. And I, I appreciate that. And so it was um, a little bit better than than what we were probably thinking. But again, there's there is some timing um, for some actual expenses. But really the the the large piece of it was and we've been trying to do this is we've been trying to grow premium growth faster than expense. Uh growth and expenses are are going to that. They're going to go up and so

Michael Sewell: So we're not going to give up. We're going to consistently work towards lowering that ratio. Hey, Mike, Mike, just to add on one data point that Mike mentioned, just to, I think, emphasize on the growth, you know, four out of the last five years as a company overall, we've had double digit net written premium growth. And the one year we didn't was at nine and a half percent. So that that is certainly as Mike pointed out, that's that's helping the cause. Okay, got it. Yeah, I'm sorry.

We watched that very carefully. Um, but in between quarters, you, you know, you may have certain expenses that might here, or hit here or there, but I would say, as a run rate, we're, we're trying to be below 30 on a ongoing basis. And, you know, once we're we're there and I think we're, we're kind of right there. I'm going to set my targets on a 29 or below, so, um, we're, we're not going to give up, we're going to consistently work.

Uh, towards lowering, uh, that ratio.

Hey Mike in uh Mike just to add on 1 data point that Mike mentioned. I just I think emphasize on the growth you know 4 out of the last 5 years as a company. Overall, we've had double digit that written premium growth and the 1 year we didn't was at 9 and a half percent so that that is certainly as Mike pointed out. That's that's helping the cause.

Michael Zaremski: That was Mike in the prepared remarks that made the expense ratio comment. Got it.

Michael Zaremski: So operating leverage is key. Got it.

Okay, got it. I'm sorry, that was Mike in the prepared remarks that made the extension show comments. Got it. So, operating leverage is key. Um, got it.

Michael Zaremski: Pivoting to just maybe a dual question on commercial lines. The Axon year loss ratio in Warthomp appears to be picked at a much higher level than in recent quarters and years. Anything going on there? And then I know you guys addressed some of the unfavorable, but commercial auto continues to be a hotspot for you all, and I feel like for many in the industry as well. So any additional comments you'd like to make on commercial auto as well? On work comp, and Mike may want to add something as well, I would just say again, it's just it's a long tail line.

um, pivoting to just like maybe dual question on Commercial lines. Um, um, the

Axe in your loss. The ratio in workers' compensation appears to be picked at a much higher level than in recent, um, you know, quarters and years. Is there anything going on there? And then, you know, I know you guys addressed some of the unfavorable, but, uh, you know, Commercial Auto continues to be a hot spot for you all. And I feel like for many in the industry as well. So, any additional comments you'd like to make on Commercial Auto as well? Thanks.

Stephen Spray: It's just our prudent approach there that we've talked about in the past. On commercial auto, it's it's along the lines still kind of what I was saying to on Mike Phillips's question. earlier is it's just you know it's we are seeing I think the industry that's pretty well documented and we as well we're seeing more attorney involvement in auto uh accidents so I think that social inflation legal system abuse however you want to put that's putting some pressure on that but again I kind of move up a layer and just look uh from quarter to quarter what our actuaries do when they see something and how quickly they act and how that's just served us well over time.

Sure, onward, Cop, uh, and Mike may want to add something as well. I would just say again, it's just, it's a long-tail line. It's just our prudent approach there that we've talked about, uh, in the past on Commercial Auto. It's along the lines still kind of what I was saying to uh on Mike Phillips's question.

Earlier is it's just, you know, it's we are seeing I think the industry I that's pretty well documented and we as well we're seeing more attorney involvement and Auto uh accidents. So I think that social inflation legal system abuse. However you want to put it, that's putting some pressure on that. But again I kind of move up a layer and just look uh from quarter to quarter what our actuaries do when they see something and how quickly they act.

Stephen Spray: And I think that's what you've got going on here in commercial auto as well. Matter of fact, the most recent accident years, 24 and 25, case incurred, paid in case, look really good right now. And you can see that. But we're adding IB&R to it. We're being prudent. There's uncertainty. And so as you have come to expect from us, I think we're taking the appropriate action.

And how that's? That's just served us well over time, and I think that's what you've got going on here in commercial auto as well. Matter of fact, the most recent accident years 2024 and 2025 case incurred, paid in case look really good right now, and you can see that. So, but we're adding IBNR to it; we're being prudent.

Stephen Spray: So on workers' comp, just as a follow-up, you know, that's a big change in the pick. So one of your, you know, peers who also has a lot of contractors has, you know, maybe said that frequency's become less of a good guy. Just anything there? Thank you. Yeah, no, I can't say we've seen anything different in the way of frequency there, Mike, but as you know, yeah, our commercial book is, you know, we write a lot of construction, but if you look at our workers' compensation premiums, as a total of our commercial. It's just, you know, it's like it's 6-8% of our total commercial lines business, so it probably has a little less impact than maybe some of the peers that you follow.

There's uncertainty, and so, as you have come to expect from us, I think we're taking the appropriate action.

So on workers, comp just to follow up, you know, that's a big, um, change in the pick. So 1 of your, you know, peers who also has a lot of contractors is, you know, maybe said that frequencies become less less of a good guy is any, um, just anything there. Thank you.

Yeah, no, I can't say we've seen anything, uh, different in the way of frequency, uh, their mic. But, as you know, our commercial book is, uh, you know, we write a lot of construction. But if you look at our workers' compensation premiums,

Uh, as a total of our commercial, it's just, you know, I think it's 68% of our total commercial lines business, so that probably has a little less impact than maybe some of the peers that you follow.

Thank you.

Operator: Our next question comes from...

Thank you.

Greg Peters: Our next question comes from Greg Peters with Raymond James, please go ahead. Thank you. Good morning, everyone.

Comes from.

Our next question comes from Greg Peters with Raymond James. Please go ahead.

Greg Peters: Can let's let's pivot over to the personalized business. And, you know, I you called out in your script and in the release, some changes that are happening inside your private client business. Maybe you can give us an idea where, you know, as this reset continues, where it's going to, where the final resting spot is, if you will, in terms of your expectations on exposures in California and elsewhere. Yeah, sure. Thanks, Greg. Appreciate it. First thing I would say, is I feel confident saying we'll do everything we can to support our California agents and policyholders. And as I mentioned, then, you know, since the wildfires occurred in that first quarter, like we do on any large loss, individual event or catastrophe, we do a deep dive and objectively look at any lessons learned.

Thank you. Good morning everyone.

Um,

Can we, let's pivot over to the personal lines business and.

Um, you know, you called out in your script and in the, um, release.

Some changes that are happening inside your Private Client business.

Maybe you can give us, uh, an idea where, you know, as this reset continues, where it's going to, where the final resting spot is, if you will.

In terms of your expectations on exposures in California and elsewhere,

Yeah, sure. Thanks. Uh, Greg appreciate it. First thing I would say,

I feel confident saying we'll do everything we can to support our California agents and policyholders.

Stephen Spray: I think it's fair to say that we've got lessons learned out of California, and we're already implementing some of those, some of those actions right now. You know, without getting into a lot of detail, I would say, you know, you can, it's again, it's fair to say, or safe to say, it's around model recalibration, around aggregation, and just our view of risk. So. Again, I feel confident that we're going to be able to do everything we can to support a lot of great California policyholders we have and the great agency plant that we have there.

And as I mentioned in, you know, since the wildfires occurred in that first quarter like we do on any large loss individual event or catastrophe, we do a deep dive and, uh, objectively. Look at any Lessons Learned. I think it's fair to say that we've got Lessons Learned out of California. And we're already implementing some of those, uh, some of those actions right now. Um, you know, without getting into a lot of detail, I would say, you know, you can, it's it's again, it's fair to say, or

Safe to say it's around model, recalibration around aggregation and just our view of risk. So

Again I feel confident that we're going to be able to uh do everything we can to support uh a lot of great California policyholders, we have and uh the great agency plant that we have there.

Stephen Spray: Related to that, you talked about, you know, the reinstatement costs going through your personalized business. After Recoveries. I'm curious on the recovery piece. is, did you sell your civil rights? or where, you know, because their portion of that fire is, looks like it's going to rest with some of the liability rests with the utility. Yeah, I would just answer that, that we have not sold our subroute right. Got it. Okay.

Um, related to that, you talked about, um, you know, the reinstatement costs going through your personalized business.

After recoveries.

Um, curious on the recovery piece. Um,

Is, did you sell your several rights?

Or, um, where you know, because a portion of that fire looks like it's going to rest with some of the liability with the utility.

Yeah, I would just answer that we have not sold our subrogation rights.

Got it.

Stephen Spray: Hey, in your prepared remarks, you talked about some changes to or some additional reinsurance you bought. Can we go back to your comments on the reinsurance? And I guess the reason why I'm asking is just trying to put all the pieces together as we go into the hurricane season and what I should think about, you know, the potential. For event exposure your company might have because it sounds like you you bought some additional cover on, you know, to raise the extend the tower. Just give us a remind me of the summary version of what's going on there.

Um, okay. Hey, um, um, in your prepared remarks, you talked about some changes to our, some additional reinsurance you bought.

um,

Can we go back to your comments on the reinsurance? Um, and I guess the reason why I'm asking is just trying to put all the pieces together as we go into the hurricane season and what I should think about, you know, the potential.

Stephen Spray: Yeah, absolutely. Again, Steve Spray. So what we did is we purchased At 7-1, we purchased an additional $300 million x of $1.5 billion on top of the PropertyCat Reinsurance Program. Very consistent with our approach when we look at the PropertyCat Reinsurance. The way we approach that is for balance sheet protection. We just felt with the growth that we've talked about here this morning, good growth, that it was prudent, especially in this marketplace where we thought it was attractive to go out and try to purchase some more on top. We went out, you know, it's a it's a subscription market.

For event exposure, your company might have because it sounds like you, you bought some additional cover on, you know, to raise the the the extended Tower. Just give us a a remind me of the the summary version of what's going on there.

Yeah, absolutely. Again, Stephen Spray. Uh, so what we did is we purchased.

At 71, we purchased an additional million dollars ($1 million) of $1.5 billion on top of the property cat reinsurance program, very consistent with our approach. When we look at the property cat reinsurance, the way we approach that is for balance sheet protection.

We just felt with the growth that we we've talked about here this morning, uh, good growth, that it was prudent, uh, especially in this marketplace, where we thought it was attractive.

to go out and, uh,

Try to purchase some more on top.

Stephen Spray: So we went out with a, I think with an aggressive rate, I think we we filled, we said 129 million of the 300 or 43% of it. So that's kind of the story there. And then on California, on the primary business, we, as it stands now, we've used about half of that property cap, the 1.5 billion pre, excuse me, 7-1, and reinstated those layers. So those layers are there for the remainder of the year.

We went out, you know, it's a subscription market. So we went out with, I think, an aggressive rate. I think we filled, we said, $129 million of the $300 million, or 43% of it.

So that's kind of the story there.

And then on California on the primary business we uh, as it stands. Now, we've used about half

Of that property cat, the $1.5 billion pre-1, excuse me, 71, and reinstated those layers. So those layers are there for the remainder of the year.

Stephen Spray: and uh just and then for the the that's the california piece what's your net Can you remind me what your net retention is on just the hurricane risk when you think about southeast and gulf coast exposures on a per event basis? And just one other, I assume on the cap bond, the additional layer you bought that you said subscription, so that wasn't done through the cap bond market, correct? That was done traditional risk transfer? Yeah, that was traditional reinsurance on a 300 X of 1.5 billion. And then on the Yeah, so you would mention you were you were kind of bifurcating wildfire and hurricane.

On a program basis.

And and just 1 other. Yeah, I assume on the on the the the cap Bond the additional

Layer you bought that, you said subscription. So that wasn't done through that. That wasn't done through the cap on Market. Correct. That was done traditional risk transfer.

Yeah, that was traditional reinsurance on the 300X of 1.5 billion. And then on the, uh,

Stephen Spray: The property is an all peril. Yeah, it's an all peril. That's an all perils contract. Greg, and we have a $300 million retention on that. So whether it's wildfire, whether it's severe convective storm. Earthquake or hurricane, as an example, we have a $300 million retention, but those perils all apply to that Property Cat Treaty. Got it. Thanks for the clarification. Yeah, my pleasure. Thanks for the question.

yeah. So you would mention you were, you were kind of by forcing wildfire and hurricane the property. Yeah, is an all. Yeah, it's an all Peril. That's an all perils contract, Greg, and we have a hundred million dollar retention on that. So whether it's Wildfire, whether it's severe convective, storm.

Earthquake or hurricane. As an example. Uh, we have a hundred million dollar retention, but those perils all apply to that property, cat treaty.

Got it. Thanks for the clarification.

Yeah, my pleasure.

Thanks for the question.

Mei Yao: Thank you. Our next question comes from Mei Yao with KBW. Please go ahead.

Thank you.

Our next question comes from Maya with KBW. Please go ahead.

Mei Yao: Hi, it's Jane Elm. Thank you for taking my questions. My first question is just a follow-up on the loss trend. Have you observed any shifts in loss trend that you can call out, either upward or downward over the recent period? Now, any comment you can add will be great. Thank you. Yeah, no, I don't think that we have anything to report back on any change in the loss trend up or down during the quarter. But thank you for the question. Got it.

I, um, it's Jane on Flammia. Thank you for taking my question.

My first question is just a follow up on the last Trend. Um, have you observed? Any shifts in La Trend that you can go out either upward or downward over the recent period?

Um, any kind of you can add would be great. Thank you.

Yeah, no. I I don't think that we have, uh, anything to report back on any change in the Lost Trend up or down during the quarter, but thank you for the question.

Mei Yao: My second question is, The girls. So commercial properties still have decent returns. Property rates now are soft. and Casualty Rates of Salary. How do you view the relative growth prospect between poverty and casualty? Yeah, sure. Thank you. You know, we're, we're a package writer as a company. When we work with our agents. The other thing I think you're hearing a lot in the marketplace about a softening property market. And we're seeing that too, on really large properties, we're seeing it probably most prevalently in our Lloyd syndicate and CGU out of London, they do a lot of direct facts, shared and layered business.

Got it. Um, my second question is, um,

The growth.

Um, so commercial property still has these in return, um, property right now as often and casualty rates of salary. How do you view the relative growth prospects between property and casualty?

Yeah, sure. Thank you. You know, we're a, we're a package writer, as a company. Uh, and when we work with our agents, the other thing, I I think you're hearing a lot in the marketplace about a softening property market and

Stephen Spray: So that's that business we're seeing some pressure on. But our small to middle market. Commercial Package Business and Commercial Property Business. You know, we're still seeing healthy rate there. And I think that's because, you know, the things that you see when you turn the TV on at night, severe convective storms haven't let up. So that's keeping pressure on property, social inflation, legal system abuse, that's keeping pressure on general liability, umbrella, as well as auto liability. So, you know, we're still seeing healthy net rate for our mix of business and what we do. Yeah, thank you for the Yeah.

We're seeing that too, on really large, uh, properties. We're seeing it, uh, probably most prevalently in our Lloyd Syndicate and cgu out of London. They do a lot of direct facts, shared and layered business.

So that's that business. We're seeing some pressure on, but our...

small to Middle Market.

Commercial package business and commercial property business.

You know, we're still seeing a healthy rate there, and I think that's because...

You know, the things that you that you see, when you turn the TV on a severe, convective storms haven't let up. Uh so that's keeping pressure on property, social inflation, legal system abuse. That's keeping pressure on, uh, general liability umbrella as well as Auto liability. So, you know, we're still seeing healthy net rate, uh, for our mix of business. And and what we do,

yeah, thank you for the

Operator: Thank you.

yeah, thank you.

Joshua Shanker: The next question is from Josh Shanker with Bank of America. Please go ahead. Yeah, thank you. First of all, looking at the growth, particularly in commercial, among other companies that report, I think you're the first company to report accelerating growth in the second quarter versus the first quarter. I don't know if that's a trend, but can you talk about what you're doing? Is this taking a larger share in agencies that you already have? Is this the newer agencies you've appointed? Is this lines of business that you are finding you can underwrite now that you didn't have that capability in the past?

Thank you.

The next question is from Josh Shankha with Bank of America. Please go ahead.

Yeah, thank you. Um, uh, first of all, uh, looking at the growth particularly in commercial among other companies that have reported, I think you're the first company to report accelerating growth in the the second quarter versus the first quarter. I don't know if that's a trend, but can you talk about what you're doing? Is this taking a larger share in agencies that you already have? Is this the newer agencies you've appointed is this, um, lines of business that you are finding, uh, you can under right now that you didn't have that capability in the past.

Joshua Shanker: Yeah, thank you, Josh. I think it's everything we do around here is an and strategy. So I think it's all of the above. You know, we've got such deep relationships. with all the agents we do business with. But you're right. We've been adding high-quality agencies at a faster clip. There's no doubt that that is certainly accelerating both the net written premium growth as well as our new business. Our E&S company continues to grow. We've added five new products at Lloyd's that just for agents of Cincinnati Insurance Company as they come through our in-house broker C-Super.

Yeah, uh, thank you, Josh. I think everything we do around here is a strategy, so I think it's all of the above.

You know, we've got such deeper relationships.

Stephen Spray: So I think we have a lot of good momentum with our agents. We keep focused on what we do well, Josh, blocking and tackling one account at a time, calling on agents, doing business face-to-face. It's just all really goes to it, and it's just been continuing to pick up momentum.

Insurance company as they come through our in-house. Broker see. Super.

so, I think

we just have a lot of, we have a lot of good momentum with our agents, we keep

You know, focused on what we do. Well, Josh blocking and tackling 1 account at a time.

Calling on agents doing business face-to-face, and it's just all.

Really goes to it. And it's, uh, it's just been continuing to pick up momentum.

Stephen Spray: Pivoting to reinsurance, you bought more, obviously, and you sold less.

Stephen Spray: Can you talk about what your inbound re-insurance strategy is going to be going forward and two, if we replayed 1Q25, has anything changed about your exposures that you'd have a different outcome? Okay, on on Cincy Rhee, first thing I would say is they are executing exactly as we want them to, you know, it's a, it is a It's an assumed model, an allocated capital model. They're seeing pricing in the marketplace that they don't feel, from their view of risk, is where they want it to be. So they've pulled back underwriting discipline. About half of the pullback is coming from property, and the other half is coming from casualty, so pretty balanced.

Um, and pivoting to reinsurance that you bought more obviously, and you sold less.

Um, can you talk about what your inbound reinsurance strategy is going to be going forward into, if we replayed Q1 2025? If anything changed about your exposures, would you have a different outcome?

Okay, on, uh, on Cincy, Reed, the first thing I would say is they are executing exactly as we want them to. You know, it is, uh,

It's, it's an assumed model.

An allocated Capital model. Um,

they are. They're seeing

Stephen Spray: But, you know, their inception to date combined ratio, which is what we focus most on, Josh, is 95.2. That's on about $3.5 billion of premium. So they're executing exactly the way we designed from the get-go and the way that we plan on doing it going forward as well. And when we feel that things are opportunistic, they'll grow it. And if we don't feel we can get the risk-adjusted return, then there may be some quarters when they back off.

Uh, they're seeing pricing in the marketplace that they don't feel from their view of risk is, uh, is where they want it to be. So they have, uh, they've pulled back underwriting discipline about half of the uh I guess of the pullback is coming from property and the other half is coming from casually, so pretty balanced.

But, you know, their inception-to-date combined ratio, which is what we focus most on, Josh, is 95.2.

That's on about $3.5 billion of premium. So

Stephen Spray: Has the shape of the portfolio today notably different than it was six months ago, such that the California wildfresh would have a different result? No, not at this point. If you're talking about the primary business, I think, on the homeowner, but that's all going to be part of it. That's all part of it. Yeah, I would say right now, for the last six months, it would be it'd be little change.

They're executing exactly the way we designed from the get-go. And, uh, and the way that we've, that we plan on doing it going forward as well. And, you know, when we when we feel that things are opportunistic, they'll grow it, and if we don't feel, we can get the risk, adjusted return, then uh, there may be some quarters when they uh when they back off.

Has the shape of the portfolio today notably differed from what it was 6 months ago, such that the California wildfires would have a different result?

No, not at this point. If you're talking about the primary business, I think, on the homeowner, but that I'm talking about the finance going, selling less and buying more.

Yeah, I would say, right now, for the last six months, it would be a little changed.

Joshua Shanker: Okay, thank you.

Joshua Shanker: Yeah, thank you, Josh.

Okay, thank you.

Yeah, thank you, Josh.

Operator: Thank you.

Operator: Again, if you have a question, please press star, then 1.

Thank you.

Michael Zaremski: We have a follow-up question from the line of Mike Zaremski with BMO, please go ahead. Hey, great. Thanks for taking the follow up. Um, you know, back to the, um, the competitive, uh, marketplace commentary, um, you know, on the, uh, the property market specifically, um, you mentioned that, you know, your colleagues, uh, in the Lloyd Syndicate and CGU, um, are, you know, seeing, um, you know, meaningful competitive pressures there on property. Do you or they have a view on, you know, assuming a normal I guess, weather season, whether the rate of decline should dissipate, or do you have any kind of forward-looking view on whether this level of competition kind of makes sense?

Again, if you have a question, please press star, then 1.

We have a follow-up question from the line of Mike Zamsky with BMO. Please, go ahead.

Hey, great. Thanks for taking the follow-up. Um, you know, back to the, um, the competitive, uh, marketplace commentary. Um, you know, on the, uh, the property market specifically, um, you mentioned that, you know, your colleagues, uh, in the Lloyd Syndicate and CGU, um, are, you know, seeing, um, you know, meaningful competitive pressures there in property. Do you, or they, have a view on, you know?

Assuming a normal.

Stephen Spray: And you know, are profits becoming less healthy, or is it a rational thing? Yeah, I don't know if I you know, there's a lot of capacity that's come in a lot of capital has come into that space.

I guess whether season, whether like the the the rate of decline should dissipate or do you have any kind of forward-looking view on whether this, this this level of competition, kind of makes sense. Um and you know you're just

Properties are becoming less healthy, or is it irrational?

Stephen Spray: Mike, I don't know if I would be able to opine on on going forward. I would say that again, uh the discipline and you look at the results we've gotten out of CGU uh just a ton of confidence in the way they're underwriting all lines of business but for what we're talking about here direct in fact and you know the other thing that CGU has been doing since inception is just they've really reshaped that book too with the diversifying both geographically and then by product line uh quite impressive and I think that's going to that's going to bode well for us into the future and that's it's a big reason why you saw uh the growth that we've seen at CGU here in the first half of the year.

Yeah, I don't know if I... you know, there's a lot of capacity that's come in, and a lot of capital has come into that space, Mike. I don't know if I would be able to opine on going forward. I would say that, again.

Uh, the discipline and you look at the results, we've gotten out of cgu. Uh, just a ton of confidence in the way they're underwriting all lines of business. But for what we're talking about here, Direct in fact, and, you know, the other thing that cgu has been doing, since Inception is just, they've really reshaped that book too. We've the the diversifying both geographically, and then by product line, uh, has been quite impressive. And I think that's going to that's going to bode well for us into the future. And that's it's a big reason why you saw uh, the growth that we've seen at cgu here in the first half of the year.

Stephen Spray: Got it. As a followup back to the competitive environment on the kinda core package part of your portfolio, I think you painted a picture of a lot of things, but ultimately, there's a good amount of inflation in the system between weather and social, et cetera, so it sounded like you don't feel like. We're going to enter a soft marketplace. I guess some of the data points and some of the investors are voting that, you know, there there is the potential for a soft market. And I think it's just off the backs of carrier profitability being.

Got it. And, um,

Uh, as a follow-up to the back to the, uh, competitive environment, um, on the uh, kind of core package, uh, part of your portfolio. Um, you know, I think you painted a picture of, you know,

There's a good amount of inflation in the system between weather and social, etc. So, you know, it sounds like you don't feel like...

Stephen Spray: being excellent, which is, you know, also intertwined with interest rates. So any, any additional comments you want to make on terms of just kind of why the SME market probably would be less likely to follow the pace of what you're seeing in the syndicated kind of property market.

Um, we're going to enter a soft Marketplace, I guess the, you know, some of the data points and some of the uh investors are voting that, you know, there there is the potential for a stock market and I think it's just off the backs of carrier, profitability being being excellent. Um, which is, you know, also intertwined with interest rates. So any any additional comments you want to make in terms of just kind of why the uh SME Market probably would be less likely to follow the the the pace of what you're seeing in this indicated kind of property Market.

Stephen Spray: Yeah. The only thing I would say there is I'll speak for Cincinnati Insurance Company in my 34 years here. I think the concept of a rising or lowering tide, raising or lowering all boats, for us, it's not in the dialogue. It's risk by risk. It is using the subjective art, I guess you could say, of underwriting both for our new business field underwriters out in the field working with our agents face to face, looking at the risks, and then the same thing with our renewal underwriters. And then I'll go back to kind of what we talked about earlier.

Yeah, the only thing I would the only thing I would say there's I'll speak for Cincinnati Insurance Company and and my 34 years here. I think the the concept of arising or lowering tide raising or lowering all boats it for us, it's just it's not in the dialogue, it's Risk by risk. It is it is uh, using the subjective, the subjective part, I guess you could say of underwriting

Stephen Spray: you know, it's risk by risk when it comes to pricing. And we're using sophisticated tools. We are using our actuarial team and the data and the pricing precision to segment our book. And if you look at our commercial lines results, you know, the price adequacy will follow those results. And, you know, the pricing in that commercial book, we feel pretty good right now. And so that's what's, that's probably what's putting pressure a little bit on the net rate change. That being said, you can still see we're getting good rate through there for all the reasons I think you mentioned, social inflation, weather, you know, along those lines.

Both for our new business field, underwriters out in the field, working with our agents face to face, looking at the risks. And then the same thing with our renewal underwriters. And then I'll go back to kind of what we talked about earlier.

You know, uh, it's it's Risk by risk when it comes to pricing and we're using sophisticated tools, we are using our Actuarial team and the data, and the pricing Precision to segment our book. And if you look at our commercial lines results, um, you know, the price adequacy will follow those results. Um, and you know, the pricing in that commercial book, we feel pretty good right now. And so that's what's, that's probably what's putting pressure a little bit on the net rate change. Uh, that being said, you can still see, we're getting good rate through there for all the reasons I think you mentioned social inflation weather. Um,

Stephen Spray: But I just You know, I'm not saying that other carriers aren't going to have a different view of a risk. And if they do, we're just so confident in the way we're pricing and the way we're underwriting that we'll have to make a decision risk by risk. If somebody takes a different view and it's, you know, it's considerably less than ours or we don't think we can make a risk-adjusted return, then we're walking away. And we've been executing on that. I just have to give a shout out to our underwriters and our field reps. They have been executing on that, working with our agents beautifully now for, candidly, the last 12 or 13 years.

You know, along those lines, but I just...

You know, I'm not saying that other carriers aren't going to have a different view of a risk. And if they do, we're just so confident in the way we're pricing and the way we're underwriting that we'll have to make a decision risk by risk. If somebody takes a different view and it's, you know, it's considerably less than ours, or where we don't think we can make a risk-adjusted return, then we're walking away, and we've been executing on that. All right, I just have to give a shout out to our underwriters and our field reps. They have been executing on that, working with our agents beautifully. Now, for candidly the last 12,

Stephen Spray: But adding agencies, continuing to build out our E&S operations, continuing to give our agents more access to Lloyd's, more efficient, more effective access to Lloyd's, growing personal lines, getting it profitable.

Uh, 13 years. So

But adding agencies, uh, continuing to build out our ENS operations, continuing to give our agents more access to Lloyd's, to more efficient, more effective access to Lloyd's.

Stephen Spray: just feel really good about where we are and where we're heading.

Growing personal lines and getting it profitable.

Stephen Spray: We're going to stay focused.

I just feel really good about where we are and where we're headed, and I want to stay focused on that.

Operator: Appreciate it.

Operator: Thank you.

Appreciate it. Thank you.

Operator: Thank you, Mike.

Operator: Thank you.

Thank you, Mike.

Operator: This concludes our question-and-answer session.

Thank you.

Stephen Spray: I would like to turn the conference back over to Steve Spray for any closing remarks. Thank you, Dorman. And thank you all for joining us today. We look forward to speaking with you again on our third quarter call. Thank you.

This concludes our question-and-answer session.

I would like to turn the conference back over to Stephen Spray for any closing remarks.

Thank you, Dorman, and thank you all for joining us today. We look forward to speaking with you again on our Q3 call.

Operator: The conference is now concluded. Thank you for attending today's presentation.

Thank you.

Operator: You may now disconnect.

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