CINF - Earnings call transcript Q3 2017 | Cincinnati Financial Corporation

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Operator

Good morning. My name is Jane, and I will be your conference operator today. At this time, I would like to welcome everyone to the Third Quarter 2017 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. And after the speakers' remarks, there will be a question-and-answer session. Instructions]. [Operator you. Thank Relations Investor may your begin Dennis Officer, conference. McDaniel, you

Dennis McDaniel

on call. Dennis Hello. third Financial. conference room with issued our and McDaniel our results Thank package, on is Chief news in quarter yesterday, At release questions. call a in you time, hear Officer, route please President earnings supplemental our Chief Steve Sewell. Hollenbeck; may some prepared Theresa Officer, Mike Marty that the first Cincinnati along given call, with for from This be Chairman Quarterly Ken website, J.F. Hoffer. our responses of cinfin.com/investors. investor Board, we portfolio. us Officer; Chief participating including Insurance's and their for XXXX Officer, Stecher; including find financial the Chief Senior Financial of Late Johnston, quarter-end of copies our by Vice Investment the Mullen; Insurance the the and Scherer; on To Officer, Cincinnati us, menu you'll is any the navigation and then others visit from to President shortest Accounting, ask far After investment Results today's from the may Chief information link of these documents, investors Executive On the Marty joining And Claims remarks, left.

over Statutory data reconciled rules therefore provided accordance prepared forward-looking. These our a with we our these involve is to turn that And of Also, to filings the direct reconciliation and be statements not some today the measures with SEC. of call over forward-looking statutory note release the to Steve. news GAAP. attention is please are risks to news to I'll your First, uncertainties, With with was and release. accounting matters certain and now, the accounting risks respect to various and uncertainties. in non-GAAP discussed

Steve Johnston

us you about third today to and our for hear morning. Dennis joining quarter good XXXX you, Thank Thank results. more

prospects challenges, the operating past presented While performance. quarter future we several positives from improved regarding see

months ratios year casualty an our good combined our quarter with for just consecutive primary sixth one position nine putting and First, objectives. in third of XXX% XXXX a the to consistent earn underwriting us property profit stayed

current we a of ratio year combined reported Second, nine XX.X%. month catastrophe accident losses before

While short-term that was ratio higher accident higher large $X vary, nine the for variance million we know X/XX than to or losses that of periods. of XXXX claim for a year losses point more contributed tend over relatively months, to and particularly largely at

through reports at relatively that underwriters We in weaker observations gained pricing confidence models moment result assumed on judgment ongoing on segmenting to our reinsurance relatively internal portfolio underwriting and continue comment that obtain policies. pricing, policies of operation. from also higher I'll risks individual to of careful by that's our indicate covered renewal take an our our a Re, Cincinnati expiring that's accounts

That loss during happened Following loss consistent first Re the in to projections reinsurance catastrophe quarter from models for experience a Cincinnati to our inception, catastrophe was years time time its industry. since favorable sizeable of contribution very a effects two profit events. experienced in which with significant the

underwriters the how quantitative decision understand and matter aspects Our experienced analysts qualitative making. of experts are and balance subject reinsurance to

History business help of to overtime. industry take smooth we are translates consistent firming premium recognized nearly XX% should advantage assessed well in rate in benefits following XXX into for prior diversification reinsurance tendency that risk So opportunity results a them, Cincinnati the transactions the prepared to with diversify far shows XXXX spike we've periods approximately and rates similar near-term years. reinsurance Re of the to We declining of it. long-term the and recent potential two and our losses continue

each of segments. for to continue disciplined we growth; premium to our premiums Turning churn fashion a grow in

combined overall similar growth the rise increases higher and our XX.X%. commercial written renewal reported segments second quarter the quarter premiums a XXXX, slowed to exception. during of the auto, for premium with we pricing price continue estimated commercial notable of to were average commercial While ratio for line third Overall, lines

quarter segment, growth effects the nice for level For first third nine continues third months our quarter partially a the offsetting both personalized a ratio combined premium before XXXX at and personalized catastrophe higher pace, improved in quarter losses both auto rate with personal for increases were average in the personalized of the Estimated for higher single-digit high total, reaching premium average rate increases second catastrophe of than slightly range. periods. XXXX

premium another of and growth. access underwriting quarter It should reported nine of surplus Our XXXX a like has profit months, combined and segment XX%. under

made again, growing by life good sources. net diversify written to insurance subsidiary X% helping and earned quarter insurance life for premiums earnings contribution third income Our our a XXXX

Our being Despite year; of average. target the of industry the one XX% in the of to primary represent quarter value operating every P&C shareholders to creation long-term company and XX% X.X% reaches a third long-term the PACE the the still measure annual was continue opportunities us deliver clients. we're first the to value of for outstanding for that performance, agencies third for that and and XX.X% for their quarter results another and year to day our terms a to nine months challenging financial we on service

our Mike reserve areas of condition. Officer, Financial financial development and Chief highlight Sewell, results, financial will and investment other performance key our Next,

Mike Sewell

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

up dividend of that patents months. growth special in Since such growth X% result for was can dividend XXXX quarter double-digit consecutive X% from the beginning variability XXXX, comparison X% and of ranging up income income for quarter the from and rising XXXX. to quarterly a our nine The quarter reported such XX% payment anytime. irregular first XX%; can for in as income for Third will the occur income XXth was the growth we've dividend tough investment make Dividend dividends quarter was X%. interest

portfolio, our in the to For they occur tend quarter. fourth

bond and yield That average the for up yield decline yielding down or XX was be from continue last growth that XXXX, gains, $X.X that more unrealized quarter of X% bonds called portfolios for of billion. pre-tax mature. to quarter X.XX% quarter another experienced reflects of to the year's quarter. higher portfolio equity points third the Our third effect basis The than

$XXX or X.XX% we've rate provide average reported the duration generated activities of first for flows period the net from quarter XXXX of quarters our two the nine portfolio blended of Funds contributor portfolio. continued last million Taxable while key increase is the interest managed to in down for well had quarter carefully catastrophe growth, quarter we the ago. operating was year. tax funds did operating investment an and business. in million, at of Cash quarter X% purchased X% year first to X.XX% yield strategically of yield a during a decrease. loss cash Once third A our averaged same X.XX% $XX income losses million a flow bonds another expenses while months peak investing from exempt $XXX effective XXXX the for same again, XX% and paid totaled the the bond change. this reported below purchase not the for pretax third expenses each year growth of recent While during time we've for of bonds

from expense casualty month XXXX periods. and property somewhat third quarter nine improved ratios underwriting XXXX comparable Our

reserves resulted years. Moving on development again in prior net to accident favorable loss reserves, setting to our overall consistent approach

in case points in the the better IBNR two the worse percentage resulted at was auto our and ratio essentially than favorable the higher quarter also quarter or the X.X current two years. somewhat of losses XXXX less full line a for in approximately third years. of loss of points, than commercial percentage development setting expenses two commercial year and trends for reported third a were of in casualty reserve for quarter business. was accident than these the each of of but unfavorable a flat losses we XXXX, of including than of of increase casualty, recent accident approach remains Paid average Development the any commercial favorable net typical than For million. development for for maintained losses. combined quarter by unfavorable of large for ratio expenses the year percentage approximately that exception incur as loss points considering for and reserves an month four our benefited major points prior nine of to largest with our since was our the Reserve part, favorable which ratio consistently a XXXX, approximately prudent is lines no basically due we expense quarter lower Yet basis, casualty half loss XXXX first of reserves in than higher prior XXXX. $X loss and beginning year development the amount business On

years. of ratio be XXXX, accident spread Our estimated loss of year or expense business favorable XXXX XXXX, XXXX, accident accident ratio months for for XX% In our commercial with the lines XX.X%, approximately combined casualty year reserve major X% ratio over including third total, XX% of year prior for quarter for loss most combined accident over and years, of and XX continued expense and nine indicates development so of several XXXX an accident XX%. points to of first and an estimated XXXX, XX% underwriting for

capital remained approach stable. strength management, our in financial Regarding

insurance third of underwriting in year book by And marketable per of gains securities net change To $X.XX. gains to $X.XX. and Investment contributions the back $X.XX in life than I'll operations quarter end net share XX cash our book declared call by non-insurance the shareholders. main $X.XX. $X.XX. also The XX third share and equity increased Property $XX.XX from September and per fixed financial value a value at They've the record in income a dividends have The $X.XX, was summarize increased portfolio, to contributed September book turn and to including of at The We increased XX% we increase value flexibility and casualty value Steve. share. September items during other reduced excellent per by gains ratio. represented to by quarter portfolio, change holding I'll for realized added the value insurance share. unrealized creation income gains net now to Life book company losses, $X.XX over the XX effect losses per realized book for unrealized drivers rose the XXXX. value conclude, that

Steve Johnston

Mike. Thanks

the thank the we value I'd to and damage shine, and normal. how the wherever as call from the by widespread of relief to team is devastating Hurricane leave quarter all open leading like communities Harvey helped they the policyholders work our and jumped from our widespread to the when to for relentlessly the of didn't California Nate magnitude upholding action country client's Cincinnati With associates who back this company and agents Irma. wildfires. our continue associates This much on Policy. respond of get reputation and fares, our Storms community into to to concern our Hurricanes Before could. in way, agents bring fourth affected about our questions, and those associates experience both the Insurance delivering of starter loss The calming to across

out our Our policyholders to by hearts and the business events. own including families these go affected

than meeting insured losses, terms the each estimate in for company the look of less remainder of many appreciate fourth with also for $X during million these you we and your of forward In our questions to to respond losses year. events. We this opportunity to of person will quarter be

Hoffer. Mullen, Marty today Marty with Ken for F. please Hollenbeck and open Jane, reminder, are the me Mike a Stecher, As Theresa call Scherer, and questions. J.

Operator

line your Arash your [Operator question And line ahead, open. Soleimani from the KBW. please, comes Go of from Instructions] first is

Arash Soleimani

Good morning.

of a just that terms to in couple So questions commercial had of wanted talk bit the line, here; I just about I more. casualty a

kind a the of So is trends wanted that ticking with you're this temporary a I I Does severity you that mean seems you would say color what's or there? just it's issue? about like up seeing to do get actually of think happening deteriorating more bit more line?

Steve Johnston

Arash, we the line. about good feel

casualty directions different think there profitability there with Mike we're that way casualty are analyzed lot executing overall, we Within line. moving while we do are upward confident are up is feel and well. over, terms of see the holding of commercial the confident and As of the in parts continuation but the and in the a that some I in trends, underwriting went profitability

Arash Soleimani

uptick is kind just of that fair in mostly an characterization? a severity, as So

Mike Sewell

This is Mike.

current prudent, and our more, much we at few it's the a a but severity yet larger we losses -- are how or had or losses releasing had few a those there any came know, of really is types say give we large any were you the trend it's he's that we're seeing losses review ask a we as take some reserves Mullen so a well, but Marty what -- a of of of You geographic maybe not during when quarter and were those we the not more trend $X more little those it so IBNR that those million look I through. necessarily Marty? some I'll probably maybe but of if whether with to would color prudent necessarily losses, it's the on is got kind

Marty Mullen

Sure, thanks Mike.

million First, those five $X this of five nine is were losses, nine general were third were main large claims, in auto $X they The we liability commercial were with to lines which different lines. of claims categorized, and of liability, those lines the in had losses commercial spread some the example, same states. eight of quarter in over across general give XX there again, those states. more And dollars million in different claims you XX other or commercial were and large

claims across our that just diverse very one spread of the across we quarters it's So pattern number claims saw country. in are a I increase those those the significant spread and of think

Arash Soleimani

I like less that of is casualty fair run a or And commercial more core XX%, for rate ratio? to mean that the is in loss assume terms

Steve Johnston

expense see their at see losses a know, see quarters let's few a actuaries going it to the little -- low a ticked our let's kind how like to to in, to what large Page our our the when But know, take looking come in couple XX.X%. wait last look like wait at Again, if they it's you XXs, up actuaries a know, up supplementary see, maybe -- I'd say last but in you from setting we're -- follow consistent XX, we're another how you the low the Yes, the bit. on quarters, ranging going look at line, loss and to you many you ratio of where say. quarters, -- that's approach so our and and XXs of up it's long-term let's it's follow are

Arash Soleimani

same jury an of awards? Sure. in you question, just And that in are uptake seeing kind

Marty Mullen

Arash, this Marty. is

certainly and prudent regard, of which case I depending think take very jurisdictions cognizant we haven't careful take to trial have on certain and certainly the specific are seen that be to a trend facts to trial making that in a more there to cases in you and deciding jurisdictions. we're decisions to that in

So have those I in think you still making to decisions specific be careful in areas.

Arash Soleimani

my Re, last net those your in below net for just in PML. Cincinnati it's actually like X Thanks X And looks one was; the answers. XXX for XXX PML

guys I So accomplishing wanted that. are see to you how just

Steve Johnston

change change bar number. technical in XX-K I think with necessarily I'm change I think that per in of to and was it change [ph], the the had kind a terms do the loss wasn't but of in getting so in it in in TVAR risks; there

Arash Soleimani

for much very answers. you thank the well, Alright, Okay.

Operator

Your Newsome open. line Sandler Paul Go next O'Neill. your question is comes from now from the ahead please, line of

Paul Newsome

today of ROE to expansion the specifically using metrics what wanted and well? measures to be you business be if a as piece to determine whether change want any tomorrow? versus is volatility you I'm terms about ask underwriting in or reinsurance in the I or of the what-not there terms of there doing business you are sort what of wondering on possible of might

Mike Sewell

beginning, been with on Paul. be contract. It question, we've From to on but will try to in each a profitability, not focus on approach. consistent the consistent growth focusing focus Good very returns

the we for merits. for had set individually that not with company a return, each Re For look example, risk try to we be to on at Cincinnati did up used specific capital

correlation in the book do mentioned look on lack will with disciplined and in from a my think of in year that, change at at. terms would the we TVAR been ones at be looking in in what we looked lines on a get I looked comments, the we expected ratio of estimate number of [ph], will at we opening that X the look measures already we've estimate factor. combination to do be, be type existing what are return capital and to we're continue very at business, accept our will As what we combined look we as regular judgment Obviously we with can of rate our the in try needed, XXX and

So, and confident ability very hired and to to down very are we me there have to be that their experienced in have now. than forward going it come stronger people really team been always the position in we and the are even a

could forward of good by of about in I it whole reinsurance quarter think and maybe the as losses in memory terms a year. back breakeven to-date [ph] breakeven perfectly that worst positioned inception and the into year probably was quarter first something in with [ph] that's I the exception bring million end really, to-date $XX near to think the or we move next we were

Paul Newsome

the underwriting and won't think you doesn't change standards, about this risk change question; underwriting are make I by horizon do But preclude something how is hard markets going changes market? created underwriting primarily is perspective not? usually there to no methods, if not Is what that a would in anything terms says need -- that if or there wouldn't perceived how a change underwriting are be my hard pricing there your on or related I that your market? conditions they'd there there be whether that out you hard they so, mean If if and from changed I prospectively. think that that not, Some to

Mike Sewell

be four bring, over. had two Nate wakeup happen will wildfires; a of call [ph], of in as We an changed settle also now that bit what approaches time forward And it of was we're claims look of has of used terms to what earthquakes, Well, of went available seeing think settling the and time. and can of different can better maybe Florida, we the a of risk. of degree storm recognition appreciation in renewed that with there a and we've assignment do terms are what in long in a think had just and things are since adjustors claims same a that three benefits appreciation have I been that I I is there that as same been going the think just it's of I all the event at think appreciation players means. we've what got period over little time hurricanes, I

these So I in being be call or wakeup but we say that's in out of approach, is our of it's of to think done terms that reminded type going to consistent in will very understanding but recognize terms there of I the factors. of kind everybody do a we risk have there what

Paul Newsome

Great, much. thank you very

Mike Sewell

Thank you, Paul.

Operator

next your Capital [Operator Instructions] the question Your Go ahead open. RBC Heleniak comes Scott line line from Markets. of from is please,

Scott Heleniak

Good morning.

reinsurance, Just about. talking at everyone like is is probably there, to it with of least that's going -- pricing kind a on a sounds question, improve follow-up

casualty in versus your some better pricing the So -- about talk of has how of that if that property just been know I you growth sort could appetite call see appetite property there? about your do there specifically, wondering it might you reinsurance, change I on see you we might if mentioned book the the appetite, for know comments XX some but and your

Steve Johnston

over We than I casualty now timed. started we're at XX-XX about Scott, approach are out oriented property. actually disciplined the To we more but

the over it's know good more think lines. here in recently you bit casualty I XX% a

unknowns takes -- interesting we're broad from It pressure will to that see had place, property the long how firming, to understand it of it -- run here that So, I will it again interesting but might do short how to no I to we'll a and the casualty, be out can in affirming kind with with the be I is, I the terms move qualitatively we will versus mid-term. look will think am to really correlated we'll be certainly there are last we firming there grow. affirming contracts to that might through in think of is and everything how consensus how confident risk agree relative quantitatively capital didn't. of contracts that the a that is that affirming for be it losses the I think see does is to How there, diversify, and be lot think the

Scott Heleniak

so And that Okay. -- what of the reinsurance is percentage say you would around… now book is, property you say would

Mike Sewell

The X%. the XXXX right property year-to-date, for XX% property XX%, is casualty is is and specialty now

Scott Heleniak

unit; kind Okay, that then that new to high Do to penetrating you you of you're XXXX? expectations expect out mostly? switching expecting continue talk where working which about in tracking lines where And can to is you personal the just versus network your to state great. just and are on or roll

J.F. Scherer

with In this high gone we and JF. not this very live, business we're planned Things were lines Washington up personal reception Massachusetts up there, out is have went just surprisingly for up net pleased worth pleased a got with and we're went Scott, in year, nicely, State was August XX%. and as is new live. big going. we of what's example, percentage, California almost XX% running

So Texas Hawaii. the places would York, that nature, Westchester centers of to net kinds we're residences Long Jersey, Massachusetts, are New where Island, located; be other of Wyoming, Colorado, secondary country New parts be the in open the worth; and of County, of states of would We'll continue high that now all Montana, that states California.

so care, also there. we've work but pleased our protect the done had areas that terms heard think losses. We those and that good in some homes for not we you wildfire operate in I out go we've with established individual So did exposure services West the mention many we're with shape, suffer that of defense example, setting in infrastructure specific out will Steve wildfire

consistent into in a think to between agencies as with that reputation all we're we'll the would get a and reputation relative who thankfully, like to fairly appointments a want there rules committed industry. get appointments. agencies We've -- able we into, the the initial I that company abandon So number our of been to we're business relatively do to have and of long to list we us -- do with approach but agencies fairly few

So there. we're the of the coming pleased we're pleased, I the premiums business quality that we're in with think obviously well, riding

say I'd it starts been So, it's start. just great -- a

Scott Heleniak

all Good have, thanks. I luck. That's helpful. that's Okay,

J.F. Scherer

Thanks.

Operator

further And time. this no the to Johnston. at to there back I'd like questions are over turn call Steve

Steve Johnston

you, call. Thank you of us on forward to with We you Thank thanks quarter to and have our and Jane, for you fourth all today. joining again look speaking a great day.

Operator

This concludes today's call. conference

now disconnect. may You

Cincinnati Financial (CINF) 27 Oct 172017 Q3 Earnings call transcript