CINF - Earnings call transcript Q2 2018 | Cincinnati Financial Corporation

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Operator

Good morning. My name is Emily and I will be your conference operator today. At this time, I would like to welcome everyone to the Second Quarter 2018 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session. you. Thank Instructions] [Operator Mr. Relations Investor Officer. McDaniel, Dennis

your You may begin conference.

Dennis McDaniel

the news Cincinnati This second for you supplemental Dennis financial issued quarter with our results at is McDaniel Financial. a from that President Scherer. Chairman we Mike joining yesterday room end and Earnings package Call. Ken Insurance Thank Sewell. on hear of our Hopper. Investment Conference our some along Hello. XXXX Officer, made the be time Insurance's Chief Late release Hollenback; and quarter navigation us may Finance, Stecher; participating Teresa including Vice for the our site Also in Chief cinfin.com/investors. Officer, then the Officer, prepared their The investment Executive Mullen call portfolio. any on of link Web Claims remarks, investors copies Chief menu Board, a responses may of Chief these results route first with Officer, and left. Investor call, to information Steve Marty far To others find documents Johnston, Senior is quarterly After please On in Cincinnati including visit will by you the shortest Marty J.F. in Financial this our Corporate At of from questions. us Chief the and President Officer ask

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

Steve Johnston

quarter of you period ago. about results. the doubled income XXXX more second same thank our us more today a morning. Net Good for for quarter second the than And joining year to hear

the While fair the this year's independent in represented securities equity XX%. increase changes large significantly of of which that rose of a value income is operating new accounting requirement change also up for portion

this points the than Our XX.X% second a our of year casualty better ratio was reflected benefits diversifying X.X combined ago for quarter business years. recent year and property, of in

Our commercial lines segment below a ratio XX%. experienced combined

segment surplus results excess Our and XXXX each Re quarter lines second excellent XX%. and with had Cincinnati combined ratio the below

basis. net had also a or subsidiary quarter an in increase XX% XX% insurance life operating an Our income reporting income excellent on

XX% segment due reserve personal increases claim. quarter reported more large per or part a reflecting to Our and line losses in $X down a year-to-date of increase million

respective accident losses accident Our than combined year. the is of year ratio X June points accident as XX year XXXX all of XXXX roughly higher before measured both lines catastrophe

in the is However, of stable of of and particular, paid on business commercial loss experienced nearly prudent lines expense a management's each lines for basis, best IBNR related paid major amount a two including ratios reserves levels homeowner loss that of fairly ratio those same for estimate by and ultimate of level the of periods. two our elevated each maintains amounts and casualty. Despite

or available, up estimates data reserves just appropriate. more down as we'll As for becomes

XXXX our we the than in on to helping profitably insurance that was stable elaborate will cash quarter that portfolio. float of One first ratios Consolidated the fuel moment. was premium better growth benefits in paid of is the investment it the it as in a of for increases quarter. grow business second Mike much our flow

X% our commercial X% ranging quarter premium in X%. segments growth premiums XXXX. to growth in segment from from written Our of second decrease Each quarter experienced line rebounded that a insurance a other X% second the to

suggest observations and Importantly reports our internal healthy. this that is growth

higher individual businesses relatively remaining average high the single of Average rate of the and obtain where commercial and covered high-end auto digit of accounts of to both in price single somewhat careful for increases total indicate range. lines pricing premium commercial our auto by portfolio needed. on in underwriting With high personal pricing judgment changes average risks the personal Segmenting first quarter rate Estimated the to policies. through first the including quarter similar Our with models underwriters average estimated near our increases remained it's range. renewal continue XXXX. steady lines auto homeowner overall digit were home and personal than for higher mostly

added loss new treaty provides XX-Q of effective for wildfires additional or fires excess from business an excess X, in Western It coverage in $XX states brush for events includes million written million million earthquakes, $XX basis million providing after of aggregate. combinations in protection reinsurance $XXX occurrence catastrophe our by event Re and of July also losses of It of $XX a for million. with on loss in coverage affecting $XX dollars Re. up a for coverage a in Cincinnati $XX per and reported only Cincinnati component we direct of of we per As excess certain million catastrophe retention to

Our percentage points performance, XXXX. creation X.X X.X% from losses experienced value first ago improvement and insurance of help the and or fixed business. points income of over were to year points, a negative focus That investment focus place growth gains maturity on enough us the component percentage gains pleased primary continue contributed X.X X.X our X.X shareholder much the versus in before the of of an measure contributed of offset well for was our contribution served long-term the us of recovery the equity a financial portfolio see has We'll a year. The portfolio. our time. past evaluation the create equity profitable our to We quarter in downturn to following the second partial portfolio in investment will in value ratio of net quarter

elements performance and provide financial Next a other Officer, financial our Chief Sewell important our condition. Mike will Financial few of insights on

Mike Sewell

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

X% up dividend income. XXXX for quarter of was Quarter including income Second XXth our investment consecutive X% growth

gains for we bond the in at bond before of value million included $X.X including reported, from increase tax ended We equity by in million billion a our million portfolio. overall million effects As decrease quarter were portfolio that quarter our $XX $XX favorable appreciated our net partially a second $XXX portfolio. investment offset the with nearly $XX

our and last As accounting. other instead by be future comprehensive unchanged that standards creation was ratio quarter, reported of in value changes as net we that highlighted the And we equity years, securities income XXXX of accounting income. fair in new part of new required will value noted

second average our income reversal the little their as as interest the equity continue pre-tax yield X.XX% from net still million yielding higher $XX fair from to quarter XX portfolio, loan the year's securities, The was more was down second be second many value bond in a sharp of income quarter quarter experienced XXXX of we maturity XXXX reach a our called points the redeemed bonds favorable date. down of $XXX for last quarter unfavorable on million basis of or effect first a of changes Drilling a of XXXX. we

yield second of in average year's we basis generated of X% portfolio. bonds grew points purchases for of Funds purchased period to Taxable $XXX continued Tax basis X.XX% million quarter. cash our in of for XXXX or from Second funds interest investment year. pre-tax six X.XX%, months same for than average Cash totaled net just ago. points first XXXX XX XXXX during flow quarter exempt year the million income ago. part months up had second up bonds this higher to flows the operating bonds for purchased from an million X% quarter six XX the provide in $XXX year due purchased a $XX from activities first last a the operating net

to of be our ratio, strategically expense is priority underwriting a investing management business. to in careful as Turning continues expenses

second casualty the XXXX. XXXX underwriting Our expense quarter points of second decreased X.X ratio by versus quarter percentage property

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

combined X.X favorable points by the ratio benefit benefit last match quarter and X.X% percentage the reserve Second of same period month six year. XXXX our XXXX development

development. $XX XXXX accident for year six of of reserve favorable year all lines first of months lives line business for XX% reserve major our casualty the of commercial basis have XXXX, in an development On favorable Our accident included experienced XXXX. accident experience years. Most for business it million XX% by XX% of and and year, accident prior XXXX

our shares line to used modestly capacity per million of a repurchased grow available second and that subsidiary, X.X average $XX.XX price financing small and related opportunities our share during quarter at to commercial million credit. of from nearly capital In leasing an we of $XXX terms management the portion we of

excellent. remain strength Our financial flexibility financial and

declared drivers of represent with gains value main creation and conclude operations life investment Life quarter share. our income value by per added book I'll insurance usual, dividends As fixed net increased a and the reduced to $X.XX a $X.XX. of value in investment Net summary of contributions than items investment and by Property losses non-insurance second $X.XX; $X.XX, ratio. second value $X.XX. book share to portfolio per $X.XX; losses for gains we by per was during per increase to $X.XX for income by quarter book the the effect The value share. book decreased $XX.XX net shareholders. and equity share increased They contributed book insurance other casualty underwriting value the portfolio

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

Steve Johnston

Thanks Mike.

encouraged by second see our several are trends positive are building We we as momentum. results quarter that

the work While deliver and agencies have remainder you excellent service forward that many the in done respond clients. daily outstanding their the insurance associates questions our to there look to represent to in is the dedicated future of of appreciate year. who and we our capable our be opportunity with your confidence companies independent during person of because of to agents meeting this still and to We because also

please As the Mullin, are and Stecher, and questions. for reminder Hopper. Ken call Scherer, J.F. Mike Hollenback Teresa today Emily Marty me a open with Marty

Operator

the from [Operator Instructions] of comes KBW. question Your Soleimani Arash line first with

open. Your go ahead. is line Please

Arash Soleimani

Thank you.

comp was on I this growth first was So was question saw the negative quarters, the there quarter. I the but few it that side, workers positive had last

to wanted that what expect just see growth that's And should there? something the we going So drove forward. if

J.F. Scherer

not JF. the lot growth. We're decreases Arash. not are we've our in workers with we're gotten. along aggressive it. the it rate work with have past, the experienced comp business commercial line comes new writer is This simply a We're segment and Hi, moderated package came overall experiencing growth in comp net business our that of experiencing what said an good as carriers We some -- along we've the

not you'll So that. see comp, of anything were I by different We're moving drastically but afraid pleased forward. don't we think

Arash Soleimani

the in given the loss of just being year-over-year fair core it environment expect And ratios business? is pricing elevated line to that continue to there that

J.F. Scherer

there. seeing to tough decreases within It's Yes. keep we're that up rate that

think on I hand, other continue we have the the improvements loss control. claims in area to from we cost lost as the On initiatives well see our as

well So in we're with actually fairly comfortable it's how doing comps, us. for we're doing

So we're with the pleased outcome.

Arash Soleimani

commercial And than casualty this development Thanks. and ratio side, it quarter you the it's two well. the look better favorable on last been the as was core like have quarters there loss

of of sequential improvement. on So just simply been we is and underwriting fruit bearing see that should factor the the taking initiatives type continue to side you've a that

J.F. Scherer

things large have Yes. pretty area, auto. those commercial claims how the with The claims a some bit with commercial has are going casualty. We're seen we've associated of on more loss the in been activity most been pleased umbrella

a off auto think a underwriting addition line of activity So more commercial time of over we doing scrutiny relative more what lot auto careful in lot to of area. we're about being the things side the the to that drivers commercial that in time. pay control And rates loss increasing itself will is spending on

Arash Soleimani

Thanks.

core and you mentioned there a the just can drove question in the development? the homeowner into what bit remarks more about ratio on last and the reserve Just but go side, detail prepared the you trends loss

J.F. Scherer

done Well, of increase look we the in all large a that lot homeowners severity at them, have of We've in on seen of dollar $X that taken review claims once variability value have. there. in There's a and the occurred, of again it. higher all We've post-mortem the claims claims. an the issue is just million these

for 'XX So XXXX full in dollar XX%. year example down plus in then claims million looking 'XX and doubled was back over

with increases we're think and just levels of So all pay things take pleased initiatives homeowners here net rate I the all late. -- worry continue experienced for we We've in worth, look to the entry elevated our a severity high including initiatives at first better us. of little doesn't looking going all forward But there, that into going with in will the quite are of inspection how we're what's that say a got protocols us. off as we've pleased that on of claims the going would all we doesn't seeing

Arash Soleimani

Thanks. if high -- maybe when plus worth you side book talk the you worth million so the net on $X And net versus book? of can just profitability these about say the are the claims briefly the then and standard homeowner's high

J.F. Scherer

about net fire net worth But talk it. quarter $XX and these more the high sides an overall from homes had worth increase these only valuable. of claims of and more on XX% losses in we we by we're writing of have most were example elevated high the some million it. we first When are the for net are year, large But in the worth. And both way. of It's seen high and claims

net What -- for writing net the progressing in we newer do. are So in of would is highly states the worth high some particular have once business again, in side new of the we're high seeing of on to terms hoped worth these as variable.

bells alarm going no ringing here So relative there. are to on what's

We that as goes are some monitoring we're seeing on. it and variability

and how would expect approach a how take prudent in so terms of of us, occur As about you a it are of the we're out though losses we're result we as reserving, we'll reserving. prudent very conservative

play that how to out. We do things will and see we'll then continue

Arash Soleimani

And what's net force high the premiums currently for worth? in

Steve Johnston

premium XX is the its through million. X On homeowner direct side, months written about

Arash Soleimani

you Okay. Great. for Thank answers. the

Steve Johnston

you. Thank

Operator

Markets. question comes with the Capital next line Heleniak Your of from Scott RBC

Your line go ahead. is open. Please

Steve Johnston

Scott. morning, Good

Operator

is line Mr. ahead. Heleniak, Please go open. your

Scott Heleniak

everyone. morning Good that. about sorry Oh,

Steve Johnston

morning. Good

Scott Heleniak

on Just first a capital question management. quick

special that you of had the do on uses how depending those buybacks looking that's but frequently. in how Can to we and with guys those stock, expect happens time time? the are time. past to the those know with weigh more over So in capital now dividends you quarter you from see some you I including versus at obviously up what

Mike Sewell

with back there a that a in Mike. so back XXX, it's to couple done was capital X before is If This shareholders. million look shares. buybacks what a -- it's great. did before Hey, did X.X XXXX, years than far in we year less the little little Yes, I Doing X.X a as returning of form shares, we've under a about of year a XXXX we that million million.

which shares So year. runs we've been say saying a of million that around kind we've been maintenance a doing

lot. bit not year And elevated it's far so this a little whole by a

about the And and sale so about time depends shares -- price we the we've we it's the think what when the the at really it price when circumstances, look the are. on at something got it look discretion currently or those really being opportunistic of we

it's to we'll a keep about take price eye average just when and a million advantages shares of on and advantage -- us our So tells we'll million-ish year take on it it. the been

Scott Heleniak

those? Okay. Is you you declare And which how time. versus when that that dividends as any thoughts to to on time special done there weigh underlying factor behind from any -- you've

Mike Sewell

a just But right of of -- uses. the uses was two buybacks. hit of couple and That's dividends there them capital, our there's using two you five there's -- on those

dividends about think board decision. the a every quarter. obviously So we that we It's

at -- that circumstances it's the we special the we discussed we meetings three a where it's -- board around the special headed. a reason, board it's So for we're has it's actively been to the doing and and the again years. the dividend Board say at is special talk company a how And on kicks do about called but actually dividend based think last

Scott Heleniak

the on in are and -- of Because a companies will the them see are side. was that accelerate think that two about the year. on actually further guys had I enough. but half rates talking fair it if pricing, that your second the versus is the both depends company you bit. for like you opposite Then QX wanted I on auto you that sounds the some QX. outlook homeowners seeing And mentioned a to personalized improved That's little and guys Okay. I question decelerating

Mike Sewell

we've that auto our end and As top home range we the concerned, quarter increase that's auto rate about year. last rate increases commercial well. of the continue as both for anticipate the in and that will single-digit far auto on quarter as of of been increases would in are matter talking second that's upper of Commercial a at in and on similar a the second is type the that

So strategy that areas we're and is wanted sticking our to in. in be to -- with pretty rate be They're continues the comfortable increases. our retention we

strategy the with pleased we're So there.

Scott Heleniak

of then, impact better QX -- had acquisition that thought bit quarter. I And ones. my you higher improvement it's ratio mentioned a the last little Okay. come you deferred XXs was ratio around the that this the know the would costs the was It on was and low you question just I the from expense for quarter. think expense

if you comment the year. of have where tracking on be wondering rest So any might that for the

Mike Sewell

No.

You're probably you're some we at quarter in spend where fair XX.X, exactly give if your of guidance that's I on pretty of right. things up make a it did the things of think to ended I first we lot going this you close say modeling. little quarter -- that lower is still a thought be typically we're lot There's models bit innovation, when we would That's invest XX.X. XXXX. which in to continuing but comment IT, being timing a out a don't building we predictive that

XX.X be that but around two a I I lower, still will so not next And little would maybe quarters being take same. indication as that the the could see bit it an

Scott Heleniak

Fair That's lot. Thanks helpful. right. a enough. All

Mike Sewell

you. Thank

Operator

Suisse. Instructions] comes next question of Zaremski Your Credit Mike line with [Operator the from

open. is line Your

Mike Zaremski

morning. good Hi,

Steve Johnston

morning, Mike. Good

Mike Zaremski

be to XX-Q I'm think so statement income if a -- material haven't reinsurance in there. yet to sure we the kind there's do term? program about maybe info it has that you the But the how the Regarding impacting should I near impact of thinking and gone you spoke

Steve Johnston

XX-K leads we've relatively ramping the enterprises. out grow we're that of forth. those smaller volume both of organizations. got Re. we a very Yes. Thinking starts have worth in results. up businesses It home. management very looking this We've -- you happy We're growing. both some and with new it out were that high of And we as think the starting which disclosed net well with Cincinnati in Cincinnati in around was those confident variability But our two to so in our premium is Re with been at I Those business

have You terms two starting kind And jumped was the at more of two at for than Cincinnati us a have the the Cincinnati the you light of writing last in of Re we lower And standard. was up. as very could periods there an where quite with worked happy in to of nothing behavior a been combine came the losses cat were event to we've out. $XXX add in diversified there the year combination that fashion But in million. way with hurricanes the could looked return really unexpected. We terms that out it

we XX-K had the out numbers in add But million to Cincinnati return this For Cincinnati periods X goes we XXX would a goes of the Aroma, is combined million XX-K could showing you the move effect. Re example to year from But marginal diversifying year from with up. one we the up from lower $XX million the million. with those $XXX Cincinnati Re. $XX we the the it $XX see $XX to the modeling, Insurance, for the combined the and two contribution a marginal to million in million CIC on could again event, of the do loss, Page event in starting XXX having If be XX, only up Re see our Cincinnati $XXX coming million, in standard as $XX of contribution

we thought So an be cover aggregate beneficial. would

for million A part and combination million Cincinnati of aggregate Standard of $XX with bought Cincinnati the we so the XXX And of this excess Re. $XX

volatility And so the in managing that very prudent lower periods. we think in that's return

could agreement on further, the also up ex the of just we net thought in be earthquakes, amounts of $XX And thought and of with Cincinnati potential so Re west, out earthquakes Cincinnati the the $XX as on fires we're and bought on add million brush California, high for well Nevada. part wildfires, would we Re be As personalized third million. the an states $XX seeing, million wildfires of side, the $XX aggregate we worth look then we would ex smaller it certain California, for a in Oregon, million side, per that the Washington that occurrence

million. Now is the $XX aggregate

So $XX entire that million $X arise coverage just total And was X was so new of we good just million available management in. parts. for could we're two we good the thought the that of there's and the pricing and in over reasonable only that confident cover for these ramp those it and is the terms businesses thought risk up very management from in managing slightly volatility

Mike Zaremski

quarter Okay. you we on negatively they they last touch little very jumping trended -- that's reserves I you -- color. That's were a changed? flattish. and they it believe were commercial can -- more at Anything out bit helpful auto. trended Can

Steve Johnston

think continuing about to progress good we're I making auto. the in we're commercial feel

the ago. from was sequentially It's quarter year accident a a of down little terms bit same where improved a also it quarter bit. In

development accident And of development the current years accident for homeowners adverse accident we current and seen some would and ultimate prudent as did JF just pick X.X we reserves described. ratio the we go reflect commercial the and see prior think of it do adverse year the On on this I of as way some this there loss when basis, we've the in we're and years, time. cautious that auto points

all our about ahead the current people commercial single that's we feel mitigating future in the digit and being when in the auto. the year also range game in our the rates are by trend optimistic coming But we're terms improvement of prospects think of taking see work done loss of approach the there So for I accident the we think confident we're I to prudent we're a picks. selection high

Mike Zaremski

then, for up And ask versus if lines this -- at can Okay. pricing broader you we question be all can But personalize -- if feels lastly should the you. are a surprised this environment in and been to at I or results maybe power bifurcated Great. commercial. -- my least there's I feel expected from like lot in people a industry it at vantage participants the have than been given of the okay. industry some pricing from more point That's

it able It feels is the little like x maybe so to there pricing comp, been cycle. keep carriers workers retention And like something rate push both increases have a and this at is different feels in comp decent healthy obviously. levels and a

kind of So you if have at past. in versus changed high this a just feel curious level things the cycle

Steve Johnston

we better we've way think we I underwrite price. by way a the become basis. the risk skilled risk, much we by very policy policy handle the on more way and it's -- claims And just at

just claims price So They do departments cover into terms understand underwriting risk the on that in pricing don't that's potential And granularly don't every way models, our we us we by we can and at by How whole I looking gives predictive control and and cost eliminate the of client. that our by to sometimes underwriting think in What mitigate enough. application make risk, averages risk win-win measures? the risk a do appropriate that more price for can using it that the reflection agent risk describe distribution to what's the we we over risk going the their appropriately and our risk that can it might what the time. all the looking it of we sure underwriting judgment, and can risk traditional the happen?

Mike Zaremski

it. Got Okay.

we results will stable like more the Thanks it -- see. a -- time, color. So but seems that for it's make over shall

Steve Johnston

you. Thank

Operator

[Operator turn Instructions] will have time. at back this Johnston. no now Mr. I over We further questions call the to

Steve Johnston

Emily. look our day. you, all call. Have We today. us speaking quarter to a great thanks you third to you again And for forward of with joining Thank on

Operator

This does call. conference today's conclude

may disconnect. day. You great a now Have

Cincinnati Financial (CINF) 27 Jul 182018 Q2 Earnings call transcript