CINF - Earnings call transcript Q2 2021 | Cincinnati Financial Corporation

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Operator

Good day, and thank you for standing by, and welcome to the Second Quarter 2021 Earnings Conference Call. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Mr. Dennis McDaniel, Investor Relations Officer. Please go ahead.

Dennis McDaniel

Hello. at McDaniel Dennis is Cincinnati Financial. This for earnings conference you joining us XXXX quarter second our call. for Thank Late yesterday, quarter we along issued a news release supplemental package, portfolio. with on financial including investment our end our our results, find website, investor of visit cinfin.com/investors. of documents, these To please copies our any navigation route the the link to far the shortest is the on The results left. quarterly information in menu Chief On Steve Johnston; Officer and Chief this Executive call, you’ll Sewell. then first Financial from hear Mike from Chairman, President, Officer, and may ask investors remarks, their call on After participating questions. the prepared At Officer, time, be Chief by and that President Chief responses some made Vice Corporate us, Insurance’s Senior Spray; of others may with room Finance, Claims including in Schambow; Hoffer. Officer, Insurance Cincinnati Marty the Officer, Steve Chief Marc Investment Hollenbeck; Theresa

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

the over call turn I’ll Now Steve. to

Steve Johnston

volatility Net Dennis, the on remain us quarter by compared of areas, our had you, efforts another second we continually of toward management with ongoing last decreased of time. today good over quarter our as to all for and $XXX quarter including progress from joining Thank Financial second focused We operations. results. excellent morning, insurance operating the business $X.X of for profitably results changes fair portfolio. primarily investment on XXXX million earnings quarter several by insurance $XXX the to for from $XXX after-tax early benefited about Non-GAAP year, of improve you since thank and with the income XXXX. and caused million income second first hear contributing operating fair Equity more six steady several XXX% after-tax income strong growing performance portfolio for value lower was catastrophe due in for year an ago. increase. billion value million basis of in less a equity million quarter, $XXX increased held of significant And securities months net an up losses to the on basis, benefit XXXX or quarters our the

before a the Our The improvement. losses current was casualty representing than continued better the quarter loss ratio for year was ratio of also second and catastrophe basis. points points improve year catastrophe property points combined to six-month XX.X% and on accident effects with year second XX.X in combined points decreased percentage better quarter better than X.X X.X a ago, the percentage XX.X last

retain operation grow better working At by time, the segmentation risks our our of from while Our accounts, on claims service line as and that we identify and pricing to same product risks, geography we diversifying expertise excellent reflecting obtaining XXXX. rate rose also underwriters emphasize premiums business business. profitable more net second less premier helps and in profitable. production the quarter casualty our great Premiums second Consolidated XX% represent for Insurance. who quarter the by an written row, agents a focus and grew the impressive Cincinnati at by of property are in associates independent

we as profitably growing are we believe to by underwrite data business. and continue price combining We and judgment

our be ahead opportunities determine of from loss of casualty inadequate. importance recognize walking the remaining the prospective for second pricing quarter for and continued pricing during cost disciplined segment. property when to also is estimate trends away Renewal We we each

profit surplus the its in estimated Each the average compared single-digit a experienced insurance year again produced second increases, price segment with personal and and grew excess the range. high insurance commercial improved mid-single-digit ago. continued Our segments, lines range while lines quarter segment insurance business percentage and

commercial Our the X%. year percentage with quarter ratio combined points superb ago by a XX.X XX.X% had results compared by its written second premiums improving with and lines segment growing net

written planned business segment, produced continuing For year XX.X% expansion points grew to second-quarter net our quarter agencies. ratio benefit second worth also from significantly, high premiums down net of by combined the X%, Its improved from ago. XX.X personal percentage lines of our a

with of again ratio Re an discipline with as maintaining XX%, continued accident four is among quarter, quarter. accident the XX% out XX% firmer development contracts and offset while favorable four Its a little produced quarters. submitted its Our time as risk its combined XX%. underwriting line fine new some in reinsurance lines advantage newer they time, hundreds routinely underwriting to excess as at Cincinnati ratio growing decreased an written taking and have in losses. write third decline business. diversified seasoned, most premiums an Global exceptional year catastrophe expense strong development typically loss premiums as and the the in impressive combined a posting surplus catastrophes also prior while growing same and loss three profit on grew team, of net they favorable a of segment while of Its a by years produced reserve reinsurance opportunities profitable for underwriters other nearly prior ratio are loss of Cincinnati been written net that reducing reserve net second the past below premiums excellent pricing, written growth talented on

for and of points at year. the excellent value-creation ago. The net markets produced XX.X% of for from X.X% measured primary a Strong and operating first half reporting net X.X% was growing gains before favorable from insurance X.X the the ratio, six I’ll and results for securities from life good X%. had another XX% subsidiary of Our second-quarter as up earned our performance. with up premiums measure financial by quarter, a first second an VCR income months life year the long-term XXXX, ago quarter contribution insurance percentage investment operations year income conclude the

few Sewell, of a financial on Mike areas our Financial will other comment Chief performance. important our Now Officer,

Mike Sewell

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

including of up quarter XXXX, a income quarter XX% same with Our very the X%. ago. to continued compared the second quarter was of investment investment during portfolio the for year income second growth perform Dividend well

For million, totaled half of average second equity income portfolio including basis last the The our both X.XX%, total approximately was from we portfolio expense equity nine investment ago. the The had average points Investing for At management income. $XX portfolio. ago. million. the business for to $X.X months year, flow as a our first second up tax We basis purchases balance first The portfolio from for half. portfolio activities is cash matter total good changes for totaling year’s bond the value always million. second operating on $XXX be our yield were portfolio the priority, first quarter billion of before pre-tax overall yield XXXX equity pre-tax net taxable in million contributing and with to our the appreciated the effects, $XXX XXXX portfolio six-month net X% net quarter, of Investment the $XXX Expense a matched portfolio. generated $XXX year X.XX%. the investment Interest for another purchases months our stock and of of and investments million again, was a was billion, the the the a XX% six for of tax-exempt of bond bond for from quarter including to $X.X in yield net important of quarter an year between Cash fixed bonds first grew maturity $XXX and and quarter gain a second strong down million six during favorable our strategic was during valuation the continues purchased year portfolio work from flow, end the portfolio. XXXX controls. achieve

expense underwriting of losses premiums. year’s than second policyholder XXXX points included credit credit quarter auto X.X higher personal percentage lower The to policies second last quarter and stay-at-home due ratio was uncollectible property a which for casualty

this was in travel. quarter the the expenses ratio higher profit that quarter first lower second than accruals higher and to sharing first second-quarter largely business less due from The the related to benefited of quarter year, in

Next, reinsurance. few I’ll reserves highlight loss a items and regarding

aims upper of and net actuarially reserving net half expense the estimated of remains Our and loss the for reserves. to approach amounts loss in range consistent

of years. The quarter accident experienced on $XXX ratio was second combined XXXX, the we of During million for prior development favorable the property X.X% net effect casualty quarter.

largest of As and we year compensation update commercial such ultimate Together, we compensation as many the do information as property on during gross our and loss by Based consider longest claims lines our they Workers’ year, accident the new reserve business. tail billion paid each and of had the represent we and and remain half net new our years. of total workers’ casualty of study expense development. data estimate $X business quarter, line for open casualty loss loss can second-quarter favorable and needed. losses reserves expenses about quarter-end as has of amounts estimates losses

Calendar-year the While over the $XX million. is data year in is losses. accident for as amount basis by any time small, development not of aggregate loss amount factor given casualty relatively an reserve was was ultimate accident Commercial release estimating paid useful. important year

$XX for half that or premiums than total year XX% than higher of six $XX the years, than which much during XX% the accident XXXX. most an a a for basis million $XXX example, in to XXXX, years than accident was reserve and XXXX what first for XXXX, first or to it the casualty of all-lines the XXXX commercial months ago, XXXX. while net accident first compensation lines million XXXX accident casualty. two-thirds pandemic recent half for a earned aggregate favorable For for four prior for saw by favorable prior XXXX, development in development the were quarter have XXXX through XXXX, reserve million in of concentrated little Nearly for workers’ despite property was the year, shorter for loss more XXXX. by tail commercial less the of XX% auto amount paid of years Net million second-quarter for in second including higher year On $XX was was the we was business, the

the on aggregate restructured of Regarding for we that up catastrophe Re. occurrence and million. to only limit program now with reinsurance, million combined And coverage written direct property we we for Re a business basis total reinsurance disclosed of of excess in our provided that loss non-renewed XX-Q loss by excess catastrophe treaty coverage our in of provides a $XX Cincinnati that Cincinnati $XX place available property

insurance reinsurance Another we disclosed as various pertains affirmative coverage to policies. option offer we on that cyber detail an

substantially transferring written on are risk. Some Cincinnati management. premium the cyber reinsurer, insurers largest XX indicate all the on U.S. briefly ceded that basis, industry among those of that recent to comment capital a a is reports therefore policies in for direct Insurance Premiums I’ll

by value quarter and portfolio approach financial remains quarter turn and our record-high gains share. we the net for by and And during Difficulty] investment second Net [Technical investment share the of per increased wrap strength value of Investment up casualty increased and fixed financial in Life increase share call I’ll increased Property effect declared insurance income a $X.XX flexibility. I’ll non-insurance Our In book to added per $XX.XX and value book $X.XX. value increased prepared equity items book book $X.XX. value-creation shareholders. for consistent, per was life back than to now $X.XX. a Steve. book value we underwriting ratio. operations over And share fashion, to $X.XX. insurance dividends the ended The with other outstanding income the portfolio net by my per gains typical Net $X.XX. losses $X.XX losses the

Steve Johnston

to together it’s feel return person, of and of June many It’s producing satisfying bringing associates execution wonderful behind get across see future Mike. a to and working an brought with across headquarters steady to of our Cincinnati optimism these business the energy has able and results. July our a so in to our the Thanks, country. a familiar from Financial. of field lots be desks strong to the to of faces This return travel see for our can hallway agents In normalcy organization, initiatives and you our the return in teams that out bit of visit with it produced

questions. and Marty As Polly, a Theresa Marc Mike Spray, and reminder, are today for Hoffer. Steve call the open Hollenbeck, with Schambow, please me

Operator

[Operator the from line with of Han Derek instructions] Your first comes question KBW.

Derek Han

Yes. morning. commercial Thanks on for a question. morning. had growth. Good taking Good question my I just the

be maybe a just about, expected the function You’ve obviously that premium to rapid unprofitable the you’ve had normalization X.X%. just in the growth maybe past, prudent have impressive a second in quarter growth little management some had of commercial the at that given non-renewing businesses? But would the that I you’ve higher. economic talked Was cycle of

Steve Spray

This Derek. is Yes. Hi, Steve Spray.

a question. think I great it’s

sophistication, to first on a underwriters Our underwriters And between profitability. executing guess, new And the continued for year, has way our I field and are business those post, this pretty advantage the growth, with us business we throughout to commercial calling are back of to improve balance lines that half runway it’s here getting we’re the new pre-COVID. of and always our the in face pricing we’ve headquarters new with growth back taking business we ahead agents a pricing and and segmentation candidly balancing get got like where now just as of good and feel to continue opportunities. pleased face

Derek Han

top-line related this a growth higher previously Got you. for or note, just you That’s on X% for guided year. helpful. And

above Your by And easier obviously first well X% wasn’t growth the really is driven comps. second-quarter mark. X.X% the half of

we should how the about in second commercial? think half, growth So the including

Steve Johnston

Johnston. are guess we Yes. for there’s about This coming X change. that just there’s XX% point that from but a the points be is percentage And good I I conditions can feel uncertainty, all segments. Thanks, they out market to growth that market, chance total, we Derek. just and Re continue hope really the I would of growth our the the first economy think represented the in Steve always And weaken. reinsurance could as half. with Cincinnati of it’s

our good feel growth, about really across our good but So confident us the of to prospects, Re there in Cincinnati growth, do that could impact growth really business our the growth is about are operational their really bringing we things that with every areas. and one

Derek Han

I up that? a loss-share if there picked And in, core the Is driver development, you higher Thanks. of behind squeeze favorable question reserve just had it. comp, one within Got material can more but kind sequentially. workers’

Steve Johnston

Throughout lot an impact. I job great think with I compensation industry, bottoming of underwriting, forth. the segmenting a just been with of there’s kind just pricing, our workers’ done there’s the comp terms had a team rate the in talk maybe been so and has it of the pressure. out of But has workers’ That think business.

good feel bit over about and prospects little And workers’ so we our term. longer compensation the

Derek Han

Okay. That’s helpful. all answers. for the you Thank

Operator

Mark [Operator Dwelle instructions] with Your next line the RBC question Capital Markets. comes of from

Mark Dwelle

of couple A morning. Good Yes. questions.

the deteriorate than very guess I was bit all activity looking accident I little a First, that a I in personal was guess behavior. it with first the bit as back was at much we’ve seen more business It obviously maybe in lines, the surprised other second lot not first work a the personal it quarter. writers did of year good driving in actually, of year but increased as quarter by lines given better result quarter. margin, a normal little the a ago, to against nearly

might that? kind So data that seeing was were the was outline see I of you – just what curious I in to with

Steve Spray

on again, one. Steve I Johnston Spray maybe team Steve can tag and this and Mark,

continued last take really showing At our results build can that up pricing lines same time, tools, as the and out segmentation, showing and sophistication business states. specific actions we’ve that to some in years, I the is some specific improving couple – and we’ve pricing or underwriting results. to of well. you up Over our new on personal had And the think see

as that, just needed well. you as specific on think hopefully, on that that putting some I premium far the can aggressive in fronts – and specifically improved states as that more results. written also action some it. that’s pressure to net gets the question the multiple And It’s growth taking have see So just some

Mark Dwelle

lines, auto-related personal sort percentage of business as to Within of your compared the is homeowners-related? what

Mike Sewell

Yes.

$XXX here $XX Inland quarter. We so Marine personal sorry, written everything for would The million; premium have I’m million; written $XXX that personal the and personal, was the homeowners of then with the auto and goes lines was other be $XXX the forth – which that million. million premium

Mark Dwelle

That’s Yes. well. a as factor probably

mix do. many a richer homeowners got peers You’ve than

Okay. Thanks that. for

thinking that overall addressed you the the quarter had rate you but how related you growth question your of it for premiums, about in in – second exposure growth partly commercial underlying I at earlier, unit to if generally The had would to easy really lines, between just policy growth unit just customers, an size to divide that that versus counts kind segment just price, true driven or by way expanded up? was the

Steve Spray

Yes.

an depends exposure Steve different our I for think there, us, of almost probably basis. This really for Price industry your in pre-COVID Mark. lines would well it is making especially bit of is are COVID. I And just Spray – it, they’re book seeing certainly to exposures differently say mix different close I in it’s returned a And little impacted retention. segments are think as then carrier, commercial to we all impact from on any getting segments, again.

manufacturing, Just and up as estate COVID in XXXX. the throughout real well construction, all half an example, held first and of pretty

have our didn’t of less and And some on us books maybe we as that business a industry amount and fair segments also. that well would impact so other fare

a there. lot moving parts of there’s So

Mark Dwelle

I that two certain ago a what some interruption general a and time in Okay. litigation passed, see are might that. of update could up remain appreciate of year we still the set on what just and only it that to continue the was year thing reserves questions. an kind you of time amount Obviously, a ago. And a a proportion provide has I you of on the then kind about business time update could this mean, talk just of other One, this IBNR?

Steve Johnston

well. BI our I’ll litigation Mark. that one, it’s to to take that continues fair think pretty progress say Sure. I And

direct policy overwhelming no And that majority During the apply to continue the from courts that the and language across decision as we we to before damage there appellate that of physical property the our the trigger coverage. coverage to We’ve property. believe damage it or we physical court language the first said trial confirmed loss our received policy considered had to quarter, policy country was virus that requires not direct or anticipated. cause that loss and does language clear is

So the well. to BI we pretty litigation that continues progress think

of really been changes consistent the they no relatively material the quarter. terms with amounts, In during have

Mark Dwelle

Re are within for exposure business occurring Thank flooding just just and of last Okay. has Europe the businesses and getting likely Cincinnati you have these then Global, to of some Within is kind to And new to used those question, this Cincinnati recently? that one that. – either in of units. been

Steve Johnston

keeping close think been we a material this exposure there’s there. We’ve can tell from point, early that, eye there. that we don’t to on no damage material and everything, It’s a still

Mark Dwelle

Okay. my are for Thanks that. all Those questions.

Steve Johnston

Thank you, questions. Excellent Mark.

Operator

there you. to And are Mr. the no questions. at this audio for now back Steve call We’ll Johnston turn remarks. thank And over closing time, further

Steve Johnston

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

Operator

This And concludes conference call. thank today’s you.

You may now disconnect.

Cincinnati Financial (CINF) 29 Jul 212021 Q2 Earnings call transcript