Earnings call transcript Q2 2023

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Operator

Good morning, ladies and gentlemen and welcome to the Cincinnati Financial Corporation Second Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded.

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

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 the 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 Vice on call, Executive route the may Executive you'll then Theresa and from including and Cincinnati the Chief Hopper. and first Claims Officer, Steve in Officer, After the the investors Finance, link to Officer, far Steve At Senior participating Johnston; others Mike from the may shortest their Insurance's Chief is Vice us, with the hear on The results Chief Investment Financial prepared left. call and President that responses Officer, and time, Soloria quarterly President Schambow; some Corporate room information in by menu On this Sewell. Chairman Marc Spray; questions. of made President be Chief ask Steve remarks,

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

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

Steve Johnston

the quarter. from for than loss of was million us more last Good million Net hear of more quarter morning to $XXX year's about XXXX today for results. joining change income of the second for a you our $XXX quite net and thank second

continue we still significant recognized large income year, As we've as investment net a securities believe We long fair the gains year, value. equity to can swings and we equity reduction grow a value in this of And in income. portfolio our portfolio over Last will from through saw in our the losses the run held occur portfolio noted gain. past, term.

had quarter basis. XX, the it quarter. the income June million losses million $XX end ago $XXX million that than for after-tax first catastrophe $XX an a the appreciated of doubled of year Non-GAAP value, higher As X% more billion operating $X.X of since from increasing the on despite were in

losses performance second property ongoing reasons of XX.X% adjust for continued combined casualty of account second including year elevated rising X.X ratio factors combined year. the changing XXXX ways, and for this we the ratio losses. increase quarter, X.X as accelerate Pricing to and in the the year percentage ago was Our inflation than for confidence we important another same accident worked second premiums Despite to better costs. continue property X.X inflation catastrophe that in for for a improved such the to about address to points The see other of indicator quarter is last the and year's decrease performance. percentage points was ex-cat better points catastrophe of second quarter effects, a year XX.X% during half quarter also period than second

of XXXX a loss point paid on improvement percentage at casualty and June major by property improved case points included ratios underwriting expense measured business before consolidated and XXXX basis, from On every with on basis. X.X improved performance basis year X.X just this which accident line incurred first the loss about current of ratio reported compared We a quarter XX a in catastrophe our losses, year.

more points longer-term the losses as or regarding to clear. reported in until remaining trends reserve ratio X.X period, incurred same the the IBNR ultimate our by prudent become recognize we estimates increased of For continue not we but component loss uncertainty cost

total to we earned the line estimated our quarter. business first umbrella commercial approximately Similar commercial in ratio XX%. profit a casualty an quarter, In of for our in small second had underwriting line combined the of

continue and Importantly, profitable Cincinnati fashion. to an by business appointed do selection in us outstanding for pricing underwriters excellent continue Insurance risk job Asians to Our in produce an

Underwriters seeking emphasize were second first retention new of increases pricing addressing that business. lines our Estimated business. profitable quarter we of than determine major inadequate average of for have accounts the each the while price ones for also quarter profitable renewal higher

single-digit range. low segment end Our insurance range, Commercial surplus Insurance the segment excess high higher averaged Lines single-digit high our while percentage of the lines near the moved and in

in the auto high for in homeowner the range. quarter Lines and single-digit mid-single-digit range second the Personal included

increase of growth premiums casualty factor In levels from written the XXXX. X% included for quarter property insurance terms in net with XX% That second exposures an portion renewal significant higher we written was inflation. a in premiums, quarter of second as elevated of consolidated

points X%, premium profitability and Lines net Its premiums risks. umbrella for briefly segment. from and business Next, was reduction better result percentage new quarter highlight grew written of reflecting X.X discipline. underwriting a I'll combined particularly ago, than XXXX including points in discipline, growth catastrophe by the written as Insurance We premiums losses. X.X second ratio XX% pricing see quarter year expected commercial second lower Commercial an

in X.X agencies. year XX%, and percentage Private points of X.X combined premiums net high catastrophe our in grew increase Cincinnati than business despite growth Its with points Lines ago the to from was ratio middle Client accounts losses. an Personal addition net for better clients worth written market a

a and of profitability. written and XX% year largely casualty by year's and premiums property certain lines opportunities. Cincinnati increase a to pricing Cincinnati ratio premiums had market, combined Re Global second opportunities for and Its ratio quarter our enhance fewer ago, XXXX. XX.X% points attractive component. XX.X% had to while ratio continued percentage market last IBNR matched X.X result due strong in in written combined premiums combination a combined surplus segments Its and as of Excess point Cincinnati net written Re than Both was X.X the of second quarter, XX%. of decreased grew a the including premiums of net the increased essentially higher a net higher a

written combined XX.X% premiums was net at growth XX%. with ratio strong Cincinnati Global's continuing

Our subsidiary excellent XX% quarter X%. earned insurance continued last in of up from life in life premium report year growth results with insurance the income net term second to

do, As the conclude I'll measure ratio, I value creation performance. usually with financial our long-term primary of

X.X%. Our valuation X.X%, VCR investment added contributed another before X.X%, investment was or portfolio second of while result. quarter XXXX losses Net income another strong favorable gains our

Now our Chief will our important other about Sewell, performance. highlight Mike factors Officer, Financial financial

Mike Sewell

and second Investment thanks for quarter. Steve pace XXXX at last today. a for us continued joining year's second of you, income Thank versus of strong of all for the quarter you XX%

for As items X% quarter. expected, income last to quarter decreased X dividend due on the we touched

First, rates are seeing dividend we more slowly. increase

special half $X totaled interest a million. that Second, year's second in of second the XX% didn't our quarter this of $XX Net year. for the stockholdings quarter, dividend of Bond we quarter income X XXXX second from purchases last first equity repeat the with in received million XXXX. rose security compared

securities more totaling investment the portfolio first to added $XXX of purchases fixed million our We net the year. with maturity the X for months

the yield points was ago. second average the for XXXX fixed of yield were Valuation unfavorable was quarter year taxable bond of quarter portfolio the total for for but XXXX aggregate tax-exempt of than basis higher bonds pretax favorable were the X.XX% second in The The purchased and a maturity changes portfolio. for XX of pretax portfolio X.XX%. quarter equity our during during second the average

of net appreciated value billion. was was fixed quarter, billion, while effects, in investment gain portfolio end million. of $XXX tax portfolio the the gain a Before the for million, The At million. equity position net total net was portfolio the bond $XXX $X.X equity the of loss for portfolio approximately maturity $X.X the $XXX net the portfolio net a was loss was position while in

investment first Strong in bond to cash to year yields Cash million, activities boosting months up X from was for XXXX $XXX addition from income income. flow of rising again X% the ago. contributed a flow operating interest growth

making business. investments We in continue controlling emphasize to between a with management and strategic expenses our expense balance

outpaced than in expense as quarter The XXXX growth property X.X lower expenses. total was second underwriting percentage year casualty premium last points growth ratio

on comment reserves. loss I'll Next,

We expense and approach use in targets of net estimated the upper actuarially that to continue loss amounts range half loss net a reserves. consistent the of

quarter, such then updated losses accident ultimate loss case estimated losses expenses and of and paid do as reserves As by each and information we new consider business. year we and line

net for XXXX, first in casualty and expense our loss half reserves IBNR the was increase million of the property $XXX For loss million, including portion. $XXX

in accident all-lines basis favorable XXXX During the of points. combined aggregate $X by $XX included: XXXX. months experienced for favorable $XX and million we favorable development favorable X.X $XX accident a that first casualty reserve million million for X development prior prior years for accident million on years the benefited ratio net year, percentage XXXX an quarter, for million XXXX; to the net On second by reserve for XXXX; unfavorable property $XXX of

remains approach outstanding is pay our that excellent financial and in shape. our we management, our still capital shares consistent through and plans. believe shareholders intended that equity strength issued offset include flexibility to Regarding compensation shares financial maintenance repurchase is dividends as We to

During repurchased share an of per average XXXX, of XXX,XXX $XXX.XX. price the we second quarter approximately at shares

the $XXX paid million quarter. in to shareholders dividends also during We

income operations value to Life value increased usual, life than other casualty As value of main second a insurance increased They net creation summary with $X.XX. book Property represent I'll per ratio. value book quarter added contributions our noninsurance Investment drivers conclude of book $X.XX. $X.XX. of share. the and insurance underwriting items by

quarter book gains a $X.XX share and per per increased and was the we net second losses value dividends $X.XX Net income and the of investment equity shareholders. effect to losses for share decreased fixed value in the per for portfolio by portfolio increase share. gains Net to declared The $X book $X.XX during value $X.XX. book investment by

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

Steve Johnston

Thanks, Mike.

organizations recognizing on the agreed. our profitable growth, ratings We are In the in through insurance third-party and of month, financial and are the insurance included I'm continue return. list, profitability we S&P again the our market proud XX navigating actions also to it. cycles. the all believe necessary strength were and to affirmed We associates challenging growth delivering our we last high are shareholder way taking

are Awards companies times of in to Casualty XX only began analysis the XX We Property X XXXX. the X since named

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

Operator

Piper with comes first Sandler. Newsome Paul Instructions] [Operator question Our from

Paul Newsome

a in the to of names maybe of of that's kind keeping many disciplined. give competition you commercial. of of products, Congrats the been us ask new companies business the Happy more I on kind hampering quarter. you sort on the but little if that sense detail source etcetera, what a wanted you production just

Steve Spray

what would This a in it's I've Spray. that reiterate Steve past, just remarks, it's prepared local. there Steve I said challenging closing kind of as his said Paul, market. in business, the

states that view of different in competitors just have You a various get different risk.

got past we tools we've think be the profit the and just with disciplined here more underwriters I time, my reps it. both and the field been have today disciplined our executing. perspective, able view carriers be field more And underwriting. about underwriters just our of front, it's our and they're and business. first different execute see risk. or just agents It's segmenting on working our that from business a way maybe to to be in to pricing renewal reps from have you'll of that But time couldn't to team, continuing the on the And new our the didn't proud the about

at not on add we month quarter, side so of make say, an of It's did on that end improvement I your on it And And tail the end quarter. X coming that Hopefully, some second us a it's a business would answers we're but I in it Paul. change the did of dynamic question, daily may end quarter, and new second basis. to more we a would market seeing trend the new business. the see see, pricing market the a the so of towards

Paul Newsome

definitely getting there. It's

in mistaking call on the a there's of I that to IBNR bit a out through there I loss business, noticed maybe less that but supplement Just number? quarter. bit little you want booked Anything was little that commercial anomalous the a and recent kind up going of

Steve Johnston

a address Sure. year, little dollar basis, Paul, And quarter on did think seen inflation faster. of this our with we're limits I increase. year, that of effect I is It's particular think inflation And to recognize the second IBNR -- we've last the and Steve. and year. I situation just premium increased actually, in leveraged bit last a on umbrella and higher think last our strong we've

-- quarter, less I as a on earned So to still had dollars slightly ratio think, of we more premium. added IBNR again, this just

Operator

with Peters Greg from comes Raymond question James. next The

Greg Peters

expense I the tail longer your in really with And writing you would casualty in curious seems a supplement. be the be And the more line -- some at and I'm ratio loss guess, began first to I'm going having a -- total it's that And to financial focus loss quarter. of loss question see show just second it look the commercial if opposite on time nice in yet would of component to business. the like improvement moving obviously, business of and start it perhaps this improved direction. we now ratio

So I maybe you some you could know us could give added on some maybe context. previous -- and provided you've just it, comments

Steve Johnston

kind Yes. X the question, Greg. Good of are related. And I think

pricing a underwriting is the and improvement and our particularly the think I of line showing we're that business. in in umbrella result of discipline

to it we a harder don't on same a view some more makes -- risk. is of mentioned, Steve price in as market basis others is, that that of that side have the bit are us disciplined compete little other with The

together I just think the how market. terms would I So X we're that add to competitive can't earlier and response much of Steve's go handling really -- in

Greg Peters

to is value a property, the in or Right. line I like of factors, reset. to I inside rate the personal pivot commercial because combination just whether feel including the wanted it's space insured numbers being on

know. And in I'm It in premium net in Or your the much example, the is wondering when a rate looking value I'm your valid pure don't way? that getting lines, -- -- to like look, of personal written homeowners wrong for XX% actual the I just I'm though. up numbers versus seems this quarter. at second how insured so I maybe question right?

Steve Spray

X/X Yes would rate at and a on about about Greg, Steve commercial personal homeowner, specifically Spray. On way X/X -- to property be exposure, it's property good it. and look

Greg Peters

just I'm about the as just second question about to others -- ratio results of for combined before for mapped of in helpful. want year. you'd the year? my recognizing range ask you're be going context the guess of to the the That's last that final would think quarter that question. that's I I thinking wondering Okay, the second expectation out have half how sort previously an we are questions the

Steve Johnston

Johnston. reasonable were it's And came Steve is at we're this we But weather to that the be we we think and first -- combined would don't think to Greg, we able be mid-XXs the I first second low half. think we where those at with are out it when volatile have in it's that the still caveats the conditions the the of growth. will ratio, market that X% quarter, we over and play out

first I think improving of focus the that our the book. But where gave in ex-cat is core the in very and again, quarter. think of we I movement confident were point nicely It's still this just we the portion really that's at information are the we're point. key with the we

Operator

Next with question comes from Mike BMO. Zaremski

Mike Zaremski

been given some Or are of a rate interest industry make we're pricing that have you've that Curious, guys experienced inflect accelerate you power any the also insights bit? kind surprised that tailwinds power strong of bit guy? the July? And pricing a it pricing good -- curious, a into just sense into does broader seeing at

Steve Johnston

agents. that with agents' We where we and Steve is model -- by and risk that -- execution Johnston. And people see boded in communicate of into in makes it This process with try us half. continuing relationships just tend second discipline our as good it's have feel our is needs it as to to of we being our and well -- us field, the great the of responsive are risk so early they're do business for our we communicate renewal the to has execution the proud go us a it's just we feel to makes so out are an that and field balancing

Mike Zaremski

Okay.

underwriting mentioned that a out the of remarks, in I the portfolio of eked -- components, think kind your small You umbrella prepared the profit.

curious are last Is you broader combined over maybe also experienced social X of known the in. a to it's Just it's that what are given year kind for versus umbrella, you or ratio or more umbrella, of maybe targeting prone inflation. the just kind you've better -- you've -- as more segment

Steve Spray

think Yes. Steve 'XX 'XX and Mike, over again, prior, I Spray. the this of the Over -- -- end last is

about like Our and And quarter. We've like ratio, obviously improving little combined that, that the that which the jurisdictional. a to prepared is XX%. more in the first for umbrella we last, In net loss the would said the written couple be commercial have deliberate today. in was ratio that line quarter, half drag net risk. around Commercial very state, premium. profitable second it from in maybe expect the ratio points X you where said The Steve yes, years, premium here of been a color I second It's improve give contributed on And by by of challenging. on too. it's our business. you overall was say, risk running last It we've X-point been Lines umbrella could remarks, I'll bit written loss been state down

work So agents said, -- deliberate that there's it's pricing make or for surprises specific with that been with often jurisdictions on and that have we reducing no limits some sure conditions, our been terms, like challenging think in we early specific got we us. them risks and to Steve

Mike Zaremski

helpful. to And maybe Doug, Lines. That's gears lastly, switching Personal Okay.

competitive others you about last -- need of wasn't good you have from have on a a give wise with feel very some call, been kind terms for lines industry an comes update in guys in of kind writers of and into maybe example, business have Maybe the biggest talked have personal profitable but about on book. getting California you the talked competitors the now terms you you the lines personal the about state of -- why can what seeing growing in, where you it think trouble dynamics, think and loss of they inflation and as quarter's understanding new of keep these states call up I you're kind standpoint to of of us pricing -- some of I or retrenching. had X being very

Steve Spray

net market business. fact Private out amount Spray the really about XX% Yes. of I both team Thanks, only lines, feel would about on our we the and -- had high or marketing, selectively Client Mike. The joined outside are now that start with business. Yes, high the become associates have, building personal from on bullish what we that not worth we expertise middle Cincinnati have again. has good on of the but the Steve claims. net and then we've in had the product we that the and long-term then expertise on worth

agents. I received states the it well where specifically have And you very disruption. think been quite there's our country growing we mentioned been bit industry a by in across that of

we Cincinnati think, we've especially that in with an excess their the able were And a seen and the policyholders able we for measured example capacity. we true disruption, definitely And think our there lines homeowners and there for we on been it business deal worth as basis. community And provide, net for to agents of writing as I able to be an high surplus specific to is over quite to be X way and as example, in move time goes to pivot bit business. have California a were

And and for long to grow like We positioned do feel business it term. this well everything at worth we're continue look really profitably. in grow long net business We we term. over are that the to high the

Inflation do. those actions have the but confident book We we're in underwriting the improve to the entire to has we've results. and impacted taken especially some pricing work

Operator

Shields The next Meyer from question with is KBW.

Meyer Shields

Steve, couple from talked your quarter? any second quick of Was trend about quarter much pretty of A in of first internal sequentially. you questions, change business every to accelerating pricing I guess. view line there

Steve Johnston

this is I Meyer, so. Yes. really think Steve. don't

it's granular. are forth. very by I it think state so -- seeing by look We and line, we at

most directions a view first at you'll see similar But part, movement a level. quater some in to detailed seeing I -- so we're for very think quarter. trends of second the And

Meyer Shields

of Commercial not at bad wondering, driving vastly I'm perfect. question. is that Okay, good I XXX% Lines that? Lines. is higher in loss look But there detail, the this just else when sure weather? than Personal IBNR provision for a And Or was ratio something a I is function

Steve Johnston

now. the I think Personal Meyer, There's as in right growth faster as it's growth probably, much the anything. Line space

Meyer Shields

perfect. the That disclosed detailed. if one then a business last lines can, you I reserve Okay, release sense. 'XX? which it's from of more But year little And act saw have question, makes

Steve Johnston

That has Meyer. been not part our of disclosure,

Operator

question Bank next with of America. Grace The Carter comes from

Grace Carter

Hi, everyone.

be flowing volatile that bit forward? commercial in which the underlying the the should we experienced Obviously, property just of really sequentially a curious cat impacted the I was at quarter of loss that by maybe line classification extent and quite and both ratio, that non-cat the just to Looking but was extrapolate year-over-year. through pricing improvement, which that versus and to going extent can

Steve Spray

can I at Spray. Steve Grace, -- can that. take a I shot

all cat, We for -- have lines We've got We think individual in understand to state our Lines you we just conditions first But terms, the all percentage can price would you the -- at, what for state price what like. and tools looks underwrite every I Commercial We annual And loss cat plans, for I look profile. to. the and for is and average think, cat. specifically we do thing both to believe at deductibles have the -- segments. lines that.

if discipline just put seeing the know numbers. So the I don't to I we've as wants else cat think add non-cat. both improvement and the far anything in that anybody you're as because of

Steve Johnston

well, quite it I Steve. -- think handled you

Grace Carter

at that over that's ratio. of there the line or ticked looking up you've of pricing loss to we're time. what kind versus guess, impact just comp a anything in change lower was a curious is seen there the used if workers' one-off That in I I or if accumulated if trend bit underlying And Okay. seeing. loss

Steve Johnston

do pricing effect. of time over that compounding Grace, have lower a just disciplined. this think I does it is We've very just the Johnston. accumulation been Steve

decrease writings there we've time good there you over As a spot account we're in particularly our that feel a as overall. can a as we so underwriter an period see, been of discipline have in that maintained

Grace Carter

being guess, ratio see the just commercial past underlying casualty And few just some some did in a get pretty loss to the reserve as Did of and then this impact regarding where finally, the the the book you loss quarters? there past confidence I releases. improvement just line you've taken that cautious in gives in well information pretty mean over square of several commentary broadly is of that quarter regarding about we've actions the part versus trends over business. some the trying of heard that talking I you umbrella is kind pretty favorable cost the Or any impact from I'm that -- that that as new that going? quarters over more

Steve Johnston

early start been several over last trying and it the address last what point the and of action the think It's is. get your effect inflation. leveraged and quarters to out is to I inflation the

Operator

Fred [ph] Private [Operator comes Instructions] Investor. next from of Our question Nelson

Unidentified Analyst

out divide it's period? that possible. thing I that And to the equity that of at philosophy for really I me thank told we're number that you to of shares on have really, that you you important of that that shares going of philosophy lives outstanding the if get think to It country. the their never shares people needs period of value. you in you to appreciate know dreamed all do the number tell I'd end number there The to call grandkids our because Cincinnati dividends have things them get to shareholders' honesty. company to Two allowed with value is and the like says and with all kids, you things the their in they the integrity tell it's Yes. Financial are outstanding are say their would of of are the me the I that cannot the of at end rising the worked how and the book of for book the many know could really

Steve Johnston

Well, really for I to Steve makes our just days. thank my you, off, you It Fred. Johnston. And thank of day. comments. is first want all really makes It This your

You're believe comments. company. here talking number appreciate million. And shares the the really at is I XXX.X we outstanding to everybody your of

Unidentified Analyst

the At the of end period?

Steve Johnston

period. At the the end of

Unidentified Analyst

divide -- shares? how You many

Steve Johnston

think million. I XXX.X it's

Unidentified Analyst

shareholder And into $XX.XX. you value get equity [indiscernible], did if you the of divide that

Steve Johnston

right. that's believe I

Mike Sewell

right, Fred. That's

Steve Johnston

I transposed it. have may

million I my I was me here. was think going paper going it's from to XXX.X slipped piece somebody from of not -- I and a memory

So the I apologize for shares. the transposing

Unidentified Analyst

you I old I my just got that's the because figure appreciate what math. with said

Steve Johnston

the old always good. Okay, is best, math The Fred.

Unidentified Analyst

people Cincinnati that thank One of with my said live incense but was TYG; God. you,

Steve Johnston

you Thank so you Here much. go.

Operator

over This would question-and-answer I for remarks. like Johnston to back session. turn concludes our Steve the closing conference any to

Steve Johnston

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

Operator

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

may disconnect. all now You

Cincinnati Financial (CINF) 28 Jul 232023 Q2 Earnings call transcript