Cincinnati Financial Corporation

Good day and thank you for standing by. Welcome to the first quarter 2021 earnings conference call. At this time, all participants line are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. Thank you. I would now like to hand the conference over to your speaker today, Mr. Dennis McDaniel, Investor Relations Officer. Please go ahead, sir.

Hello, this is Dennis McDaniel at Cincinnati Financial. Thank you for joining us for our first quarter 2021 earnings conference call. Late yesterday, we issued a news release on our results, along with our supplemental financial package, including our quarter end investment portfolio. To find copies of any of these documents, please visit our investor website, senfen.com slash investors. The shortest route to the information is the quarterly results link in the navigation menu on the far left. On this call, you'll first hear from Chairman, President, and Chief Executive Officer Steve Johnston, and then from Chief Financial Officer Mike Sewell. After their prepared remarks, investors participating on the call may ask questions. At that time, some responses may be made by others in the room with us, including Chief Investment Officer Marty Hollenbeck and Cincinnati Insurance's Chief Insurance Officer Steve Spray, Chief Claims Officer Mark Shambo, and Senior Vice President of Corporate Finance Teresa Hopper. First, please note that some of the matters to be discussed today are forward-looking. These forward-looking statements involve certain risks and uncertainties. With respect to these risks and uncertainties, we direct your attention to our news release and to our various filings with the SEC. Also, our reconciliation of non-GAAP measures was provided with the news release. Statutory accounting data is prepared in accordance with statutory accounting rules and therefore is not reconciled to GAAP. Now, I'll turn over the call to Steve.

Thank you, Dennis. Good morning, and thank you for joining us today to hear more about our first quarter results. We were pleased with operating performance and believe it reflects our proven strategy in careful execution as we seek to continue growing profitably over the long term. Net income for the first quarter 2021 rose by $1.8 billion compared with the first quarter a year ago and included increases in the fair value of our equity security portfolio. Non-GAAP operating income was up $85 million or 62% for the quarter, despite higher catastrophe losses reducing it on an after-tax basis by $21 million more than last year. Our 91.2% property casualty combined ratio was 7.3 percentage points better than a year ago, with elevated catastrophe losses this year causing an increase of 1.3 points. The current accident year loss and loss expense ratio before catastrophe loss effects continued to improve and was 2.3 percentage points better than the same quarter a year ago. Our results continue to benefit from efforts to diversify risks by product line and geography, and likewise from segmentation of risks as we underwrite and price policies. While economic effects of the pandemic and pricing discipline continue to slow Commercial Line's new business premium growth, we believe we are growing our business profitably. And our relationships with the independent agents who represent us are as strong as ever. Consolidated property casualty net written premiums rose 12% in the first quarter of 2021. And we continue to see various indicators of good pricing and underwriting discipline. Renewal pricing during the first quarter continued to be ahead of our estimate for prospective loss cost trends for each property casualty segment. Our commercial and personal lines insurance segments again experienced mid-single-digit percent range estimated average price increases, while the excess and surplus lines insurance segment improved to the high single-digit range. The combined ratio for our commercial line segment improved by 17.1 percentage points compared with the first quarter a year ago, and we grew net written premiums by 5% with an ongoing emphasis on pricing segmentation on a policy by policy basis. Our personal line segment grew first quarter net written premiums by 6%, with the high net worth portion of this segment continuing to progress as planned. The combined ratio for personal lines was 6.8 percentage points higher than the first quarter a year ago, with underlying improved performance offset by catastrophe losses that were 9.1 points higher. Our excess and surplus line segment produced a 92% combined ratio and grew net rent and premiums by 16%. Cincinnati RE contributed to roughly half of our net rent and premium growth in the first quarter by taking advantage of improved pricing in the reinsurance market, growing its premiums by $91 million. Losses from winter freeze events hurt its results and caused a modest underwriting loss. Cincinnati Global produced another nice underwriting profit and grew its net written premiums by 11%. Our life insurance subsidiary reported first quarter net income at a satisfactory level and grew term life insurance earned premium by 9%. Before I close my prepared remarks, I'd like to mention one important update with respect to business interruption claims litigation. Earlier this month, the Ohio Supreme Court agreed to answer the question certified to it by the Federal District Court. That is, does the general presence in the community or on surfaces at a premises of the novel coronavirus known as SARS-CoV-2 constitute direct physical loss or damage to property? Or does the presence on a premises of a person infected with COVID-19 constitute direct physical loss or damage to property at that premises. We appreciate the court's decision to hear our case. We believe resolving these questions of law at the state level will create a more efficient judicial process throughout Ohio, benefiting all parties involved. I'll conclude with the value creation ratio, our primary measure of long-term financial performance. Our VCR was 4.1%. for the first quarter of 2021, including 2.2 percentage points contributed by improved valuation of our investment portfolio. Now, our Chief Financial Officer, Mike Sewell, will add his comments regarding other important areas of our financial results.