Cincinnati Financial Corporation

Excuse me, this is the operator. Today's conference is scheduled to begin shortly. Please continue to stand by and thank you for your patience. Once again, this is the operator. Today's conference is scheduled to begin shortly. Please continue to stand by and thank you for your patience. Thank you. Thank you. Good day and thank you for standing by. Welcome to third quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's remarks, there will be a question and answer session. To ask a question during the session, you will need to press star then the number one on your telephone. And if you require any further assistance, please press star zero. I would like to hand the call over to your speaker today, Mr. Dennis McDaniel, Investor Relations Officer. Sir, you may proceed.

Hello, this is Dennis McDaniel, Investor Relations Officer at Cincinnati Financial. Thank you for joining us for our third 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, cynthin.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, Theresa 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, a reconciliation of non-GAAP measures was provided with the news release. Statutory accounting data is prepared in accordance with statutory accounting rules and therefore has not reconciled the gap. 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 third quarter results. Overall, it was another good quarter. While weather-related catastrophes were lower than a year ago, communities across our country were impacted by hail, wind, flooding, and fire. As we send our field claims associates into these communities, they shine, providing excellent service in reassuring affected families and businesses. Net income for the third quarter of 2021 fell $331 million compared with the third quarter of last year, due to $457 million less benefit on an after-tax basis in the fair value of securities held in our equity portfolio. Equity portfolio fair value changes have caused significant earnings volatility for several quarters recently, and net income increased $1.3 billion for the first nine months of 2021 compared with a year ago, despite the third quarter decrease. Non-GAAP operating income for the third quarter of 2021 more than tripled, up $146 million or 232% versus a year ago, with lower catastrophe losses on an after-tax basis contributing $31 million of the increase. Our 92.6% third quarter 2021 property casualty combined ratio was 11 percentage points better than last year, with decreased catastrophe losses this year representing 4.1 points of the improvement. Our current accident year combined ratio before catastrophe loss effects also continued to improve and was 2.5 percentage points better than the first nine months of 2020. Premium growth continued at a nice pace during the quarter as a strengthening economy and great relationships we enjoy with our agents helped us grow ahead of industry estimates. Consolidated property casualty net written premiums rose 10% in the third quarter of 2021. We continue to focus on risk segmentation, giving our underwriters the tools they need to retain and write more profitable accounts while walking away from opportunities when we determine pricing is inadequate. Renewal pricing during the third quarter continued to be ahead of our estimate for prospective loss cost trends for each property casualty segment. Our commercial lines insurance segment again experienced mid-single digit percentage range estimated average renewal price increases down slightly from the second quarter. Our third quarter personalized segment average renewal price increases slowed a little compared with the second quarter, including personal auto in the low single digit range, while the excess and surplus lines insurance segment continued in the high single digit range. Our commercial line segment had an outstanding quarter with this 80.6% combined ratio improving by 21.8 percentage points compared with the third quarter a year ago and growing net written premiums by 10%. For our personal line segment, third quarter net written premiums grew 7% as it continued to benefit from planned expansion of high net worth business produced by our agencies. Its third quarter 2021 combined ratio was higher than a year ago, largely due to driving patterns moving towards pre-pandemic levels, increasing our personal auto loss ratio. Personal auto still produced a small underwriting profit for the third quarter, and for the first nine months of 2021, our personal line segment in total had an underwriting profit. Our excess and surplus line segment produced a sub-95% combined ratio, for the third quarter and the first nine months of the year, and grew third quarter net written premiums by 30%. Cincinnati RE and Cincinnati Global each grew net written premiums in the third quarter of 2021. While both experienced significant losses from Hurricane Ida, leading to underwriting losses for the quarter, we weren't surprised by the level of loss we saw for an event of this magnitude based on our models. Our life insurance subsidiary, produced third quarter 2021 net income of $11 million and grew term life insurance earned premiums by 8%. I'll conclude with the value creation ratio, our primary measure of long-term financial performance. Strong operating results measured as net income before investment gains were the largest component of our VCR for both the third quarter and the first nine months of the year. VCR through September 30th 2021 was 12.4%, already reaching our annual average target range of 10% to 13%. Now, our Chief Financial Officer, Mike Sewell, will add perspective on some other areas of our financial performance.