Cincinnati Financial Corporation

Good day and thank you for standing by. Welcome to the fourth quarter 2021 earnings conference call. At this time, all participants 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 will need to press star 1 on your telephone. And if you require any further assistance, please press star 0. Thank you. I would now like to hand the conference over to your first speaker today, Mr. Dennis McDaniel. Investor Relations Officer, please go ahead.

Hello, this is Dennis McDaniel at Cincinnati Financial. Thank you for joining us for our fourth quarter and full year 2021 earnings conference call. Late yesterday, we issued a news release on our results along with our supplemental financial package, including our year-end investment portfolio. To find copies of any of these documents, please visit our investor website, senfin.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 President, Steve Sprague, 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 is not reconciled to GAAP. And now I'll turn over the call to Steve.

Thank you, Dennis, and good morning. Thank you for joining us today to hear more about our results. It's satisfying to see excellent operating results in overall financial performance in 2021 for both the fourth quarter and full year. As usual, we face challenges, but our strategy continues to work well, thanks to outstanding efforts by our associates and the independent agents who represent Cincinnati Insurance. Net income for the fourth quarter rose $421 million compared with the fourth quarter of last year, including $346 million more benefit on an after-tax basis in the fair value of securities held in our equity portfolio. Non-GAAP operating income for the fourth quarter 2021 was up $58 million or 22% versus a year ago. And on a full year basis, it was 96% higher than 2020. Our 84.2% fourth quarter property casualty combined ratio was 3.1 percentage points better than last year. with decreased catastrophe losses this year representing 1.1 points of the improvement. An outstanding full-year 2021 combined ratio of 88.3% was nearly 10 points better than last year, with lower catastrophe losses representing 4.1 points of the improvement. The current Accent Year combined ratio before catastrophe loss effects also continued to improve and was 1.5 percentage points better than accident year 2020, measured at 12 months. We believe we can successfully balance prudent underwriting and business growth to maintain a 2022 gap combined ratio in the low to mid-90% range. We also believe our 2022 property casualty premium growth rate can be 8% or more. We recognize that weather and significant changes in industry market conditions that influence insurance policy pricing trends are some of the variables that will affect the property casualty results we ultimately report. Premium growth continued at a strong pace during the quarter, reflecting a strengthening economy, generally steady pricing, and the benefit of great relationships with our agents. Consolidated property casualty net written premiums rose 10% for both the fourth quarter and full year 2021. Pricing segmentation continues to be an emphasis with our underwriting working to retain and write more profitable accounts while taking appropriate action on opportunities that we determine have inadequate pricing. Renewal pricing during the fourth 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 up a little for the third quarter. Our fourth quarter personal line segment average renewal price increases slowed a little compared with the third quarter, remaining in the low single digit range. while the excess and surplus lines insurance segment was near the low end of the high single-digit range. Our commercial line segment had a superb year with its 83.8% combined ratio improving by 14.5 percentage points compared with 2020 and growing net written premiums by 8%. For our personal line segment, net written premiums grew 8% for the quarter and 6% for the year, driven by planned expansion of high net worth business produced by our agencies. Its full-year 2021 combined ratio of 94.0% improved 3.1 percentage points from a year ago, including an excellent 80.0% for the fourth quarter. Our excess and surplus line segment produced a sub-90% combined ratio for the fourth quarter and the year, and grew full-year net written premiums by 22%, another terrific year. Cincinnati Re and Cincinnati Global each had another year of healthy growth. Cincinnati Re grew net written premiums by 53% for the full year 2021 as reinsurance market conditions improved. It experienced a modest underwriting loss that included significant losses from Hurricane Ida. Those losses remained within our expectations of loss potential for events of IDA's magnitude based on our models. Cincinnati Global grids 2021 premiums by 6%, with a combined ratio below 90%. Our life insurance subsidiary generated full-year 2021 net income of $44 million, up 38% from a year ago. and grew term life insurance earned premiums by 7%. On January 1 of this year, we again renewed each of our primary property casualty treaties that transfer part of our risk to reinsurers. For our per-risk treaties, terms and conditions for 2022 are fairly similar to 2021. The main change for our property casualty treaty is retaining an additional $43 million of losses for the layers between $100 million and $600 million, while adding $47 million of coverage in a new layer between $800 million and $900 million. Rates for our property casualty treaties generally rose in the high single-digit range. We expect 2022 seeded premiums for these treaties in total to be approximately $110 million about 3% higher than last year. 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 and improved valuation of our investment portfolio each made large contributions to VCR for both the fourth quarter and on a full-year basis. With VCR of 12.1% for the quarter, VCR for the full year was 25.7%, far exceeding our average annual target range of 10 to 13%. Now, our Chief Financial Officer, Mike Sewell, will comment on some other important aspects of our financial performance.