Cincinnati Financial Corporation

Good morning and welcome to the Cincinnati Financial Corporation third quarter 2023 earnings conference call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star, then two. 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.

Hello, this is Dennis McDaniel at Cincinnati Financial. Thank you for joining us for our third quarter 2023 earnings conference call. Late yesterday, we issued a news release on our results, along with a supplemental financial package, including our quarter and investment portfolio. To find copies of any of these documents, please visit our investor website, centhen.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 and Chief Executive Officer Steve Johnston, and then from Executive Vice President and 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 President Steve Sprague, Chief Investment Officer Steve Soloria, and Cincinnati Insurance's 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, 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. Now I'll turn over the call to Steve.

Good morning, and thank you for joining us today to hear more about our results. We are pleased with our operating performance in the third quarter, as we again saw improved underwriting ratios for almost every major line of business compared with the first half of this year. The net loss of $99 million for the third quarter of 2023 included recognition of $362 million on an after-tax basis for the reduction of fair value of equity securities still held. We continue to believe the value of our equity portfolio will increase over the long term. As of September 30th, it had $5.6 billion in appreciated value. It decreased 8% during the third quarter, but has increased 2% since the end of last year. Non-GAAP operating income of $261 million for the third quarter more than doubled last year's $116 million, including a decrease of catastrophe losses of $58 million on an after-tax basis. The 94.4% third quarter 2023 property casualty combined ratio was 9.5 percentage points better than the third quarter of last year, including a decrease of 4.8 points for catastrophe losses. Our 2023 XCAT accident year combined ratios are also better than 22, improving 3.4 percentage points for the third quarter and 1.7 points on a nine-month basis. Similar to last quarter, we also see signs of positive momentum in operating performance. Price and segmentation by risk and significant average price increases contributed to the increase in our underlying profit, combining with risk selection and other efforts to address elevated inflation effects on incurred losses. On a current accident year basis, Measured at September 30th, before catastrophe losses, our 2023 consolidated property casualty loss and loss expense ratio improved from 2022 by 4.3 percentage points on a case-incurred basis. For the same time period, we increased the incurred but not reported, or IBNR, component of the ratio by 3.0 points as we continue to recognize uncertainty regarding ultimate losses, remaining prudent in our reserve estimates until longer-term loss cost trends become more clear. Agencies appointed by Cincinnati Insurance are producing profitable business for us, working with associates who provide outstanding service to agents and their clients. Our underwriters are working diligently to retain profitable accounts while managing ones that we determine have inadequate pricing. They are also careful in selecting risks and pricing new business policies. Estimated average renewal price increases for the third quarter continued at a healthy pace. Our commercial line segment again averaged near the low end of the high single-digit percentage range, while our excess and surplus lines insurance segment continued in the high single-digit range. Personal lines for the third quarter included auto rising to the low double-digit range, and homeowner rising to the low end of the high single-digit range. We reported 12 percent growth in consolidated property casualty net written premiums for the quarter. That included an 11 percent increase in third quarter renewal written premiums, reflecting higher levels of insured exposures in addition to price increases. Considering operating performance by insurance segment, I'll comment on premium growth and how profitability is improving compared to a year ago. Commercial lines grew net written premiums 5 percent in the third quarter, reflecting pricing discipline. For example, lower written premiums this year for workers' compensation and commercial umbrella together reduced the third quarter 2023 growth rate for total commercial lines by 2 percentage points. The commercial lines combined ratio improved by 3.8 percentage points despite an increase of 2.2 points from higher catastrophe losses. Personal lines grew net written premiums 29% with growth in middle market accounts in addition to Cincinnati private client business for our agency's high net worth clients. The combined ratio was 4.6 percentage points better than last year, including 2.0 points from lower catastrophe losses. Excess and surplus lines improved its combined ratio by 3.4 percentage points and continued to grow profitably with net written premiums up 6%. Both Cincinnati RE and Cincinnati Global again enhanced our overall combined ratio and continue to demonstrate risk diversification benefits. Cincinnati RE's combined ratio for the third quarter of 2023 was an excellent 81.0%, with net written premiums essentially matching last year's third quarter. Casualty premiums again decreased as we saw fewer attractive opportunities in certain segments of the market. Property premiums increased 24%, largely due to higher pricing, while specialty premiums increased 31% due to attractive opportunities in pricing. Cincinnati Global's combined ratio was an excellent 79.5%, while reporting strong growth with net written premiums up 21%. Our life insurance subsidiary again performed well with third quarter 2023 net income up 9%, and term life insurance earned premiums growing 2%. I'll conclude with our primary measure of long-term financial performance, the value creation ratio. While our VCR on the nine-month basis is 4.4%, our third quarter 2023 VCR was negative 2.6%. Net income before investment gains or losses for the quarter contributed positive 2.4%. lower valuation of our investment portfolio, and other items contributed negative 5.0 percent. Next, Chief Financial Officer Mike Sewell will add his commentary about our financial performance.