Cincinnati Financial Corporation

Good day and welcome to the Cincinnati Financial First Quarter 2024 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, today's 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 first quarter 2024 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, centhen.com slash investors. The shortest route to the information is the quarterly results link and 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 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. Now, I'll turn over the call to Steve.

Good morning, and thank you for joining us today to hear more about our results. In short, we are off to a great start. Our first quarter results reflect the success of our initiatives to continue balancing the profit and growth of our insurance operations, coupled with strong investment income. Net income of $755 million for the first quarter of 2024 included recognition of $484 million on an after-tax basis for the increase in fair value of equity securities still held. representing about three-quarters of the increase in net income. Strong operating results generated the rest of the increase. Non-GAAP operating income of $272 million for the first quarter nearly doubled last year's $141 million, including a decrease in catastrophe losses of $93 million on an after-tax basis. The 93.6% First quarter 2024 property-cavity combined ratio was 7.1 points better than the first quarter of last year, including a decrease of 6.9 points for catastrophe losses. While our combined ratio for accident year 2024 before catastrophe losses was a percentage point higher than accident year 2023 at three months, if we exclude Cincinnati REIT and Cincinnati Global, the ratio improved by one point. Accent year 2024 also improved on a case-incurred basis. However, we increased incurred but not reported, or IV&R, reserves as we continue to recognize uncertainty regarding ultimate losses and remain prudent in our reserve estimates until longer-term loss-cost trends become more clear. We are also pleased with other measures indicating good momentum in our operating performance. Another quarter of pricing segmentation by risk plus average price increases help to improve our underwriting profitability, combining with careful risk selection and other efforts to address elevated inflation effects on incurred losses. Agencies representing Cincinnati Insurance, supported by our experienced and professional associates, produced another quarter of profitable business for us. Our underwriters continue to emphasize retaining profitable accounts and managing ones that we determine have inadequate pricing based on our risk selection and pricing expertise. Estimated average renewal price increases for the first quarter continued at a healthy pace with commercial lines near the low end of the high single digit percentage range, excess and surplus lines in the high single digit range, personal auto in the low double digit range, and homeowner in the high single digit range. Our consolidated property casualty net written premiums grew 11% for the quarter, with what we believe was a nice mix of new business and renewals. I'll briefly review operating performance by insurance segment, highlighting premium growth and improved profitability compared to a year ago. Commercial lines grew net written premiums 7% in the first quarter, with a 96.5% combined ratio that improved by 3.9 percentage points including 4.2 points from lower catastrophe losses. Personal lines grew net written premiums 33%, including growth in middle market accounts in addition to private client business for our agency's high net worth clients. Its combined ratio was a very profitable 93.9%, 18.6 percentage points better than last year, including 15.9 points from lower catastrophe losses. Excess and surplus lines also produced a profitable combined ratio of 91.9 percent, rising two percentage points from the first quarter a year ago, along with net written premium growth of 7 percent. Both Cincinnati REIT and Cincinnati Global continue to produce significant underwriting profit, reflecting our efforts to diversify risk and further improve income stability. Cincinnati REITs combined ratio for the first quarter of 2024 was an excellent 78.6%. That includes IB&R that we routinely carry for expected losses from reinsurance treaties. We believe our potential exposure for losses from the Baltimore Bridge collapse is immaterial. Cincinnati REITs net written premiums decreased by 12% overall, driven by a shifting casualty portfolio mix in response to changing market conditions. Property and specialty premiums increased due to attractive opportunities in pricing.