Cincinnati Financial Corporation

Good day and welcome to the Cincinnati Financial Corporation third quarter 2024 earnings conference call. All participants will be in a 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 a touch-tone phone. 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 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, investors.centrum.com. 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 President and Chief Executive Officer Steve Spray, 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 Executive Chairman Steve Johnston, Chief Investment Officer Steve Soloria, and Cincinnati Insurance's Chief Claims Officer Mark Shambo, and Senior Vice President of Corporate Finance Teresa Hopper. 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 for the third quarter and first nine months of the year. Several metrics show the progress we are making as we work to provide value to shareholders over time and to deliver outstanding service to agencies and their clients through our dedicated associates. Our combined ratio continues to improve absent the volatility caused by severe weather. While the devastation Hurricane Helene in particular inflicted on communities is heartbreaking, our claims associates are working tirelessly to deliver superior service with empathy and care. We had another quarter of strong premium growth bolstered by improved pricing precision and risk segmentation by our underwriters on a policy by policy basis. In addition to another quarter with nice investment income growth, we executed investment portfolio rebalancing to a larger degree than a typical quarter. We believe that effort will produce both near-term and long-term financial benefits. Net income of $820 million for the third quarter of 2024 included recognition of $645 million on an after-tax basis for the increase in fair value of equity securities still held. Non-GAAP operating income of $224 million for the third quarter was down $37 million from a year ago, driven by an $86 million increase in after-tax catastrophe losses. Our 97.4% third quarter 2024 property casualty combined ratio was 3.0 percentage points higher than the third quarter of last year and included an increase of 3.9 points for catastrophe losses. Our 86.8% accident year 2024 combined ratio before catastrophe losses improved by 0.9 percentage points compared with accident year 2023 for the third quarter and was 0.8 points better on a nine-month basis. We had another quarter of what we believe is profitable premium growth. Agencies representing Cincinnati Insurance again produced a robust amount of new business for us, and we continue to appoint agencies where we identify appropriate expansion opportunities. Our underwriters use pricing segmentation by risk. plus average price increases along with careful risk selection to help improve our underwriting profitability. Estimated average renewal price increases for the third quarter improved incrementally compared with the second quarter of this year. Commercial lines moved a little higher in this high single digit percentage range and excess and surplus lines remained in the high single digit range. Our personal line segment also moved a little higher with personal auto in the low double-digit range and homeowner in the high single-digit range. Our consolidated property casualty net written premiums grew 17% for the quarter, including 16% growth in agency renewal premiums and 30% in new business premiums. As I next comment on performance by insurance segment, I'll focus on third quarter premium growth and underwriting profitability compared with a year ago. Commercial lines grew net written premiums 11%, with an excellent 93.0% combined ratio that improved by 2.2 percentage points, including 1.3 points from lower catastrophe losses. Personal lines grew net written premiums 29%, including growth in middle market accounts and Cincinnati private client business for our agency's high network clients. Its combined ratio was 110.3%, 10.4 percentage points higher than last year, driven by an increase of 12.7 points from higher catastrophe losses. Excess and surplus lines grew net written premiums 23%, with a combined ratio of 95.3%. While that's still quite profitable, it's less so than a year ago due to higher catastrophe losses and a modest amount of unfavorable reserve development on prior accident years. Both Cincinnati RE and Cincinnati Global were again profitable and continue to reflect our efforts to diversify risk and further improve income stability. Cincinnati Re grew third quarter 2024 net written premiums 5% and had a 95.6% combined ratio, bringing its nine-month combined ratio to a very profitable 81.5%. The $38 million of catastrophe losses Cincinnati Re reported for the quarter included approximately $19 million for Hurricane Helene. Cincinnati Global's combined ratio was an outstanding 66.6% for the third quarter, with 12% growth in net written premiums. Our life insurance subsidiary had another profitable quarter, including net income of $20 million, and term life insurance earned premium growth of 4%. Before I close my prepared remarks, I'd like to briefly comment on the estimated effects of Hurricane Milton on fourth quarter results. While it is still early, we estimate our pre-tax incurred losses will total between $75 million and $125 million, net of any applicable reinsurance recoveries. Catastrophe losses for direct business written by the Cincinnati Insurance Company represents less than $15 million of that estimate, while Cincinnati Re represents more than half. Now, I'll conclude as usual with our primary measure of long-term financial performance, the value creation ratio. Our third quarter 2024 VCR was 9.0%, bringing the nine-month total to an excellent 17.8%. Net income before investment gains or losses for the quarter contributed 1.7%. Higher overall valuation of our investment portfolio and other items contributed 7.3%. Next, Chief Financial Officer Mike Sewell will highlight some additional aspects of our financial performance.