Cincinnati Financial Corporation

Ladies and gentlemen, thank you for standing by. Today's conference call will begin momentarily. Until that time, your lines will again be placed on a music hold. Thank you for your patience. Thank you for standing by. My name is Jordan and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Cincinnati Financial fourth quarter and full year earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you'd like to withdraw your question, press star one again. Thank you. I'd now like to turn the call over to Dennis McDaniel, investor relations officer. Please go ahead.

Hello, this is Dennis McDaniel, Cincinnati Financial. Thank you for joining us for our fourth quarter and full year 2025 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, investors.senpen.com. The shortest route to the information is the quarterly results section near the middle of the investor overview page. On this call, you'll first hear from President and Chief Executive Officer Steve Sprague, 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 Andy Schnell. 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, our 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 had another excellent quarter of operating performance that again demonstrated the resilience of our proven operating model and the long-term strategy that drives our insurance business. Investment results were also part of that excellent performance, including investment income growth and another quarter with net investment gains. Operating performance was very strong for the fourth quarter and boosted full-year results enough to outperform last year in several key areas. despite starting 2025 with the largest catastrophe loss in our company's history. Net income of $2.4 billion for full year 2025 was 4% higher than 2024. Fourth quarter net income of $676 million rose 67% and included recognition of $145 million on an after-tax basis for the increase in fair value of equity securities still held. Non-GAAP operating income for the quarter increased 7% to $531 million. For full year 2025, it was up 5% from a year ago. Our fourth quarter 2025 property casualty combined ratio was an outstanding 85.2%. It lowered the full year combined ratio to 94.9%, near the midpoint of our long-term average target range. The full year ratio was 1.5 percentage points higher than last year, driven by an increase of 1.6 points in the catastrophe loss ratio. On a current accident year basis measured at 12 months before catastrophe losses, the combined ratio improved by 0.4 percentage points. The loss and loss expense portion would have improved slightly if not for the unfavorable effect of 0.3 points from reinsurance reinstatement premiums. Consolidated property casualty net written premiums continued to grow, but at a slower pace, 5% for the quarter. That reflects our pricing discipline in the insurance marketplace as our underwriters carefully consider risks on a policy by policy basis and use pricing precision tools to segment those risks as part of their underwriting decisions. Estimated average renewal price increases for most lines of business during the fourth quarter were lower than the third quarter of 2025, but still at a level we believe was healthy. Our standard and excess and surplus commercial lines business averaged increases in the mid single digit percentage range. Our personal line segment included homeowner in the low double digit range and personal auto in the high single digit range. We believe our relationships with independent agencies are as strong as ever and that they will continue to trust us with their high-quality new business. The fourth quarter 2025 decrease in new business written premiums was driven by our personal line segment that had unusually large amounts the past two years. However, the $92 million for the quarter was still 62% more than the average of the three years prior to 2023. Policy retention rates in 2025 were similar to 2024. Our commercial line segment was down slightly, but still in the upper 80% range. Our personal line segment was also down slightly, but still in the low to mid 90% range. Performance by insurance segment is the next area I'll highlight, focusing on full year 2025 results compared with 2024. But first, I'll note that all operating units had an excellent fourth quarter profitability, each with combined ratios below 90%. Commercial lines' 91.1% combined ratio for the year improved by 2.1 percentage points, including a decrease of 1.9 points in the catastrophe loss ratio. Its net written premiums grew 7%. Personal lines is 103.6% combined ratio for 2025 increased by 6.1 percentage points, including an increase of 7.1 points in the catastrophe loss ratio. Its net written premiums grew 14%. Access and surplus lines increased 88.4% combined ratio for the year improved by 5.6 percentage points, including a decrease of one point in the catastrophe loss ratio. Its net written premiums grew 11%. Both Cincinnati RE and Cincinnati Global produced strong results and again demonstrated the benefits of diversifying risk to improve income stability. Cincinnati REIT's combined ratio for the year was 95.9%. Its 1% decrease in net written premiums reflects changing reinsurance market conditions. Cincinnati Global's combined ratio for 2025 was 79.2%, with premium growth of 10%, benefiting from product expansion. Our life insurance subsidiary increased annual net income by 16% and grew term life insurance earned premiums by 3%. Moving on to our reinsurance seeded programs. On January 1st 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 2026 are fairly similar to 2025, other than an average premium rate decrease of approximately 7%. The primary objective of our property catastrophe treaty is to protect our balance sheet. The treaty's main change this year is increasing the top of the program to $2 billion, compared with $1.8 billion effective July 1, 2025. Should we experience a 2026 catastrophe event totaling $2 billion in losses, will retain $523 million, compared with $803 million for an event of that magnitude during the second half of last year. We expect 2026 seeded premiums for these treaties in total to be approximately $204 million, with the increase from the actual $192 million in 2025 driven by additional coverage and subject premium growth. As usual, I'll conclude my prepared remarks with the value creation ratio. Our 18.8% full-year 2025 VCR exceeded our five-year annual average target range of 10 to 13%. On a full-year basis, net income before investment gains or losses contributed 9.1%. Higher overall valuation of our investment portfolio and other items contributed 9.7%. Now, Chief Financial Officer Mike Sewell will highlight investment results and other important points about our financial performance.