Cincinnati Financial Q2 2025 Earnings Report

Cincinnati Financial EPS Results

• Actual EPS: $1.97
• Consensus EPS: $1.39
• Beat/Miss: Beat by +$0.58
• One Year Ago EPS: $1.29

Cincinnati Financial Revenue Results

• Actual Revenue: $2.48 billion
• Expected Revenue: $2.80 billion
• Beat/Miss: Missed by -$316.84 million
• YoY Revenue Growth: +15.50%

Cincinnati Financial Announcement Details

• Quarter: Q2 2025
• Date: 7/28/2025
• Time: After Market Closes
• Conference Call Date: Tuesday, July 29, 2025
• Conference Call Time: 11:00AM ET

Cincinnati Financial (NASDAQ:CINF), together with its subsidiaries, provides property casualty insurance products in the United States. It operates through five segments: Commercial Lines Insurance, Personal Lines Insurance, Excess and Surplus Lines Insurance, Life Insurance, and Investments. The Commercial Lines Insurance segment offers coverage for commercial casualty, commercial property, commercial auto, and workers' compensation. It also provides contract and commercial surety bonds, and fidelity bonds; and machinery and equipment. The Personal Lines Insurance segment offers personal auto insurance; homeowner insurance; and dwelling fire, inland marine, personal umbrella liability, and watercraft coverages to individuals. The Excess and Surplus Lines Insurance segment offers commercial casualty insurance that covers businesses for third-party liability from accidents occurring on their premises or arising out of their operations, such as injuries sustained from products, as well as other coverages, including miscellaneous errors and omissions, professional liability, and excess liability; and commercial property insurance, which insures buildings, inventory, equipment, and business income from loss or damage due to various causes, such as fire, wind, hail, water, theft, and vandalism. The Life Insurance segment provides term life insurance products; universal life insurance products; worksite products, such as term life; and whole life insurance products, as well as annuities. The Investments segment invests in fixed-maturity investments, including taxable and tax-exempt bonds, redeemable preferred stocks, and mortgage-backed securities; and equity investments comprising common and nonredeemable preferred stocks. It also offers commercial leasing and financing services; and insurance brokerage services. Cincinnati Financial Corporation was founded in 1950 and is headquartered in Fairfield, Ohio.

Cincinnati Financial Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Net income more than doubled to $685 million in Q2, with non-GAAP operating income up 52% to $311 million year-over-year.
• Positive Sentiment: Property casualty combined ratio improved to 94.9%, with commercial, excess & surplus, and reinsurance segments all posting combined ratios below 93% and the accident-year ratio at 85.1% before catastrophes.
• Positive Sentiment: Net written premiums grew 11% overall, including 16% growth in agency renewals and strong increases in personal lines (20%) and international business (45%).
• Positive Sentiment: Investment income rose 18% thanks to portfolio rebalancing and higher bond yields (avg. 4.93%), alongside net unrealized gains of $496 million on equities and bonds.
• Positive Sentiment: Underwriting expense ratio declined 1.8 points to 28.6%, and favorable reserve development of $63 million improved the combined ratio by 2.6 points in Q2.

Presentation

[Operator]

Ladies and gentlemen, good morning. You are connected to the Cincinnati Financial Corporation conference call. We request that you please stay connected. This conference will begin within the next two minutes. We thank you for your patience.

[Operator]

Ladies and gentlemen, good morning. You are connected to the Cincinnati Financial Corporation earnings conference call. We request that you please stay connected. This conference will begin within the next two minutes. We thank you for your patience.

[Operator]

Good day, and welcome to the Cincinnati Financial Corporation Second Quarter Earnings Conference Call. All participants will be in the listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I'd now like to turn the conference over to Dennis McDaniel, Investor Relations Officer. Please go ahead.

[Dennis McDaniel, VP & IR Officer at Cincinnati Financial]

Hello. This is Dennis McDaniel of Cincinnati Financial. Thank you for joining us for our second quarter twenty twenty five 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.synthin.com.

[Dennis McDaniel, VP & IR Officer at Cincinnati Financial]

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, Teresa Hopper. Please note that some of the matters to be discussed today are forward looking.

[Dennis McDaniel, VP & IR Officer at Cincinnati Financial]

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.

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

Good morning and thank you for joining us today to hear more about our results. I'm pleased to report strong operating performance. Because we are confident in the long term direction and strategy of our insurance business, we didn't lose focus after the California wildfires early in the year. We stayed anchored to our agent centered strategy, continuing to balance profitability and growth. We also continue to benefit from rebalancing our investment portfolio in the second half of last year and reported very strong investment income growth in the second quarter of this year.

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

Our commercial lines and excess and surplus lines insurance segments again produced combined ratios below 93%. Second quarter twenty twenty five results for Cincinnati Re and Cincinnati Global were also outstanding, each with a combined ratio below 85%. Spring and summer storms added 23.8 percentage points to our personal lines combined ratio and its combined ratio was still just two percentage points shy of an underwriting profit for the quarter. The second half of the year is typically more profitable for our personal lines business. Over the past five years, we've seen an average improvement of eight points in the second half of the year for that segment.

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

Net income of $685,000,000 for the 2025 more than doubled our result from a year ago and included recognition of $380,000,000 basis for the increase in fair value of equity securities still held. Non GAAP operating income of $311,000,000 for the second quarter was up 52. Our 94.9% second quarter twenty twenty five property casualty combined ratio improved by 3.6 percentage points compared with second quarter last year, despite a one point increase in catastrophe losses. The 85.1% accident 2025 combined ratio before catastrophe losses for the second quarter improved by 3.1 percentage points compared with the accident year 2024. Our consolidated property casualty net written premiums grew 11% for the quarter, including 16% growth in agency renewal premiums.

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

New business written premiums continued to grow in our commercial and excess and surplus line segments. However, they decreased by $22,000,000 in our personal line segment, in part from a $13,000,000 reduction in California as we slowed growth in some parts of that state. Steady premium growth and reinsurance market opportunities prompted us to add an additional layer of $300,000,000 on top of our property catastrophe reinsurance program. Expanded coverage totaling $129,000,000 or 43% of the layer was placed with reinsurers for an estimated seated premium cost of less than $5,000,000 We continue to focus on our profitable premium growth objectives that are supported by various efforts, including superior claim service and fostering relationships with the best independent insurance agents in our industry. Our underwriters excel in pricing and risk segmentation on a policy by policy basis as they make risk selection decisions.

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

Combining that with average price increases should help us continue to improve our underwriting profitability. Estimated average renewal price increases for most lines of business during the second quarter were lower than the 2025, but still at a level we believe was healthy. Commercial lines in total averaged increases near the high end of the mid single digit percentage range and excess and surplus lines was again in the high single digit range. Our personal lines segment included homeowner in the low double digit range and personal auto in the high single digit range. Moving on to highlight second quarter performance by insurance segment, I'll note premium growth and underwriting profitability compared with a year ago.

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

Commercial lines grew net written premiums 9% with an excellent 92.9% combined ratio that improved by 6.2 percentage points, including 2.3 points from lower catastrophe losses. Personal Lines grew net written premiums 20%, including growth in middle market accounts and Cincinnati private client. Its combined ratio was 102%, 4.9 percentage points better than last year despite an increase of 2.9 points from higher catastrophe losses. Access and surplus lines grew net written premiums 12% with a nice profit margin. That segment produced a combined ratio of 91.1%, an improvement of 4.3 percentage points.

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

Cincinnati Re and Cincinnati Global each had an outstanding quarter and continue to reflect our efforts to diversify risk and further improve income stability. Cincinnati Re second quarter twenty twenty five net written premiums decreased by 21% reflecting pricing discipline or market conditions softened. Its combined ratio was 82.8%. Cincinnati Global's combined ratio was 78.4% along with premium growth of 45% as it continues to benefit from product expansion in recent years. Our life insurance subsidiary had another strong quarter, including 8% net income growth.

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

In addition, term life insurance earned premiums grew three percent. I'll end my commentary with a summary of our primary measure of long term financial performance, the value creation ratio. Our VCR was 5.2% for the 2025. Net income before investment gains or losses for the quarter contributed 2.3. Higher overall valuation of our investment portfolio and other items contributed 2.9%.

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

Now I'll turn it over to Chief Financial Officer, Mike Sewell for additional insights regarding our financial performance.

[Michael Sewell, EVP - CFO, Principal Accounting Officer & Treasurer at Cincinnati Financial]

Thank you, Steve, and thanks to all of you for joining us today. We reported excellent 18% growth in investment income in the '25, reflecting efforts during 2024 to rebalance our investment portfolio. Bond interest income grew 24% and net purchases of fixed maturity securities totaled $492,000,000 for the quarter and July for the first six months of this year. The second quarter pre tax average yield of 4.93% for the fixed maturity portfolio was up 29 basis points compared with last year.

[Michael Sewell, EVP - CFO, Principal Accounting Officer & Treasurer at Cincinnati Financial]

The average pretax yield for the total of purchased taxable and tax exempt bonds during the second quarter of this year was 5.82%. Dividend income was up 1% and net purchases of equity securities totaled $56,000,000 for the quarter and $61,000,000 on a year to date basis. Valuation changes in aggregate for the second quarter were favorable for both our equity portfolio and our bond portfolio. Before tax effects, the net gain was $480,000,000 for the equity portfolio and $16,000,000 for the bond portfolio. At the end of the second quarter, the total investment portfolio net appreciated value was approximately $7,200,000,000 The equity portfolio was in a net gain position of $7,600,000,000 while the fixed maturity portfolio was in a net loss position of $458,000,000 Cash flow in addition to higher bond yields contributed to investment income growth.

[Michael Sewell, EVP - CFO, Principal Accounting Officer & Treasurer at Cincinnati Financial]

Cash flow from operating activities for the first six months of twenty twenty five was $1,100,000,000 That's down $44,000,000 from a year ago due to paying $442,000,000 more for catastrophe losses in the first half of this year. As usual, I'll briefly comment on expense management and our efforts to balance expense control with strategic business investments. The 2025 property casualty underwriting expense ratio decreased by 1.8 percentage points, primarily due to growth in earned premiums outpacing the growth in expenses. The 28.6 expense ratio contributed to strong results for the quarter, but I don't expect it to remain that low in the short term. There are several factors such as the magnitude and timing of various expenses that can cause variation between quarters.

[Michael Sewell, EVP - CFO, Principal Accounting Officer & Treasurer at Cincinnati Financial]

Regarding loss reserves, our approach remains consistent and aims for net amounts in the upper half of the actuarially estimated range of net loss and loss expense reserves. As we do each quarter, we consider new information such as paid losses and case reserves. Then we updated estimated ultimate losses and loss expenses by accident year and line of business. For the first six months of twenty twenty five, our net addition to property casualty loss and loss expense reserves was $829,000,000 including $711,000,000 for the IBNR portion. During the second quarter, we experienced $63,000,000 of property casualty net favorable reserve development on prior accident years have benefited the combined ratio by 2.6 percentage points.

[Michael Sewell, EVP - CFO, Principal Accounting Officer & Treasurer at Cincinnati Financial]

On an all lines basis by accident year, net favorable reserve development for the first June of twenty five totaled $154,000,000 including a favorable $183,000,000 for '24, favorable $12,000,000 for '23, and an unfavorable $41,000,000 in aggregate for accident years prior to '23. I will conclude my comments with capital management highlights. We paid $133,000,000 in dividends to shareholders during the 2025. No shares were repurchased during the quarter. We believe both our financial flexibility and our financial strength are stellar.

[Michael Sewell, EVP - CFO, Principal Accounting Officer & Treasurer at Cincinnati Financial]

The parent company cash and marketable securities at the end of the quarter was $5,100,000,000 Debt to total capital remained under 10%. And our quarter end book value was a record high $91.46 per share with $14,300,000,000 of GAAP consolidated shareholders equity providing ample capacity for profitable growth of our insurance operations. Now, I'll turn the call back over to Steve.

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

Thanks, Mike. We're continuing to follow the same bold vision our founders created seventy five years ago, a company built for independent agents.

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

Doing business face to face, handling claims fast, fair, and with empathy, having expertise and financial strength to grow through all market cycles. It had value in 1950, it has value today, and I'm confident it will have value for decades to come. As we've been celebrating our anniversary, we've also been recognizing the many associates who contributed to our success. I want to take a moment to thank one of them now. Teresa Hoffert will retire in September after forty five years of service.

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

Her remarkable career includes joining our company as a clerical associate, earning an undergraduate and a graduate degree in the evenings, and then advancing through the finance ranks to become an executive officer and treasurer for some of our insurance subsidiaries. Her hard work and dedication have benefited all of us. Thank you, Teresa, for your many years of leadership and friendship. We wish you all the best in this next chapter of your life. As a reminder, with Teresa, Mike, and me today are Steve Johnston, Steve Soloria, and Mark Shambo. Dorwin, please open the call for questions.

[Operator]

Certainly. Thank you. We will now begin the question and answer session. The The first question comes from Michael Phillips with Morgan Stanley. Please go ahead.

[Michael Phillips, MD & Senior Analyst at Oppenheimer & Co. Inc.]

Thanks. Good morning. It's Mike Phillips from Oppenheimer. First question, I wanted to parse out some differences in your commentary on the commercial lines for real pricing, where in the press release, you gave some commentary, you gave a little more detail by line in the queue. In the queue, your commentary hasn't changed much, high single digit for commercial casualty, high single digit for commercial property, kind of mid single digit for commercial auto.

[Michael Phillips, MD & Senior Analyst at Oppenheimer & Co. Inc.]

And that's no different than prior quarters, at least not last quarter. This quarter, and Steve said it in your opening comments, you've moved from commercial rental pricing of high single digit to kind of mid single digit. I guess, understand the differences between those two commentaries, first off. And then it feels like maybe mid single digit pricing for commercial might be kind of where loss trends are. Don't if you agree with that or not.

[Michael Phillips, MD & Senior Analyst at Oppenheimer & Co. Inc.]

And so if so, what does that mean for future margin expansion? Thank you.

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

Yeah, Mike. You're right. It's kind of nuanced there. What we're saying on commercial lines is that we've moved to the kind of the high end of the mid single digits. So I'm just trying to point out candidly that it just was down a bit from the first quarter just to again, just for total transparency.

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

One thing that I a couple of things I would I guess maybe point out the way I'm looking at it is the net rate changes remain very strong in commercial lines. To kind of answer the second part of your question, maybe other than workers' compensation, we believe that rate is at least matching or outpacing loss costs. Now again, that's perspective. Everything we do is perspective on the pricing. The other thing I would point out is if you just look at the results in commercial lines, we've got now thirteen point five consecutive years of underwriting profit, the 92.9 here in the first six months.

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

And, you know, in prior calls you've heard me talk a lot about the pricing sophistication and the segmentation that our underwriters working with our agents have just been executing on beautifully. And if you think about that book and the performance that we've had there and moving towards more price adequacy, I think that's what's putting a little bit of pressure on the overall average net rate change. What I focus more on though again is the segmentation. Are we retaining that business that's most adequately priced? And then are we being aggressive working with our agents on the business that we feel needs the most rate action?

[Michael Phillips, MD & Senior Analyst at Oppenheimer & Co. Inc.]

Okay, Steve. Thank you. That's helpful. Question is related to reserves and maybe specifically commercial casualty. I'm going to go back to year end data, but kind of couple that with what we've seen so far this year, where at year end, you took some releases in GL in recent accident years.

[Michael Phillips, MD & Senior Analyst at Oppenheimer & Co. Inc.]

And I think now you're taking a little bit more in the recent accident years. Mike said 2024 favorable, 2023 favorable. I don't know what lines that was, but at least in GL, you've taken some favorable development in the So I guess just could you give us comfort in how you can take those releases in the recent accident years for GL and how that might not be too soon? Are you moving things around by accident year, but just some comfort around those recent accident years for general liability? Thank you.

[Michael Sewell, EVP - CFO, Principal Accounting Officer & Treasurer at Cincinnati Financial]

Yeah, this is Mike Sewell. Thanks for the question. I do gain, first of all, a lot of comfort with our reserving process. It's a consistent approach with some of the same actuaries doing the work. And then when I look at the numbers and I do see it by year, we don't lay it all out exactly.

[Michael Sewell, EVP - CFO, Principal Accounting Officer & Treasurer at Cincinnati Financial]

But on the commercial casualty, as you noticed, it was 2,000,000 favorable. If I'm looking at the accident years, the large piece of it, 14,000,000 was favorable for the 2024 year. But if I start to look down 2023, it was basically flat 2221. I'll call those two years were flat together. And going back to the years 2020 and prior, it was reserve strengthening of $10,000,000 So when you take a look at all that, the total reserves that are outstanding on that line, very little movement, but it's a little bit across the board.

[Michael Sewell, EVP - CFO, Principal Accounting Officer & Treasurer at Cincinnati Financial]

But your observations correct that there is a little bit more for this quarter that was coming from the most recent current accident year.

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

Hey Mike, Steve Spray. I might just add, agree obviously completely with what Mike Sewell just said. But from my seat, what I've been looking at this, here's my first year on the job and even prior to that, is just and what I appreciate so much is that Mike said the consistent process, the consistent team. And if you kind of just move up a layer, the way I've been looking at it is just the track record that we have as a company, you know, thirty plus years of overall favorable reserve development.

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

Commercial lines this year in total we've got favorable Reserve Development. You know, every quarter, and I think I talked about this on the last quarter call, every quarter in this line or that line you're going to see some movement. I guess that's the nature of reserving. The thing I most appreciate is that our team here, the consistent team, follows that consistent process. And when they see something, they're quick to act.

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

And I think that's what you're seeing. And the prudence that we are carrying with a lot of the uncertainty, both in say in casualty and then in commercial auto, you can see the same thing.

[Michael Phillips, MD & Senior Analyst at Oppenheimer & Co. Inc.]

Okay, thanks guys. I'll stick to the two. Appreciate your comments.

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

Thank you, Mike.

[Operator]

Thank you. Our next question is from Mike Zaremski with BMO. Please go ahead.

[Michael Zaremski, MD & Senior Equity Research Analyst at BMO Capital Markets]

Hey, thanks. Good morning.

[Michael Zaremski, MD & Senior Equity Research Analyst at BMO Capital Markets]

On the expense ratio, was much better than expected, I believe, Steve, in the prepared remarks, you said that there were some onetime items. So just I guess is the should we be still thinking that the guide on the expense ratio is kind of trying to get below 30? Or is there should be run rate some of this better than expected or half of it? Or just trying to see if there's anything really changed there? Thanks.

[Michael Sewell, EVP - CFO, Principal Accounting Officer & Treasurer at Cincinnati Financial]

Yeah, no, that's a great question, Mike, and I appreciate that. And so it was a little bit better than what we were probably thinking. But again, there is some timing for some actual expenses, but really the large piece of it was, and we've been trying to do this is we've been trying to grow premium growth faster than expense growth. And expenses are going go up. And so we watch that very carefully, but in between quarters, you may have certain expenses that might hit here or there.

[Michael Sewell, EVP - CFO, Principal Accounting Officer & Treasurer at Cincinnati Financial]

But I would say as a run rate, we're trying to be below 30 on an ongoing basis. And once we're there, and I think we're kind of right there, I'm gonna set my targets on a 29 or below. So we're not gonna give up. We're gonna consistently work towards lowering that ratio.

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

Hey Mike, Mike, just to add on one data point that Mike mentioned, I'll just to emphasize on the growth.

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

Four out of the last five years as a company overall, we've had double digit net written premium growth. And the one year we didn't was at 9.5%. So that is certainly, as Mike pointed out, that's helping the cause.

[Michael Zaremski, MD & Senior Equity Research Analyst at BMO Capital Markets]

Okay, got it. I'm sorry that was Mike in the prepared remarks that made the expense ratio comment. Got it. So operating leverage is key. Got it.

[Michael Zaremski, MD & Senior Equity Research Analyst at BMO Capital Markets]

Pivoting to just maybe a dual question on commercial lines. The accident year loss ratio in work comp appears to be picked at a much higher level than in recent quarters and years. Anything going on there? And then I know you guys addressed some of the unfavorable, but commercial auto continues to be a hotspot for you all and I feel like for many in the industry as well. So any additional comments you'd like to make on commercial auto as well? Thanks.

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

Sure. On work comp, and Mike may want to add something as well. Would just say again, it's just it's a long tail line. It's just our prudent approach there that we've talked about in the past. On commercial auto, it's along the line still kind of what I was saying to on Mike Phillips' question earlier is it's just, you know, we are seeing I think the industry that's pretty well documented and we as well, we're seeing more attorney involvement in auto accidents.

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

So I think that social inflation, legal system abuse, however you want to put it, that's putting some pressure on that. But again, I kind of move up a layer and just look from quarter to quarter what our actuaries do when they see something and how quickly they act and how that's just served us well over time. And I think that's what you've got going on here in commercial auto as well. As matter of fact, the most recent accident years '24 and '25 case incurred, paid in case, look really good right now and you can see that. But we're adding IBNR to it.

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

We're being prudent. There's uncertainty. And so as you have come to expect from us, I think we're taking the appropriate action.

[Michael Zaremski, MD & Senior Equity Research Analyst at BMO Capital Markets]

So on workers' comp, just as a follow-up, that's a big change in the PIC. So one of your peers who also has a lot of contractors maybe said that frequencies become less of a good guy. Just anything there? Thank you.

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

Yeah, no I can't say we've seen anything different in the way of frequency there, Mike. But as you know, yeah, our commercial book is, you know, we write a lot of construction. But if you look at our workers' compensation premiums as a total of our commercial, it's just, you know, it's like it's 6%, 8% of our total commercial lines business. So that probably has a little less impact than maybe some of the peers that you follow. Thank you.

[Operator]

Thank you. Next question comes from Greg Peters with Raymond James. Please go ahead.

[C. Gregory Peters, MD - Insurance at Raymond James]

Thank you. Good morning, everyone. Kim, let's let's pivot over to the personal lines business. And, you know, I you called out in your script and in the release some changes that are happening inside your private client business. Maybe you can give us an idea where, you know, as this reset continues, where it's going to where the final resting spot is, if you will, in terms of your expectations on exposures in California and elsewhere?

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

Yeah, sure. Thanks Greg. Appreciate it. First thing I would say is I feel confident saying we'll do everything we can to support our California agents and policyholders. As I mentioned then, since the wildfires occurred in the first quarter, like we do on any large loss individual event or catastrophe.

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

We do a deep dive and objectively look at any lessons learned. I think it's fair to say that we've got lessons learned out of California and we're already implementing some of those actions right now. You know, without getting into a lot of detail I would say, you know, you can it's again, it's fair to say or safe to say it's around model recalibration, around aggregation, and just our view of risk. So again, I feel confident that we're going to be able to do everything we can to support a lot of great California policyholders we have and the great agency plant that we have there.

[C. Gregory Peters, MD - Insurance at Raymond James]

Related to that, you talked about the reinstatement costs going through your personal lines business after recoveries. I'm curious on the recovery piece. Did you sell your several rights? Where, you know, Or because a portion of that fire looks like it's going to rest with some of the liability rests with the utility.

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

Yeah, would just answer that, that we have not sold our subro rights.

[C. Gregory Peters, MD - Insurance at Raymond James]

Got it. Okay, hey, in your prepared remarks you talked about some changes to or some additional reinsurance you bought. Can we go back to your comments on the reinsurance? And I guess the reason why I'm asking is just trying to put all the pieces together as we go into the hurricane season and what I should think about, the potential per event exposure your company might have? Because it sounds like you bought some additional cover on to raise the extended tower.

[C. Gregory Peters, MD - Insurance at Raymond James]

Just give us, remind me of the summary version of what's going on there.

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

Yeah, absolutely. Again, Steve Spray. So what we did is we purchased at sevenone we purchased an additional $300,000,000 x of $1,500,000,000 on top of the property cat reinsurance program. Very consistent with our approach when we look at the property cat reinsurance, The way we approach that is for balance sheet protection. We just felt with the growth that we've talked about here this morning, good growth that it was prudent, especially in this marketplace where we thought it was attractive to go out and try to purchase some more on top.

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

We went out, you know, it's a subscription market. So we went out with a, I think, with an aggressive rate. I think we filled, we said 129,000,000 of the 300 or 43% of it. So that's kind of the story there. And then on California, on the primary business, we as it stands now, we've used about half of that property cat, the 1,500,000,000.0 pre 07/01, and reinstated those layers.

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

So those layers are there for the remainder of the year.

[C. Gregory Peters, MD - Insurance at Raymond James]

And then the that's the California piece. What's your net can you remind me what your net retention is on just the hurricane risk, when you think about Southeast And Gulf Coast exposures on a per event basis? And just one other, I assume on the cap bond, the additional layer you bought that, you said subscription, that wasn't done through the cap bond market, correct? That was done traditional risk transfer?

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

Yeah, that was traditional reinsurance on the 300x of $1,500,000,000 then on the so you had mentioned you were kind of bifurcating wildfire and hurricane. The property that's is an all an all perils contract, Greg. And we have a $300,000,000 retention on that. So whether it's wildfire, whether it's severe convective storm, earthquake, or hurricane, as an example, we have a $300,000,000 retention, but those perils all apply to that property cat treaty.

[C. Gregory Peters, MD - Insurance at Raymond James]

Got it. Thanks for the clarifications.

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

Yeah, my pleasure. Thanks for the question.

[Operator]

Thank you. Our next question comes from Mei Yao with KBW. Please go ahead.

[Analyst]

Hi. It's Jean on for Mia. Thank you for taking my question. My first question is just a follow-up on the loss trend. Have you observed any shifts in large trends that you can call out either upward or downward over the recent period?

[Analyst]

Any color you can add would be great. Thank you.

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

Yeah. No, I don't think that we have anything to report back on any change in the loss trend up or down during the quarter. But thank you for the question.

[Analyst]

Got it. My second question is on the growth. So commercial properties still have decent returns. Property rates now softens and casualty rates are salary. How do you view the relative growth prospect between property and casualty?

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

Yeah, sure. Thank you. We're a package writer as a company when we work with our agents. The other thing I think you're hearing a lot in the marketplace about a softening property market. And we're seeing that too on really large properties.

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

We're seeing it probably most prevalently in our Lloyd syndicate in CGU out of London. They do a lot of direct fact shared and layered business. So that business we're seeing some pressure on. But our small to middle market commercial package business and commercial property business, we're still seeing healthy rate there. And I think that's because you know, the things that you see when you turn the TV on at night, severe convective storms haven't let up.

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

So that's keeping pressure on property, social inflation, legal system abuse, that's keeping pressure on general liability umbrella, as well as auto liability. So we're still seeing healthy net rate for our mix of business and what we do.

[Analyst]

Yeah. Thank you for the color.

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

Yeah. Thank you.

[Operator]

Thank you. The next question is from Josh Shanker with Bank of America. Please go ahead.

[Josh Shanker, Managing Director at Bank of America]

Yes. Thank you. First of all, looking at the growth, particularly in commercial, among other companies that report, I think you're the first company to report accelerating growth in the second quarter versus the first quarter. I don't know if that's a trend, but can you talk about what you're doing? Is this taking a larger share in agencies that you already have?

[Josh Shanker, Managing Director at Bank of America]

Is this the newer agencies you've appointed? Is this lines of business that you are finding you can underwrite now that you didn't have that capability in the past?

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

Yes, thank you, Josh. I think everything we do around here is an A and strategy, so I think it's all of the above. We've got such deep relationships with all the agents we do business with. But you're right, we've been adding high quality agencies at a faster clip. There's no doubt that that is certainly accelerating both the net written premium growth as well as our new business.

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

You know, our E and S company continues to grow. We've added five new products at Lloyd's that we just for agents of Cincinnati Insurance Company as they come through our in house broker, C Super. So I think we have a lot of good momentum with our agents. We keep focused on what we do well, Josh, blocking and tackling one account at a time, calling on agents, doing business face to face. It's just all really goes to it and it's just been continuing to pick up momentum.

[Josh Shanker, Managing Director at Bank of America]

Pivoting to reinsurance, you bought more obviously and you sold less. Can you talk about what your inbound reinsurance strategy is going to be going forward? And two, if we replayed 1Q twenty five, has anything changed about your exposures that you'd have a different outcome?

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

Okay, on CINCI Re, first thing I would say is they are executing exactly as we want them to. You know, it's an assumed model, an allocated capital model. They're seeing pricing in the marketplace that they don't feel from their view of risk is where they want it to be. So they've pulled back underwriting discipline. About half of the, I guess, the pullback is coming from property and the other half is coming from casualty.

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

So pretty balanced. But you know their inception to date combined ratio, which is what we focus most on Josh, is 95.2. That's on about $3,500,000,000 of premium. So they're executing exactly the way we designed from the get go the way that we plan on doing it going forward as well. And, you know, when we feel that things are opportunistic, they'll grow it.

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

And if we don't feel we can get the risk adjusted return, then there may be some quarters when they back off.

[Josh Shanker, Managing Director at Bank of America]

Is the shape of the portfolio today notably different than it was six months ago, such that the California Wildfresh would have a different result?

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

No, not at this point. If you're talking about the primary business I think on the homeowner. That's the Okay, what's comment part

[Josh Shanker, Managing Director at Bank of America]

is selling less and buying more.

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

Yeah, I would say right now for the last six months it be little changed.

[Josh Shanker, Managing Director at Bank of America]

Okay, thank you.

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

Yeah, thank you, Josh.

[Operator]

Thank you. We have a follow-up question from the line of Mike Zaremski with BMO. Please go ahead.

[Michael Zaremski, MD & Senior Equity Research Analyst at BMO Capital Markets]

Hey. Great. Thanks for taking the follow-up. Back to the competitive marketplace commentary. On the property market specifically, you mentioned that your colleagues in the Lloyd's syndicate and CGU are seeing meaningful competitive pressures there in property.

[Michael Zaremski, MD & Senior Equity Research Analyst at BMO Capital Markets]

Do you or they have a view on assuming a normal, I guess, weather season, whether like the rate of decline should dissipate? Or do you have any kind of forward looking view on whether this level of competition kind of makes sense and profits are becoming less healthy? Or is it irrational?

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

Yeah, I don't know if I, you know, there's lot of capacity that's come in, a lot of capital that's come into that space, Mike. I don't know if I would be able to opine on going forward. I would say that again, the discipline and you look at the results we've gotten out of CGU, just a ton of confidence in the way they're underwriting all lines of business. But for what we're talking about here, Direct and Fact. And the other thing that CGU has been doing since inception is just they've really reshaped that book too.

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

Diversifying both geographically and then by product line has been quite impressive. And I think that's going to bode well for us into the future. And that's a big reason why you saw the growth that we've seen at CGU here in the first half of the year.

[Michael Zaremski, MD & Senior Equity Research Analyst at BMO Capital Markets]

Got it. And as a follow-up back to the competitive environment on the kind of core package part of your portfolio. I think you painted a picture of, it's a lot of things, but ultimately there's a good amount of inflation in the system between weather and social, etcetera. So it sounded like you don't feel like we're going to enter a soft marketplace. I guess some of the data points and some of the investors are voting that there is the potential for a soft market and I think it's just off the backs of carrier profitability being excellent, which is also intertwined with interest rates.

[Michael Zaremski, MD & Senior Equity Research Analyst at BMO Capital Markets]

So any additional comments you want to make in terms of just kind of why the SME market probably would be less likely to follow pace of what you're seeing in the syndicated kind of property market?

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

Yeah. The only thing I would say there is I'll speak for Cincinnati Insurance Company. In my thirty four years here, I think the concept of a rising or lowering tide, raising or lowering all boats, for us it's just not in the dialogue. It's risk by risk. It is using the subjective art, I guess you could say, of underwriting both for our new business field underwriters out in the field working with our agents face to face, looking at the risks, and then the same thing with our renewal underwriters.

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

And then I'll go back to kind of what we talked about earlier. It's risk by risk when it comes to pricing. And we're using sophisticated tools. We are using our actuarial team and the data and the pricing precision to segment our book. And if you look at our commercial lines results, you know, the price adequacy will follow those results.

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

And, you know, the pricing in that commercial book we feel pretty good right now. And so that's probably what's putting pressure a little bit on the net rate change. That being said, you can still see we're getting good rate through there for all the reasons I think you mentioned, social inflation, weather, you know, along those lines. But I just, you know, I'm not saying that other carriers aren't going have a different view of a risk. And if they do, we're just so confident in the way we're pricing and the way we're underwriting that we'll have to make a decision risk by risk.

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

If somebody takes a different view and it's considerably less than ours or we don't think we can make a risk adjusted return, then we're walking away. And we've been executing on that. I just have to give a shout out to our underwriters and our field reps. They have been executing on that, working with our agents beautifully now for candidly the last twelve or thirteen years. But adding agencies, continuing to build out our E and S operations, continuing to give our agents more access to Lloyd's, more efficient, more effective access to Lloyd's, growing personal lines, getting it profitable.

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

Just feel really good about where we are and where we're heading. We're going to stay focused.

[Michael Zaremski, MD & Senior Equity Research Analyst at BMO Capital Markets]

Appreciate it. Thank you.

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

Thank you, Mike.

[Operator]

Thank you. This concludes our question and answer session. I would like to turn the conference back over to Steve Spray for any closing remarks.

[Stephen Spray, Director, President & CEO at Cincinnati Financial]

Thank you, Dorwin, and thank you all for joining us today. We look forward to speaking with you again on our third quarter call.

[Operator]

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Participants

Executives

• Dennis McDaniel, VP & IR Officer
• Stephen Spray, Director, President & CEO
• Michael Sewell, EVP - CFO, Principal Accounting Officer & Treasurer

Analysts

• Michael Phillips, MD & Senior Analyst at Oppenheimer & Co. Inc.
• Michael Zaremski, MD & Senior Equity Research Analyst at BMO Capital Markets
• C. Gregory Peters, MD - Insurance at Raymond James
• Analyst
• Josh Shanker, Managing Director at Bank of America