Cincinnati Financial Q3 2023 Earnings Call Transcript

Participants

Corporate Executives

• Dennis E. McDaniel, Vice President, Investor Relations Officer
• Steven J. Johnston, Chairman and Chief Executive Officer
• Michael J. Sewell, Chief Financial Officer, Executive Vice President and Treasurer (Principal Accounting Officer)
• Stephen M. Spray, President

Analysts

• Gregory Peters, Raymond James
• Michael Zaremski, BMO Capital Markets
• Grace Carter, Bank of America Co.
• Meyer Shields, Keefe, Bruyette & Woods
• Fred Nelson, N/A

Presentation

[Operator]

Good morning, and welcome to the Cincinnati Financial Corporation Third Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] 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.

[Dennis E. McDaniel, Vice President, Investor Relations Officer at Cincinnati Financial]

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 our supplemental financial package including our quarter-end investment portfolio. To find copies of any of these documents, please visit our investor website, cinfin.com/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 Spray; Chief Investment Officer, Steve Soloria; and Cincinnati Insurance's Chief Claims Officer, Marc Schambow; 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.

[Steven J. Johnston, Chairman and Chief Executive Officer at Cincinnati Financial]

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 of 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 ex-CAT accident year combined ratios are also better than 2022, improving 3.4 percentage points for the third quarter and 11.7 points on a nine-month basis.

Similar to last quarter, we also see signs of positive momentum in operating performance. Pricing segmentation by risk and significant average price increases contributed to the increase in our underwriting profit combined 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 models 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 lines segment. Again, average is 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% growth in consolidated property-casualty net written premiums for the quarter. That included an 11% 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% 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 of 2023 growth rate for total commercial lines by two 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 continue 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 at 19% in 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 a 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 a positive 2.4%. Lower valuation of our investment portfolio and other items contributed a negative 5.0%.

Next, Chief Financial Officer, Mike Sewell will add his commentary about our financial performance.

[Michael J. Sewell, Chief Financial Officer, Executive Vice President and Treasurer (Principal Accounting Officer) at Cincinnati Financial]

Thank you, Steve, and thanks to all of you for joining us today. Investment income again contributed nicely to improved operating results growing 17% for the third quarter of 2023, compared with the third quarter of 2022. Dividend income was up 5% for the quarter and part due to net equity security purchases for the first nine months of 2023 that totaled $89 million. Bond interest income continued to show strong growth, up 19% for the third quarter of this year, we added more fixed maturity securities to our investment portfolio with net purchases totaling just over $1 billion for the first nine months of the year. The third quarter pre-tax average yield of 4.4% for the fixed maturity portfolio rose 36 basis points compared with last year. The average pre-tax yield for the total of purchased taxable and tax-exempt bonds during the third quarter of 2023 was 6.4%.

Valuation changes in aggregate for the third quarter of 2023 were unfavorable for both our equity and bond portfolios. Before-tax effects the net loss was $463 million for the equity portfolio and $369 million for the bond portfolio. At the end of the quarter, total investment portfolio net appreciated value was approximately $4.4 billion. The equity portfolio was in a net gain position of $5.6 billion, while the fixed maturity portfolio was in a net loss position of 1.2 billion. Cash flow continued to boost investment income adding to the benefit of rising bond yields. Cash flow from operating activities for the first nine months of 2023 was nearly $1.5 billion, up $54 million from a year ago. We always strive for our expense management efforts to strike an appropriate balance between controlling expenses and making strategic investments in our business.

The third quarter of 2023 property-casualty underwriting expense ratio was 0.6 percentage points higher than last year primarily due to an increase in associate and travel-related expenses. On a nine-month basis that was. 0.4 points lower.

Moving on to loss reserves. Our approach consistently aims for net amounts in the upper here 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 and then updated estimated ultimate losses and losses expenses by accident year that line of business. For the first three quarters of 2023, our net additions to property-casualty loss and loss expense reserves was $655 million, including $539 million for the IBNR portion.

During the third quarter, we experienced $53 million of property-casualty net favorable reserve development on prior accident years that benefited the combined ratio by 2.7 percentage points. On an all-line basis by accident year, net reserve development for the first nine months of 2023 included favorable $123 million for 2022, $7 million for 2021 $72 million for 2020, and $11 million in aggregate for accident years prior to 2020.

In terms of capital management, we also have a consistent long-term approach. During the third quarter of 2023, we paid out $115 million in dividends to shareholders. We did not repurchase any shares. Our assessment of our financial flexibility and our financial strength is that both are in excellent condition.

As usual, I'll conclude with a summary of third-quarter contributions to book value per share. They represent the main drivers of our value-creation ratio. Property-casualty underwriting increased book value by $0.56, life insurance operations increased book value, $0.73, investment income other than life insurance and net of non-insurance items added $1.04, net investment gains and losses for the fixed-income portfolio decreased book value by $1.86, net investment gains and losses for the equity portfolio decreased book value by $2.33 and we declared $0.75 per share in dividends to shareholders. The net effect was a book-value decrease of $2.61 per share during the third quarter to $67.72 per share.

Now I'll turn the call back over to Steve.

[Steven J. Johnston, Chairman and Chief Executive Officer at Cincinnati Financial]

Thanks, Mike. I'm proud of the way our associates continue to help the independent agents who represent Cincinnati Insurance navigate this challenging market. We're sticking to our fundamentals listening, offering solutions, and building strong relationships. Because our field associates live and the communities, our agents serve, we see in our quickly-to-market pressures most impacting them where they're able to find solutions that contribute to our agent's success leading to long-term shareholder value.

As a reminder with Mike and me today are Steve Spray, Steve Soloria, Marc Schambow, and Theresa Hoffer. Gary, please open the call for questions.

Questions and Answers

[Operator]

We will now begin the question-and-answer session [Operator Instructions] Our first question is from Greg Peters with Raymond James. Please go ahead.

[Gregory Peters, Analyst at Raymond James]

Well, good morning, everyone.

[Steven J. Johnston, Chairman and Chief Executive Officer at Cincinnati Financial]

Good morning, Greg.

[Gregory Peters, Analyst at Raymond James]

Can we start off with, in your press release, you've talked about the 193 new agent appointments this year, how long does it take them once they've been appointed to get up to some minimum levels of premium on a per agent basis, or put it another way what sort of the production targets do you have in mind when you appoint new agents and can you just clarify the comments of the -- the agents that are just doing personal lines only?

[Stephen M. Spray, President at Cincinnati Financial]

Yeah, Greg, this is Steve Spray. It really depends agency by agency. One thing, I think as a company, we've always prided ourselves on is we do business with the best independent agents out there and we are very deliberate about the agencies we appoint, we spend a lot of time kind of making sure that it's a fit for both us and the agency. So when we go into a relationship, we feel pretty confident that we're aligned and that the future will bear fruit. It just depends on the size of the agency, maybe the state and community. But over time, we are the number one or number two carrier as measured by premium volume and the majority of the agencies, we do business with for at least five years or more. So that gives you a little just a little flavor of the trajectory that we have and so it just depends but we don't want to be just consequential, inconsequential player in any agency.

[Gregory Peters, Analyst at Raymond James]

And the percentage of, I think you called out the press release, a chunk of those were personal lines only. Was that geographically focused or can you add some color on that?

[Stephen M. Spray, President at Cincinnati Financial]

Yeah, sure, Greg. Sorry, you guys. Typically personal lines-only agencies will be private client or high-net-worth focused agencies to where maybe, maybe as an example, let's say, in the State of California we're not active there for commercial lines right now. So if we make an agency appointment in California, it will be personal lines only and it would be high-net-worth or private client-focused.

[Gregory Peters, Analyst at Raymond James]

Got it, all right. I guess, pivoting to the commercial lines side of the business. If we look at new business trends in your commercial, it is kind of flattish in the last couple of quarters. And by the way, we've heard some other carriers talk about pockets of increased competition Maybe you could give us some perspective inside your book of commercials where you're seeing some headwinds from competition and where you're seeing some opportunities.

[Stephen M. Spray, President at Cincinnati Financial]

Yeah, again, Steve Spray, Greg. It's that new business that you're pointing to is all-around underwriting discipline and pricing segmentation and just disciplined from our field underwriters on the pricing front. So it's a very competitive, it's always a competitive market and it varies by state, it varies by territory on who we're competing but we have just over the years, our proven model, appointing the best agents, assigning field associates to those agencies, making decisions locally. That has served us really well over the long hold. In the last 10 years, the pricing precision and the pricing segmentation, and the tools that we have have really been which were driving quite frankly, the profitability that you see that we're producing and our new business underwriters are working with our agents out in the field are executing on that disciplined strategy and has put pressure. Candidly, it's put some pressure on the new business this year, but I can tell you each quarter of this year the commercial market has gotten a little more disruptive. We're seeing more and more opportunities at the underwriting terms, conditions quality, and pricing that we feel are adequate. Okay. And then I guess the final question would be on personalized because if we look at your results for the quarter actually, you're doing pretty well as in the context of how the rest of the markets are performing and you're also reporting some substantial growth in new business written. So maybe give us sort of an updated view on the trends you're seeing inside your personal lines business, and I'm thinking about auto and property, clearly. So if you could separate the two, that would be great.

[Steven J. Johnston, Chairman and Chief Executive Officer at Cincinnati Financial]

So first of all, I might comment just we're pleased and encouraged by the improvement of the ex-CAT accident, that core loss ratio that we're seeing in personal lines as well. Certainly, it had some pressure with inflation and with increased cat levels but feel like we are restaurants, say, feel like we are confident that we're getting the rate prospect to go forward basis that's adequate. The fact that about 55% of our personal lines today would be what we call private client, 45% roughly, middle-market. We think that is a key for us with our agency model in the marketplace that we can be a go-to care for our agents on regardless of the size of the and the way we handle claims locally fast with empathy we think puts us in a really good position going forward on our personal lines.

Yeah, the loss ratio has been -- has certainly been under pressure with inflation and the increase -- the increased CAT activity but we're confident where we are going forward. We've seen a lot of opportunity out there, a lot of disruption in that personal lines market. Candidly, I've never seen a 100 markets in the personal lines market, we're seeing today and we think with our balance sheet. Again, our agency strategy, the way we're approaching it, the expertise, the pricing precision, we think it's going to bode well for us in the future to grow that personal lines book.

[Gregory Peters, Analyst at Raymond James]

Great, thanks for the detail.

[Steven J. Johnston, Chairman and Chief Executive Officer at Cincinnati Financial]

Absolutely. Thank you, Greg.

[Operator]

The next question is from Mike Zaremski with BMO. Please go ahead.

[Michael Zaremski, Analyst at BMO Capital Markets]

Hey, thanks, good morning. I guess maybe -- maybe going back to kind of the topic of growth and risk selection. Maybe just sticking with commercial lines. So if I kind of just step back, Cincinnati Financial's pricing power levels are fairly similar to a number of your peers. Yet, your growth rate, just overall growth rate is much lower than your historical growth rate relative to the industry, which you've been talking about this, about changing your appetite a bit every quarter, this isn't like a surprise but just, just kind of curious, like our -- our, I would have thought, it doesn't seem like you're losing business because of pricing, if I'm -- if because your pricing levels are similar to peers. So is it or maybe I'm wrong and on just certain lines actually, you're actually we're looking at all-in rate in certain lines, who actually are casualty raising a lot more than the average, or is that has your fundamental like risk selection process change in that, you're just not willing to take on certain risks or you're trying to shed certain risks and kind of just kind of see where we are in this kind of journey to whether the -- your historical growth rate will get back to what it used to be historically, relative to the industry if your appetite decides to change.

[Stephen M. Spray, President at Cincinnati Financial]

Yeah, Mike. Steve Spray again, Steve Johnston commented in his opening remarks on the net written premium piece of commercial, so I might start there in that. We've got a two-point drag on commercial lines from workers' compensation and umbrella or access, you could call it, both for different reasons work comp, about a point drag. That has been going on now for several years, just simply the price and the rate decreases that are being pushed through really for the industry. On the umbrella that is deliberate, it started probably a little over a year ago, your commercial and commercial lines.

In certain jurisdictions, and certain states we really took aggressive appropriate underwriting actions in our umbrella book reducing limits that may be shedding some of that business. So that's, that's putting a wait on the commercial lines growth as well. So your comment of returning to historical levels or walking away from other business is. Like, I was saying before I think we've got a winning strategy, we've got a winning model, we're doing business locally with the best agents in the business. Face-to-face that has served us well for many-many years, and our risk selection, our claims handling, our loss control those things have all improved on a linear basis since I've been here, I think 32 years ago.

Our pricing precision segmentation has improved exponentially over the last 10 years. So where we just didn't have those tools, so when I was a field rep 15 years ago and they looked into each individual account that we do and priced them on their own merits. So, yes, our field underwriters and our renewal underwriters have those pricing precision tools that they use to where if we don't feel like we can get an adequate rate on a risk-adjusted basis we'll walk away from an account and we'll wait it out. First and foremost is we need an underwriting profit. We've got 11.5 years in a row now, 11 years and nine months of underwriting profit and we want to keep that rolling. I don't worry about growth over the long haul at the Cincinnati Insurance Company. We are talking about agency appointments, we have plenty of runway to continue to do that. We're growing our E&S company. You see what's going on in personal lines. Well, I'm not -- I'm not, I don't worry about growth prospects for the future.

[Michael Zaremski, Analyst at BMO Capital Markets]

Okay, that's a thorough and helpful answer. And my follow-up is you've been deliberate in your actions to kind of increase IBNR. And you talked about uncertainty in terms of, more uncertainty in terms of the loss cost trend environment. Growth is obviously, you just talked about it maybe a little bit slower too. So would it be fair to characterize that Cincinnati is taking a view that the loss cost trend is a bit higher on a go-forward basis than it has been a year or two ago, is that a fair characterization?

[Steven J. Johnston, Chairman and Chief Executive Officer at Cincinnati Financial]

Greg, this is Steve Johnston. And yes. I think what we've seen. It was kind of a rapid acceleration of inflation starting at the beginning of 2021. It is now in the last several months moderated, still going up but moderated. I think just with the way that we time our rate increases and rolling onto the book, it takes a little while for them to actually reach all the policyholders. But the key point, I think is that we are very prospective in terms of the way we look at inflation.

The most important thing we can do is to look out into the prospective policy periods, there are pricing for right now, so do our best to estimate the loss costs and the inflation impact on that perspective period and set the pricing right, and do it on a individual by individual, policy by policy basis is the best we can. I think we're in a good position to continue doing that.

[Michael Zaremski, Analyst at BMO Capital Markets]

Okay, so you clearly feel it sounds like pricing is in an excess of loss trend, knock-on-wood if everything plays out. If you agree with that.

[Steven J. Johnston, Chairman and Chief Executive Officer at Cincinnati Financial]

I would agree with that.

[Michael Zaremski, Analyst at BMO Capital Markets]

Okay, thank you very much.

[Steven J. Johnston, Chairman and Chief Executive Officer at Cincinnati Financial]

Thank you, Greg.

[Operator]

The next question is from Grace Carter with Bank of America. Please go ahead.

[Grace Carter, Analyst at Bank of America]

Hi, everyone.

[Steven J. Johnston, Chairman and Chief Executive Officer at Cincinnati Financial]

Good morning, Grace.

[Grace Carter, Analyst at Bank of America]

Good morning. Looking at kind of results line-by-line in the commercial segment, it seems like quite a few saw year-over-year improvement but the workers' compensation line, sticks out a little bit. It's kind of the second quarter in a row where we've seen a decent bit of pressure on the underlying loss ratio. I was just curious if we could get more color on what's going on there. I mean obviously, you all referenced the pricing pressure for that book but we've also heard some other peers talk about concerns regarding medical inflation. If you all could just give us some more color on what's happening there.

[Stephen M. Spray, President at Cincinnati Financial]

Yeah, Grace, Steve Spray. Thanks for the question. The accident year combined ratio, loss ratio for work comp is yes, it is, it's under pressure. Calendar year it's still performing quite well. The -- It is -- I hate to keep the same, the same story but it really is simply just pressure, downward pressure on the rates that are put out by the rating bureaus, and fortunately, I think for Cincinnati Insurance Company, we've always been conservative on the workers' compensation lines. We've got tremendous expertise we're ready to grow that business when we think that the pricing is at an attractive level. But right now it's again, we're doing it risk-by-risk and we are running new workers' compensation business but it's just it's a line that as you mentioned medical inflation can be impacted over time. I can see that we're seeing anything out of the ordinary with medical inflation at this point but that line of business is definitely under pressure on an accident-year basis, and primarily from just pressure.

[Grace Carter, Analyst at Bank of America]

Thank you. And I guess on Cincinnati Re. You have mentioned kind of reducing casualty premiums in that book for a couple of quarters now and we've also heard some it's more players in the market start talking about concerns over casualty loss cost trends lately. I was just curious if you think that there's anything particularly new going on in casualty reinsurance or if the recent comments are surprising to you all at all and I guess next year. Just if you think opportunities from Property, Specialty, etc will outweigh any sort of ongoing pressure on the casualty piece of that book to allow it to inflect back to growth. Thanks.

[Steven J. Johnston, Chairman and Chief Executive Officer at Cincinnati Financial]

Thank you. Grace. Really good question. And I think it boils down to our model at Cincinnati Re and that we didn't really actually form a company Cincinnati Re at rights on Cincinnati Insurance paper. So there's an A-plus quality there. And then as an allocated capital model what we've tried to do is just look at every contract, is it comes up we don't try to do things. This much in property, this much in casualty, this much in specialty, just look at each contract, it becomes available to us on its own merits and if we can get the target hurdle rate that we're looking for and feel good about how it fits into our overall risk model, we will go ahead and right at it. So, I would think that we will see movements in the various business lines that reflect that. I think right now, just what we're seeing is certain lines like professional liability, transactional liability, and so forth are areas where we felt that the pricing and sometimes the opportunity are not is as good as they've been in the past so what we are seeing really is a good opportunity in the property and specialty lines. So we'll just go out that contract-by-contract and very bullish with everything that Cincinnati Re is bringing to us in terms of profitability and diversification.

[Grace Carter, Analyst at Bank of America]

Thank you.

[Operator]

[Operator Instructions] The next question is from Meyer Shields with KBW. Please go ahead.

[Meyer Shields, Analyst at Keefe, Bruyette & Woods]

Great, thanks, and good morning all.

[Steven J. Johnston, Chairman and Chief Executive Officer at Cincinnati Financial]

Good morning, Meyer.

[Meyer Shields, Analyst at Keefe, Bruyette & Woods]

Hello. Sorry. Two questions on personal lines. First, is there any appreciable difference in the profitability of product lines and middle-market?

[Stephen M. Spray, President at Cincinnati Financial]

Yeah, Meyer, Steve Spray. We don't, right now we aren't disclosing the difference in loss ratios for our specific book between middle-market and high-net-worth and private clients but I can tell you over the long pull the industry tried to quarter has outperformed the middle market by a pretty good margin and we feel like we can create those same results over time as well. Not that we want to subsidize middle-market and middle-market books, these stand-on returns, we've got the pricing precision there, we've got the agency force. So we expect both segments to be profitable but we do think over the long haul, the high-net-worth private client will outperform.

[Meyer Shields, Analyst at Keefe, Bruyette & Woods]

Okay, that's very helpful. I fully understood. Second question on a couple of companies have talked about moderating cost inflation specifically for auto physical damage and I was wondering whether you're seeing that in the third quarter as well.

[Steven J. Johnston, Chairman and Chief Executive Officer at Cincinnati Financial]

Well, we have seen just certain areas within physical damage and know as we look at replacement vehicles, rental cars that sort of thing. But again, we're still kind of looking at inflation on how it's been cumulative since 2021 as we use that data to forecast the loss cost and the premium needed in the perspective periods. So we're being cautious. I think in terms of where we are with our inflation rates but we do feel that we're getting ahead of our loss cost trends, we are ahead of our loss cost trends with their pricing and I think we benefited there. While we had a stay-at-home credit during 2020, we did not actually, we ran that through the expense ratio. We did not actually decrease the order rates and I think that's helping us now as we contemplate inflation in our pricing delivery,

[Meyer Shields, Analyst at Keefe, Bruyette & Woods]

Yeah, totally agree and that's very helpful. Thank you so much.

[Steven J. Johnston, Chairman and Chief Executive Officer at Cincinnati Financial]

Thank you, Meyer.

[Operator]

The next question is from Fred Nelson, a Private Investor. Please go ahead.

[Fred Nelson, Private Investor at Cincinnati Financial]

I got to call last night from a lady pushing, thank you for Cincinnati Financial. I told her I would repair that today on the phone, on the conference call and she didn't know she had one. But the question is battery-operated vehicles of all types. Has that changed the pricing of insurance replacement costs of accidents? Do you have any comments you can share?

[Steven J. Johnston, Chairman and Chief Executive Officer at Cincinnati Financial]

Yes, sir, this is Steve, Jonathan. I think what we just have to do is make sure that we contemplate the costs involved you as we go to having more electronic vehicles in the fleet, there'll be more of that cost in the battery. They are less complex, I believe, in terms of all the different parts that are involved. So it is different. It will create a challenge to stay on top of, as we contemplate those costs and prices but we feel that we're up to the task. Please, thank you for the call us. We appreciate your comments.

[Fred Nelson, Private Investor at Cincinnati Financial]

Well, thank you. The battery-operated call by our people in the farming business with pickup trucks and other machinery and they say, it's not an easy thing to work with, there to ask the question about insurance. And so thank you for the best, you do. I really appreciate it.

[Steven J. Johnston, Chairman and Chief Executive Officer at Cincinnati Financial]

Thank you, Fred, it's always good to hear from you.

[Operator]

This concludes our question-and-answer session. I would like to turn the conference back over to Steve Johnston, for any closing remarks.

[Steven J. Johnston, Chairman and Chief Executive Officer at Cincinnati Financial]

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

[Operator]

[Operator Closing Remarks]