Cincinnati Financial Q4 Earnings Call Highlights

Key Points

• Strong underwriting and investment drove results despite a record catastrophe: Full-year 2025 net income was $2.4 billion (+4%) and Q4 net income rose 67% to $676 million (including $145 million after-tax equity fair-value gains), with a Q4 P&C combined ratio of 85.2% and full-year 94.9% near management’s target midpoint.
• Premium growth and pricing remained healthy but line performance varied: Consolidated P&C net written premiums grew 5% in Q4 with renewal pricing generally positive (mid-single-digit commercial, low-double-digit homeowners, high-single-digit personal auto), while commercial and E&S combined ratios improved and personal lines worsened to 103.6% largely due to catastrophe impacts.
• Reinsurance, investments and capital returns strengthened the balance sheet: The catastrophe program top was raised to $2.0 billion (reducing retained loss), ceded premiums are expected to rise to ~$204 million in 2026, investment income grew double digits for the year, and the company returned $730 million to shareholders while book value hit a record $102.35 and debt-to-capital stayed under 10%.

Cincinnati Financial NASDAQ: CINF management said strong fourth-quarter underwriting and higher investment income helped lift full-year 2025 results, overcoming what it described as the largest catastrophe loss in the company’s history earlier in the year.

Quarter and full-year results

President and CEO Steve Spray said the company delivered “another excellent quarter of operating performance,” supported by investment income growth and net investment gains. Full-year 2025 net income was $2.4 billion, up 4% from 2024. Fourth-quarter net income was $676 million, up 67%, and included $145 million after tax from an increase in the fair value of equity securities still held.

Non-GAAP operating income increased 7% in the fourth quarter to $531 million, while full-year 2025 non-GAAP operating income rose 5% year over year.

Underwriting results were a key driver of the quarter. The fourth-quarter 2025 property casualty combined ratio was 85.2%, which Spray called “outstanding,” and it lowered the full-year combined ratio to 94.9%, near the midpoint of the company’s long-term average target range. The full-year combined ratio was 1.5 points higher than 2024, which management attributed to 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 points, though Spray noted the loss and loss expense portion would have improved slightly more absent a 0.3-point unfavorable impact from reinsurance reinstatement premiums.

Premium growth, pricing, and retention trends

Consolidated property casualty net written premiums grew 5% in the fourth quarter, which Spray said reflected pricing discipline as underwriters evaluated risks on a policy-by-policy basis and used pricing precision tools to segment risks.

Spray said estimated average renewal price increases across most lines were lower in the fourth quarter than in the third quarter but still “healthy.” He cited the following renewal pricing trends for the quarter:

• Standard commercial lines and excess & surplus commercial lines: mid-single-digit percentage increases
• Homeowners: low double-digit percentage increases
• Personal auto: high single-digit percentage increases

New business written premiums declined in the fourth quarter, driven by unusually high personal lines new business over the prior two years, though Spray said the quarter’s $92 million of new business was still 62% above the average of the three years prior to 2023.

Policy retention in 2025 was similar to 2024. Commercial lines retention was down slightly but remained in the upper 80% range, and personal lines retention was down slightly but remained in the low-to-mid 90% range.

Segment underwriting performance and catastrophe impacts

Spray said all operating units produced combined ratios below 90% in the fourth quarter. For full-year 2025 compared with 2024, management highlighted the following results:

• Commercial lines: 91.1% combined ratio, improving 2.1 points, including a 1.9-point decrease in the catastrophe loss ratio; net written premiums grew 7%.
• Personal lines: 103.6% combined ratio, worsening 6.1 points, including a 7.1-point increase in the catastrophe loss ratio; net written premiums grew 14%.
• Excess and surplus lines: 88.4% combined ratio, improving 5.6 points, including a 1.0-point decrease in the catastrophe loss ratio; net written premiums grew 11%.
• Cincinnati Re: 95.9% combined ratio; net written premiums decreased 1%, which management tied to changing reinsurance market conditions.
• Cincinnati Global: 79.2% combined ratio with 10% premium growth, benefiting from product expansion.

Spray also noted the life insurance subsidiary increased annual net income by 16% and grew term life insurance earned premiums by 3%.

Reinsurance renewals and catastrophe protection

Management said it renewed its primary property casualty reinsurance treaties effective January 1. For per-risk treaties, Spray said terms and conditions for 2026 were fairly similar to 2025, except for an average premium rerate decrease of about 7%.

On the property catastrophe program, Spray said the main change was increasing the top of the program to $2.0 billion from $1.8 billion (a change he noted was effective July 1, 2025). He explained that if the company experiences a 2026 catastrophe event totaling $2.0 billion in losses, it would retain $523 million, compared with $803 million for an event of that magnitude in the second half of last year.

The company expects total 2026 ceded premiums for these treaties to be about $204 million, up from $192 million in 2025, driven by additional coverage and subject premium growth.

Investments, reserves, capital return, and automation initiatives

Executive Vice President and CFO Mike Sewell said investment income increased 9% in the fourth quarter and 14% for full-year 2025 versus the prior-year periods. Bond interest income grew 10% in the fourth quarter, and net purchases of fixed maturity securities totaled $1.6 billion for 2025. The fixed maturity portfolio’s pretax average yield was 4.92% in the fourth quarter, similar to last year, and the average pretax yield on purchased taxable and tax-exempt bonds during 2025 was 5.6%.

Dividend income matched the prior-year quarter despite the absence of a $6 million special dividend recorded in December 2024. Net purchases of equity securities totaled $74 million for the year. Before tax effects, the company recorded a fourth-quarter net gain of $181 million for the equity portfolio and $24 million for the bond portfolio. At year-end, the investment portfolio had approximately $8.4 billion of net appreciated value, with the equity portfolio in a net gain position of $8.5 billion and the fixed maturity portfolio in a net loss position of $181 million.

Cash flow from operating activities was $3.1 billion for 2025, up 17%. Sewell also said the property casualty underwriting expense ratio decreased 0.2 points in the fourth quarter, as higher agency profit-sharing commissions were offset by earned premium growth that outpaced other expenses.

On reserves, Sewell said the company aims to hold net reserves in the upper half of the actuarially estimated range. During 2025, Cincinnati Financial recorded a net addition to property casualty loss and loss expense reserves of $1.3 billion, including $1.1 billion for IBNR. For prior accident years, the company reported $196 million of net favorable reserve development in 2025, improving the combined ratio by 2.0 points. Sewell said accident year development included favorable $275 million for 2024, favorable $8 million for 2023, and unfavorable $87 million in aggregate for years prior to 2023. He also pointed to commercial casualty as an area of concern, saying its current accident year ratio before catastrophes increased 4.2 points due to uncertainty including potential negative effects from “legal system abuse,” while management said it remained confident in pricing and risk selection.

For capital management, Sewell said the company returned $730 million to shareholders in 2025, including $525 million in dividends and $205 million of share repurchases. Cincinnati Financial repurchased about 1.4 million shares at an average price of $151, including 651,000 shares during the fourth quarter at $157. Parent company cash and marketable securities were $5.6 billion at quarter end, debt to total capital remained under 10%, and book value per share reached a record $102.35 with $15.9 billion of GAAP consolidated shareholders’ equity.

Spray also discussed “intelligent automation” efforts, including creation of an AI center of excellence and a proprietary generative AI chatbot used by commercial lines underwriters to obtain reference information to support underwriting decisions. He said the company is focusing on efficiency and productivity gains, with an expectation of additional impacts to profitability and growth as the tools are scaled.

About Cincinnati Financial NASDAQ: CINF

Cincinnati Financial Corporation NASDAQ: CINF is an insurance holding company headquartered in the Cincinnati area of Ohio that provides property and casualty insurance products and related services. Founded as part of the Cincinnati Insurance group, the company operates through a set of insurance subsidiaries to underwrite and service policies for both personal and commercial customers. Cincinnati Financial is publicly traded and emphasizes underwriting discipline and long-term relationships with its distribution partners and policyholders.

The company's core business centers on property and casualty insurance, including homeowners, automobile, commercial casualty, commercial multi-peril, and specialty commercial coverages.

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