CINCINNATI FINANCIAL CORP Q2 FY2024 earnings call

• Strong financial performance in Q2: Net income $312M, non-GAAP operating income $204M up $13M y-o-y. Investment income grew 10%. • Property casualty combined ratio: 98.5% in Q2, 96.1% in first half. Premium growth: Consolidated net written premiums up 14%, agency renewal up 12%, new business up 34%. • Underwriting efforts: Using pricing segmentation, risk selection, and premium increases to improve profitability. • Reserve development: Favorable overall, but commercial casualty had unfavorable development. • Investment details: Dividend income down due to unusual items, bond interest income up 18%. Net purchases of fixed maturity securities $771M in first half. • Expense management: Underlying expense ratio up due to profit sharing commissions and employee expenses. • Capital management: Paid $125M in dividends, repurchased 395,000 shares, book value at record high $81.79 per share.

Commercial lines: Net written premiums grew 7% in Q2 with a 99.1% combined ratio, up 2.2 percentage points. Personal lines: Net written premiums grew 30%, combined ratio 106.9%, 0.7 percentage points better than last year. Excess and surplus lines: Net written premiums grew 15%, combined ratio 95.4%, up 3.2 percentage points from prior year. Cincinnati REIT: Combined ratio 70.1%, net written premiums grew 17%. Cincinnati Global: Combined ratio 63.2%, net written premiums down 18% in Q2. Life insurance: Net income $24 million, operating income growth 26%, term life earned premiums grew 2%.

• Confidence in entering second half with improved accident year results and combined ratio better than last year's first half. • Expect continued growth in net written premiums, prudent reserve estimates, and focus on profitable growth.

• Uncertainty regarding ultimate losses and loss cost trends. • Reserve development fluctuations, especially in commercial casualty. • Competitive market dynamics affecting pricing and growth in certain segments.

Q: Michael Phillips asked about commercial casualty reserve development and its relation to prior accident years.

A: Steve Spray responded that the unfavorable reserve development for commercial casualty was for prior accident years like 2020, 2021, etc., and that the company is confident in its reserving process.

Q: Gregory Peters inquired about competitive positioning and expense ratio.

A: Steve Spray discussed focusing on local relationships and risk selection, while Mike Sewell mentioned the expense ratio was up due to commission pressures and employee expenses but progress is being made.

Q: Charles Lederer asked about the maturity of pre-2021 accident years for general liability and personal lines trends.

A: Mike Sewell talked about confidence in reserves for pre-2021 accident years and Steve Spray discussed strong growth in personal lines segments like middle market and high net worth.

Q: Mike Zaremski asked about workers' comp trends and commercial auto line performance.

A: Mike Sewell stated prudence in workers' comp due to long tail and volatility, while Steve Spray discussed strong commercial auto performance due to risk selection and book makeup.

Q: Grace Carter asked about E&S underlying loss ratio differences and commercial auto line status.

A: Steve Spray explained E&S loss ratio differences as due to data noise and discussed commercial auto's positive trends from past actions and risk selection.

Q: Meyer Shields asked about non-public regionals' response to social inflation and agent appointment impact.

A: Steve Spray discussed opportunities created by market dynamics for Cincinnati and emphasized quality of agents over quantity to avoid diluting franchise value.