CINCINNATI FINANCIAL CORP Q3 FY2025 earnings call

• Operating Performance: Excellent quarter with strong investment income growth. Net income $1.1 billion, non-GAAP operating income $449 million (doubled year-over-year). • Property Casualty: 88.2% third quarter 2025 property casualty combined ratio improved by 9.2 percentage points; accident year 2025 combined ratio before catastrophe losses 84.7% (improved by 2.1 percentage points). • Investment Income: Grew 14% in Q3 2025; bond interest income up 21%; fixed maturity portfolio pretax yield 5.10% (up 30 bps); equity portfolio net gain $846 million. • Expense Management: Property casualty underwriting expense ratio decreased 0.5 points; loss reserves updated with net addition to reserves $1.1 billion (IBNR $900 million); net favorable reserve development $176 million for first 9 months. • Capital Management: Paid $134 million in dividends; repurchased ~404,000 shares; debt to total capital under 10%; book value record high $98.76 per share.

Commercial Lines: Net written premiums grew 5% with a 91.1% combined ratio, improving by 1.9 percentage points (2.8 points from lower catastrophe losses). Personal Lines: Net written premiums grew 14%, combined ratio 88.2% (22.1 percentage points better, 19.5 points from lower catastrophe losses). Excess and surplus lines: Net written premiums grew 11%, combined ratio 89.8% (improved by 5.5 percentage points). Cincinnati Re: Net written premiums decreased 2% (due to property market changes), combined ratio 80.8%. Cincinnati Global: Combined ratio 61.2%, premium growth 6% (from product expansion). Life Insurance: Strong quarter with 40% net income growth, term life insurance earned premiums grew 5%.

• Investment income growth expected to continue from rebalancing efforts. • Confidence in long-term direction and strategy of insurance business. • Continued focus on underwriting, pricing, and risk segmentation.

• Legal system abuse/social inflation impacting loss trends. • Potential volatility in large claims and reserve development. • Competitive pressures in the insurance market affecting new business and pricing.

Q: I wanted to start with commercial auto, try to drill down a little bit. So kind of what's happening there for you guys.

A: Yes, Mike, this is Steve Spray. I can start there. Let me just talk about maybe overall reserves in general because I think that's a question that we'd love to address. And the way I look at it is we've had 30-plus years of all lines favorable development. And through the 9 months of this year were favorable. The quarter is favorable. Every quarter, we're getting -- I noticed we get movement to and fro. This quarter, commercial property work comp, very favorable. Obviously, commercial auto and casualty, we're having a little bit of a prior year. I think the one way I get really comfortable -- the data point that I'm getting comfortable with is, if you look at on an all-lines basis from each accident year from 2020 forward, our initial pick for each of those accident years has developed favorably as of 9/30. Now commercial auto has had maybe a little bit of a noise in it there by accident year. But we're profitable through 9 months on commercial auto. And I just feel like the prudent approach that we have taken, the consistent approach, the consistent team, we're just -- we're trying to stay ahead of that line of business that has a little bit of a temperature.

Q: Could you take Mike's question and insert general liability instead of commercial auto and maybe give us some thoughts there?

A: Yes. Paul, I appreciate the question. Kind of what I was talking about before, where I get the confidence. One thing I would say, again, maybe kind of a bigger picture is I think it's well documented across our country, how legal system abuse is impacting all of us, including our industry, including Cincinnati Insurance. So that is certainly adding some pressure there. But again, let me go back to what gives me the confidence, and I'll specifically speak to casualty as well is just, again, a consistent process, we have consistent team, the overall all-lines track record of 30-plus years of favorable development, again, favorable for the quarter, favorable for the full 9 months. And then the other data point that I was really paying attention to for this quarter is just again, if you look at each of the accident years from 2020 and forward, if you look at our initial pick for each of those accident years, it has developed favorably on an all-lines basis as of 9/30, and that holds true for casualty as well.

Q: Circling back to the capital investment portfolio questions. Steve, you started out saying -- talking about the strength of investment income from the rebalancing last year, I guess we can see the equity markets have been extremely strong year-to-date, which has helped you all. I'm just trying to understand is, there a fast and hard kind of ratio that if the equity markets still keep going up, you'll need to do another rebalancing?

A: Steve, this is -- sorry, this is Steve Soloria. In regards to the equity portfolio, we have always managed and trimmed around growth in individual names or sector exposures, kind of adhering to our investment policy statements. We continue to evaluate it. Last year's move was kind of a compilation of a lot of internal discussion, but a lot of external factors driving our action. Our initial decision to trim was a typical one that we would have, and it just kind of grew as we began to look at external factors like the upcoming election, potential tax rate changes and the implications for the capital gains we might have to pay. So there were a lot of external factors driving it, which made it a big -- a larger bite of the apple, so to speak. I wouldn't take it off the table moving forward, but there -- those external factors aren't weighing on us right now. So we'll continue to kind of manage it more at the individual security and industry level where we need to just trim to manage the portfolio. I'll kind of leave the capital management discussion for a different audience.