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Cincinnati Financial (NASDAQ:CINF)
Q2 2020 Earnings Call
Jul 28, 2020, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Ladies and gentlemen, thank you for standing by. And welcome to The Cincinnati Financial Corporation's second-quarter 2020 earnings conference call. [Operator instructions]. It is my pleasure to turn the call over to Dennis McDaniel, investor relations officer to begin.

Please go ahead, sir.

Dennis McDaniel -- Investor Relations Officer

Hello. This is Dennis McDaniel at Cincinnati Financial. Thank you for joining us for our second-quarter 2020 earnings conference call. Like 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 Steve Johnston, chairman, president, and chief executive officer. And then from Chief Financial Officer Michael 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 Chief Investment Officer Martin Hollenbeck and Cincinnati Insurance's Chief Insurance Officer Steve Spray, Chief Claims Officer Martin Mullen, and Senior Vice President of Corporate Finance Theresa Hoffer. First, please note that some of the matters to be discussed today are forward-looking. These forward-looking statements involve risks and uncertainties. With respect to these risks and uncertainties, we direct your attention to our news release and through 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 the GAAP. Now, I'll turn the call over to Steve.

Steve Johnston

Good morning everyone, and thank you for joining us today. As we shared in our press release, the second quarter was a challenging one, but we also saw reasons for optimism. That optimism stems from the proven track record of our agency centered strategy in our investment approach, plus our ability to execute our plans. Operating performance was satisfactory, considering how catastrophe effects for any given quarter can cause income variability.

Net income for the quarter more than double the same period a year ago, and it was nice to see the positive effects of a recovering stock market during the second quarter of 2020. While non-GAAP operating income was $69 million less than the second quarter a year ago, a $79 million after-tax increase in catastrophe losses drove that change. Our 103.1% property casualty combined ratio was 6.6 percentage points higher than a year ago, with elevated catastrophe losses representing 6.5 points of the increase. The pandemic-related losses and expenses we reported increased the second-quarter combined ratio by 4.6 points, while several other factors had the effect of improving that ratio. The current accident year loss and loss expense ratio before catastrophe loss effects improved by 2.5 percentage points on a six-month basis.

Importantly, we continued our steady approach aimed at adequately reserving for losses, as Mike will further explain with his prepared remarks. Operating results continue to benefit from efforts to diversify risks by product line, and geography, and also from ongoing segmentation of risks. Our underwriters and agencies are working well together, as in the past to segment pricing on a policy by policy basis, improving pricing is needed. When we determine profit margins are unsatisfactory, we remain confident in declining new business or renewal opportunities. Independent insurance agents who represent our company are among the best in the industry, in our excellent relationships with them helped us continue to grow profitably even in the midst of the pandemic. Our consolidated property casualty net written premiums rose 6% in the second quarter of 2020, and we had good growth in each insurance segment.

The rate of growth is slower than the 10% we reported both for the first quarter of the year, and full-year 2019 reflecting the effects of the pandemic. Renewal pricing during the quarter was generally at higher levels, than in the first quarter of this year. And each insurance segment in the mid-single digit percentage range for average price increases. New business written premium volume was the main area where pandemic effects were evident. While new business submissions from agencies for the first half of second-quarter 2020 were down, compared to last year.

Submissions accelerated to more than a year ago during the second half of the quarter. For renewal business and our commercial line segment, second-quarter 2020 estimated average price increases were near the low end of the mid-single digit percent range, higher than first-quarter pricing. The combined ratio for commercial lines rose 0.5 percentage points, compared with the second quarter a year ago. The ratio before catastrophe effects improved by 1.8 percentage points, while net written premium grew 3%.

Our personalized segment also continued to experience average rate increases, as indicated by renewal written premiums growing 6% for the quarter. The combined ratio for personal lines was 13.4 percentage points, higher than the second quarter a year ago, driven by catastrophe losses that were 15.1 points higher. Current accident year results for the personalized segment continued to improve as planned. Our excess and surplus line segment grew net written premiums by 17% during the second quarter of 2020. Its combined ratio rose by nearly 26 percentage points and reflected more prudent reserving as Mike will explain further.

We remain confident in our prospects for profitable growth in excess and surplus lines. As previously reported, both Cincinnati Re® and Cincinnati Global experienced pandemic related losses that drove their combined ratios a few points over 100%. In both grew net written premium at a double-digit pace in a very disciplined fashion. Our life insurance subsidiary had a good second quarter, with net income up 50% from a year ago, and non-GAAP operating income up 22%. It also grew term life insurance earned premiums by 9%. I'll wrap up by highlighting the value creation ratio, our primary measure of long term financial performance.

Our VCR of 16.3% for the second quarter of 2020 reverse most of the negative result for the first quarter. With improved valuation of our investment portfolio boosting our results 15.5 percentage points. Despite short-term variability, investing in stocks remains an important part of our long-term strategy to create value for shareholders. Now, our chief financial officer, Mike Sewell, will highlight other significant aspects of our financial results.

Michael Sewell -- Chief Financial Officer

Thank you, Steve. And thanks to all of you for joining us today. Investment performance during the quarter provided more reasons for confidence in our proven business strategy. The pandemic has not changed how we approach investment management, and we believe that will continue to serve shareholders, policyholders, and others well over the long term. Investment income continued its steady growth of 4% for the second quarter, and first six months of 2020.

Matching the rate of growth for full year 2019. Dividend Income grew 6% for the second quarter. For the first half of the year, net purchases for the equity portfolio totaled $149 million. Interest income from our bond portfolio grew 3%, compared with the same quarter a year ago.

Average yield was 4.11%, down 1-basis-point from the second quarter of last year. The average pre-tax yield for our total of purchase taxable and tax exempt bonds during the second quarter was 4.4%. We also continue to add to the fixed maturity portfolio with net purchases during the first half of the year, totaling $107 million. Investment portfolio valuation changes for the second quarter of 2020 were favorable for both our bond and stock portfolios. Much of the fair value decreases during the first quarter of the year in our stock portfolio recovered during the second quarter of 2020.

On an after tax basis, the second quarter fair value increase for the equity securities still held was $825 million. For our bond portfolio, the second quarter net increase in unrealized gains was $400 million. We ended the quarter with total investment portfolio net appreciated value of $4.3 billion, including nearly $3.6 billion in our equity portfolio. Cash flow continues to be an important factor in growing investment income.

Cash flow from operating activities was strong for the second quarter of 2020, and generated $447 million, up 62% from a year ago. Turning to expense management, always one of our priorities. We understand the balance of strategic business investments and expense containment. The second-quarter 2020 property casualty underwriting expense ratio was 0.4 percentage points higher than last year second quarter. As we disclosed, the drivers of that increase were the stay-at-home policy holder credit, for personal auto policies, and higher credit losses due to uncollectable premiums, partially offsetting those increases was lower spending for several items such as business travel.

We expect some of those expenses to return to a normal rate in the future quarters as governmental restrictions ease. Next, I'll comment on lost reserves. Our approach is consistent in target's net amounts in the upper half of the actuarially estimated range of net loss, and loss expense reserves. During the second-quarter 2020, we experienced property casualty, net favorable development on prior accident years.

The combined ratio effect of 3.3% for the quarter was very similar to the 3.5% annual average during 2018 through 2019. On an all line basis by accident year, net reserve development for the first half of the year was favorable for the two most recent accident years, with $60 million for 2019, and $35 million for 2018, an aggregate accident years prior to 2018 were unfavorable by $15 million. Every quarter, we consider new information such as paid losses and estimate ultimate losses, and loss expenses by accident year-end line of business. As we obtain and study new data during the year, we update estimates as needed. An example of how our estimate for ultimate losses can change is how we increased reserves for older accident years, in our excess and surplus line segment during the second quarter.

We provided several related details in our 10Q, and supplemental financial package. It is important to understand that of the $13 million net change in second quarter, prior accident year reserved development for that segment, $9 million was related to IBNR reserves. Regarding capital management, we still believe that our financial strength is excellent, and that we have plenty of financial flexibility. I'll end my prepared remarks as usual, with a summary of the second quarter contributions to book value per share.

They represent the main drivers of our value creation ratio. Property Casualty underwriting decreased book value by $0.20, life insurance operations added $0.07, investment income other than life insurance, and reduced by non-insurance items increase book value by $0.53. Net investment gains and losses for the fixed income portfolio increased book value per share by $2.49. Net investment gains and losses for the equity portfolio increase book value by $5.25, and we declared $0.60 per share in dividends to shareholders.

The net effect was a book value increase of $7.54 during the second quarter, $57.56 cents per share. And now I'll turn the call back over to Steve.

Steve Johnston

Thanks Mike. The second quarter is often the challenging one. In this year's second quarter was certainly no exception. I applaud the efforts of our associates to stay focused on our insurance business, serving independent agents, underwriting risks, and paying claims.

While creating and embracing new ways to do so safely, effectively, and efficiently. This focus on the execution of our proven strategy will continue to help us grow profitably over time for the benefit of all stakeholders, while also creating shareholder value. As a reminder with Mike, and me today, our Steve Spray, Marty Mullen, Marty Hollenbeck, and Theresa Hoffer. Maria, please open the call for questions.

Questions & Answers:


Operator

Thank you. [Operator instruction] Our first question comes from the line of Mike Zaremski of Credit Suisse.

Mike Zaremski

Good day, everybody. Now first question. I think that we're all kind of curious whether you feel the underlying loss ratio is getting actual, and actually any benefit from COVID-19 in terms of potentially just less-- loss activity due to certain areas being shut down in courts, and just less economic activity. That's my first question.

Steve Johnston

I think we would have gotten some benefit during the second quarter. I think as I mentioned, the activity really did pick up in the second half of the second quarter. BUt also,the driver of the improved performance was just the hard work that was done by our associates and the agents in terms of the improved pricing, the improved segmentation of risks, inspection of properties, and basically just executing our strategy.

Mike Zaremski

So there there could have been some benefit in depending how the economy shapes up as the year progresses there. It could remain a slight benefit as well. Is that fair.

Steve Johnston

That's fair. We'll continue to monitor it. It's hard to predict how things are going as we monitor activity. And even look at it outside sources like the Google mobility data which is public, it does seem that things are on the improvement, but we'll keep an eye on it.

I just think that the most important thing is that we focus on our business, focus on executing our strategy, and just keep our entire associate workforce, and all the agents focused on not being distracted by outside things, and to really execute our proven strategy.

Mike Zaremski

Understood. Moving to the reinsurance segment. There was a preannounced. there was some COVID-19 related--There's just interruption I think charges in there.

To those policies have a virus exclusion.

Steve Johnston

For the reinsurance, Cincinnati Re®--they had some pandemic related losses that we did reflect in our prerelease. They scoured their policies looking for instances where there would be affirmative coverage it resulted both from the property book that they write, and from the professional liability book that they write.

Mike Zaremski

Affirmative then would just mean that there wouldn't be an exclusion that they won't cover. The high related to COVID-19, would that means.

Steve Johnston

It means that there would be nothing in the policy language that would say that there needed to be direct physical damage or loss to property.

Mike Zaremski

Got it. And my guess my last question maybe I'll go back in the queue. On the broad pricing environment, it feels like in the small and medium sized business space where or since he focuses on it. It feels like there are certain competitors pushing for more rate than others.

Do you feel there's a big need for rate because if we take a look at how most firms are are doing financially over the past couple years. Your results seem to be in pretty decent shape obviously, COVID-19 is going to have a negative impact. I guess I'm trying to get at investors have been interested in the pricing trajectory moving more and more, and then originally expected, it feels like it's due to COVID-19 uncertainty. If COVID-19 losses end up being manageable, many participants in industry expect including your team.

Is there--do you expect pricing to stay elevated or could we see the trajectory move downward.

Steve Johnston

From what we see, the trajectory is moving upward. As we mentioned, our pricing on average has gone higher than it has been in the second quarter. And the key point with us is we continue to look at every policy one by one. And we want to make sure that we get an adequate risk adjusted price, given everything that we bring to the table from our predictive models, to our underwriting, to our claims brings to the table, loss inspection.

We just want to make sure we understand the risks that we write, that we price, that the next risk that we write adequately on a risk adjusted basis. It does seem that the average of that has been moving up, and we would anticipate it continues to move up. But we also focus on the distribution around that average make, sure that we're properly segmenting the book and looking at each policy on a one by one basis.

Mike Zaremski

Thank you for the answers.

Operator

Our next question comes from one of Paul Newsome of Piper Sandler.

Paul Newsome -- Piper Sandler -- Analyst

Good morning. I wonder if you could talk a little bit more detail about the components of growth. I think I've got the maths right. But it looks like they're counter forces here with price increases, plus whatever the economic impact was.

A little bit surprised at the growth because I would have expected there had been a little bit more of an impact from the recession, and companies going out of business. But maybe you could just focus on what you're seeing there as well as the the top line, and how that would likely emerging in the future.

Steve Johnston

Sure. And I think it's a continuation of the comment I had from the first quarter call is that--and I'm still in Steve Spray line here and probably a chance to use it in a minute that our business model seems to be built for this kind of disruption with the relationships that we have. And the way I described it in the last call is if you think of the economy is like a pie. That pie may shrink in times that we saw in the first half of the quarter, it may then start to grow as things rebound.

But based on our business model where the premium credit growth comes from is just the execution of our strategy, and we feel in all circumstances through the quarter. We were getting a little bit bigger piece of that pie than we otherwise would. Because of our business model--the fact that all of our field representatives, claims representatives, everybody out there in the field already work from their homes in the communities with our great independent agents had the relationships in place, and we were really able to react very quickly to agency needs.

Paul Newsome -- Piper Sandler -- Analyst

What's going on from the agent count perspective. Has the pandemic had any impact on your efforts to expand geographically.

Steve Johnston

We continue to to appoint agents. It's very interesting the way you can do things virtually now. And really we've capitalized on again the field people really knowing their territories. They're responsible for understanding their their whole territory with all the agents not just the ones that represent us.

They're able to make contact and to do things virtually. It's a big credit to Steve Spray, and Angie Delaney, and the people out in the field that have really kept their focus because it's so easy with all this distraction around us to lose focus. There's really been a tremendous emphasis throughout the company to keep everybody focused on the business, on the task at hand, and not to be distracted by everything.

Paul Newsome -- Piper Sandler -- Analyst

Thank you. Keep safe.

Operator

Our next question comes from the line of Meyer Shields of KBW.

Meyer Shields -- KBW -- Analyst

I was hoping to get a little more color on the sequential improvement in commercial casualty, specifically the accident year loss ratio.

Steve Spray -- Chief Insurance Officer

Meyer, Steve Spray. It just follows along with what Steve was saying earlier. It is just implementation and execution of a segmentation strategy that we've got across all lines of business. Obviously, we're a package underwrite, and the market if anything--the market is giving us some runway especially in the excess casualty area.

I would call that market access umbrella. Pretty hard market. So we're seeking out opportunities there, underwriting, pricing, and so again, it's basic blocking and tackling, and execution by all associates working with our agents on our segmentation strategy.

Meyer Shields -- KBW -- Analyst

So that means that there's no--this is my word, substantial reliance on maybe depressed actual clean counts in the quarter. It sounds like there are other factors that are driving that improvement.

Steve Johnston

I would say that's true particularly for the commercial casualty.

Meyer Shields -- KBW -- Analyst

That's very helpful, thank you. Second, basically an accounting question. For things like the domestic business interruption defense, and the credit for applicable premiums. Is there a reason to expect those to continue in the third quarter.

Steve Johnston

I'll tackle the reserve question and turn it over the premium part to Mike. And basically, we just booked our best estimate of the ultimate expense as of June 30th. With the information that we have for all the claims through June 30th. So it is our our best estimate of the ultimate expense number.

Michael Sewell -- Chief Financial Officer

This is Mike. As it relates to the premiums, anything that's related to uncollectible premiums. As we look at the aging, and the moratoriums as that pulls off some state of might have continued some of that, so we are watching the aging of that. So we will evaluate that at the end of each quarter that we report out.

And so that will be adjusted accordingly. At that time, in the past it's been very minor what we've had. And so this is a little bit elevated but we've shown you the numbers that we've reported.

Meyer Shields -- KBW -- Analyst

That's helpful. Thanks so much.

Operator

Our next question comes from the line of [Inaudible] of RBC Capital Markets.

Unknown Speaker

Good morning. Couple of questions. First, on the workers comp line of business. There was a pretty significant decline in premiums, and I don't think that was entirely a surprise.

Would you be able to split that break, that decline into rate decreases, volume decreases, and premium credits or something that gives a flavor of what some of the underlying pieces are. I'm sure there's a lot going on in that number.

Steve Johnston

Well, the key is there is a lot going on there, and we can't say that the rate changes continued in the negative mid-single-digit range we have seen. What makes it difficult, we had an executing underwriting discipline in segmenting the policies up until the pandemic, and so we'd seen a decline in exposures, and had that trend going. It may have accelerated a little bit as we came into the pandemic. But I'm hard pressed to give you a percentage break out in that regard.

It's just awfully tough.

Unknown Speaker

Well, I mean the pricing is at least a little bit of a help. Turning over to the E&S line. There was a little bit of a reserve addition there. Again, that's the third quarter in a row.

There's been at least a small addition. Can you talk a little bit more detail about what you're seeing there. And it's unusual for you guys to have a reserve out for more than one quarter in a row. So three kind of bears, some extra attention at least [Inaudible].

Steve Johnston

As I look at it, if you go back to our 10-K. The development happened on accident years 2016 and prior, if we look in the K and note on reserves. For excess years 2011 through 2016, if we look at those years from the initial pick through year-end 2019, they had developed favorably by $156 million. In the first half of 2020, we've added back $11 million across those excess years.

So one point is, the initial picks are still where we are now versus the initial picks that we're still in a favorable position. It's just that we did see a modest increase in the loss payments during this calendar year on those excess years versus what we expected in some of those mature years. So we acted prudently as we always try to do. We increased our reserves by the $11 million.

So we're confident in the prospects of CSU. We're confident in our best estimate of the reserves that we booked here in the second quarter. While the accident year combined ratio including catastrophe losses is higher this quarter it's still run at 91% for quarter and 89.4% for the full year. So that continues to be quite good, particularly in the business world and we're getting now strong double digit--we're getting strong double-digit premium growth.

We've constantly increased rates and that's actually accelerated in the quarter. We're doing a good job of managing limits in terms of conditions. So we're confident in the prospects of the CSU in this business, but we did see the need as we will. When we saw that the payments in those accident years prior to 2017 pick up more than what we would have expected during the first half of the year.

Unknown Speaker

That's very helpful color that definitely puts the frame on the situation. One more question if I may. On the second quarter is normally your highest quarter for catastrophe losses. But this quarter was even higher than a normal high quarter, and there were a fair number of volume move of [Inaudible]events.

You just talked about what you were seeing whether there were geographies or types of storms. Can you just provide a little bit more depth to the CAT number to help understand that and what made it so much higher than what it had been even in other heavy second quarters.

Michael Sewell -- Chief Financial Officer

Let me just throw out a couple of numbers and then Marty, will probably want to give a little bit more color. But thinking about the second quarter of this year, there was about 20 CATS that were in there, compared to about 16 CATS last year. Two of the CATS were about about the same size, about 50 million a piece, and those were both occurring right there at the beginning of April. And when you look at the the states that those were in, there's about 15 states or more for each of those.

And so for a particular region, it's going to be across the board. The next largest was about 27 million and then we had the civil unrest, and of course that--of across the country. So maybe Marty's got a little bit more information you mark or color you'd like to share.

Martin Mullen -- Chief Claims Officer

Thanks Mike. This is Marty Mullen. Of course to have a little bit more on Mike's description. There's namely was this middle Southeast, Tennessee, and Arkansas, Hale and events and tornadic winds.

So it was really a weather events related to those two causes of loss. I'm pretty proud of the fact that during this COVID-19 situation, we were able to respond with our CAT teams, and mobilize them to those areas and handled within our CAT strategy personal handling of those claims within. Of course the safety precautions that were given and taking care of. It's just an unusual that it was large hail that hit some of the areas of our commercial footprint which we responded to.

And again, we handled them considering the environment we are in and the amount of the claims that were submitted. We responded in outstanding fashion. Receiving a lot of favorable comments from our agents and our policyholders. Hopefully that provide some color.

Any other questions on that Mike.

Unknown Speaker

I think that's some good additional detail. Appreciate the answer for all the questions.

Operator

Our next question comes from the line of Mike Zaremski of Credit Suisse.

Mike Zaremski -- Credit Suisse -- Analyst

Thanks for the follow ups. I'll ask some questions on business interruption. Is it changing the terms and conditions to add a buyers exclusion on a new business.

Steve Johnston

We're continually looking at that at this point. We do not have plans to add the virus exclusion. We feel that our standard policy language is strong. We feel confident in it.

Our standard commercial property policies do not provide coverage for business interruption claims unless there is direct physical damage or loss to property. And because the virus does not produce direct physical damage or loss of property, we believe strongly that no coverage exists for this peril. And now two judges, one in Michigan, and one in New York recently voiced their agreement that viruses do not satisfy the direct physical damage requirement.

Mike Zaremski -- Credit Suisse -- Analyst

Understood. And then some of the reinsurers have been saying that they've been adding a communicable disease exclusion. Curious if you had any reinsurance renew lately, and that language was added

Steve Johnston

Not that I'm aware of. No. Our general property policies renew, January 1st, catastrophe in per excess.

Mike Zaremski -- Credit Suisse -- Analyst

And lastly, sometimes investors ask about one of since his unique policy advantages is that some clients has had for a three-year term. Can you remind us how to think about the three-year term in the context of how rate earns in.

Steve Spray -- Chief Insurance Officer

Our three-year policy provides--First of all, we think it's a big advantage in the marketplace. We think it shows our desire for long term relationships, consistency, stability. It's always proven to be an advantage for us. Our retentions at the first, and second anniversary of a three-year policy are about 10 points higher than what we actually have a renewal.

As far as how the premium guarantee or the rate guarantee works is your property, your general liability, your crime, your own Marine coverages would have a great guarantee. Now the premium could go up or down based on exposure, but the rates would be guaranteed. Obviously, your auto, your workers compensation, your umbrella, those can be adjusted annually. And I believe with renewals and with those lines of business, I've got my number right here that about 75% of our premiums are subject to anniversary adjustment.

But the three-year policy is a hallmark of Cincinnati. And like I said ,we think it's consistent with our value proposition for long-term sustained relationships.

Mike Zaremski

And just curious and do you think it has anything to do with why your top line is held in better than expected, and maybe agents anecdotally are gravitating if the consensus is pricing is going to go higher maybe agents here are gravitating more of that product or is just more so. Some of your competitors might be retrenching a little bit and you guys aren't.

Steve Spray -- Chief Insurance Officer

It's a good question. it's a little bit of both. I think agents in policyholders appreciate that contrary to popular belief, policyholders don't like to go through the renewal process every year. It helps them from an efficiency standpoint again, it shows a long-term commitment both to agents and the policyholders.

I think that with the rising pricing, all of our tools we have today like Steve said, allow us to price each risk on a risk adjusted basis at levels that are satisfactory for returning a profit. And I can tell you the pricing metrics on our new business have continued to get better, and better. And a lot of that has to do with execution. But also the market is providing us a little bit of lift as well.

Mike Zaremski

Understood. And thanks again for the insights there.

Operator

[Operator instructions] Our next question comes from line of [Inaudible] of Deutsche Bank.

Unknown Speaker

Thanks, and good morning. Just a following up on an earlier question around the potential frequency benefit to commercial from the economic slowdown. In my mind, I hope this doesn't belabor the point. But the frequency impact might be more notable in a Short tail line versus the long tail line.

There was something you could just use that you can pass out. Any other commentary on the duration of the business that appreciate that.

Steve Johnston

Good question. I'm not sure I can't give a number answer to that. But I just as with most things with the property coverage in terms of business activity, and so forth you would know sooner. It's a shorter tail then the longer tail casualty lines.

And all of that as we put out our best estimates for reserves and so forth is considered, and there's always consideration when you do reserving between stability and responsiveness, Our actuaries have done a good job there, and we've put together a quarter here with our best estimate on the reserves, and you bring up a good point in asking about the property versus the casualty.

Unknown Speaker

And so in response to another earlier question you've talked about the blocking and tackling that you have with the relationships with the agents and how that's helping to sustain production. How can we think about this from a--are you picking up a larger share of new business. Are the agents steering more renewals in your direction. What are the moving parts of how that relationship benefit is manifesting.

Steve Spray -- Chief Insurance Officer

Steve Spray, again. And again, it's a little bit of both. I think what Steve said, earlier is what's happening is the fact that our business model is really good in good good times, but it's proving to be very resilient and effective in these difficult times as well. And so the fact that we have fewer relationships, but very deep that allows us to manage that a little better.

The fact that our field associates who all have authority to make decisions regardless of their--for all of our disciplines, being local in the community, having fewer agencies to call on, having close relationships. I think it's creating--we've got such great trust with each other that it's opening the dialogue and if there's an account that another carrier takes action on, and that the agent doesn't necessarily feel is appropriate, we're there. They can get a hold of us. We're in the community.

We're responsive. Our field associates are coming up with all different kinds of ways to reach out to agencies and be creative, be present. That's what's given us less. So it is some--that's new new, we would call it, new to the agency not us.

And I think we're getting opportunities on some other carriers renewals as well.

Steve Johnston

And Phil, I would agree with everything Steve said, and would just add commentary as we move through the quarter. In new business, as you can see from our numbers versus other quarters was impacted. But while the submissions from our agencies in the first half of the second quarter where down, when we got into the second half of the second quarter, we actually saw more submissions coming in than we had in the second half of the second quarter a year ago.

Unknown Speaker

That leads me to my last question. It's early but is there any July read on how that submission activity has trended. And I'm wondering if we've had a pullback in some states now as the shelter in place comes back into play. Has that put any initial pressure on submission activity.

Steve Johnston

I haven't seen it. I in fact I really hesitate to comment on the third quarter yet. Since so much is in flux still, but I haven't seen the pullback. But that's not to say that it wouldn't be there, and there's a bit of a pipeline as business comes into.

I should probably be pretty careful about commenting at all on that on the third quarter here.

Unknown Speaker

No. It's early. It's unfair to ask it, but I appreciate your time. Thanks so much and be well.

Operator

Our next question comes from the line of Meyer Shields of KBW.

Meyer Shields -- KBW -- Analyst

I forgot to ask this the first time around I apologize for forgetting it. But given the overall trend of the economy toward reopening, can you give us some insight in terms of how business is rushing to claim filings. Again domestically how those trended over the course of the quarter.

Steve Johnston

We don't comment a lot on the detail of the number of claims or the or the sequence of individual claims over the quarter there. I would say they did trail off toward the--as time went on.

Martin Mullen -- Chief Claims Officer

Meyer, this is Marty Mullen. There's a comment of what we're seeing in some of the courts says they're focusing on criminal prosecutions and follow up because those that take priority. Because during the COVID-19 shutdown the courts were inactive. The criminal cases in most dockets are taking precedence over the civil cases, not saying that they aren't seeing receiving attention but I know there's a lot of energy by the courts to make sure that they get turned on the criminal prosecutions first.

Operator

Our next question comes from line of Ron Bodman of Capital Returns Management.

Ron Bodman

Hi John, hope everyone's well. Sounds like it. With all the stress in the world and particularly in your markets, are you seeing any reduction in claim settlement values.

Steve Johnston

I have not knows that Ron.

Ron Bodman

Thank you.

Operator

And at this time there appears to be no further question. I'd like to turn the floor back over to Mr. Johnston, for any additional or closing remarks.

Steve Johnston

Thank you,Maria. And thanks to all of you for joining us today. We look forward to speaking with you again on our third-quarter call. Have a great day.

Operator

Thank you. Ladies and gentlemen, this does conclude today's conference call. You may now disconnect, and have a wonderful day.

Duration: 49 minutes

Call participants:

Dennis McDaniel -- Investor Relations Officer

Steve Johnston

Michael Sewell -- Chief Financial Officer

Mike Zaremski -- Credit Suisse -- Analyst

Paul Newsome -- Piper Sandler -- Analyst

Meyer Shields -- KBW -- Analyst

Steve Spray -- Chief Insurance Officer

Unknown Speaker

Martin Mullen -- Chief Claims Officer

Michael Zaremski -- Credit Suisse -- Analyst

Ron Bodman

More CINF analysis

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