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DATE

Tuesday, July 29, 2025, at 11 a.m. ET

CALL PARTICIPANTS

  • President and Chief Executive Officer — Steve Spray
  • Executive Vice President and Chief Financial Officer — Mike Sewell
  • Executive Chairman — Steve Johnston
  • Chief Investment Officer — Steve Soloria
  • Chief Claims Officer, Cincinnati Insurance — Mark Shambo
  • Senior Vice President, Corporate Finance — Teresa Hopper

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TAKEAWAYS

  • Net Income: $685 million in GAAP net income for Q2 2025, more than double the prior-year amount, including $380 million after-tax from higher equity security fair values.
  • Non-GAAP Operating Income: Non-GAAP operating income was $311 million, up 52% compared to the prior year.
  • Property Casualty Combined Ratio: 94.9%, a 3.6-percentage-point improvement compared with Q2 2024, despite a one-point increase in catastrophe losses.
  • Commercial Lines Net Written Premiums: Up 9%, with a 92.9% combined ratio, improving 6.2 percentage points due to lower catastrophe losses.
  • Personal Lines Impact of Catastrophes: Spring and summer storms added 23.8 points to the personal lines combined ratio, which remained just two points above underwriting profitability.
  • Combined Ratio for Reinsurance and Global Segments: Cincinnati Re combined ratio was 82.8% and Cincinnati Global combined ratio was 78.4%; Global’s net written premiums grew 45% from ongoing product expansion.
  • Investment Income: Rose 18%, with bond interest income up 24%, supported by $492 million in fixed-maturity security purchases.
  • Expense Ratio: Property casualty underwriting expense ratio decreased by 1.8 points to 28.6, driven by earned premium growth exceeding expense growth.
  • Cash Flow from Operations: Cash flow from operating activities was $1.1 billion for the first six months of 2025, down $44 million due to $442 million in higher catastrophe claim payments.
  • Book Value per Share: Reached a record $91.46 per share book value (GAAP).
  • Parent Company Cash and Marketable Securities: $5.1 billion at quarter-end.
  • Debt to Total Capital: Debt to total capital remained under 10% at quarter-end.
  • Value Creation Ratio (VCR): 5.2%, with 2.3% from net income before investment gains/losses and 2.9% from higher investment valuations and other items.
  • Commercial Line Renewal Price Increases: Averaged near the high end of the mid-single-digit percentage range; excess and surplus line in the high single-digit range.
  • Reinsurance Program Expansion: Added a $300 million property catastrophe reinsurance layer above $1.5 billion, of which $129 million (43%) was placed with reinsurers at a cost below $5 million.
  • Reserve Development: Net favorable reserve development of $154 million for the first six months of 2025, including $183 million for accident year 2024, $12 million for accident year 2023, and a $41 million unfavorable adjustment for accident years prior to 2023.
  • Dividend Payments: $133 million paid to shareholders; no share repurchases.

SUMMARY

Cincinnati Financial(CINF 0.13%) reported significant top- and bottom-line growth, along with improved operating leverage, reinforced by prudent catastrophe risk management for Q2 2025. Management described stable commercial pricing trends with segmentation efforts contributing to retention of adequately priced business and profit sustainability. The addition of reinsurance layers and comprehensive CAT coverage reflects a proactive approach ahead of hurricane season, addressing geographic and peril aggregation.

  • CEO Spray said, "New business written premiums continued to grow in our commercial, and excess and surplus line segments. However, they decreased by $22 million in our personal line segment in part from a $13 million reduction in California as we slowed growth in some parts of that state."
  • CFO Sewell stated, "That's down $44 million from a year ago, due to $442 million in higher catastrophe loss payments in the first six months of 2025."
  • Management clarified that estimated average renewal price increases for core lines dropped slightly from the prior quarter but remain at 'healthy' levels.
  • It was confirmed that subrogation rights related to California wildfire claims remain unsold.

INDUSTRY GLOSSARY

  • Combined Ratio: The sum of incurred losses and expenses divided by earned premiums, indicating underwriting profitability (below 100% reflects profit).
  • Value Creation Ratio (VCR): Management’s primary measure of long-term shareholder value creation, combining earnings and investment gains as a percent of beginning book value.
  • Spring and Summer Storms: Severe weather events referenced as major contributors to catastrophe losses and ratio volatility in personal lines.
  • Subrogation Rights: The insurer's legal right to pursue recovery from a responsible third party after paying a claim to the policyholder.
  • IBNR: "Incurred But Not Reported" reserves set aside for claims that have occurred but have not yet been reported to the insurer.

Full Conference Call Transcript

Dennis McDaniel: Hello. This is Dennis McDaniel of Cincinnati Financial Corporation. Thank you for joining us for our second quarter 2025 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 investors.cincinnatifinancial.com. The shortest route to the information is the quarterly results section near the middle of the investor overview page. On this call, you'll first hear from President and Chief Executive Officer Steve Spray 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 Executive Chairman Steve Johnston, Chief Investment Officer Steve Soloria, and Cincinnati Insurance's Chief Claims Officer Mark Shambo, and Senior Vice President of Corporate Finance Teresa Hopper. 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.

Steve Spray: Good morning, and thank you for joining us today to hear more about our results. I'm pleased to report strong operating performance. Because we are confident in the long-term direction and strategy of our insurance business, we didn't lose focus after the California wildfires early in the year. We stayed anchored to our agent-centered strategy, continuing to balance profitability and growth. We also continue to benefit from rebalancing our investment portfolio in the second half of last year and reported very strong investment income growth in the second quarter of this year. Our commercial lines and excess and surplus lines insurance segments again produced combined ratios below 93%.

Second quarter 2025 results for Cincinnati Re and Cincinnati Global were also outstanding, each combined ratio below 85%. Spring and summer storms added 23.8 percentage points to our personal lines combined ratio, and its combined ratio was still just two percentage points shy of an underwriting profit for the quarter. The second half of the year is typically more profitable for our personal lines business. Over the past five years, we've seen an average improvement of eight points in the second half of the year for that segment.

Net income of $685 million for the second quarter of 2025 more than doubled our result from a year ago and included recognition of $380 million on an after-tax basis for the increase in fair value of equity securities still held. Non-GAAP operating income of $311 million for the second quarter was up 52%. Our 94.9% second quarter 2025 property casualty combined ratio improved by 3.6 percentage points compared with the second quarter last year despite a one-point increase in catastrophe losses. The 85.1% accident year 2025 combined ratio before catastrophe losses for the second quarter improved by 3.1 percentage points compared with the accident year 2024.

Our consolidated property cash net written premiums grew 11% for the quarter, including 16% growth in agency renewal premiums. New business written premiums continued to grow in our commercial, and excess and surplus line segments. However, they decreased by $22 million in our personal line segment in part from a $13 million reduction in California as we slowed growth in some parts of that state. Steady premium growth and ranch market opportunities prompted us to add an additional layer of $300 million on top of our property catastrophe reinsurance program. Expanded coverage totaling $129 million or 43% of the layer was placed with reinsurers for an estimated seated premium cost of less than $5 million.

We continue to focus on our profitable premium growth objectives that are supported by various efforts, including superior claims service and fostering relationships with the best independent insurance agents in our industry. Our underwriters excel in pricing and risk segmentation on a policy-by-policy basis as they make risk selection decisions. Combining that with average price increases should help us continue to improve our underwriting profitability. Estimated average renewal price increases for most lines of business during the second quarter were lower than the first quarter of 2025 but still at a level we believe was healthy.

Commercial lines in total averaged increases near the high end of the mid-single-digit percentage range and excess and surplus lines was again in the high single-digit range. Our personal lines segment included homeowner in the low double-digit range and personal auto in the high single-digit range. Moving on to highlight second quarter performance by insurance segment, I'll note premium growth and underwriting profitability compared with a year ago. Commercial lines grew net written premiums 9% with an excellent 92.9% combined ratio that improved by 6.2 percentage points including 2.3 points from lower catastrophe losses.

Including growth in middle market accounts and Cincinnati private client, its combined ratio was 102%, 4.9 percentage points better than last year despite an increase of 2.9 points from higher catastrophe losses. Excess and surplus lines grew net written premiums 12% with a nice profit margin. That segment produced a combined ratio of 91.1%, an improvement of 4.3 percentage points. Cincinnati Re and Cincinnati Global each had an outstanding quarter and continue to reflect our efforts to diversify risk and further improve income stability. Cincinnati Re's second quarter 2025 net written premiums decreased by 21%, reflecting pricing discipline, or market conditions softened. Its combined ratio was 82.8%.

Cincinnati Global's combined ratio was 78.4%, along with premium growth of 45% as it continues to benefit from product expansion in recent years. Our life insurance subsidiary had another strong quarter including 8% net income growth. In addition, term life insurance earned premiums grew 3%. I'll end my commentary with a summary of our primary measure of long-term financial performance, the value creation ratio. Our VCR was 5.2% for the second quarter of 2025. Net income before investment gains or losses for the quarter contributed 2.3%. Higher overall valuation of our investment portfolio and other items contributed 2.9%. Now I'll turn it over to Chief Financial Officer, Mike Sewell, for additional insights regarding our financial performance.

Mike Sewell: Thank you, Steve, and thanks to all of you for joining us today. We reported excellent 18% growth in investment income in the second quarter of 2025, reflecting efforts during 2024 to rebalance our investment portfolio. Bond interest income grew 24% and net purchases of fixed maturity securities totaled $492 million for the quarter, and $712 million for the first six months of this year. The second quarter pre-tax average yield of 4.93% for the fixed maturity portfolio was up 29 basis points compared with last year. The average pre-tax yield for the total of purchase taxable and tax-exempt bonds during the second quarter of this year was 5.82%.

Dividend income was up 1% and net purchases of equity securities totaled $56 million for the quarter and $61 million on a year-to-date basis. Valuation changes in aggregate for the second quarter were favorable for both our equity portfolio and our bond portfolio. Before tax effects, the net gain was $480 million for the equity portfolio, and $16 million for the bond portfolio. At the end of the second quarter, the total investment portfolio net appreciated value was approximately $7.2 billion. The equity portfolio was in a net gain position of $7.6 billion while the fixed maturity portfolio was in a net loss position of $458 million. Cash flow in addition to higher bond yields contributed to investment income growth.

Cash flow from operating activities for the first six months of 2025 was $1.1 billion. That's down $44 million from a year ago due to paying $442 million more for catastrophe losses in the first half of this year. As usual, I'll briefly comment on expense management and our efforts to balance expense control with strategic business investments. The second quarter of 2025 property casualty underwriting expense ratio decreased by 1.8 percentage points, primarily due to growth in earned premiums outpacing the growth in expenses. The 28.6 expense ratio contributed to strong results for the quarter but I don't expect it to remain that low in the short term.

There are several factors such as the magnitude and timing of various expenses that can cause variation between quarters. Regarding loss reserves, our approach remains consistent and aims for net amounts in the upper half 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. Then we updated estimated ultimate losses and loss expenses by accident year and line of business. For the first six months of 2025, our net addition to property casualty loss and loss expense reserves was $829 million including $711 million for the IBNR portion.

During the second quarter, years have benefited the combined ratio by 2.6 percentage points. On an all-lines basis by accident year, net favorable reserve development for the first six months of 2025 totaled $154 million including a favorable $183 million for 2024, favorable $12 million for 2023, and an unfavorable $41 million in aggregate for accident years prior to 2023. I'll conclude my comments with capital management highlights. We paid $133 million in dividends to shareholders during the second quarter of 2025. No shares were repurchased during the quarter. We believe both our financial flexibility and our financial strength are stellar. The parent company cash and marketable securities at the end of the quarter was $5.1 billion.

Debt to total capital remained under 10%. And our quarter-end book value was a record high, $91.46 per share. With $14.3 billion of GAAP consolidated shareholders equity providing ample capacity for profitable growth of our insurance operations. Now I'll turn the call back over to Steve.

Steve Spray: Thanks, Mike. We're continuing to follow the same bold vision our founders created 75 years ago. A company built for independent agents. Doing business face to face, handling claims fast, fair, and with empathy. Having the expertise and financial strength to grow through all market cycles, it had value in 1950, it has value today, and I'm confident it will have value for decades to come. As we've been celebrating our anniversary, we've also been recognizing the many associates who contributed to our success. I want to take a moment to thank one of them now. Teresa Hopper will retire in September after 45 years of service.

Her remarkable career includes joining our company as a clerical associate, earning an undergraduate and a graduate degree in the evenings and then advancing through the finance ranks to become an executive officer and treasurer for some of our insurance subsidiaries. Her hard work and dedication have benefited all of us. Thank you, Teresa, for your many years of leadership and friendship. We wish you all the best in this next chapter of your life. As a reminder, with Teresa, Mike, and me today are Steve Johnston, Steve Soloria, and Mark Shambo. Dorwin, please open the call for questions.

Operator: Certainly. Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed, and you would like to withdraw your question, please press star then two. The first question comes from Michael Phillips with Morgan Stanley. Please go ahead.

Michael Phillips: Thanks. Good morning. It's Mike Folchropenheimer. First question, I wanted to parse out some differences in your commentary on the commercial lines real pricing. We're you know, in the press release, you give some commentary. You get a little more detailed by line in the queue. The queue your commentary hasn't changed much. High single digit for commercial casualty, high single digit commercial property. Kinda mid single digit for commercial auto. And that's that's no different than prior quarters, at least not last quarter. This quarter, and Steve said it in your opening comments, you've moved from commercial renewal pricing of high single digit to kind of mid single digit.

I guess, understand the differences between those two commentaries first off, and then it feels like maybe, you know, mid single digit pricing for commercial might be kinda where loss trends are unless you agree with that or not. And so if so, what does that mean for future margin expansion? Thank you.

Steve Spray: Yeah, Mike. You're right. It's kinda nuance there. We're what we're saying on commercial lines is that we've moved to the kind of the high end of the mid single digit. So it's just trying to point out candidly that it just was down a bit from the first quarter, just to again, just for total transparency. One thing that I a couple things I would, I guess, maybe point out while I'm looking at it is the net rich net rate changes remain very strong in commercial lines. To kinda answer the second part of your question, maybe other than workers' compensation, we believe that the rate is at least matching or outpacing loss cost Now, again, that's perspective.

You know, everything we do is perspective on the pricing. The other thing I would point out is if you just look at the results in commercial lines, and we've got now thirteen and a half consecutive years of underwriting profit The ninety two nine here in the six in the first six months And you know, in prior calls, you've heard me talk a lot about the pricing sophistication and the segmentation that our underwriters working with our agents have just been executing on beautifully. And if you think about that book and the performance that we've had there, and moving towards more price adequacy.

I think that's what's putting a little bit of pressure on the overall average net rate change What I focus more on though again is the segmentation. Are we retaining that business that's most adequately priced? And then are we being aggressive working with our agents on the business that we feel needs the most rate action.

Michael Phillips: Okay, Steve. Thank you. That's helpful. Second question that we kinda is related to reserves and maybe specifically commercial casualty. I'm gonna go back to your end data, but kinda couple that with what we've seen so far this year. Where year end, you took some releases and GL in recent accident years, and I think now you're you're sticking a little bit more the recent accident years. Mike said, twenty four favorable, twenty three favorable. I don't know what line that was, but at least in GL, you've taken some favorable development on the recent XNE.

So could I guess, just could you give us comfort in how you can take those releases on the recent accident years for GL I know that might not be too soon. Are you moving things around by accident here? But just some comfort around those recent years for general liability. Thank you.

Mike Sewell: Yeah. This is Mike Sewell. Thanks for the question. You know, I do gain, you know, first of all, a lot of comfort you know, with our reserving process. It's a consistent approach with some of the same actuaries doing the work. And then when I look at the numbers, and I do see it by year, you know, we don't lay it all out exactly, but on the commercial casualty, as you noticed, it was two million favorable. If I'm looking at the accident years, the large piece of it, fourteen million, was favorable for the twenty four. Year. But if I start to look down, twenty three it was basically flat, twenty two, twenty one.

I'll call those two years were flat together. And, you know, going back to the years twenty, and prior, it was reserve strengthening of ten million dollars. So when you take a look at all that, the total reserves that are outstanding on that line, very, very little movement, but it's it's a little bit across the board. But your observation's correct. That there is a little bit more for this quarter that was coming from the most recent current accident year.

Steve Spray: Hey, Mike. Steve Spray. I might just add I agree, obviously, completely with what Mike Sewell just said. But from my seat, well, I've been looking at this, you know, here's my last my first year on the job and even prior to that. Is just and what I appreciate so much is that Mike said the consistent team. And if you kinda just move up a layer, the way I've been looking at it is just the track record that we have as a company. You know, thirty plus years of overall the favorable reserve development. Commercial lines this year in total we've got favorable reserve development.

Every quarter, and I think I talked about this on the last quarter call, Every quarter, in this line or that line, you're gonna see some movement. I guess that's the know, that's the nature of reserving. The thing I most appreciate is that our team here, the consistent team, follows that consistent process And when they see something, they're quick to act. And I think that's what you're seeing. And the prudence that we are carrying with a lot of the uncertainty both in, say, in casualty, and then in commercial auto. You can see the same thing.

Michael Phillips: Okay. Guys. I'll stick to it too. Appreciate your comments. Thank you, Mike.

Operator: Thank you. Our next question is from Mike Zaremski with BMO. Please go ahead.

Mike Zaremski: Hey. Thanks. Good morning. On the expense ratio, which was much better than expected, I believe, Steve, in the prepared remarks. You said that there were some one-time items. So just I guess, is the should we be still thinking that the guide on the expense ratio is kind of try to get below thirty or is there should be run rate some of this better than expected or half of it or just trying to see if there's anything really changed there. Thanks.

Steve Spray: Yeah. No. That's a great question, Mike, and I appreciate that. And so it was a little bit better than what we were probably thinking. But, again, there's there is some timing for some actual expenses. But, really, the large piece of it was and we've been trying to do this, is we've been trying to grow premium growth faster than expense growth. And expenses are going to they're they're gonna go up. And so we watch that very carefully, but in between quarters, you know, you may have certain expenses that might hear hit here or there. But I would say as a run rate, we're we're trying to be below thirty on a ongoing basis.

And, you know, once we're we're there, and I think we're we're kinda right there, I'm gonna set my targets on a twenty nine or below. So we're we're not gonna give up. We're gonna consistently work towards lowering that ratio.

Mike Sewell: Hey, Mike. In Mike, just to add on one data point that Mike mentioned, just to I think, emphasize on the growth. Four out of the last five years as a company overall, we've had double digit

Mike Zaremski: Okay. Got it. I'm sorry. That was Mike in the prepared Got it. Pivoting to just a maybe dual question on commercial lines. The accident year loss ratio in work comp appears to be picked at a much higher level than in recent know, quarters and years. Anything going on there? And then know, I know you guys addressed some of the unfavorable, but, you know, commercial auto continues to be a hot spot for you all, and I feel like for many in the industry as well. So any additional comments you'd like to make on commercial auto as well? Thanks.

Steve Spray: Sure. On work comp, and Mike may wanna add something as well. I just say again, it's just it's a long tail line. It's just our prudent approach there that we've talked about in the past. On commercial auto, it's it's along the lines still kinda what I was saying to on Mike Phillips's question. Earlier is it's just know, it's we are seeing I think the industry that's pretty well documented and we as well. We're seeing more attorney involvement in auto accidents So I think that social inflation, legal system abuse, however you wanna put it, that's putting some pressure on that.

But, again, I kinda move up a layer and just look from quarter to quarter what our actuaries do when they see something and how quickly they act and how that's that's just served us well over time. And I think that's what you've got going on here in commercial auto as well. Matter of fact, the most recent accident year is twenty four and twenty five. Case incurred, paid in case, look really good right now, and you and you can see that. So but we're adding IBNR to it. We're being prudent. There's uncertainty. And so as you have come to expect from us, I think we're taking the appropriate action.

Mike Zaremski: So on workers' comp, just a follow-up, you know, that's a big change in the PIC. So one of your you know, peers who also has a lot of contractors is, you know, maybe said that frequencies become less of a good guy. Is any just anything there, thank you.

Steve Spray: Yeah. No. I can't say we've seen anything different in the way of frequency there, Mike. But as you know, yeah, our con our commercial book is you know, we write a lot of construction. But if you look at our workers' compensation premiums, as a total, of our commercial. It's just you know, it's like, it's six, eight percent of our total commercial lines business. So probably has a less little less impact than maybe some of the peers that you follow.

Mike Zaremski: Thank you.

Operator: Thank you. Our next question comes from Craig Peters with Raymond James.

Craig Peters: Thank you. Good morning, everyone. Can let's let's pivot over to the personal lines business. And you know, I you called out in your script and in the release some changes that are happening inside your private client business Maybe you can give us a an idea where you know, as this reset continues, where it's gonna where the final rest spot is, if you will, in terms of your expectations on exposures in California and elsewhere.

Steve Spray: Yeah. Sure. Thanks, Greg. Appreciate it. First thing I would say, I is I feel confident saying we'll do everything we can to support our California agents and policyholders. And as I mentioned in you know, since the wildfires occurred in the first quarter, like we do on any large loss, individual event or catastrophe. We do a deep dive and objectively look at any lessons learned. So I think it's fair to say that we've got lessons learned out of California, and we're already implementing some of those some of those actions right now.

You know, without getting into a lot of detail, I would say, you know, you can it's it's again, it's fair to say or safe to say it's a round model. Recalibration. Around aggregation, and just our view of risk. So again, I feel confident that we're gonna be able to do everything we can to support a lot of great California policyholders we have and the great agents plant that we have there.

Craig Peters: Related to that, you talked about you know, the reinstatement costs. Going through your personal lines business. After recoveries I'm curious on the recovery piece. Is did you sell your sovereign rights or where would you know, because their portion of that fire is looks like it's gonna rest with some of the liability rest with the utility.

Steve Spray: Yeah. I would just answer that we have not sold our subro rights.

Craig Peters: Got it. Okay. Hey. In your prepared remarks, you talked about some changes to or some additional reinsurance you bought And can we go back to your comments on the reinsurance? And I guess the reason why I'm asking is just trying to put all the pieces together as we go into the hurricane season and what I should think about you know, the potential you know, or event exposure your company might have. Because it sounds like you bought some additional cover on you know, to raise the extended tower Just give us a remind me of the summary version of what's going on there.

Steve Spray: Yeah. Absolutely. Again, Steve Spray. So what we did is we purchased at seven one. We purchased an additional three hundred million dollars x of one point five billion on the on top of the property cat reinsurance program, very consistent with our approach we look at the property cat reinsurance The way we approach that is for balance sheet protection. We just felt with the growth that we've we've talked about here this morning, good growth, that it was prudent especially in this marketplace where we thought it was attractive. To go out and try to purchase some more on top. We went out you know, it's a it's a subscription market.

So we went out with a, I think, with an aggressive rate. I think we filled said a hundred and twenty nine million of the three hundred or forty three percent of it. So that's kind of the story there. And then on California, on the primary business, we as it stands now, we've used about half of that property cat the one point five billion pre sub one excuse me, seven one and reinstated those layers So those layers are there for the remainder of the year.

Craig Peters: And just and then for the that's the California piece. What's your net Can you remind me what your net retention is on the on just the hurricane risk, you know, when you think about southeast and gulf coast exposures. On a per event basis, And just one other Yeah. I assume on the on the cap bond, the additional layer you bought that, you said subscription. So that wasn't done through that those wasn't done through the cap bond market. Correct? That was done traditional risk transfer?

Steve Spray: Yeah. That was traditional reinsurance. On the three hundred x of one point five billion. And then on the yeah. So you had mentioned you were you were kinda bifurcating wild Fire. And hurricane property Yeah. Got much of it. Is an old Yeah. Yeah. It's an all peril that's an all perils contract. Greg, and we have a three hundred million dollar retention on that. So whether it's wildfire, whether it's severe convective storm, earthquake, or hurricane, as an example, we have a three hundred million dollar retention, but those perils all apply to that property cat. Treaty.

Craig Peters: Got it. Thanks for the clarifications.

Steve Spray: Yeah. My pleasure. Thanks for the question.

Operator: Our next question comes from May Yaw with KBW. Please go ahead.

May Yaw: In large trend you can call out Over the recent period. Any color you can add will be great. Thank you.

Steve Spray: Yeah. No. I don't think that we have anything to report back on any change in the loss trend up or down during the quarter. But thank you for the question.

May Yaw: Got it. My second question is the growth. The commercial property still have decent return. Property rates now soften and casualty rates are set rate. How do you view the relative growth prospect between property and casualty?

Steve Spray: Yeah. Sure. Thank you. You know, we're we're a package writer. As a company. And when we work with our agents, The other thing I think you're hearing a lot in the marketplace about a softening property market. And we're seeing that too on really large properties We're seeing it probably most prevalently in our Lloyd Syndicate in CGU out of London. They do a lot of direct fax shared and layered. Business. So that's that business we're seeing some pressure on. But our small to middle market you I commercial package business and commercial property business you know, we're we're still seeing healthy rate there.

And I think that's because I know, the things that you that you see when you turn the TV on at night, severe convective storms, haven't let up. So that's keeping pressure on property. Social inflation, legal system abuse, that's keeping pressure on general liability umbrella as well as auto liability. So you know, we're still seeing healthy net rate for our mix of business. And what we do.

May Yaw: Yeah. Thank you for the color.

Steve Spray: Yeah. Thank you.

Operator: The next question is from Josh Shanker with Bank of America. Please go ahead.

Josh Shanker: Yeah. Thank you. First of all, looking at the growth, particularly in commercial, among other companies that report, I think you're the first company report accelerating growth in the second quarter versus the first quarter. I don't know if that's a trend. But can you talk about what you're doing? Is this taking a larger share in agencies that you already have? Is this the newer agencies you've appointed? Is this, lines of business that you are finding you can under right now that you didn't have that capability in the past?

Steve Spray: Yeah. Thank you, Josh. I think it's everything we do around here is an a and strategy, so I think it's all of the above. You know, we've got such deep relationships with all their agents we do business with. But you're right. We've been adding high quality agencies at a at a faster clip there's no doubt that is that is certainly accelerating both the net written premium growth as well as our new business. You know, our E and S company continues to grow. We've added five new products at Lloyds, that we just for agents of Cincinnati Insurance Company as they come through our in house broker c super.

So I think we just have a lot of we have a lot of good momentum with our agents We keep focused on what we do well, Josh, blocking and tackling, one account at a time, calling on agents, doing business face to face, It's just all really goes to it, and it's it's it's just been continuing to pick up momentum.

Josh Shanker: And pivoting to reinsurance you bought more, obviously, and you sold less. Can you talk about what your inbound reinsurance strategy is gonna be going forward? And two, if we replayed one q twenty five, has anything changed about your exposures that you'd have a different outcome?

Steve Spray: Okay. On Scentsy Re, first thing I would say is they are executing exactly as we want them to. You know, it's a it is a it's it's an assumed model. An allocated capital model they are they're seeing they're seeing pricing in the marketplace that they don't feel from their view of risk, is where they want it to be. So they have they've pulled back underwriting discipline. About half of the I guess, of the pullback is coming from property and the other half is coming from casual. So pretty balanced. But, you know, their inception to date combined ratio, which is what we focus most on, Josh, was is ninety five point two.

That's on about three and a half billion dollars of premium. So they're executing exactly the way we designed from the get go. And the way that we've that we plan on doing it going forward as well. And know, when we when we feel that things are opportunistic, they'll grow it. And if we don't feel we can get the risk adjusted return, then there may be some quarters when they when they back off.

Josh Shanker: Has is the shape of the portfolio today notably different than it was six months ago, such that the California Wild Fresh have a different result.

Steve Spray: No. Not it's not at this point. If you're talking about the primary business, I think, on the homeowner, that's probably the part that's on the Selling less and buying more. Yeah. I would say right now, at for the last six months, it would be it'd be little changed.

Josh Shanker: Okay. Thank you.

Steve Spray: Yeah. Thank you, Josh.

Operator: Again, if you have a question, please press star then one. We have a follow-up question from the line of Mike Zaremski with BMO. Please go ahead.

Mike Zaremski: Hey. Great. Thanks for taking the follow-up. Back to the competitive marketplace commentary, You know, on the property market specifically, you mentioned that, you know, your colleagues in the Lloyd Syndicate and CGU are, you know, seeing you know, meaningful competitive pressures there in property. Do you or they have a view on, you know, assuming a normal I guess, weather season, whether, like, the rate of decline should dissipate, or do you have any kind of forward looking view on whether this level of competition kind of makes sense? And, you know, you're just profits are becoming less healthy, or is it irrational?

Steve Spray: Yeah. I don't know if I you know, there's a lot of capacity that's come in A lot of capital has come into that space, Mike. I don't know if I would be able to opine on going forward. I would say that, again, the discipline you look at the results we've gotten out of CGU, just a ton of confidence in the way they're underwriting all lines of business. But for what we're talking about here direct and fact. And, you know, the other thing that CGU has been doing since inception is just they've really reshaped that book too. We've The diversifying both geographically and then by product line, has been quite impressive.

And I think that's going to that's gonna bode well for us into the future. And that's a big reason why you saw the growth that we've seen at CGU here in the first half of the year.

Mike Zaremski: Got it. And a follow-up to back to the competitive environment, on the, kinda core package, part of your portfolio. You know, I think you painted a picture of you know, it's a lot of things, but, ultimately, there's just there's a good amount of inflation in the system between weather and social, etcetera. So you know, it sound like you're you don't feel like we're gonna enter a soft marketplace. I guess the you know, some of the data points and some of the investors are voting that, you know, there is the potential for a soft market. And I think it's just off the backs of carrier profitability being excellent.

Which is, you know, also intertwined with interest rates. So any additional comments you'd wanna make on in terms of just kind of why the SME market probably would be less likely to follow the pace of what you're seeing in the syndicated kind of property market.

Steve Spray: Yeah. The only thing I would the only thing I would say there is I'll speak for Cincinnati Insurance Company and in my thirty four years here. I think the concept of a rising or lowering tide, raising or lowering all boats it for us, it's just it's not in the dialogue. It's risk by risk. It is it is using the subjective the subjective art, I guess you could say, of underwriting both for our new business field underwriters out in the field working with our agents face to face looking at the risks, And then the same thing with our renewal underwriters. Then I'll go back to kinda what we talked about earlier.

You know, it's it's risk by risk when it comes to pricing. And we're using sophisticated tools We are using our actuarial team and the data And if you look at our commercial lines results, the feel pretty good right now. And so that's what's probably what's putting pressure a little bit on the net rate change. That being said, you can still see we're getting good rate through there for all the reasons I think you mentioned social inflation. Weather, you know, along those lines.

But I just you know, I'm not saying that other carriers aren't gonna have a different view of a risk And if they do, we're just so confident in the way we're pricing and the way we're underwriting that we'll have to make a decision risk by risk. If somebody takes a different view and it's know, it's considerably less than ours or where we don't think we can make a risk adjusted return, then we're walking away. And we've been executing on that I just have to give a shout out to our underwriters and our field reps. They have been executing on that, working with our agents, beautifully now for candidly, the last twelve or thirteen years.

So but adding agencies continuing to build out our E and S operation, continuing to give our agents more access to Lloyd's, to more efficient, more effective access to Lloyd's. Growing personal lines, getting it profitable, just feel really good about where we are and where we're heading. Stay we're gonna stay focused.

Mike Zaremski: Appreciate it. Thank you.

Operator: Thank you, Mike. This concludes our question and answer session. I would like to turn the conference back over to Steve Spray for any closing remarks.

Steve Spray: Thank you, Dorman, and thank you all for joining us today. We look forward to speaking with you again on our third quarter call.

Operator: Thank you. Conference has now concluded. Thank you for attending today's presentation. You may now disconnect.