Good day, and welcome to the Cincinnati Financial Corporation Second Quarter Earnings Conference Call. Please note this event is being recorded. I'd now like to turn the conference over to Dennis McDaniel, Investor Relations Officer. Please go ahead.

Hello. This is Dennis McDaniel at Cincinnati Financial. 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.cinfin.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, Marc Schambow; and Senior Vice President of Corporate Finance, Theresa Hoffer. 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.

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 with a 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 2 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 8 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 second quarter last year despite a 1 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 accident year 2024. Our consolidated property casualty 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 lines segment, in part from a $13 million reduction in California as we slowed growth in some parts of that state. Steady premium growth and reinsurance 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 ceded 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. Personal lines grew net written premiums 20%, 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 where 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.

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 '25, reflecting efforts during 2024 to rebalance our investment portfolio. Noninterest income grew 24%, and net purchases of fixed maturity securities totaled $492 million for the quarter and $712 million for the first 6 months of this year. The second quarter pretax average yield of 4.93% for the fixed maturity portfolio was up 29 basis points compared with last year. The average pretax yield for the total of purchased 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 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 update 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, we experienced $63 million of property casualty net favorable reserve development on prior accident years that 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 '25 totaled $154 million, including a favorable $183 million for '24, favorable $12 million for '23 and an unfavorable $41 million in aggregate for accident years prior to '23. 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.

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've contributed to our success. I want to take a moment to thank one of them now. Theresa Hoffer 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, Theresa, 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 Theresa, Mike and me today are Steve Johnston, Steve Soloria, and Marc Schambow. Dorman, please open the call for questions.

The first question comes from Michael Phillips with Morgan Stanley.

It's Mike Phillips from Oppenheimer. First question, I wanted to parse out some differences in your commentary on the commercial lines renewal pricing, where in the press release, you gave some commentary, and you give a little more detail by line in the Q. In the Q, your commentary hasn't changed much, high single digit for commercial casualty, high single digit for commercial property, kind of mid-single digit for commercial auto. And 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 I understand the differences between those two commentaries first off. And then it feels like maybe mid-single-digit pricing for commercial might be kind of where loss trends are. I don't know if you agree with that or not. And so if so, what does that mean for future margin expansion?

Yes, Mike, you're correct. It's somewhat complex. In commercial lines, we've reached the higher end of the mid-single digits. I want to be transparent that this represents a slight decline from the first quarter. I’d like to highlight a couple of points: net rate changes in commercial lines remain very robust. Regarding your second question, except for workers' compensation, we believe that the rates are at least keeping pace with or exceeding loss costs. This is a forward-looking perspective on pricing. Additionally, our commercial lines have achieved 13.5 consecutive years of underwriting profit, with a 92.9% combined ratio in the first half of the year. In previous discussions, I’ve emphasized the pricing sophistication and segmentation that our underwriters, in collaboration with our agents, have been executing excellently. Considering the performance in this area and our movement toward improved price adequacy, this has slightly pressured the overall average net rate change. Ultimately, my focus is on segmentation: are we retaining the business that is priced appropriately, and are we proactively collaborating with our agents on the accounts that require the most rate adjustments?

Okay, Steve. That's helpful. Second question kind of is related to reserves and maybe specifically commercial, casualty. I'm going to go back to year-end data, but kind of couple that with what we've seen so far this year, where at year-end, you took some releases in GL in recent accident years. And I think now you've taken a little bit more in the recent accident years. Mike said 2024 favorable, 2023 favorable. I don't know what lines that was, but at least in GL, you've taken some favorable development in the recent accident years. So I guess just could you give us comfort on how you can take those releases in the recent accident years for GL? I know that might not be too soon. Are you moving things around by accident year, but just some comfort around those recent accident years for general liability.

Yes. This is Mike Sewell. Thanks for the question. I do gain, first of all, a lot of comfort 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, we don't lay it all out exactly. But on the commercial casualty, as you noticed, it was $2 million favorable. If I'm looking at the accident years, the large piece of it, $14 million was favorable for the 2024 year. But if I start to look down, 2023, it was basically flat, '22, '21, I'll call those two years were flat together. And going back to the years 2020 and prior, it was reserve strengthening of $10 million. So when you take a look at all that, the total reserves that are outstanding on that line, very little movement, but it's a little bit across the board. But your observation is correct that there is a little bit more for this quarter that was coming from the most recent current accident year.

I want to express my agreement with what Mike Sewell mentioned. From my perspective, considering my first year in this role and my previous experience, I've come to value the consistent process and team we have in place. Looking at our track record as a company, we have over 30 years of positive reserve development. In commercial lines this year, we have seen favorable reserve developments every quarter. I believe I mentioned this in the last earnings call; while there is always some fluctuation quarter to quarter within our lines, I greatly appreciate that our team adheres to a consistent process and is quick to respond when necessary. This reflects our prudent approach amidst the uncertainties in sectors like casualty and commercial auto.

Our next question is from Mike Zaremski with BMO.

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, should we be still thinking that the guide on the expense ratio is kind of trying to get below 30%? Or should we run rate some of this better than expected or half of it? Or just trying to see if there's anything really changed there.

Yes, that's a great question, Mike, and I appreciate it. It was a bit better than we anticipated. However, there is some timing related to actual expenses. The main focus has been to grow premium growth faster than expense growth. While expenses are expected to rise, we monitor that closely. There may be certain expenses that fluctuate between quarters. As a general expectation, we aim to maintain an expense ratio below 30% consistently. Once we achieve that, I'm targeting 29% or lower. We are committed to working diligently towards reducing that ratio.

Mike, just to add on one data point that Mike mentioned, just I think, emphasize on the growth. Four out of the last five years as a company overall, we've had double-digit net written premium growth. And the one year we didn't was at 9.5%. So that is certainly, as Mike pointed out, that's helping the cause.

Okay, got it. I'm sorry, that was Mike in the prepared remarks that made the expense ratio comments. Got it. So operating leverage is key. Got it. Pivoting to just maybe a 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 quarters and years. Anything going on there? And then I know you guys addressed some of the unfavorable, but commercial auto continues to be a hotspot 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?

Sure. On workers' compensation, it's a long-term line, and we continue to take a prudent approach as we've discussed previously. Regarding commercial auto, we're observing an increase in attorney involvement in auto accidents, which is well recognized in the industry. This trend, often referred to as social inflation or legal system abuse, is creating some pressure. However, I prefer to focus on how our actuaries respond to these developments quarter by quarter and how effective that has been for us historically. In fact, for the most recent accident years, '24 and '25, the incurred cases are looking quite favorable. That said, we are also increasing our Incurred But Not Reported (IBNR) reserves as a precaution due to the existing uncertainty. As always, we are taking the necessary measures.

So on workers' comp, just a follow-up, that's a big change in the pick. So one of your peers who also has a lot of contractors maybe said that frequency has become less of a good guy. Just anything there?

Yes, I can't say we've noticed any significant change in frequency. Our commercial book includes a substantial amount of construction, but when you consider our workers' compensation premiums relative to our total commercial lines business, they only account for about 6% to 8%. Therefore, this likely has less impact compared to some of our peers.

Our next question comes from Greg Peters with Raymond James.

Let's shift our focus to the personal lines business. You mentioned in your script and in the release some changes occurring within your private client business. Could you provide some insight into where this reset is heading and what your expectations are for exposures in California and other regions?

Yes, thanks, Greg. I want to express my confidence in our commitment to support our California agents and policyholders. Since the wildfires in the first quarter, we have conducted a thorough review to identify any lessons learned, as we do after any significant event. It's clear that we have gained insights from the situation in California, and we are already taking action based on those findings. Without going into too much detail, I can say that our focus is on model recalibration, aggregation, and our overall perspective on risk. I am confident that we will do everything possible to support our valuable California policyholders and the agency network we have in that region.

You mentioned the reinstatement costs related to your personal lines business following recoveries. I'm interested in the recovery aspect. Did you sell your subrogation rights? Or is it the case that part of the responsibility for that fire will remain with some of the liability tied to the utility?

Yes. I would just answer that, that we have not sold our subro rights.

Got it. In your prepared remarks, you mentioned some changes to the additional reinsurance you acquired. Can we revisit your comments on the reinsurance? I'm asking because I'm trying to piece together everything as we approach hurricane season and what I should consider regarding the potential per event exposure your company might face. It seems you obtained additional coverage to extend the tower. Could you remind me of the summary of what's happening there?

Yes, certainly. Steve Spray here. On July 1, we acquired an additional $300 million of reinsurance on top of our $1.5 billion property catastrophe program. This aligns with our strategy for balance sheet protection. Given the positive growth we've discussed, we deemed it wise to secure more coverage, particularly in the current favorable market. We entered a subscription market with what I believe was a competitive rate and successfully filled $129 million of the $300 million, which is about 43%. Regarding California's primary business, we have utilized approximately half of that $1.5 billion property catastrophe reinsurance, specifically $71 million, and we have reinstated those layers, which will remain in place for the rest of the year.

And just for the California piece, can you remind me what your net retention is on the hurricane risk, particularly regarding Southeast and Gulf Coast exposures on a per event basis? Additionally, I assume the additional layer you purchased was through subscription and not through the cat bond market, correct? That was done via traditional risk transfer.

Yes, that was traditional reinsurance on the $1.5 billion limit. Regarding the bifurcation of wildfire and hurricane, it is indeed an all-perils contract, Greg, and we have a $300 million retention on that. Whether it's wildfire, severe convective storm, earthquake, or hurricane, we maintain a $300 million retention, and these perils all fall under that property catastrophe treaty.

Our next question comes from Meyer Ya with KBW.

This is Jing Li asking on behalf of Meyer. I would like to follow up on the loss trend. Have you noticed any changes in the loss trend recently, either an increase or decrease? Any additional insights would be appreciated.

Yes. 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.

Got it. My second question is on the growth. So commercial properties still have decent return. Property rates now softened and casualty rates accelerate. How do you view the relative growth prospect between property and casualty?

Yes, sure. Thank you. We're a package writer as a company 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's syndicate and CGU out of London. They do a lot of direct fact shared and layered business. So that's that business, we're seeing some pressure on. But our small to middle market commercial package business and commercial property business, we're still seeing healthy rate there. And I think that's because the things 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 we're still seeing healthy net rate for our mix of business and what we do.

The next question is from Josh Shanker with Bank of America.

First of all, looking at the growth, particularly in commercial, among other companies that have reported, I think you're the first company to 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 underwrite now that you didn't have that capability in the past?

Thank you, Josh. Everything we do here is part of a strategy. It's a combination of various factors. We have strong relationships with the agents we work with, and you are correct that we have been adding high-quality agencies at an increasing pace. This is certainly contributing to the growth of our net written premiums and our new business. Our Excess and Surplus lines company is also growing. We've introduced five new products through Lloyd's that are exclusive to agents, particularly through our in-house broker, C-SUPR. We have significant momentum with our agents, and we remain focused on our strengths, approaching one account at a time, meeting with agents, and conducting business face-to-face. This approach has been gaining momentum.

And pivoting to reinsurance, you bought more, obviously, and you sold less. Can you talk about what your inbound reinsurance strategy is going to be going forward? And two, if we replayed 1Q '25, has anything changed about your exposures that you would have a different outcome?

Okay. On Cinci Re, first thing I would say is they are executing exactly as we want them to. It's an assumed model, an allocated capital model. 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'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 casualty. So pretty balanced. But their inception to date combined ratio, which is what we focus most on, Josh, is 95.2%. That's on about $3.5 billion of premium. So they're executing exactly the way we designed from the get-go and the way that we plan on doing it going forward as well. And 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 back off.

Has the shape of the portfolio today notably different than it was 6 months ago, such that the California wildfires would have a different result?

No, not at this point. You're talking about the primary business, I think, on the homeowner, but that part of that...

We have a follow-up question from the line of Mike Zaremski with BMO.

Back to the competitive marketplace commentary. On the property market specifically, you mentioned that your colleagues in the Lloyd's syndicate and CGU are seeing meaningful competitive pressures there in property. Do you or they have a view on 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're just profits are becoming less healthy? Or is it irrational?

Yes, I can't provide a definitive opinion on the future given the significant capacity and capital influx into the market. However, I have a lot of confidence in the results we've seen from CGU and their underwriting across all business lines. CGU has been actively reshaping their portfolio, diversifying geographically and by product line, which has been impressive. This strategy is likely to benefit us moving forward, and it's a key factor in the growth CGU has experienced in the first half of the year.

Got it. As a follow-up regarding the competitive environment surrounding your core package offerings, it seems you've indicated that while there are various factors at play, there is significant inflation present in the system due to weather and social issues. It appears that you don't anticipate entering a soft marketplace. However, some data points and perceptions from investors suggest a potential for a softer market, likely influenced by strong carrier profitability linked to interest rates. Do you have any further insights on why the SME market might be less inclined to mirror the trends observed in the syndicated property market?

Yes. Speaking from my 34 years at Cincinnati Insurance Company, I believe the idea that a rising or falling tide affects all boats doesn't apply in our situation. It's about assessing risks individually. We focus on the subjective aspect of underwriting, with our field underwriters engaging face-to-face with agents to evaluate risks, as well as with our renewal underwriters. As mentioned earlier, our pricing approach remains risk-focused, utilizing advanced tools, our actuarial team, and precise data to segment our portfolio. If you review our commercial lines results, you'll find that price adequacy aligns closely with those outcomes. We feel confident about the pricing in that commercial segment. However, this approach may slightly affect the net rate change. Nonetheless, we are still able to achieve good rates for various reasons, including social inflation and weather factors. While other carriers might have different risk assessments, we trust our pricing and underwriting strategies and will decide on each risk independently. If another carrier's assessment is significantly lower than ours and we believe we cannot secure a risk-adjusted return, we will choose to walk away. Our underwriters and field representatives have successfully implemented this strategy alongside our agents over the past 12 to 13 years. Additionally, we are expanding our agencies, enhancing our Excess and Surplus operations, and providing our agents with improved access to Lloyd's, all while working toward profitability in personal lines. We feel great about our current position and direction and remain committed to our focus.

This concludes our question-and-answer session. I would like to turn the conference back over to Steve Spray for any closing remarks.

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

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.