Cincinnati Financial Corp (CINF) Q1 2025 Earnings Call Highlights: Navigating Catastrophe …

Q: Can you confirm if there were any reserve movements in commercial casualty and if lower emergence on known claims was mainly property-related? A: Yes, there was $1 million of favorable development in commercial casualty, with no significant movements between accident years. The lower emergence was indeed property-related. – Michael Sewell, CFO

Q: How much of the California wildfire claims are still open, and how do you view the risk of these open claims? A: We’ve paid about 65% of the gross claims, amounting to $488 million. The net loss from the California wildfires is at the low end of our range, $449 million. We are collecting reinsurance on the rest. – Michael Sewell, CFO

Q: How do tariffs impact your overall book, particularly concerning the California fires? A: Tariffs are a macro pressure, but Cincinnati is prepared to respond. We have a history of prudent reserving and sophisticated pricing tools to manage such impacts. – Stephen Spray, CEO

Q: Is there a structural response to tariffs, given your three-year contracts in commercial lines? A: About 75% of our commercial lines premiums are adjusted annually. We have tools to segment and price business effectively, even with three-year policies. Exposures are adjusted annually, which helps manage tariff impacts. – Stephen Spray, CEO

Q: Given the significant catastrophes early in the year, is Cincinnati considering buying additional reinsurance? A: We reinstated our property cat reinsurance tower after the first event and currently have no plans to purchase additional reinsurance. We regularly evaluate capital management strategies. – Stephen Spray, CEO

Q: Is reinsurance still a diversifier given recent volatility and potential declines in property cap pricing? A: Yes, reinsurance remains core to our strategy. Despite volatility, our inception-to-date combined ratio for Cincinnati Re is 95.8, providing diversifying revenue and profit streams. – Stephen Spray, CEO

Q: How does appointing new agencies impact Cincinnati Financial’s culture? A: We appoint high-quality agencies aligned with our values, maintaining a family feel. Our regional approach and local presence ensure that new agencies receive the Cincinnati experience, fueling future growth. – Stephen Spray, CEO

Q: Are you seeing increased competition in larger accounts and specialty lines? A: Yes, larger accounts face more competition, but the commercial market remains rational. Our Lloyd’s syndicate experiences pressure in shared and layered markets, but we maintain underwriting discipline. – Stephen Spray, CEO

Q: What are the trends in commercial auto reserves and any reserve issues? A: We had $7 million of reserve strengthening in commercial auto due to higher-than-expected loss emergence from 2019-2021. Overall, we had $91 million of favorable development, spread across various lines. – Michael Sewell, CFO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.


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