Cincinnati Financial Corp. (NASDAQ:CINF) Q2 2018 Earnings Conference Call - Final Transcript

Jul 27, 2018 • 11:00 am ET

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Cincinnati Financial Corp. (NASDAQ:CINF) Q2 2018 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Good morning. My name is Emily and I will be your conference operator today. At this time, I would like to welcome everyone to the second quarter 2018 earnings conference call. (Operator Instructions).

Mr. Dennis McDaniel, Investor Relations Officer. You may begin your conference.

Executive
Dennis McDaniel

Hello. This is Dennis McDaniel at Cincinnati Financial. Thank you for joining us for our second quarter 2018 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 cinfin.com/investors. The shortest route to the information is a quarterly results link in the navigation menu on the far left.

On this call, you will first hear from Steve Johnston, President and Chief Executive Officer; and then from Chief Financial Officer, Mike Sewell. After their prepared remarks, investors participating in the call may ask questions. At that time, some responses may be made by others in the room with us, including Chairman of the Board, Ken Stecher; Chief Investment Officer, Marty Hollenback; and Cincinnati Insurance's Chief Insurance Officer, J.F. Scherer; also Chief Claims Officer, Marty Mullen and Senior Vice President of Corporate Finance, Teresa Hopper. (Forward-Looking Cautionary Statements)

And now, I will turn the call over to Steve.

Executive
Steve Johnston

Good morning. And thank you for joining us today to hear more about our second quarter results. Net income for the second quarter of 2018 more than doubled the same period a year ago. While this year's new accounting requirement for changes in the fair value of equity securities represented a large portion of the increase operating income, which is independent of that change also rose significantly up 24%.

Our 97.2% property, casualty combined ratio for the second quarter of this year was 1.1 (ph) points better than a year ago and reflected benefits of diversifying our business in recent years. Our commercial lines segment experienced a combined ratio below 95%. Our excess and surplus lines segment and Cincinnati Re had excellent results each with the second quarter 2018 combined ratio below 80%.

Our life insurance subsidiary also had an excellent quarter reporting a 42% increase in net income or 31% on an operating income basis. Our personal line segment reported a down quarter reflecting reserve increases in part due to a 53% year-to-date increase and large losses of $1 million or more per claim.

Our all lines accident year 2018 combined ratio before catastrophe losses is roughly 2 points higher than accident year 2017, both measured as of June 30 of the respective accident year. However, on a paid basis, the ratio is nearly the same for each of those two periods.

Despite that fairly stable level of paid amounts experienced by each of our major lines of business management's best estimate of ultimate loss and loss expense ratios and related reserves maintains a prudent amount of IBNR including elevated levels for two lines in particular, homeowner and commercial casualty. As more data