Cincinnati Financial Corp. (NASDAQ:CINF) Q3 2018 Earnings Conference Call Transcript
Oct 26, 2018 • 11:00 am ET
Good morning. My name is Michelle, and I will be your conference operator today. At this time I would like to welcome everyone to the Third Quarter 2018 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions)
I would now like to turn the call 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 third 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 the quarterly results link in the navigation menu on the far left. On this call, you'll first hear from Steve Johnston, President and Chief Executive Officer; and then from 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 Chief Investment Officer, Marty Hollenbeck; and Cincinnati Insurance's Chief Insurance Officer, J.F. Scherer; Chief Claims Officer, Marty Mullen; Senior Vice President of Commercial Lines, Steve Spray; and Senior Vice President of Corporate Finance, Theresa Hoffer.
(Forward-Looking Cautionary Statement)
Now, I'll turn over the call to Steve.
Good morning, and thank you for joining us today to hear more about our third quarter results. Net income for the third quarter of 2018 was more than 5 times the same period a year ago. Approximately three quarters of the growth in net income again reflected variability related to this year's new accounting requirement for changes in the fair value of equity securities. About 1/8th of the increase was from other nonrecurring items generally related to taxes. And Mike will comment further on that in a moment. The remaining growth in net income largely reflects improved underwriting results despite higher catastrophe losses and is reflected by our improving property casualty combined ratio and 41% growth in non-GAAP operating income.
Our 96.8% combined ratio for the third quarter of this year was 2.5 points better than a year ago and is the result of several factors including ongoing benefits by diversifying our business in recent years. Our commercial line segment experienced another good quarter with a combined ratio of near 95%. Importantly, we're seeing signs of improvement in paid loss cost trends for our commercial casualty line of business. The paid ratio for the first nine months of 2018 was almost 2 percentage points lower than the same period a year ago.
While we're currently maintaining a prudent amount of IBNR reserve for that line particularly for accident year 2018. We were comfortable with releasing some reserves for older accident years largely accident years 2016 and prior. We continue to take a careful approach to growing our