Cincinnati Financial CEO Calls Slower Growth 'Normalization,' Pledges 'Profit First'
Steve Spray points to a doubled premium base while conceding the most pressure sits in larger commercial accounts.
Cincinnati Financial's slowdown in premium growth is "more of a normalization from really exceptionally strong growth," not a reversal, CEO Steve Spray said on the insurer's third-quarter earnings call. Consolidated property casualty net written premiums grew 2% in the quarter, and Spray said the company will not chase volume: "it is profit first."
Growth slows, profits hold
Cincinnati Financial, an insurance holding company that sells property casualty coverage through independent agencies, posted net income of $459 million for the quarter. Non-GAAP operating income, an adjusted measure, was $443 million, down $6 million from a year earlier despite catastrophe losses $146 million higher after tax, Spray said.
The property casualty combined ratio, a measure of underwriting profit where lower is better, rose 2.7 percentage points to 90.9%, including 7.0 points from catastrophe losses. By segment, commercial lines premiums grew less than 1%, personal lines 1%, and excess and surplus lines 5%. Cincinnati Re grew 34% and Cincinnati Global 13%.
Spray said average renewal price increases were lower than in the second quarter: low single digits for commercial and excess and surplus lines, high single digits for homeowners and mid single digits for personal auto.
Doubled premiums, and where pressure bites
Spray said new business dollars remain strong in absolute terms. Personal lines net written premiums doubled over four years and tripled over ten, he said, and company net written premium doubled from the end of 2018 to 2025. The five-year compound annual growth rate was 10.4%, and 8.6% over ten years.
Asked by an analyst at Raymond James where competition bites, Spray said pressure rises with account size in commercial lines. Small to midsize business is competitive but still seems rational, he said. He offered no formal growth guidance, saying the focus is agent relationships and broader products.
He told an analyst at BMO Capital Markets that about 60% of personal lines is now high net worth, and that private client business will become a bigger share of what the company does.
Three-year policies as a cushion
More than half of commercial package policies are on three-year terms, Spray said, with rates locked on property, general liability, crime and inland marine. He said that protects the company in a down market.
Spray also said AI processing of emailed new business submissions speeds quote delivery by more than 30% in commercial and excess and surplus lines. Chief Financial Officer Mike Sewell said parent company cash and marketable securities was $6.1 billion, book value was $105.42 per share, and the quarterly value creation ratio was negative 2.1%, hurt by bond valuations as rates rose.
Chief Claims Officer Mark Shambo, whom Spray thanked for nearly 40 years of service, is retiring in January; the call was his last.
Sources
- Cincinnati Financial (CINF) Q3 Earnings: How Key Metrics Compare to Wall Street Estimates — Yahoo Finance
- Document — sec.gov
- Cincinnati Financial (CINF) Q3 Earnings Top Estimates — Yahoo Finance
- Cincinnati Financial: Q3 Earnings Snapshot | wusa9.com — Associated Press
- Cincinnati Financial (CINF) Dividend Outlook Draws Focus, Is The Stock Still Undervalued? — Yahoo Finance
