Q1 2026 Earnings Call Transcript

Good day, ladies and gentlemen, and thank you all for joining us for this Cincinnati Financial Corporation First Quarter 2026 Earnings Conference Call. Today's session is also being recorded. It is now my pleasure to turn the floor over to Investor Relations Officer, Dennis E. McDaniel. Welcome, Dennis.

Hello. This is Dennis E. McDaniel at Cincinnati Financial Corporation. Thank you for joining us for our First Quarter 2026 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.synthin.com. The shortest route to the information is the quarterly results section near the middle of the investor overview page. On this call, you will first hear from president and chief executive officer, Stephen Michael Spray, and then from executive vice president and chief financial officer, Michael James 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 Steven Soloria, Cincinnati Insurance’s chief claims officer, Mark Shambo, and senior vice president of corporate finance, Andy Schnell. 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, 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 will turn the call over to Steve.

Good morning, and thank you for joining us today to hear more about our results. Performance for the first quarter of the year was good and included several aspects that demonstrated the success of our proven strategy and our ability to execute it. Both our insurance and investment operations performed quite well. Net income of $274 million for 2026 included recognition of $82 million on an after-tax basis for the decrease in fair value of equity securities still held.

Non-GAAP operating income was strong at $330 million for the quarter compared with an operating loss of $37 million a year ago. The 95.6% first quarter 2026 property casualty combined ratio improved by 17.7 percentage points compared with first quarter last year, including a decrease of 14.2 points for catastrophe losses. We had an excellent 87.5% accident year 2026 combined ratio before catastrophe losses for the first quarter. Turning to premium growth, our consolidated property casualty net written premiums grew 7% for the quarter, including a favorable 2% effect from net reinstatement premiums recorded in first quarter 2025. Our strong financial position and sophisticated pricing and segmentation models allowed us to benefit from market disruption over the past few years.

We stayed the course providing a stable market for our agents, in turn, growing at an accelerated pace. In fact, in just the last seven years, we have doubled the size of our consolidated property casualty net written premiums. As those market challenges shift, growth is slowing as our underwriters continue to emphasize pricing and risk segmentation on a policy-by-policy basis in their underwriting decisions. Estimated average renewal price increases for most lines of business during the first quarter were lower than 2025, but still at levels we believe were healthy.

Commercial lines in total averaged increases near the high end of the low single-digit percentage range, and excess and surplus lines was again in the mid single-digit range. Our personal lines segment, including personal auto and homeowner, was in the high single-digit range. Our premium growth objectives are further supported by exceptional claim service and our deep relationships with best-in-class independent insurance agents. Next, I will comment on first quarter performance by insurance segment compared with a year ago.

As we pursue profitable premium growth, we believe pricing discipline in a challenging market contributed to strong profitability this quarter. Commercial lines grew net written premiums 3% with a 98.6% combined ratio that increased by 6.7 percentage points, including 6.0 points from higher catastrophe losses. Personal lines grew net written premiums 15% driven by Cincinnati Private Client. The combined ratio for personal lines was 96.8%, 54.5 percentage points better than last year, including a decrease of 41.9 points from lower catastrophe losses.

Excess and surplus lines grew net written premiums 8% and produced a very good combined ratio of 89.3%. Cincinnati Re and Cincinnati Global each continue to contribute to profitability and reflect our efforts to diversify risk and further improve income stability. Cincinnati Re’s first quarter 2026 net written premiums decreased by less than 1%. Its combined ratio was an outstanding 79.7%.

Cincinnati Global’s combined ratio was also stellar at 78.7% along with premium growth of 31% as it continues to benefit from product expansion in recent years. Our life insurance subsidiary continued to deliver excellent results, including 24% net income growth. In addition, term life insurance earned premiums grew 7%. I will end my commentary with a summary of our primary measure of long-term financial performance, the value creation ratio.

Our VCR was 0.2% for 2026. Net income before investment gains or losses for the quarter contributed 2.1%. Lower overall valuation of our investment portfolio and other items contributed negative 1.9%. Now I will turn it over to Chief Financial Officer Michael James Sewell for additional insights regarding our financial performance.

Thank you, Steve, and thanks to all of you for joining us today. We reported growth of 14% in investment income in 2026 driven by strong cash flow from insurance operations. Bond interest income grew 12% and net purchases of fixed-maturity securities totaled $624 million for the first three months of the year. The first quarter pretax average yield of 5.02% for the fixed-maturity portfolio was up 10 basis points compared with last year.

The average pretax yield for the total of purchased taxable and tax-exempt bonds during the first quarter of this year was 5.37%. Dividend income was up 13%, including a $6 million special dividend received from one of our equity holdings. Net sales of equity securities totaled $54 million for the quarter. Valuation changes in aggregate for the first quarter were unfavorable for both our equity portfolio and our bond portfolio.

Before tax effects, the net loss was $71 million for the equity portfolio and $220 million for the bond portfolio. At the end of the first quarter, the total investment portfolio net appreciated value was approximately $7.7 billion. The equity portfolio was in a net gain position of $8.1 billion while the fixed-maturity portfolio was in a net loss position of $4[inaudible] billion. Cash flow continued to benefit investment income growth.

Cash flow from operating activities for the first three months of 2026 was $656 million, more than double a year ago. Regarding expense management, our first quarter 2026 property casualty underwriting expense ratio decreased by 0.6 percentage points, reflecting a favorable 0.7 points from the effect of net reinstatement premiums in the first quarter 2025. Turning to loss reserves, our approach remains consistent. We aim 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 three months of 2026, our net addition to property casualty loss and loss expense reserves was $466 million, including $419 million for the IBNR portion. During the first quarter, we experienced $81 million of property casualty net favorable reserve development on prior accident years that benefited the combined ratio by 3.2 percentage points. On an all-lines basis by accident year, net favorable reserve development for the first three months of 2026 included favorable $72 million for 2025, favorable $25 million for 2024, and an unfavorable $16 million in aggregate for accident years prior to 2024. I will conclude my comments with first quarter capital management highlights.

We paid $133 million in dividends to shareholders. We repurchased approximately 1.1 million shares at an average price per share of $164.93. We believe both our financial flexibility and our financial strength are in great shape. Parent company cash and marketable securities at quarter end was $5.6 billion. Debt to total capital remained under 10%.

And our quarter-end book value was $101.60 per share, with nearly $16 billion of GAAP consolidated shareholders’ equity providing plenty of capacity for the profitable growth of our insurance operations. Now, I will turn the call back over to Steve.

Thanks, Mike. I think this quarter’s solid results demonstrate that we have the people and plans in place to keep building on our success regardless of market cycles and conditions. Our associates continue to answer the call for our agents and the communities they serve, developing deep relationships and informing smart underwriting decisions. Early in March, AM Best also expressed their confidence in our plans by affirming our A+ rating, citing our strong balance sheet and operating performance.

If you would like to hear more about how we will continue to deliver value for policyholders, agents, associates, and shareholders, we invite you to join us for our annual meeting of shareholders this Saturday, May 2, at the Cincinnati Art Museum. You are also welcome to listen to our webcast of the meeting available at investors.synfin.com. As a reminder, with Mike and me today are Steve Johnston, Steven Soloria, Mark Chambeau, and Andy Schnell. Jim, please open the call for questions.

We will now open the call for questions. Gentlemen, thank you for your remarks. And to our phone audience, at this time, if you would like to ask a question, simply press star followed by the digit one on your telephone keypad. Pressing star and 1 will place your line into a queue, and I will open your lines individually and you will be invited to direct your question.

We will take our first question today from the line of Michael Wayne Phillips at Oppenheimer. Please go ahead.

Yes. Thank you. Good morning, everybody. Thanks for the time.

I guess, Steve, I want to dive a little more into the renewal price change in commercial. It seemed to decelerate a little more than maybe we have heard from others, but it is obviously hard to really accurately say on that. I guess your high end of low single digit, obviously it is impacted by your commercial property and comp. They are not a small piece of that segment.

So maybe could you provide any comments on the pricing environment in your commercial casualty specifically, what that looks like today, and maybe how that compares to what you see as loss trends in commercial casualty?

Yeah, thanks. Good morning, Mike. Good to hear from you. The high end of the low single-digit range—just so you know—that is all in.

That takes into account some of the impact that we get from our three-year policies. Specifically to casualty, and not bifurcating it down, but just all in on casualty, we are getting mid single-digit increases. I think more importantly, from my perspective, with shifting market cycles, our focus is on being a package writer, focused on policy-by-policy risk selection, terms and conditions, and then using the pricing tools that we have and segmenting the book. That is where we focus most of our efforts versus any straight average.

The straight average just does not tell the story through any market cycle. But I think even now, as things are softening, it is even more crucial that our underwriters, working with agents, continue to deliver on that segmentation strategy.

Okay, Steve. Thank you. I guess, switching over to personal, specifically the umbrella book. You have grown that nicely in the last couple of years.

I think you are north of $200 million or so of premium—so small base. But can you just talk about your strategy there? How big do you want that to be, say, the next year or two? Does it get to a half billion in the next two years?

And thoughts on the volatility of that business in terms of losses—so just thinking about how much you want to grow in the near term on that.

Yeah. Thanks, Mike. I have no specific guidance on how large we want to grow that umbrella. Again, in personal lines, as you know, we are a package writer, and so in many cases that umbrella comes along with that, probably even more so with our focus on private client.

Those individuals—higher net worth folks—are desiring larger limits, and we have the balance sheet and the expertise. That has performed well for us. Legal system abuse in commercial lines has been well documented, and so it is something we pay attention to—certainly in personal lines, especially with umbrella and excess. But we feel good about where we are there, and we will continue to grow it.

And then just one quick numbers question if I could. Mike, the $72 million on 2025 accident—I assume that is homeowners and property ones?

Repeat that again.

Yeah. Mike, you mentioned the $72 million of favorable in 2025. I was just curious to make sure—was that homeowners and commercial property?

Yes.

Okay. Cool. Thank you, guys.

Thank you, Mike.

Our next question today will come from the line of Joshua David Shanker at Bank of America.

Yes. Thank you for taking my question. But first, I just want to say, Dennis, on Dennis’ retirement, it is a big deal at Cincinnati Financial Corporation. I wish Dennis the best and he is just the best in the business, so I only have great things to say and think about him. So we are going to miss you, Dennis.

Well, thank you, Josh, and the good thing is the team is ready to continue to execute. I am around for a few more months, but thank you.

Well, so here are my questions. First of all, when I look at the growth rate of the homeowners business and I compare that to other personal and auto, I kind of think of a high net worth package as you want everything from the customer—or maybe I am wrong about that. You know, you sell a whole package. We want your cars.

We want your toys. We want your art. Why is there such a difference in the growth rates? Are you looking for a property-only type of high net worth purchase, or what is the difference between the growth rates of the subgroups within personal lines?

Yeah. Thanks, Josh. You are all over it. We are a package writer both in middle market personal lines and in private client.

We want to be an online solution for the policyholders. But you make a great point. I think one of the advantages that we have by being a premier carrier for our agents in middle market and high net worth is diversification that naturally comes with that business. High net worth—you are right—is more property driven.

Homes are larger. There may be fewer vehicles, but high net worth generally is property driven, less auto. Middle market is the opposite—lower property, higher auto. And then, you did not ask this, but I will take it a step further: you get geographic diversification between middle market and high net worth as well.

Middle market, in general, tends to be more in the center of the country; private client is more Northeast, West Coast, and Florida driven.

When I look at the numbers—23% growth in the homeowners segment—but the new business production is down a lot. I assume most of that growth is really coming through rate these past couple of quarters. Can we bifurcate between how much rate you are asking and how much your appetite for unit growth has changed in the past six months?

Yeah, you are right. There are a lot of moving parts. One thing I would say I would go back to, Josh, is that last year we had reinstatement premiums in the homeowner line and that is making the comps different, so I would point you to that. With regards to the new business, after the loss last year in California, as we have discussed, we did an immediate after-action lessons learned.

And so growth in California new business really slowed last year. It has kind of picked back up here in the first quarter, but not enough to overcome what came down there. We have still got a lot of rate working into the book. I think the biggest thing, though, Josh, to wrap it all up—again, a lot of moving parts—but if you look at 2024 and 2025, and we have talked a lot about this, they were historic hard-market years, especially for personal lines.

So I think we are just really returning back to maybe a little bit more of a normal state.

Is there a decline in the amount of new business, as measured by number of homes, that you are putting on in 1Q26 versus 1Q25 and 1Q24?

Yeah. In commercial lines, our policy counts are growing. In personal lines, the exposure units have been down a little bit. So to answer your question, yes, policy counts are down a bit.

If you— No, no, you can continue. I think it is a good thing you were saying.

Which we think is a good thing.

We are getting more rate for less exposure. We think that bodes well.

And then in California, when you are raising price, are you finding that you are retaining that customer—that the customer is happy to stay on that price—or is that causing a higher amount of churn?

There is competition back in California now. Just as a reminder there as well, Josh, all new homeowner business that we are writing today—and have been over the last several years—is on an excess and surplus lines basis. So the rates, I think over the last several years there, have been pretty stable. We feel they are adequate and we are comfortable with the pricing there, but we are seeing some additional competition come back into California for new business.

Well, thank you very much for all the clarity.

Great questions, Josh. Thank you.

Next, we will hear from Michael David Zaremski at BMO Capital Markets.

Great, thanks. First question, shifting to capital management. We saw elevated share repurchase levels—I think the highest we have seen in a while. I can see that the capital currently versus historical, we can see top-line growth is running a bit lower as the market becomes more competitive.

Maybe should we be run-rating this level of buybacks unless things change meaningfully on the valuation of the CINF stock?

Yes, Mike, this is Mike. It is a great question and thank you for it. It was probably, I will say, a little elevated for Q1 of this year. But is it unusual?

No, it is not. We still have said that we are doing maintenance—maybe a little bit of maintenance plus. The last year that we did a little over 1 million shares in Q1 was back in 2020. So, six years ago, we did 2.5 million shares. But if I start to look at full years, we have done almost 1.1 million this year.

Last year, we did 1.3 million, 1.1 before that. In 2022, we did 3.7 million. So I would say this is not unusual. I would call it maintenance plus.

And we will see how things go the rest of the year and what we determine to do.

Got it. Thanks for the clarification there. Maybe switching gears to the question I think we get the most on—back to the lawsuit/social inflation lines of business. We can see from your KPIs that the casualty has been favorable for the last five quarters, and the underlying in commercial auto, etc., seems to be improving a bit.

Would you say you are getting over the hump of more rearview-mirror there, or is it still to be determined and you are making sure to be very careful on growth, using your analytics in those lines of business? Thanks.

Yeah, thanks, Mike. You are all over it. I would say it is both. We are confident in the pricing and the risk selection that we are seeing there.

But I would also say we are not out of the woods as an industry, and specifically us, when it comes to social inflation—legal system abuse, as we prefer to call it. You are seeing some tort reform push around the country. We monitor that. APCIA, I think, does an excellent job on behalf of the industry.

But I think there is still a tremendous amount of uncertainty around that. You can see it in our ex-cat accident year picks, both in commercial casualty and commercial auto. I think commercial auto is the epicenter. So I do not think we are over any hump, but I think we are prepared for what might come at us—based on our picks and, as you mentioned, the analytics, the way we are pricing risk-by-risk and doing risk selection.

Got it. That is helpful. Then just lastly, stepping back, when we think about the overall competitive environment in commercial lines—and taking into account your risk selection analytics, etc.—is it fair, if we paint a broad brush, to say pricing power in commercial lines is still biased downwards versus kind of stable over the coming year, despite still material levels of social inflation impacting the broader industry?

Mike, I will not project forward for you. Where we are right now, I would say you cannot paint the whole book with a broad brush. We are definitely seeing pressure. The larger the premium, the larger the account, the more pressure there is there.

Peel that back a little bit—it is even more so on commercial property. We are still seeing net rate, but as I mentioned to Michael earlier, the average really does not tell the story. It is looking at every single policy, on a risk-adjusted basis, and making decisions from there. Our underwriters—I cannot speak highly enough of how they are executing on that through all market cycles.

And I think what makes it more efficient and effective is that they are dealing with the most professional agents in the business who can convey value. That is what we are looking for—long-term consistency, stability, and predictability. I would be remiss if I did not mention just how our underwriters and our agents are executing on that.

And just lastly then, I know Cincinnati Financial Corporation has been proactively moving into the—larger account is not the right word; I do not want to compare you to Chubb or AIG—but bigger premium policy levels over many years now. Does that just mean maybe the hit rate could be a bit lower on the larger premium stuff if the current competitive environment sticks? Thanks.

Yes, Mike. Absolutely. And you are right. We have always written larger accounts for our agents, but we really decided to get deliberate about it and build out expertise within the last decade.

We continue to grow that unit. Our agents are responding well to the expertise that we bring to the table across all disciplines there. But yes, as we are growing that, it might be putting a little bit more of an outsized pressure because not only are we not winning on some accounts based on our view of the risk, retention is struggling there a little bit too.

Thank you.

Thank you, Mike.

Jon Paul Newsome at Piper Sandler, you have our next question. Please go ahead.

I was wanting to go back to the reserve issues. There was a very small change in the past pre-2024. I presume that is pretty much all casualty at this point. Are we making a little bit of a statement or not? I do not want to read too much into $16 million, but about what is going on with casualty reserves there?

No, Paul. Let me state that again. In total, we had 3.2 points of favorable development; it was $81 million. So this is in total. $72 million of that favorable development was for accident year 2025. $25 million was favorable for 2024. And then the remaining $16 million unfavorable was across multiple years prior to that.

So it is really spread across multiple accident years. I would say nothing is really popping out to me.

There was a statement in your 10-Q that was sort of a qualifier for the reiteration of your long-term combined ratio goals, something along the lines of there are several reasons why 2026 results might be below the long-term targets. Any color on that thought and what we should be thinking about in terms of what you are concerned about?

No, Paul. Nothing more to read into that. Our long-term target is still 92 to 98. We will continue to underwrite and price risk-by-risk. We are still writing the same mix of business—everything there is consistent. With the market putting more downward pressure on rate, I think it is just an acknowledgment that we will be prudent in our picks there.

Okay. Makes sense. Thanks, guys. Appreciate it.

Thank you, Paul.

And a reminder to our phone audience that it is star and 1 if you have a question or even a follow-up. We will hear now from Meyer Shields at KBW.

Great, thanks so much. I guess one question: you talked about the 108 agency appointments in the first quarter. I know that historically, Cincinnati Financial Corporation has been very demanding in terms of agency quality. Does that number have to slow down at any point in time?

And maybe less big picture, I was hoping you could talk about which geographic regions are seeing the most appointments right now.

Yeah. Thanks, Meyer. The strategy as a company has always been to have as few agents as possible, but as many as necessary. You look at us on a relative basis to the industry and to our peers: I think we have about roughly 2,400 agency relationships operating out of 3,500-plus locations.

We have always had a limited distribution model, and even adding three or four hundred agencies—or whatever it might be—in a year is still a relatively small number. But I think the most important point, and you make it, Meyer, is I feel like in my thirty-five years, one of the keys to our success is we have always done a great job of underwriting agencies. You point to that with the quality, and that is a big focus of ours—just making sure that we are aligned with these agencies, that they are professional, they are centers of influence in their community. We think that there are a lot more agencies across the country that meet those standards, and we will continue to appoint while keeping our standards high.

To your question on various states, we feel like we can appoint agencies in any state and do well, but we do prioritize agency appointments in those states we feel like right now we have a better-than-average shot at good risk-adjusted returns.

Okay. Great. That is very helpful. Another question: do either Cincinnati Global or Cincinnati Re have any exposure to the political violence, marine, or energy risks in the Middle East right now?

To answer that—and thanks for the question, Meyer—it is very little. There was a little bit more on the Cincinnati Re side, but it was $5 million. On the Cincinnati Global side, it was $1 million, and actually it was below $1 million. So very minor in total, but we will be watching that one day at a time.

Okay. Perfect. Thank you so much.

We have no further questions from our audience at this time. Mr. Spray, I am happy to turn the floor back to you, sir, for any additional or closing remarks that you have.

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

Ladies and gentlemen, this does conclude today’s meeting, and we thank you all for your participation. You may now disconnect your lines and have a great day.