Cincinnati Financial Stock

Good day, everyone, and thank you for joining this Cincinnati Financial Corporation Second Quarter 2026 Earnings Conference Call. [Operator Instructions] Today's session is being recorded. It is my pleasure to turn the floor over for opening remarks and introductions to Mr. Dennis McDaniel, Investor Relations. Please go ahead, sir.

Hello. This is Dennis McDaniel at Cincinnati Financial. Thank you for joining us for our second 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.cinfin.com. The shortest route to the information is the quarterly results section near the middle of the Investor Overview page. .

On this call, you'll first hear from President and Chief Executive Officer, Steve Spray; and then from Executive Vice President and 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 Executive Chairman, Steve Johnston, Chief Investment Officer, Steve Solaria, and Cincinnati Insurance's Chief Claims Officer, Mark Shambaugh 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, we 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 and according with statutory accounting rules and therefore, is not reconciled to GAAP.

Now I'll turn over the call to Steve.

Good morning, and thank you for joining us today to hear more about our results. Our second quarter and first half results continue to reflect consistent execution of our strategy including maintaining pricing discipline in a softening property casualty insurance market. While catastrophe losses for the quarter were modestly higher than our longer-term average Other metrics for our property casualty operations were generally in line with our expectations.

Net income of nearly $1.3 billion for the second quarter of 2026 included recognition of $882 million on an after-tax basis for the increase in fair value of equity securities still held. Non-GAAP operating income was $224 million for the quarter compared with $311 million a year ago. The 100.8% second quarter 2026 property casualty combined ratio increased by 5.9 percentage points compared with second quarter last year including an increase of 2.3 points for catastrophe losses.

Our current accident year combined ratio before catastrophe losses for the first 6 months of 2026 was 87.8%, fairly consistent with the 87.7% reported through the first 6 months of 2025. Turning to premium growth. Our consolidated property casualty net written premiums grew 3% for the quarter. Slowed growth reflects pricing discipline 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 second quarter were lower than the first quarter of 2026, but still at levels we believe were healthy. Commercial lines and excess and surplus lines averaged increases near the high end of the low single-digit percentage range. Our Personal Lines segment included personal auto and homeowner increases in the high single-digit percentage range.

While market conditions have tempered premium growth, we believe our focus on providing outstanding service and our deep relationships with independent insurance agents keep us positioned well for long-term success. Next, I'll comment on second quarter performance by Insurance segment compared with a year ago. Commercial Lines grew net written premiums 3% with a 104.1% combined ratio that increased by 11.2 percentage points, including 4.9 points from higher catastrophe losses.

Personal Lines grew net written premiums 1% and impacted by lower new business premiums that reflect softening market conditions. The combined ratio for personal lines was 99.9%, 2.1 percentage points better than last year, including a decrease of 1.6 points from lower catastrophe losses. Excess and surplus lines grew net written premiums 8% and and produced an excellent combined ratio of 90.5%. Cincinnati Re and Cincinnati Global continue to contribute to premium growth as well as diversifying risk of our insurance operations.

Cincinnati Re's second quarter 2026 net written premiums increased by 16%. Its combined ratio was an outstanding 87.6%. Cincinnati Global's combined ratio of 110.8% along with premium growth of 1%. Our life insurance subsidiary had another strong quarter, including 15% net income growth. In addition, term life insurance earned premiums grew 5%. I'll end my commentary with a summary of our primary measure of long-term financial performance, the value creation ratio. Our VCR was 7.9% for the second quarter of 2026. Net income before investment gains or losses for the quarter contributed 1.4%. Higher overall valuation of our investment portfolio and other items contributed 6.5%.

Now, I'll turn it over to Chief Financial Officer, Mike Sewell, for additional insights regarding our financial performance.

Thank you, Steve, and thanks to all of you for joining us today. Investment income continued to grow at a nice pace, up 12% in the second quarter '26, driven by strong cash flow from insurance operations and higher yields on the fixed maturity portfolio. Bond interest income grew 14% and net purchases of fixed maturity securities totaled $316 million for the quarter and $940 million for the first 6 months of the year. .

The second quarter pretax average yield of 5.08% for the fixed maturity portfolio was up 15 basis points compared with last year. The average pretax yield for the total of purchased taxable and tax-exempt bonds during the second quarter of this year was 5.66%. Dividend income was up 3% for the quarter. Net sales of equity securities totaled $678 million for the quarter and $732 million on a year-to-date basis.

While that portfolio rebalancing activity was higher than a typical quarter, it's similar to our actions during the third quarter of 2024 and does not represent a change in our investment approach. Valuation changes in aggregate for the second quarter were favorable for both our equity portfolio and our bond portfolio. Before tax effects, the net gain was $1.3 billion for the equity portfolio and $79 million for the bond portfolio.

At the end of the second quarter, the total investment portfolio net appreciated value was approximately $8.6 billion. The equity portfolio was in a net gain position of $8.9 billion, while the fixed maturity portfolio was in a net loss position of $326 million. Cash flow continued to benefit investment income growth. Cash flow from operating activities for the first 6 months of 2026 was $1.4 billion, up 29% from a year ago. Briefly moving to expense management. Our second quarter 2026 property casualty underwriting expense ratio increased by 1.2 percentage points due to an increase in commission expenses and timing of recognition of certain expenses.

On a 6-month basis, the ratio increased only 0.3 of a percentage point. Next, I'll comment on loss reserves. Our approach remains consistent and aims 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 updated estimated ultimate loss and loss expenses by accident year and line of business.

For the first 6 months of 2026, our net addition to property casualty loss and loss expense reserves was $981 million, including $845 million for the IBNR portion. During the second quarter, we experienced $42 million of property casualty net favorable reserve development on prior accident years that benefited the combined ratio by 1.7 percentage points. On an all-lines basis by accident year, net favorable reserve development for the first 6 months of 2026 included favorable $127 million for '25, favorable $42 million for '24 and an unfavorable $46 million in aggregate for accident years prior to '24. Our commercial casualty line of business experienced $14 million of unfavorable reserve development during the second quarter, which was driven by on older accident year that included updated estimates for ultimate losses for a small number of insurance.

I'll conclude my comments with second quarter capital management highlights. We paid $143 million in dividends to shareholders. In addition, we repurchased approximately 1.3 million shares at an average price per share of $161.93 and or $216 million. We believe our balance sheet continues to provide significant flexibility and financial strength. Parent company cash and marketable securities at quarter end was $5.7 billion.

Debt to total capital remains under 10%. Our quarter end book value was a record high, $108.64 per share. with nearly $17 billion of GAAP consolidated shareholders' equity, providing ample capacity for the profitable growth of our insurance operations.

Now I'll turn the call back over to Steve.

Thanks, Mike. We see many positives in our results through the first 6 months. As we head into the back half of the year, we will continue demonstrating our expertise in underwriting pricing and risk selection and building strong relationships with our appointed independent agents. I'm confident that we have the people and plans in place to finish the year strong. Before we open the call for questions, I'd like to recognize Dennis McDaniel. As many of you know, this is Dennis' final earnings call before retirement.

Over the past [indiscernible] years, he has been an outstanding ambassador for our company, building strong relationships with the investment community while helping communicate our strategy and performance with transparency and integrity. We are grateful for his contributions, and we wish him the best in this next chapter of life.

As a reminder, with Mike and me today are Steve Johnston, Steve Solaria, Marc Schambow, and Andy Schnell. Jim, please open the call for questions.

[Operator Instructions] We will hear first today from Michael Phillips at Oppenheimer.

I want to thanks to Dennis for all years of great work and one of the best in the business. So all the best to you on us as we go to the next chapter. I appreciate everything. I guess first question would be a topic that's not that new, it comes up every now and then, but Steve, I want to hear your thoughts that maybe might be updated here. On the commercial lines, current accident year had some spike. It looks like in large loss activity, $2 million or more. I think typically, when this comes up, it's small, it's more of a quarterly anomaly, maybe not so much of a trend, but we've seen this now a couple of quarters in a row from the other companies. And I'm wondering, I guess, to the extent you're worried this might be a trend that we need to watch more closely? And to what extent does that impact your comments on commercial lines rates at a healthy level?

Yes. Thanks, Mike. Mike Sell has got the specifics on the large accounts. But yes, we Mike, we've talked about this in the past as well. Every time we have a large loss in any line of business. We do an after-action review on it to see if there's anything that could go towards a trend I think what you're seeing here again is just inherent volatility. It's very few claims. There's variability that goes with it. And so I don't see any trend on the, specifically on those large loss pickup. But Mike?

Yes, I would say -- thanks for the question, it's Mike Sewell. So on a year-to-date basis, we did have about new current accident year losses, large losses. So that was about $112 million compared to the prior year '26 new losses -- that was about $101 million, and that was through Q2 of 2025. I would say with that related to the property, the property was up about $20 million year-over-year on large losses. And it was really primarily related to 1 large loss that that did reach our working treaty on that. So that was hitting that for about $15 million.

But overall, when you take a look at our current year greater than $2 million, the $120 million this year versus $101 million last year. You compare that with our earned premiums both years, it was only a 2.2% loss ratio. So very consistent. And I would echo what Steve just said that there's no indication of unexpected concentration of large losses by risk category, region or what have you.

And Mike, you mentioned the pricing, I would just add in there. The Obviously, our actuaries are looking at large loss trends, frequency trends, all of that together for pure premium. And I would just add that the I'll say, specifically in commercialized. I think that's where you were directing it. The new business pricing metrics that we use, the cope underwriting that we -- every underwriter does both new and renewal is holding up really well, too.

Next question would be on Mike's comments on the expense management. You guys are known as clearly 1 of the best agency relationships with the business. But I guess, how do you think -- do you think at all about maybe any changes in strategy on how you approach your agents as we get deeper into the self-market and maybe what that might mean if anything at all, for pressure on the expense ratio from here?

Yes. As far as -- are you talking commissions, Mike, for agencies.

Certainly commissions, yes. But anything I guess, more specific on commissions. And is there any pressure to changed the commission structure to get more business in the door with rates going the way they are and again, what that means both pricing and the expense ratio.

Yes. No, okay. Thanks. We can -- Mike and I can bifurcate this because there's efficiencies that we're working on, on the corporate side to continue to drive down our non-commission expense ratio. But 1 thing that we're, I think, extremely proud of as a company is we measure ourselves on is how we compensate the independent agents that represent us. If you look at our commission schedule, just our primary commission schedule. It's very fair. But I don't think it's going to stand out to you in any one line of business. It's just fair across the board. By by design and deliberately, we have a very, I think, a very fair above-average profit sharing contract with our agents. And it is driven off of underwriting profit for a profitable business, they send our way. And we feel that when an agent writes profitable business with us that we'll share more of that with them than many of our competitors, that's again, by design, it's our agency focus and aligns us with our agencies.

So we feel like our compensation to agents is already the strongest, and we see no need for amending that. And as far as getting pressure, I think our agents recognize that we are a top payer across the board. And so we don't see a lot of pressure there.

And I would say, Mike, on the non-commission side, we continue to strive of being more efficient, watching our cost, Costs are going up. And I've said before is that we are trying to keep the increase of our noncommission costs lower than the growth in premiums. And so I think as you see premiums slowing down, we're going to have to double down our efforts on watching our costs, but -- we still need to invest, invest in technology, our people, et cetera, et cetera. So my job might be a little bit harder, but I think we'll be able to do it. .

Our next question will come from Gregory Peters at Raymond James.

So in the press release, when you get into the consolidated results, the first bullet point talks about the 3% growth in the second quarter and you call out price increases, I think that's pretty straightforward where you're getting price where you're not. You also see a higher level of insured exposures. I wanted you to comment on that. I also -- you also called out the second quarter growth in Cincinnati Re and the global underwriting business. And -- those are 2 areas that I would think might not be growing considering your comments about rising competition in the marketplace. So that would -- that's the first area that I wanted to focus on my questions on.

Sure, Greg. And out of the release, we were talking about the 3% net written premium growth on a consolidated basis. About 2/3 of that is coming from rate and about 1/3 from exposure. So just think increased sales payrolls in the stability side or just property values, inflationary property values in general there.

On Cincinnati Re and Cincinnati Global, again, since that global, net written premiums were up 1%. So they are feeling pressure primarily from larger property shared layer, direct in fact, that are showing pricing and underwriting discipline there. So their growth has been under pressure. And then Cincinnati Re, that's obviously an assumed reinsurance operation can be a little more opportunistic.

They can -- they're a little more nimble, can move in and out of different covers. And so their growth can also be a little more seasonal, Greg. So the 16% growth is strong. We feel good about the underwriting and the pricing there as well.

Okay. Fair enough. And then I'll pivot for my follow-up question to the personal lines business. where the growth is slowing down new business agency new businesses down. Maybe you can frame how you're thinking about the top line for that business going forward, considering the pressures on pricing. Auto, looks like it's flat or up a little bit home, up a little bit better. Just give us some perspective of how you're thinking about this going forward?

Yes. We're thinking long term as we do with everything there. At the end of I'll call at the end of 2025, Greg, over the last 4 years, we doubled our personal lines operation and premiums. So with our balance sheet, able to take advantage of a really difficult, tough, hard market and personal lines. So the slowing in premiums, both for net written in for new business has been expected I think it's still healthy. The pricing there is still healthy. We still have -- candidly, we still have room for margin improvement in Personal Lines. We're on a good path. We're still earning rate in, but the volatility of cat, we all can see it. We all know it. and we have to underwrite and price for cats.

So Personal Lines is doing a nice job with rate -- with terms conditions, with risk selection of driving down their non-cat loss ratio and taking action to curtail that cat or manage it as well as possible. So we still have room for some margin improvement there. But the slowing growth has been -- it's been predictable, quite frankly. We're comfortable with it, and it's profit first there. So they're going to continue to show underwriting price underwriting discipline as well.

Our next question will come from Mike Zaremski at BMO.

I believe we -- Mr. Zaremski, please resignal, sir. We'll move forward to Josh Shanker at Bank of America.

Yes, as I said on the last call, I'm the President [indiscernible] club. So I really -- I appreciate everything he's done for the company and done for shareholders over the years. In terms of homeowners, can you talk the timing a little bit of re-underwriting the book -- and when you sort of take pricing and you look at the book and how many properties you have that maybe don't fit what you want at the current pricing? And can you go through the quarter and when all that came together? .

Well, as far as, say, re-underwriting personal lines or homeowner Josh. That's just -- that's been a -- I don't know if there's any moment in time other than most recently post California wildfire we took a hard look at California and just took a different view of the risk for homeowners, specifically, aggregations, different terms, conditions, pricing. So -- but beyond that, it's just been an ongoing process of making sure that we're getting the rate that we need, handling Midwest convective storm, terms, conditions and pricing, more on our middle market, homeowner business there. So it's really just been an ongoing process over time and continues.

Look, if someone asked me 6 months ago to identify one of the key growth targets at Cincinnati. It's always appointing new agents and getting a higher share of their business. But the high net worth opportunity is obviously a very clear opportunity. And given the slowdown in growth this quarter, does that change the trajectory of how we should be thinking about Cincinnati growth longer term in the high net worth business?

No, I don't think it should at all. I think more of the pressure we're feeling right now, Josh, is in middle market. personal lines, and that's where the market was really hard the last several years, and we're able to take advantage of those growth opportunities. But no, you shouldn't think any differently about our growth of high net worth going forward. It's a little over 60% of our business today of our personal lines business that's grown steadily over time. And I think that will continue to become a bigger and bigger part of our business. It's performing well, where -- the one thing that you might see, again, that would lend you to believe that the trajectory is a little different. It's just are retrenching a bit in California post wildfire loss.

But now our commitment to high net worth, our ability to grow that. I think the agents response to us in the way we do business in the high net worth space is recognized, and I think our agents are affording us premier high net worth carrier status and their agencies.

And if you'll forgive me 1 more. If we think about your 60% right now, high net worth in that homeowner business, fast forward, maybe a couple of years, you're [indiscernible]. At some point, does Cincinnati become less of a relevant player in the middle market.

No, I don't think so, Josh. We're -- we have an agency strategy. We appoint great agencies and we try to reflect what they do across all lines of business. We grew up as a middle-market personal lines underwriting company. It's important to our agents and the communities that they're in, it's important to us. Obviously, you have to make sure you've got the pricing right there. That's a more competitive, comparative rater world. But no, as long as it's important to our agents, and they're out conveying the value that they bring and a carrier like us brings with our broad coverage forms and the way we handle claims, middle-market personal lines will continue to be important and be a big part of what we do.

That said, Josh, yes, Josh, that said, I'll go back to what I said earlier. We still feel that there's room for for margin improvement in our personal lines, and we're focused on that. So you'll see -- you may see the growth under pressure there. It's going to be profit first. So don't confuse that though with a lack of commitment to the line or to the segment.

And we'll hear next from Mike Zaremski at BMO.

Just echoing everyone's comments, Dennis, you'll be missed. -- have fund the next chapter. First question on the expense ratio details you provided. I don't think in 2Q last year, you quantified anything. So any quantification you want to offer us so we kind of better understand what the reversal was and how to think about the run rate, et cetera?

Yes. This is Mike Sewell. There's probably -- when I look at it, -- it was the largest primary piece was the commissions and you do have that from time to time. But when I look at really the other noncommission expense, it's just a little bit all over the board. There might be 1 or 2 places that it was a little bit higher for the quarter, but then it evens out for the year. So it's just the timing of when certain costs are incurred or when you're hiring certain people, et cetera, et cetera. So it's -- but we should probably look at it over multiple quarters, not just 1 quarter. And we are -- we want to keep it under that 30% expense ratio. And I'm going to try to have my target to keep taking it down further.

Got it. And just sticking with the expense ratio. A number of insurance carriers, peers have kind of come out with long-term '27, some '28, some even '30 kind of specific guidance on cost efficiencies due to newer technologies, et cetera. Is that -- any comments on if that's something Cincinnatis considering. Do you have enough data and use cases to feel comfortable there? Maybe your business model is a bit different than others.

Yes. Good question. We -- obviously, we're doing those things, and I think we've talked about some technology items in the past AI, this and that. So we are working on that, getting efficiencies, et cetera, but we really, in the past, have not given, I'll say, guidance going out into the future on specifics of calculations or ratios like that.

But rest assured, we're working extremely hard, and I think Steve has talked about that in the past.

Got it. And then just lastly, on the share repurchase number. Is it fair to say there was a bump in there from the portfolio rebalancing unlocking some equity capital? Or is it just more the shares were cheaper or both?

We look at it every quarter with what we do, and it was kind of a good timing with the rebalancing and Steve -- sorry could talk about that. But yes. So on a year-to-date basis, we've done 2.4 million shares. It does feel maybe that plus when I've said maintenance plus. But within the last 5 years, we did have 1 year where we repurchased 3.7 million shares. So it is not outsized of anything that we've done in the past and I would just say it's going to be a quarter-to-quarter type of a thing that we look at.

Operator, are you still with us?

In the queue for question would be May Shields from KBW.

Yes, I can hear you perfectly. Thank you so much. I want to start by again acknowledging Dennis, it's like the continent professional will certainly be missed.

Thank you for that and others who have given me good well wishes in recent weeks. Thank you very much. It's a bit of a pleasure working with the investment community.

I probably speak for everybody when I say it's heartfelt and Sandrin the other direction. I was hoping to get a little commentary on the asset or loss ratio in Cincinnati Global and see whether that's related to the Middle East?

And see, Meyer, could you repeat that? Just that very ending.

If it was related to what to the conflict in the Middle East?

Okay. Yes. No, very good. That's a great question. And you noticed that pickup. It was on Page 19 of the supplement. There was an increase there for the second quarter. And one is the -- we did have the conflict in the Middle East, Iraq. There was a net charge there of about $10 million. Plus, we also had 1 contingency. As you know, there was a heat wave going through Europe. And so we did have 1 reserve in there for about $7.5 million for a contingency event. So between those 2 that was the driver.

Meyer, just to -- Mike got that right, the loss was actually in Saudi Arabia and then the second, the contingency we -- in the U.S., we refer to that as event cancellation as well.

Right. Perfect. Understood. And a second question, and I'm not worried about workers' compensation being inadequately reserves, but there was a sequential step down in the accident loss ratio -- and I'm wondering if there's anything unusual in that number.

Yes. I would say there really wasn't anything that I would say, stuck out to us on the workers' comp. So there's no surprises in there. .

Your next question comes from the line of Matt Palazola from Bloomberg Intelligence.

The commercial casualty underlying loss ratio deterioration. Could you talk about how much of that was maybe unusually large claims versus a different view of loss costs?

I can start, Matt, and then Mike can come in there. If you look at that ex cat accident year casualty loss ratio, we've held that pretty pretty close to the pick we had at the end of the year 2025. And a lot of that is being prudent due to things that you're hearing from the industry and you're hearing from us, legal system abuse, just pressure on severity on that line. And there's just -- there's a fair amount of inherent uncertainty in casualty. So I think it's -- we're holding prudent reserves in that line of business until we have further data as it progresses.

And that concludes our Q&A session for today. Mr. Spray, I'm happy to turn it back to you, sir, for any additional or closing remarks.

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

Ladies and gentlemen, this does conclude the Cincinnati Financial Corporation Second Quarter 2026 Earnings Call. You may now disconnect your lines, and we hope that you enjoy the rest of your day.

Good morning, and welcome friends. I'm Steve Johnston, Chairman of Cincinnati Financial Corporation, and it's an honor to be with you at our Annual Meeting of Shareholders. I would like to formally call the meeting to order.

Our meeting today will follow the agenda set forth in the company's notice of annual meeting. During the meeting, discussion will follow the presentation of each item of business. At that time, comments and questions must relate to the item of business being presented. At the end of the meeting, there will be a general question-and-answer session where we welcome questions provided they relate to the business of the company. If you wish to speak during the general Q&A session, proceed to the microphone, once the floor is open, for questions and wait to be recognized.

Once recognized, please state your name, and if you are a representative of a shareholder, the name of the shareholder you represent. Please keep your questions and comments concise and limited to an appropriate topic and be seated to hear the response. Keep in mind that we will not answer questions that are specifically related to pending or threatened litigation, pertaining to personal grievances or individual concerns or deemed out of order or not suitable by the Corporate Secretary.

At this time, if any shareholder wishes to turn in your proxy, please raise your hand and one of the inspectors of election will collect it. Also, any registered shareholder wishing to vote in person may come forward to see the inspectors of election, here to my left, who will facilitate voting in person. Thank you.

I will now ask Tom Hogan, Chief Legal Officer, Executive Vice President and Corporate Secretary, to read the meeting of notice.

Thank you, Mr. Chairman. I certify that on March 18, 2026, Notice of the Annual Meeting of Shareholders was mailed to those persons who were shareholders of record of the company on March 4, 2026. That notice provided that the annual meeting be held at 9:30 a.m. on Saturday, May 2, 2026, at the Cincinnati Art Museum, and that the items of business to be considered at the meeting would be: Electing 14 Directors for 1-year terms, voting on amended and restated articles of incorporation, voting on a nonbinding shareholder proposal if properly presented, voting on a nonbinding proposal to approve compensation for the company's named executive officers, ratifying the selection of Deloitte & Touche LLP as the company's independent registered public accounting firm for 2026 and transacting such other business as may properly come before the meeting.

I will include a copy of the notice along with the minutes of the meeting and the company's records.

Thank you, Mr. Hogan. Let me now introduce our appointed inspectors of election. Brandon McIntosh, Cincinnati Insurance Assistant Vice President and Manager of Shareholder Services. He's waving. And Alyson Osenenko from Alliance Advisors is with us virtually. Alliance supports the company with proxy solicitation and vote tabulation services. Inspectors, please tabulate the shares represented in person or by proxy at the meeting. While the inspectors tabulate the shares, let me make some introductions.

Let's start with the introduction of our Director nominees. Please hold your applause until we recognize all of our Directors. Directors, please stand and remain standing as your name is called. Nancy Benacci, Linda Clement-Holmes, Dirk Debbink, Jill Meyer, David Osborn, Gretchen Schar, Charlie Schiff, Doug Skidmore, Steve Spray, John Steele, Larry Webb, Ed Wilkins, Peter Wu, I am also standing for reelection at today's meeting. Thanks to all of you for your efforts on behalf of the shareholders of Cincinnati Financial.

Next, let me introduce the corporate officers here today with Tom and me. Steve Spray, President and Chief Executive Officer; Mike Sewell, Chief Financial Officer, Principal Accounting Officer, Executive Vice President and Treasurer; Steve Solaria, Chief Investment Officer and Executive Vice President.

Now I'd like to recognize the many other company officers and associates in attendance today. Would you all please stand. Thank you for your interest in the company and for your many contributions to our 2025 performance. Your attention to our core strategic initiatives has set our company on the right path to continue our long-term success.

I'd like to take a minute now to welcome some other special guests to the meeting today. We have some prior Directors of the company, Jack Schiff, Jr., Jack? And Tony Woods. We also have some retired officers, legal-beagles actually, Lisa Love and Mark Huller.

We have some other nice guests that we would like to announce. We generally go with our youngest who would be [ Curtis Hunker ]. Please stand Curtis, 6 years old. And please hold your applause for the rest now until I'm done. Curtis got a special cheer there. But please stand and stay standing: [ Zach Dutra ]. These are first-time at the shareholder meeting. [ Greg and Shar Steinbeck ], [ Ross Cannell ], Alex and [ Katherine Cloft ], [ Angie Miller ], [ Marion Kevin Jorgensen ], [ Madelin Rooke ], [ Carter Womack ], [ Sergi Martinez ], [ Victoria Hacker ], [ Amy DePue ], [ Abigail Grah ] and [ Sean Sweeney ].

All right. Representing Cincinnati Global, our Lloyd's of London syndicate, we have [ Mark Bruner ], Chief Financial Officer of Cincinnati Global Underwriting all the way from London. Mark?

From Deloitte & Touche, our independent registered public accounting firm, we have Eileen Crowley, David Freitas, Matt Brackmann, Colin Moeller and Patrick Roberts. Thank you all for attending today.

This is the 40th year we've held our shareholder meeting here at the Cincinnati Art Museum, and we thank Cameron Kitchin, Museum Director, and his staff for making this beautiful facility available. Cameron, are you in here? Okay, he's out and about making sure that all the food is taken care of and everything else.

At this time, the inspectors may be ready with proxies. Mr. McIntosh, how many shares are represented at today's meeting?

Mr. Chairman, we, the undersigned inspectors of election, duly appointed to act at the Annual Meeting of Shareholders of Cincinnati Financial Corporation held on the second day of May 2026 respectfully report as follows: the number of shares represented in person, 0; the number of shares represented by proxy, 136,429,858. Total number of shares represented, 136,429,858. That is 87.6% of shares outstanding, respectfully submitted Brandon McIntosh and Alyson Osenenko.

Thank you, Mr. McIntosh. We have a quorum present, and the meeting may proceed. Is there a motion to waive the reading of the minutes from the last shareholder meeting of May 3, 2025?

Chairman, I move to waive the reading of the minutes of the last Annual Meeting of Shareholders and to approve the minutes as written.

Thank you, Mr. Hogan. Is there a second?

Second.

Thank you, Mr. Sewell. Any discussion? All in favor by signifying aye. Oppose, same sign. Motion carries unanimously. Thank you very much.

We have 5 items of business to present this year before our inspectors tally the votes. I'd like to also note that the polls remain open for each matter to be voted on at this meeting. After each item of business is presented, I will open the floor for discussion. At that time, please keep questions and comments concise and limited to that particular agenda item. I will take questions on any other appropriate topics later in the meeting.

The first is the election of Directors. To nominate the slate of Directors listed in the proxy statement, I call on Kelly Roebuck, Senior Financial Manager, Financial Planning and Analysis.

Good morning, Mr. Chairman. I hereby nominate Nancy C. Benacci, Linda W. Clement-Holmes, Dirk J. Debbink, Steven J. Johnston, Jill P. Meyer, David P. Osborn, Gretchen W. Schar, Charles O. Schif, Douglas S. Skidmore, Stephen M. Spray, John F. Steele, Larry R. Webb, Edward S. Wilkins and Peter Wu for election as Directors of the company to hold office until the date of the Annual Meeting of Shareholders in 2027 and until their successors are elected and seated.

Thank you, Mrs. Roebuck. Are there any other nominations? Seeing none, I declare the nominations closed.

The next order of business is approving the amended and restated articles of incorporation. To present this proposal, I call on [ Michael Berg ], Cincinnati Insurance Vice President, Corporate Legal.

Mr. Chairman, I propose that shareholders approve the following resolution: resolved that in accordance with the applicable provisions of Chapter 1701 of the Ohio revised code and the amended and restated Articles of Incorporation of Cincinnati Financial Corporation, the amended articles are hereby adopted and shall supersede the existing articles.

Thank you, Mr. [ Berg ]. Is there any discussion at this time?

The next order of business is the nonbinding shareholder proposal. To present the proposal, I welcome [ Cameron Barber ], who is an authorized representative of [ John Chevedden ].

Thank you, Mr. Chairman. Shareholders ask the Board of Directors to take steps necessary to amend governing documents to give owners a combined 10% of the outstanding common stock the power to call a special shareholder meeting. Such a special shareholder meeting can be an online shareholder meeting. Proposal 2 and 3 are both the same special shareholder meeting topic. These proposals are in reverse order because the shareholder proposal 3 was drafted first and the Cincinnati Federal Proposal 2 came later.

Proposal 2 is masquerading as giving shareholders the right to call for a special shareholder meeting. With proposal 2, there is a poison-like peel barrier that is too challenging. Proposal 3 by contrast is for an attainable shareholder right to call for a special shareholder meeting. Only proposal 2 has a barrier that makes it sort of a placebo right for shareholders to call for a special shareholder meeting because history shows that proposal 2 is unusable.

The barrier in Proposal 2 is a need for a formal backing of 25% of all shares outstanding to call for a special shareholder meeting. A 25% requirement is too high because shareholders at more than 100 companies have voted on the right to call for a special shareholder meeting and not 1 of these 100 companies have ever cited 1 example of a special shareholder meeting was ever actually taking place where the requirement was 25%. Cincinnati Financial also seems to be engaging in questionable practices. The shareholder proposal cannot duplicate a company proposal. Cincinnati Financial is taking advantage of a loophole where the company proposal can, by contrast, duplicate a shareholder proposal if a company simply decides to do so.

Please vote, yes.

Thank you, Ms. [ Barber ]. Is there any discussion at this time?

The fifth order of business is voting on a nonbinding proposal to approve the compensation for the company's named executive officers. To present this proposal, I call on [ Brian Wood ], Cincinnati Insurance, Senior Vice President, Human Resources.

Mr. Chairman, I propose that shareholders approve the following resolution: Resolved that the company's shareholders approve on an advisory basis the compensation of the named executive officers as disclosed in the company's proxy statement for the Cincinnati Financial Corporation 2026 Annual Shareholder Meeting pursuant to the compensation disclosure rules of the SEC, including the compensation discussion and analysis, the 2025 summary compensation table and the other related tables and narrative disclosure.

Thank you, Mr. Wood. Is there any discussion at this time?

The final order of business is to ratify the selection of Deloitte & Touche LLP as the company's independent registered public accounting firm for 2026. To present the proposal, I call on Andy Schnell, Cincinnati Insurance Senior Vice President and Treasurer, Corporate Finance.

Mr. Chairman, I propose that shareholders ratify the selection of Deloitte & Touche LLP as the company's independent registered public accounting firm for 2026.

Thank you, Mr. Schnell. Is there any discussion on this one at this time?

Again, I would invite any shareholder who wants to vote in person to come and see the inspectors of election or raise your hand and we'll come to you to receive your vote. Seeing and hearing none, the polls are now closed for each matter voted on at this meeting. While the inspectors of election are tallying the votes, I invite our President and CEO, Mr. Steve Spray, to talk about the company's 2025 performance and trends that may affect 2026 and beyond.

You'll have an opportunity to ask questions at the end of the meeting, so please let us know if you want to hear more on any subject at that time.

As we begin, let me remind you that some of the matters we will discuss are forward-looking and may involve certain risks and uncertainties. You may refer to various filings with the SEC for factors that could cause results to differ materially from those discussed. You can find reconciliations for non-GAAP measures in our most recent quarterly earnings news release, which is available at investors.cinfin.com. Mr. Spray?

Thank you, Mr. Chairman. Good morning, all here at the beautiful Cincinnati Art Museum, and thank you for everyone who's tuning in online as well. It's my pleasure, my privilege this morning to give you an update on your company's results and operations.

As we start every meeting at the company, whether it be with associates, with our agent partners, we share this slide. We think it's important to constantly remind ourselves and our partners of our vision and our strategy. Our vision is to be the best company serving independent agents. Notice, I didn't say the best insurance company. I said the best company serving independent agents.

Our strategy is illustrated by the pyramid here. We were founded by 4 independent agents in 1950. We put independent agents at the top of the pyramid at the center of everything we do. We appoint the most professional agents in the business, build deep relationships with each and every one of them and then reflect what they do well. I also like to say that we take the company out into the community where our agents are, put associates in the communities assigned to the agencies and then empower them to make decisions at the local level. That is one of our absolute key differentiators.

We handle claims, fast, fair, personal and with empathy. And in headquarters, we respond, we build expertise. We provide support for all of our agents, all of our field associates across the country.

Financial strength, I'm going to talk about that in a few slides, but I stand here before you today and say that your company has never been stronger financially. And then we put everything on a foundation of ethical behavior at Cincinnati Insurance. We live the golden rule. We treat others the way we would want to be treated. This vision, this strategy has served us all very well for 75-plus years, and we're extremely confident that it's going to serve us all well far into the future.

These next few slides, we really look at as a scorecard on how we are delivering on that vision and on that strategy. First one I have for you is net written premium growth. You can see we finished 2025 just a little over 9%. Strong 5 years. You go back even further, and we've got strong growth. As a matter of fact, we're growing at almost 1.3x the industry average on a compounded annual growth rate over these last 5 years. I think a fun little fact as well is since 2018, your company has doubled its net written premiums. We went from at the end of 2018 to just over $5 billion of consolidated net written premiums. We finished 2025 at just over $10 billion of net written premiums.

I think this is important because our customers, our partners, they're independent. They have choices. They don't owe us anything. We have to show up and earn every dollar that we get as a company in our agencies. And our agencies have afforded us that opportunity and I'd just like to right now just say thank you to all the agents out there for everything you do for the company.

Most importantly, we're doing it profitably. 2025 marks 14 consecutive years that your company has generated an underwriting profit. It's something that we're extremely proud of. It's a streak that we want to continue to focus on and keep going. Over those 14 years, I think we've done an excellent job and the average combined ratio of those 14 years is 94.8%. And our guidance and our goal is always 92% to 98%. So we're hitting that mark of modest underwriting profit while remaining affordable out in the communities that we and our agents serve.

The 94.9% that you see for 2025, I think, is we're especially proud of because your company was able to respond to the single largest catastrophe in the company's history, the California wildfires. And I think being able to -- by the end of the year to turn in a 94.9% just is a testament to our business model, to our agents, to our associates on the way they execute policy; by policy, the way our claims teams handle claims fast, fair and personal. So to turn in a result of 94.9% after, again, the worst catastrophe in the company's history, I think, just shows to the consistency, the resiliency and the stability that we're all striving for.

So when you're growing, you're doing it profitably and you're investing wisely you can build a fortress balance sheet like we had at Cincinnati Financial. You can see here at the end of 2025, we have just under $16 billion of GAAP equity, supporting a little over $10 billion in net written premiums. Cincinnati Insurance has never wanted for capital to grow the company, and that's never been truer than it is today. We stand ready to take all the great new business, our agents can send our way.

Now of course, we're going to underwrite it and we're going to price it for the long term. We're not thinking in the next 2 months or even the next year. We're thinking 2 years, 5 years, 10 years, 15 years from now, how do we remain that consistent, reliable, stable partner for our agents and the policyholders in their communities.

I'd like to call this slide or we like to call this slide continuous improvement. And I've just taken a snapshot in time from 2007 forward, but I could take this back to 1950 and we can take it forward beyond 2022. It really summarizes the strategy. I said it earlier, we appoint the best agents in the business, build deep relationships, try to reflect what they do well, listen to the needs of the agents and their clients and their communities, and we respond.

I went back to 2007 when we started our E&S company. And you can see all the products and services that we as a company have developed over the years. And we did it before '07, and we'll continue going forward. But every one of these minus 1, I'd say, business unit, premium-producing business unit, came at the direct request or a direct feedback of one of our agent partners. I think the thing that's most important here, too, is just this window, just these business units, these premium-producing units at the end of 2025 generated well over $4 billion of our $10 billion in net written premiums. So really goes to our strategy and something that we'll continue to focus on.

This kind of shows you it in a little different light. Over the last decade plus, we have really been focused on diversifying our revenue, both geographically and, as I'm showing you here, by business unit. And you can see the nice growth through all business units, commercial lines, personal lines, Cincinnati Life Insurance Company, Steve mentioned Cincinnati Global and Cincinnati Re and then, of course, our E&S operations, CSU. So this is a deliberate strategy of the company. We'll continue to do this. This will continue to help us reduce volatility from year-to-year. So that strategy is performing well and our associates are doing an excellent job.

This slide really, I think, validates both our short-term goals and our long-term strategy. Simply put, what we're doing here is we're taking $1, 1987, investing in either in the S&P 500 or in Cincinnati Financial. I think everyone knows how well the S&P has done over this time. And you can see how your company's total shareholder return has done in comparison to the S&P. And you can see this gray line, the VCR, stands for value creation ratio. That's our primary financial metric as a company. And I think you can see why we use VCR as our primary financial metric. So goes VCR, so goes total shareholder return of the company. So this is something that we will remain focused on as well.

This slide just shows you how VCR has performed over time. We've taken it back 5 years. The goal for VCR is over any -- average over a 5-year period is 10% to 13%. And you can see that there can be volatility in it. But over the long pull, you can see how this rewards shareholders. With the strong operations that we have, with the excellent investing that our team does, this has afforded the Board of Directors of Cincinnati Financial to continue to return capital to shareholders.

We've got -- at the end 2025, we've got 65 consecutive years of increasing dividends. As a matter of fact, at the end of January this year, your board increased the regular quarterly dividend from $0.87 to $0.94, about an 8% increase. That sets the stage for 66 consecutive years. We're not just paying a dividend of increasing that dividend every year for 66 years. That's something we can find only 7 other publicly traded companies in the U.S. can match that record. Something that we're proud of, something I can tell you we're focused on, is something that we'll continue to strive to deliver into the future.

Maybe give you a little highlights of the first quarter. We just wrapped that up. We had our conference call last week, 7% net written premium growth, 96.5% (sic) [ 95.6% ] combined ratio, every major business unit at the company in the first quarter turned an underwriting profit. VCR, you can see, at 0.2% through the first quarter. So we're off to a really good start for 2026. It's only 1 quarter. We got a lot of work to do, but we're happy with the start.

One metric I don't have on this slide that I would like to share is net investment income. Net investment income in the first quarter was up again 14%. So just continuing to support everything we do at Cincinnati Financial. With our great relationships with agents and the financial strength that we cultivate and that we prioritize, our claims associates across the country never have to worry about our ability to pay clients. They can spend their energy and their effort focusing on delivering on that promise that we put in that policy contract. And I don't think anybody does it better than a local independent agent that represents Cincinnati and a local Cincinnati claims representative.

Every time we receive a claim, it gives us an opportunity to make a bad day better. We want to pay every dollar we owe under the policy contract, but we want it to be more than just a transaction. We want to turn a bad event into a favorable experience. And again, I don't think anybody does it better than a Cincinnati agent and a Cincinnati claims rep at the local level.

What I'd like to do now share with you a short video where we had the opportunity to not make 1 bad day but 2 bad days better for a couple who put their trust in Cincinnati Insurance.

[Presentation]

[Audio Gap] personal empathetic claim service, just like you saw in that story, it really upholds the reputations of all of our agents in the communities where they are. It sells more insurance through word of mouth. And along the way, we also sometimes pick up a few accolades. In 2026, you can see that Forbes rated Cincinnati Insurance as one of the best carriers out there for the consumer for homeowners and auto insurance. And then in 2025, we received -- we were a gold winner in the Crisis Response of the Year Category by Best in Biz for our response to Hurricane Helene. So not things that we look for, but it's certainly nice to validate, and I love the fact that it recognizes our agents and our field associates as well.

Now we've got a winning strategy at the company that we know will continue to create great value over the years into the future for our company, for our associates and for our agents and of course, continue to create long-term shareholder value for each and every one of you.

So thanks for your time this morning. Much appreciated. Mr. Chairman, I'll turn the meeting back over to you.

Thank you, Mr. Spray. Before we hear from the inspectors of election, I'd like to remind shareholders of the services of our stock register, transfer agent and dividend dispersing agent that Equiniti Trust Company can provide. Equiniti can help shareholders of record convert paper certificates to electronic book entry instead. Holding your shares electronically eliminates the risk and expense of paper certificates being misplaced or destroyed. Equiniti can also help you enroll in dividend reinvestment plans, compounding your returns over time. If you like more information, please either contact our shareholder services department or visit Equiniti at www.shareowneronline.com.

Inspectors, do you have the preliminary voting results?

Mr. Chairman, we, the undersigned inspectors of election, duly appointed to act at the Annual Meeting of Shareholders of Cincinnati Financial Corporation held on the second day of May 2026 hereby submit our preliminary report on the results of the voting.

For the first proposal, the election of Directors, each of this year's nominees received more votes cast for their election than against.

For the proposal to approve the amended and restated articles of incorporation, the affirmative vote of approximately 75% of our common shares outstanding were voted in favor of approving the amended and restated articles of incorporation.

The nonbinding shareholder proposal was supported by approximately 27% of the shares present or represented and entitled to vote at the meeting.

For the nonbinding advisory say-on-pay vote, approximately 96% of the shares present or represented and entitled to vote at the meeting were voted in favor of the nonbinding resolution to approve the compensation for the company's named executive officers.

For the final proposal, approximately 95% of the shares present or represented and entitled to vote at the meeting were voted in favor of ratifying the appointment of Deloitte & Touche LLP as the company's independent registered public accounting firm for 2026, respectfully submitted Brandon McIntosh and Alyson Osenenko.

Thank you, Mr. McIntosh. It appears all Directors have been elected, all management proposals have passed and the appointment of Deloitte & Touche as the company's independent registered public accounting firm has been ratified. The shareholder proposal that the company adopt a 10% ownership threshold requirement to call a special shareholder meeting failed to receive a majority of the shares represented in person or by proxy. The inspectors of election will furnish to Corporate Secretary with a written report of the final vote count with respect to matters voted on today to be included in the minutes of the meeting. We'll announce final results once they are certified early next week.

At this time, we welcome your questions, and we want to learn more about your interest in our business. Please come to 1 of the 2 microphones we've set up to share your comment or to ask your question so that we can keep the meeting on schedule and allow everyone to speak who wishes to. Please keep your questions to 2 minutes or less. Mr. Spray, would you like to join me?

Are there any questions? Okay. Hearing or seeing no questions, unless there is other business for today's meeting, I request a motion to adjourn.

So moved.

Is there a second?

Second.

Before we stand adjourned, I'd like to mention that you are welcome to tour the entire art museum free of charge. Your program has details on the museum special exhibitions which are also available to you today. Refreshments are still available as well. We stand adjourned.

Thank you very much for your presence today. We look forward to seeing you again next year.

Good day, ladies and gentlemen, and thank you all for joining us for this Cincinnati Financial Corporation First Quarter 2026 Earnings Conference Call. [Operator Instructions] Today's session is also being recorded.

It is now my pleasure to turn the floor over to Investor Relations Officer, Mr. Dennis McDaniel -- excuse me, Mr. Dennis McDaniel rather. Welcome, Dennis.

Hello. This is Dennis McDaniel at Cincinnati Financial. 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.cinfin.com. The shortest route to the information is the Quarterly Results section near the middle of the Investor Overview page.

On this call, you'll first hear from President and Chief Executive Officer, Steve Spray, and then from Executive Vice President and 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 Executive Chairman, Steve Johnston; Chief Investment Officer, Steve Soloria; and Cincinnati Insurance's Chief Claims Officer, Marc Schambow; 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, we 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'll turn over the call 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 the first quarter of 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, $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 7 years, we've 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 the fourth quarter of 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 included personal auto and homeowner in the high single-digit range. Our premium growth objectives are further supported by exceptional claims service and our deep relationships with best-in-class independent insurance agents.

Next, I'll 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'll 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 the first quarter of 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'll turn it over to Chief Financial Officer, Mike 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 the first quarter of '26, 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 3 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 of $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 $401 million.

Cash flow continued to benefit investment income growth. Cash flow from operating activities for the first 3 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 updated estimated ultimate losses and loss expenses by accident year and line of business. For the first 3 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 3 months of 2026 included favorable $72 million for '25, favorable $25 million for '24 and an unfavorable $16 million in aggregate for accident years prior to '24.

I'll 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 remain 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'll 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, A.M. Best also expressed their confidence in our plans by affirming our A+ rating, citing our strong balance sheet and operating performance. If you'd like to hear more about how we'll 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.cinfin.com. As a reminder, with Mike and me today are Steve Johnston, Steve Soloria, Marc Schambow and Andy Schnell.

Jim, please open the call for questions.

[Operator Instructions] We'll take our first question today from the line of Michael Phillips at Oppenheimer.

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've heard from others, but it's obviously hard to really accurately say on that. I guess your high end of low single digit, obviously, that's impacted by your commercial property and comp. They're 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?

Yes. Mike, good to hear from you. Yes, the high end of the low single-digit range, so that takes -- that's all in, that takes into account some of the impact that we'll get from our 3-year policies. Specifically to casualty and not bifurcating it down, but just all in on casualty, we're getting mid-single-digit increases. I think more importantly, from my perspective, Mike, in shifting market cycles, I think our focus on policy -- we're a package writer, focused on policy by policy, risk selection terms, conditions and then using the pricing tools that we have and segmenting the book is where we focus most of our efforts versus any straight average. It just doesn't -- the straight average just doesn't tell the story through any market cycle. But I think even now, as things are softening, I think it's even more crucial that our underwriters working with the agents continue to deliver on that segmentation strategy.

Okay, Steve. I guess switching over to personal, specifically the umbrella book. You've grown that nicely in the last couple of years. I think you're north of $200 million or so of premium, so a small base. But can you just talk about your strategy there? How big do you want that to be, say, over the next year or 2? Does it get to $0.5 billion in the next 2 years? Obviously, your thoughts on the volatility of that business in terms of losses. So just kind of thinking about how much you want to grow in the near term on umbrella.

Yes. Thanks, Mike. No specific guidance on how large or how much we want to grow that umbrella. Again, in personal lines, I think, as you know, we're a package writer. And so in many, 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've got the balance sheet. We've got the expertise, and that has performed well for us. Legal system abuse in commercial lines has been well documented. And so it's 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'll continue to grow it.

Okay. And then just one quick numbers question, if I could. Mike, that $72 million on 2025 accident year, I assume that's homeowners and property lines?

Repeat that again?

Yes. Mike, you mentioned the $72 million of favorable in '25 accident year. I just was curious to make sure that was -- was that homeowners and commercial property?

Yes.

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

First, I just want to say, Dennis -- on Dennis' retirement, it's a big deal at Cincinnati Financial. And I wish Dennis the best and he's just the best in the business. So I only have great things to say and think about him. So we're going to miss you, Dennis.

Thank you, Josh. And the good thing is the team is ready to continue to execute. I'm around for a few more months, but thank you.

Well. So here's 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 company or maybe I'm wrong from the customer or maybe I'm wrong about that. You sell a whole package. We want your cars, we want your toy, 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's the difference between the growth rates of the subgroups within personal lines?

Yes. Thanks, Josh. You're all over it. We are a package writer, both in middle market personal lines and in private client. We want to be an all-line solution for the policyholders. But you make a great point. I think it's one of the advantages that we have by both -- by being a premier carrier for our agents in middle market and high net worth. There's diversification that naturally comes with that business.

High net worth, you're right. It is more property driven. Homes are larger. There's just maybe fewer vehicles, but high net worth generally is property driven, less auto. Middle market is the opposite, lower property, higher auto pricing. And then I'll take it -- you didn't ask this, but I'll take it a step further. We're getting 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 seems to be -- not seems to be, but is more Northeast, West Coast, Florida driven.

Well, so 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're asking and how much your appetite for unit growth has changed in the past 6 months?

Yes, you're right. There's a lot of moving parts. The one thing I would say, I'd go back to also, Josh, is that last year, we had reinstatement premiums in the homeowner line, and that's making the comps different. So I'd point you to that.

With regards to just the new business, we -- after the loss last year in California, as we've discussed, we did an immediate after action lessons learned. And so growth in California new business really slowed last year. It's kind of picked back up here in the first quarter, but not enough to maybe overcome what's come down there. We've 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 '24 and '25, and we've talked a lot about this, they were historic hard market years, especially for personal lines. So I think we're 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're putting on in 1Q '26 versus 1Q '25 and 1Q '24?

Yes. In commercial lines, our policy counts are growing. In personal lines, the exposure units have been down a little bit. So the -- I don't know how much it would impact that. But to answer your question, yes, the policy counts are down a bit, which of course is a good thing -- sorry.

No, no, no. You can continue and I'll get -- you think it's a good thing you were saying.

Yes. No, we're just getting -- just like it's just one on one. We're getting more rate for less exposure. So we think that bodes well.

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

Yes. There was 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, they have been pretty stable. We feel they're adequate. We're comfortable with the pricing there, but we are seeing some additional competition come back into California for new business.

Next, we'll hear from Mike Zaremski at BMO Capital Markets.

First question, shifting to capital management. We saw an elevated share repurchase level. I don't think we've seen that in a while. I can see that the cap currently versus historical, you can see top line growth is kind of running a bit lower as the market becomes more competitive. Maybe just should we be run rating this level of buybacks unless things change meaningfully on the valuation of the Cinci stock?

Yes. Mike, this is Mike Sewell. It's a great question, and thank you for it. It was probably, I'll say, a little elevated for Q1 of this year. But is it unusual? No, it's not. We still have said that we're doing maintenance, maybe a little bit of maintenance plus. The last year that we did, I'll say, a little over 1 million shares in Q1 was back in 2020. So 6 years ago, we did 2.5 million shares. But if I start to look at full years, we've done almost 1.1 million this year. Last year, we did 1.3 million, 1.1 million before that. 2022, we did 3.7 million. So I would say this is not unusual. It's, I would call it, maintenance plus, and we'll see how things go the rest of the year and what we determine to do.

Got it. And just maybe switching gears to the question I think we get the most on is back to the lawsuit, social inflation lines of business. We can see from your KPIs that the casualty has been favorable last -- for the last 5 quarters and the underlying is -- in commercial auto and et cetera, it seems to be improving a bit. Would you say you guys are kind of getting over the hump of more rearview mirror there? Or is it still kind of TBD and kind of making sure to be very careful on growth using your analytics in those lines of business?

Yes. Thanks, Mike. You're again, all over it. And I'd say it's both. We are confident in the pricing and the risk selection that we're seeing there. But I'd say we also feel that we're not out of the woods as an industry and specifically us when it comes to social inflation, legal system abuse, as we probably prefer to call it. And you're 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 just think that there's still a tremendous amount of uncertainty around that. And so you can see it in our ex-cat accident year picks, both in commercial casualty, commercial auto, I think, is where you'll -- that's kind of the epicenter. So just -- I don't think we're over any hump, but I also think we're prepared for what might come at us just, one, based on our picks. But two, like you mentioned, the analytics, the way we're pricing risk by risk and risk selection.

Got it. That's helpful. And then just lastly, stepping back. When we think about the overall competitive environment in commercial lines and taking into account your risk collection analytics, et cetera. But is it fair to kind of paint a broad brush to say pricing powers on commercial lines is still biased downwards versus kind of stable-ish over the coming year despite kind of still material levels of social inflation impacting the broader industry?

Yes, Mike, I won't project it forward for you, but where we are right now, I would say it is. It is. You can't paint the whole book with a broad brush. We're definitely seeing pressure. The larger the premium, the larger the account, the more pressure there is there. And then kind of peel that back a little bit, it's even more so on commercial property. We're still seeing net rate. But as I was mentioning to Mike Phillips earlier, the average just doesn't -- really doesn't tell the story. It's look at every single policy on a risk-adjusted basis and make decisions from there.

And our underwriters just -- I can't speak highly enough of how they're executing on that through all market cycles. And I think what makes it maybe more efficient, more effective is that they are dealing with the most professional agents in the business that can convey value. And that's what we're looking for, long-term consistency, stability and predictability. And I just think -- I'd be remiss if I didn't mention just how our underwriters and our agents are executing on that.

And just lastly then, I know Cinci has been proactively moving into the larger account is the right word because I don't want to compare you guys to Chubb or an AIG, but kind of bigger premium policy levels over many years now. So does that just mean maybe the hit rate could be a bit lower on the larger premium stuff if the current competitive environment sticks?

Yes, Mike, absolutely. And you're right, we've been -- we've always written larger accounts for our agents, but we really decided to get deliberate about it, 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 kind of all disciplines there. But yes, as we're growing that, it might be putting a little bit more of an outsized pressure because we're -- not only are we not winning on some accounts based on our view of the risk, retention is struggling there a little bit, too.

Paul Newsome at Piper Sandler, you have our next question.

I was wanting to go back to the reserve issues, the very small change in the past pre '24. I presume that's pretty much all casualty at this point. Are we making a little bit of a statement or not? I don't want to read too much into the $16 million, but about what's going on with casualty reserves there?

No, Paul. And let me -- I'm going to state that again. So we -- in total, obviously, 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's really kind of spread across the -- across multiple accident years. And I would say nothing is really popping out to me.

My follow-up question sort of illustrates -- I was having trouble sleeping last night, there was a statement in your 10-K -- 10-Q that was sort of a qualifier for the reiteration of your long-term combined ratio goals. And it's something along the lines of there's several reasons why '26 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're concerned about?

Yes. No, Paul, nothing more to read into that. Our long-term target is still 92% to 98%. We'll continue to underwrite and price risk by risk. And with -- we're still writing the same mix of business. Everything there is consistent. Just with a market that might be putting more pressure, downward pressure on rate, I think it's -- there's just an acknowledgment that we'll be prudent in our picks there.

[Operator Instructions] We'll hear now from Meyer Shields at KBW.

I guess one question. You talked about the, I think, 108 agency appointments in the first quarter. And I know that historically, Cincinnati has been very demanding in terms of agency quality. Does that number sort of have to slow down at any point in time? And maybe more or less big picture, I was hoping you could talk about which geographic regions are seeing the most appointments right now?

Yes. Thanks, Meyer. We -- the strategy as a company has always been to have as few agents as possible, but as many as necessary. And you look at us on a relative basis to the industry and to our peers, I think we've got about roughly 2,400 agency relationships operating out of 3,500-plus locations. We've always had a limited distribution model. And even adding 300 or 400 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 35 years, one of the keys to our success is we've always done a great job of underwriting agencies. And you point to that with the quality. And that's a big focus of ours is just making sure that we're aligned with these agencies that they're professional, they're centers of influence in their community. And we think that there are a lot more agencies across the country that meet those standards, and we'll continue to appoint, we'll continue to keep our standards high.

And 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 where we feel like right now, we have a better-than-average shot at good risk-adjusted returns.

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

Yes. To answer that, and thanks for the question, Meyer. It's very little that we have. I think there was a little bit more on the Cinci Re side, but it was $5 million. On the Cinci Global, it was $1 million. And actually, it was below $1 million. So very minor in total, but we are -- we'll be watching that one day at a time.

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

Well, 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.

Thank you for standing by. My name is Jordan, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Cincinnati Financial Fourth Quarter and Full Year Earnings Conference Call. [Operator Instructions]

I'd 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 fourth quarter and full year 2025 earnings conference call. Late yesterday, we issued a news release on our results, along with our supplemental financial package, including our year-end investment portfolio. To find copies of any of these documents, please visit our investor website, investors.cinfin.com. The shortest route to the information is the Quarterly Results section near the middle of the Investor Overview page.

On this call, you'll first hear from President and Chief Executive Officer, Steve Spray; and then from Executive Vice President and 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 Executive Chairman, Steve Johnston; Chief Investment Officer, Steve Soloria; and Cincinnati Insurance's Chief Claims Officer, Marc Schambow; 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, we 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'll turn over the call to Steve.

Good morning, and thank you for joining us today to hear more about our results. We had another excellent quarter of operating performance that again demonstrated the resilience of our proven operating model and the long-term strategy that drives our insurance business. Investment results were also part of that excellent performance, including investment income growth and another quarter with net investment gains. Operating performance was very strong for the fourth quarter and boosted full year results enough to outperform last year in several key areas despite starting 2025 with the largest catastrophe loss in our company's history.

Net income of $2.4 billion for full year 2025 was 4% higher than 2024. Fourth quarter net income of $676 million rose 67% and included recognition of $145 million on an after-tax basis for the increase in fair value of equity securities still held. Non-GAAP operating income for the quarter increased 7% to $531 million. For full year 2025, it was up 5% from a year ago.

Our fourth quarter 2025 property casualty combined ratio was an outstanding 85.2%. It lowered the full year combined ratio to 94.9%, near the midpoint of our long-term average target range. The full year ratio was 1.5 percentage points higher than last year, driven by an increase of 1.6 points in the catastrophe loss ratio. On a current accident year basis, measured at 12 months before catastrophe losses, the combined ratio improved by 0.4 percentage points. The loss and loss expense portion would have improved slightly, if not for the unfavorable effect of 0.3 points from reinsurance reinstatement premiums.

Consolidated property casualty net written premiums continued to grow, but at a slower pace, 5% for the quarter. That reflects our pricing discipline in the insurance marketplace as our underwriters carefully consider risks on a policy-by-policy basis and use pricing precision tools to segment those risks as part of their underwriting decisions. Estimated average renewal price increases for most lines of business during the fourth quarter were lower than the third quarter of 2025, but still at a level we believe was healthy.

Our standard and excess and surplus commercial lines business averaged increases in the mid-single-digit percentage range. Our personal lines segment included homeowner in the low double-digit range and personal auto in the high single-digit range. We believe our relationships with independent agencies are as strong as ever and that they will continue to trust us with their high-quality new business.

The fourth quarter 2025 decrease in new business written premiums was driven by our personal lines segment that had unusually large amounts the past 2 years. However, the $92 million for the quarter was still 62% more than the average of the 3 years prior to 2023. Policy retention rates in 2025 were similar to 2024. Our commercial lines segment was down slightly, but still in the upper 80% range. Our personal lines segment was also down slightly, but still in the low to mid-90% range.

Performance by insurance segment is the next area I'll highlight, focusing on full year 2025 results compared with 2024. But first, I'll note that all operating units had an excellent fourth quarter profitability, each with combined ratios below 90%. Commercial lines' 91.1% combined ratio for the year improved by 2.1 percentage points, including a decrease of 1.9 points in the catastrophe loss ratio. Its net written premiums grew 7%. Personal lines' 103.6% combined ratio for 2025 increased by 6.1 percentage points, including an increase of 7.1 points in the catastrophe loss ratio. Its net written premiums grew 14%. Excess and surplus lines' 88.4% combined ratio for the year improved by 5.6 percentage points, including a decrease of 1 point in the catastrophe loss ratio. Its net written premiums grew 11%.

Both Cincinnati Re and Cincinnati Global produced strong results and again demonstrated the benefits of diversifying risk to improve income stability. Cincinnati Re's combined ratio for the year was 95.9%. Its 1% decrease in net written premiums reflects changing reinsurance market conditions. Cincinnati Global's combined ratio for 2025 was 79.2% with premium growth of 10%, benefiting from product expansion. Our life insurance subsidiary increased annual net income by 16% and grew term life insurance earned premiums by 3%.

Moving on to our reinsurance ceded programs. On January 1 of this year, we again renewed each of our primary property casualty treaties that transfer part of our risk to reinsurers. For our per risk treaties, terms and conditions for 2026 are fairly similar to 2025, other than an average premium rate decrease of approximately 7%. The primary objective of our property catastrophe treaty is to protect our balance sheet. The treaty's main change this year is increasing the top of the program to $2 billion compared with $1.8 billion, effective July 1, 2025. Should we experience a 2026 catastrophe event totaling $2 billion in losses, we'll retain $523 million compared with $803 million for an event of that magnitude during the second half of last year. We expect 2026 ceded premiums for these treaties in total to be approximately $204 million, with the increase from the actual $192 million in 2025 driven by additional coverage and subject premium growth.

As usual, I'll conclude my prepared remarks with the value creation ratio. Our 18.8% full year 2025 VCR exceeded our 5-year annual average target range of 10% to 13%. On a full year basis, net income before investment gains or losses contributed 9.1%. Higher overall valuation of our investment portfolio and other items contributed 9.7%.

Now Chief Financial Officer Mike Sewell will highlight investment results and other important points about our financial performance.

Thank you, Steve, and thanks to all of you for joining us today. Investment income was a significant contributor to higher net income and improved operating results, rising 9% for the fourth quarter and 14% for the full year 2025 compared with the same periods of last year. Bond interest income grew 10% for the fourth quarter, and net purchases of fixed maturity securities totaled $1.6 billion for the full year 2025. The fourth quarter pretax average yield of 4.92% for the fixed maturity portfolio was similar to last year. The average pretax yield for the total of purchased taxable and tax-exempt bonds during 2025 was 5.6%.

Dividend income for the quarter matched last year, even without the repeat of a $6 million special dividend from December 2024. Net purchases of equity securities totaled $74 million for the year. Valuation changes in aggregate for the fourth quarter and the year were favorable for both the equity portfolio and our bond portfolio. Before tax effects, the fourth quarter net gain was $181 million for the equity portfolio and $24 million for the bond portfolio. At the end of the fourth quarter, the total investment portfolio net appreciated value was approximately $8.4 billion. The equity portfolio was in a net gain position of $8.5 billion, while the fixed maturity portfolio was in a net loss position of $181 million.

Cash flow from successful insurance and investment activities continued to fuel investment income. Cash flow from operating activities for full year 2025 was $3.1 billion, up 17%. Regarding expense management, our strategy continues to seek a good balance between controlling expenses and investing in our business. Our fourth quarter 2025 property casualty underwriting expense ratio decreased by 0.2 percentage points as an increase in agency profit sharing commissions was offset by growth in earned premiums, outpacing growth in other expenses.

Turning to loss reserves. Our approach remains consistent and aims 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 updated estimated ultimate losses and loss expenses by accident year and line of business.

During 2025, our net addition to property casualty loss and loss expense reserves was $1.3 billion, including $1.1 billion for the IBNR portion. For current accident year [ loss loss ] expenses before catastrophe effects and measured at 12 months, several of our major lines of businesses had 2025 ratios better than 2024. The main exception was commercial casualty, rising 4.2 percentage points. That reflects ongoing uncertainty, including potential negative effects of legal system abuse we and others in the industry have noted in recent years. We remain confident with our pricing and risk selection for this line of business.

For prior accident years, we experienced $196 million of property casualty net favorable reserve development during 2025 that benefited the combined ratio by 2.0 percentage points. On an all-lines basis by accident year, net reserves developed during 2025 included a favorable $275 million for '24, favorable $8 million for '23 and an unfavorable $87 million in aggregate for accident years prior to '23.

As usual, I'll conclude with capital management highlights. For the full year 2025, we returned capital to shareholders totaling $730 million, including $525 million of dividends paid and $205 million of share repurchases. We repurchased approximately 1.4 million shares at an average price of $151 per share, including 651,000 shares during the fourth quarter at $157 per share. We continue to believe our financial flexibility and our financial strength are both in an excellent position.

Parent company cash and marketable securities at quarter end was $5.6 billion. Debt to total capital remained under 10%. Our quarter end book value was a record high $102 million -- $102 and $0.35 per share with $15.9 billion of GAAP consolidated shareholders' equity, providing plenty of capacity for profitable growth of our insurance operations.

Now I'll turn the call back over to Steve.

Thanks, Mike. Before we get to Q&A, I want to share our efforts related to intelligent automation. As most of you have heard us say before, our vision is to be the best company serving independent agents. Strategies we undertake must ladder up to improving the experience for the independent agents we serve and their clients. We are embracing intelligent automation to improve processes across our technology ecosystem. Generative AI is certainly a part of it, but it's only one aspect.

Our work began with improvements to our data architecture, giving us a rich understanding of our risks and how we could shape our entire insurance portfolio for the future. We use workflow tools in each insurance segment that organize data and automate certain activities in writing new business or in other transactions. That experience formed a deep pool of talented associates with the knowledge, skills and desire to continue our journey into generative AI. Most importantly, these associates are also insurance experts. We've created an AI center of excellence, which is harnessing cloud provider large language models to create internal solutions that can be then -- that can then be easily replicated throughout our company for fast scalability.

We have a number of projects completed, and even more on the road map. Let me share an example. Using generative AI, we created a proprietary chatbot that our commercial lines underwriters use to obtain reference information and find answers that assist with underwriting decisions. We are concentrating on using Gen AI to gain efficiency that leads to meaningful productivity gains for our associates. We're optimizing their efforts, allowing them to add more value to our business, deepening relationships, sharing expertise and focusing their energy on the most complex underwriting and claims decisions. As we continue to weave Gen AI into our business, we expect to see additional impacts to our profitability and growth.

As a reminder, with Mike and me today are Steve Johnston, Steve Soloria, Marc Schambow and Andy Schnell. Jordan, please open the call for questions.

[Operator Instructions] Your first question comes from Michael Phillips from Oppenheimer.

I guess I did want to start with the commercial casualty line. Mike, I heard your comments on the uncertainty and the legal system abuse. I think it's been pretty common for everybody for a while. I guess pricing seems to be getting softer for commercial casualty for the industry. Maybe not necessarily for you, but at least for your peers. So I guess just as we think about '26 and your 2025 number of, I guess, 76% or 77%, how much confidence do you have in that number not continuing to creep up from here or hopefully holding flat or maybe just confidence around that given what is a bit of a softer market today than it was the last couple of years?

Yes, Mike, Steve Spray. Let me -- I can start, and then if Mike wants to add some additional thoughts, he can as well. Just to your -- to the softness in the pricing, I think the -- we did see -- just -- I'll speak to maybe overall commercial pricing there in the fourth quarter. We did see it start to get more competitive pretty quickly in the fourth quarter on a packaged basis, all lines. Now most of that was driven by commercial property. But I think again, as a packaged company, the auto and the casualty kind of got drawn into that.

I just -- I can understand somewhat, the property softening just given the results of the industry, and you can see Cincinnati's results as well. But I just think there's loss cost headwind, particularly in casualty, as Mike mentioned on the legal system abuse, commercial auto. So I think that the pricing is going to is going to hold up. We're confident in the future.

For 2026, we're confident that our rates, our pricing are exceeding loss costs in all lines, except for workers' compensation. The only other thing I might add there, Mike -- and we talk about it in prior quarters -- is if you look at the average rate increase for Cincinnati -- I'll just speak to Cincinnati -- it just doesn't tell the entire picture. Our underwriters, both on new and renewals, have been executing now for years on using sophisticated tools they have to segment the business, the accounts we write, risk by risk. And when you get into a market like we're in and you have commercial results like we have, 14 consecutive years of underwriting profit, I think it only stands to reason that the average net rate is going to be under pressure. We have fewer accounts that are underpriced or that need aggressive action. And then on the business that's most adequately priced, we're coaching our teams to make sure they do whatever they need to do to keep that business. And so sometimes when the market gets a little softer, we have to give up a little rate on that. But again, in my opening remarks, I said we're still confident in the risk selection. And the overall pricing, we think, is very healthy in the commercial book, too.

Okay. Yes, Steve. That's helpful. I appreciate the comments. Second question is on your tech investments, and you've talked on this for a while. One of the benefits that you've talked about is more accurate pricing. I guess, do you see that those investments and [ be 1 comment ] of more accurate pricing? Is that more applicable to you in personal lines versus commercial lines? Or is it kind of the same? Do you apply that to both? Should it be applied to both? And how do you think about that from the two sides of the fence there?

Yes, we definitely apply it to both. Like I just mentioned, our overall combined ratio as a company now, 14 consecutive years of underwriting profit. And for someone who's been here for 34-plus years, grew up as an underwriter, I can tell you we've always had this culture of continuous improvement. We've gotten better at risk selection. We've gotten better at loss control, loss mitigation. We've got better claims management.

But from my seat, that's always been linear. And the pricing sophistication and segmentation that we instituted back -- roughly 2011, 2012, that has been exponential in the improvement in the results of Cincinnati Insurance, and it is in commercial lines, it's in personal lines. It runs through other areas of our business as well. It's probably been more pronounced in the improvement in commercial lines over the years. But the sophisticated pricing is probably even more important in middle market personal lines and specifically, personal auto.

So if you can see the ex-cat accident year continuing to improve in personal lines, and that's heading in the right direction. And we need that too. Cat has been -- we've had a lot of volatility, a lot of variability around cat. And we think there's still room for improvement across all lines of business, actually, but probably more importantly in personal lines.

Your next question comes from the line of Paul Newsome from Piper Sandler.

I wanted to follow up a little bit on the commercial competition question that Mike asked. And maybe some thoughts, is it still very much large versus small, the competition you're seeing in the fourth quarter, incrementally changing towards? Is it still just the large folks? Or are we seeing it creep down into smaller accounts over time? And similarly, I want to see if there's any sort of thoughts you had or observations you had related to the kind of source of that incremental competition? Is it just across the board? Or are we seeing some emergence of some folks that maybe aren't necessarily terribly disciplined [ carriers ] or MGAs or whoever?

Yes. Paul, I would say, yes, it's still -- it is still, I would say, leaning towards larger accounts. And then even there, I'd be saying more specifically towards large property. But like I mentioned, it's gotten more competitive in the middle market space for sure. And I think that is what you're seeing there, too.

But let me maybe put this in perspective a little bit too and see if this helps. If you look over the last 3 or 4 years, we were in unprecedented hard market, if I'd say, for my career, particularly in personal lines. And with our financial strength, we were able to really help our agents continue to write business through that hard market and be there in a really dislocated market.

Let me just give you a -- let me give you -- I hate the tough comp thing because it sounds like an excuse, so that's not what I'm driving at here. 2024 was just an extraordinary year when it comes to new business, both for personal lines and commercial lines. And if you look at -- if you just look at the -- at 2025, over 2023, commercial lines new business was up 31%; '25 over '23 for personal lines, new business were up 14%; 2025 over 2023 for E&S, up 30%. On a -- if you consolidate those 3, '25 was up over 25% over 2023.

So on an actual basis, we are still really pleased with the new business. We're able to write it at pricing that we feel is adequate and that we're -- that it's healthy and that we're happy with. So a little bit of this softening is just coming off. I'd say a pretty extraordinary hard market. And again, we were able to grow through that because of the relationships we have with our agents, because of our financial strength.

Cincinnati Insurance company since 2018 on an all-lines basis, we've doubled net written premiums since 2018 from just a little over $5 billion to now over $10 billion in net written premium. Personal lines more than doubled in the last 4 years. So that just kind of frames it, Paul. Hopefully, the way we're looking at it, the way I'm looking at it, really strong growth for the company. I think this is a natural slowdown. And we'll -- one thing I can promise you is we're going to maintain discipline through all cycles when it comes to risk selection and pricing. And I couldn't be more proud of the underwriters, both on the new business and on the renewal and the way they're executing with what I think are the most professional agents in the business.

That makes a lot of sense. A second question, different. Where are we in the process or derisking on the personal lines side? You mentioned California. I think it's maybe -- it's a little bit broader than that. But where are we in that process? Are we kind of done? Are we -- a few quarters to go before all of this works itself out and then you can't necessarily get out of some of those policies we need?

Yes. Paul, we are well into the process. I wouldn't be able to give you a view on if we're for a quarter or 2 or 3 or 4 away. I can just tell you, from my perspective, we're well into it. On the metrics we're using, we're exceeding the expectations that we have for ourselves at this point in the process. We had moratoriums on certain areas for new business. We're working with the state of California, and we'll continue to do that as well.

But as far as lessons learned in California, I think it really boils down to -- it's just a new view of risk, I think, both for us and for the industry on what a really bad day can look like in aggregations. And so that's where our focus has been terms, conditions and pricing on our E&S homeowner business in California. Whether it's post loss or pre-loss, we still feel really good about where we are there.

Your next question comes from the line of Mike Zaremski from BMO Capital Markets.

Great. In terms of the new reinsurance program that you detailed, should we embed a lower top line impact in the income statement, maybe specifically on personal lines?

On the -- this is Mike, and thanks for the question, Mike. On our -- the cat program is really applicable to both commercial and personal. So in 2025, you saw a huge benefit that the cat program had on our personal lines side. So I won't say maybe it matters on which one gets hit first depending on what the cat is. But we still have a reinstatement, 1 reinstatement generally speaking, on the overall cat program. So that would cover us for a second loss. But as Steve mentioned, if we do have a $2 billion loss this year compared to last year, that would be '26 compared to '25, we would have a lower amount that we would be out in the current year with the improved coverage up to $2 billion.

Mike, Steve Spray. The only thing I might add is that, as I said in my prepared remarks too, is that the overall rate on that property cat program was down 7%, even with the additional coverage.

Okay. That's a good clarification. Okay. So we shouldn't be -- I shouldn't be kind of impacting the premium, the cost for that in the model. Okay. It's good to hear about the upside protection.

Maybe switching gears to workers' comp, the answer might just be you guys are booking really conservatively on an accident year basis, but if I just look at what you're looking at, it continues to increase year-over-year. Obviously, a lot of reserve releases. But is anything changing on comp that we should be aware of?

I would say -- let me start and Steve, if you want to add on. But as it relates to release reserves, it has been consistent. And I not that I'm surprised, but each year, we have been having favorable development. We have had the many years of favorable development. We did have $20 million of favorable development in the fourth quarter, with $65 million for the year.

For the quarter, I would say the $20 million, it was spread really throughout if you look back the last 10-plus years, the most favorable was 2024, 2023 accident years. That was $4 million and $3 million between those two. If you look at it on a year-to-date basis, the $65 million of favorable development primarily came from accident year '23, '22 and 2020. The other accident years were -- even the most recent accident year on a year-to-date basis for 2024, that was a favorable $2 million of favorable development. So we continue to reserve the way we do conservatively and we'll just -- I'll watch what our actuaries do.

I might just add on the -- kind of on the day-to-day business, underwriting and pricing of comp. We've made -- that's another area we've made great strides over the last 15 years is our expertise. And then our appetite per comp, we just [ wrong ]. We just have felt that the rate environment wasn't where we wanted it to be, so we've been cautious. We've been careful, conservative.

In comp, it is -- you can see, I think it's now roughly 200 -- a little over $240 million of premium. So it has less impact on the overall commercialized book. But we stand ready to help our agents write work comp where we feel like we can get a risk-adjusted return. And I think the future will bode well for us on comp.

One of the other things is some of our biggest states -- well, our biggest state, Ohio, is obviously a monopolistic state, and we don't write workers' compensation here. And we're not active for work comp in California and some of our other larger states, Texas. There a little more minimal as well. So that's just kind of a view from the say, the business side.

Helpful. And maybe lastly, just going back to the commercial lines competitive environment. I guess if we think about your comments about casualty is still an issue for the industry in terms of inflation there, property is well priced. I guess if you all had a crystal ball for the industry, if you don't want to speak to Cinci, would you expect pricing to continue moderating just a tad from the property side? Or I don't know if you guys are willing to go on record there. We can see that you guys might not be playing full offense right now based on the kind of agency appointments and top line growth. But just curious if you feel the competitive environment, the rate of change on pricing has kind of moderated and the kind of stable-ish territory?

Yes, Mike, let me make sure -- I'm glad you mentioned this, but make sure we are playing full offense. We always are. We've got such a winning strategy and model that's been proven over time. We're on full office. We're adding more products, whether it be on the standard side for commercial and personal, our small business platform. Our E&S company continues to grow. We're adding product out of Lloyd's for -- to help our agents write more business with us as well. We're adding agencies across the country. The high-quality agencies, that will continue.

So we'll continue to play offense. But playing offense, winning offense is not going to be in pulling back on risk selection or probably even more cutting rate. That's not going to be part of the equation. So we're going to have to, along with, I think, the best agents in the -- like I said, in the country, we can't always come down to a price. We've got to be able to convey value that we think we bring as a company, that I know our agents bring in their communities. And that's where we're going to win. And if price becomes more and more of an equation, then we just have to get -- we're going to have to get more at bats and kind of weed through all that.

As far as looking forward on competition, I said it kind of early on here. Just with the headwinds on loss costs, primarily around casualty, general liability, umbrella, management liability has been under pressure, commercial auto. I just don't see that market. That's my opinion. I don't see that market getting continuing to have pressure on pricing. I just don't think it makes sense. Now -- it may go there, and I think it will have an impact on us because if it gets to a point where, again, on a risk-by-risk basis, if we don't feel we can get a risk-adjusted return, we're going to turn away from those in the short term, because we're playing a long game here.

[Operator Instructions] Your next question comes from the line of Greg Peters from Raymond James.

This is [ Mitch ] on behalf of Greg. So you mentioned in an earlier response that you expect commercial auto pricing to hold up. Can you give us an update on where commercial auto renewal pricing was in the quarter? And based on current claims, how much additional rate you believe might be required to sustain underwriting margins in 2026?

Yes. Thanks, [ Mitch ]. Well, commercial auto rate for the fourth quarter was up mid-single digits. We think it on a pricing is prospective. Looking forward, we think that -- and we're confident that our commercial auto pricing is exceeding loss costs.

One thing that I think is a little unique with us, [ Mitch ], as I mentioned earlier, too, is we are a package writer. And so we do not -- monoline auto is not a big product for Cincinnati Insurance Company. We're also not in a heavy transportation rider, long-haul trucking risks. It's not to say we don't have 1 or 2 in our portfolio, but that is not a focus of ours. So I think our commercial auto over the last, I'll say, 7, 8 years has been a little more predictable and a little more as of year-end 2025 commercial auto, even with some adds in accident year 2025, on a calendar year basis, we were slightly profitable in commercial auto. So for us, we feel good about commercial auto. And again, it's part of the package.

Great. Turning over to the investment portfolio. You mentioned reinvestment yields are running about 70 basis points above the book yield. How are you guys expecting that to translate into net investment income growth in 2026 considering the declining rate environment?

Thanks, Mitch. This is Steve Soloria. We're thinking that the longer rate -- longer maturity rates are going to kind of hold steady from where they are. So we're expecting to be able to put money to work there pretty consistently. The insurance side has given us a lot of cash to work with.

But from a market standpoint, the Fed seems to be kind of cautious on what they're going to do on the short end. So we think on the long end, we'll continue to get yields in the ballpark of where we've been right now. So we're pretty comfortable that we'll see solid growth going into 2026 and beyond.

That concludes our question-and-answer session. I'll now turn the call over to Steve Spray, CEO, for closing remarks.

Thank you, Jordan, and thank you all for joining us today. We look forward to speaking with you again on our first quarter 2026 call.

That concludes today's meeting. You may now disconnect.

Good day, and welcome to the Cincinnati Financial Corporation 2025 Third Quarter Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference 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 2025 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.cinfin.com. The shortest route to the information is the quarterly results section near the middle of the Investor Overview page.

On this call, you'll first hear from President and Chief Executive Officer, Steve Spray; and then from Executive Vice President and 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 Executive Chairman, Steve Johnston; Chief Investment Officer, Steve Soloria; and Cincinnati Insurance's Chief Claims Officer, Marc Schambow; 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, we 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'll turn over the call to Steve.

Good morning, and thank you for joining us today to hear more about our results. We had an excellent quarter of operating performance and remain confident in the long-term direction and strategy of our insurance business. We also reported very strong investment income growth in the third quarter of this year, with ongoing benefits from rebalancing our investment portfolio in the second half of last year. Net income of $1.1 billion for the third quarter of 2025 included recognition of $675 million on an after-tax basis for the increase in fair value of equity securities still held.

Non-GAAP operating income of $449 million for the third quarter more than doubled the third quarter from a year ago. Our 88.2% third quarter 2025 property casualty combined ratio improved by 9.2 percentage points compared with third quarter last year, including a decrease of 9.3 points for catastrophe losses. The 84.7% accident year 2025 combined ratio before catastrophe losses for the third quarter improved by 2.1 percentage points compared with accident year 2024. Although the pace of growth slowed, our consolidated property casualty net written premiums still grew at a healthy 9% for the quarter.

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 third quarter were lower than the second quarter of 2025, but still at a level we believe was healthy. Commercial Lines in total average increases in the mid-single-digit percentage range and excess and surplus lines was again in the high single-digit range.

Our Personal Lines segment included homeowner in the low double-digit range in personal auto in the high single-digit range. Additional support for our premium growth objectives includes outstanding claims service and strong relationships with independent insurance agents who enthusiastically partner with us.

Next, I'll highlight third quarter performance by Insurance segment compared with a year ago. In addition to premium growth, underwriting profitability for each area was excellent. Commercial Lines grew net written premiums 5% with a 91.1% combined ratio that improved by 1.9 percentage points, including 2.8 points from lower catastrophe losses. Personal Lines grew net written premiums 14%, including growth in middle market accounts and Cincinnati Private Client. Its combined ratio was 88.2%, 22.1 percentage points better than last year, including a decrease of 19.5 points from lower catastrophe losses.

Excess and surplus lines grew net written premiums 11% and produced a combined ratio of 89.8%, an improvement of 5.5 percentage points. Cincinnati Re and Cincinnati Global each had an outstanding quarter and continue to reflect our efforts to diversify risk and further improve income stability. Cincinnati Re, third quarter 2025 net written premiums decreased by 2%, primarily due to changing conditions in the property market. Its combined ratio was 80.8%. Cincinnati Global's combined ratio was 61.2%, along with premium growth of 6% as it continues to benefit from product expansion in recent years.

Our life insurance subsidiary had another strong quarter, including 40% net income growth. In addition, term life insurance earned premiums grew 5%. I'll end my comments with a summary of our primary measure of long-term financial performance, the value creation ratio. Our VCR was 8.9% for the third quarter of 2025. Net income before investment gains or losses for the quarter contributed 3.1%. Higher overall valuation of our investment portfolio and other items contributed 5.8%.

Now I'll turn it over to Chief Financial Officer, Mike 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 the third quarter of '25, reflecting efforts during 2024 to rebalance our investment portfolio in addition to strong cash flow from insurance operations. Bond interest income grew 21% and net purchases of fixed maturity securities totaled $232 million for the quarter and $944 million for the first 9 months of this year.

The third quarter pretax average yield of 5.10% for the fixed maturity portfolio was up 30 basis points compared with last year. The average pretax yield for the total of purchased taxable and tax-exempt bonds during the third quarter of this year was 5.52%. Dividend income was up 1% and net purchases of equity securities totaled $57 million for the quarter and $118 million on a year-to-date basis. Valuation changes in aggregate for the third quarter were favorable for both our equity portfolio and our bond portfolio.

Before tax effects, the net gain was $846 million for the equity portfolio and $242 million for the bond portfolio. At the end of the third quarter, the total investment portfolio net appreciated value was approximately $8.2 billion. The equity portfolio was in a net gain position of $8.4 billion, while the fixed maturity portfolio was in a net loss position of $217 million.

Cash flow, in addition to higher bond yields, contributed to investment income growth. Cash flow from operating activities for the first 9 months of 2025 was $2.2 billion, up 8%. Turning to expense management. Our third quarter 2025 property casualty underwriting expense ratio decreased by 0.5 percentage points, primarily due to growth in earned premiums outpacing growth and expenses. For loss reserves, our approach remains consistent and aims 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. We then updated estimated ultimate losses and loss expenses by accident year and line of business. For the first 9 months of 2025, our net addition to property casualty loss and loss expense reserves was $1.1 billion, including $900 million for the IBNR portion.

During the third quarter, we experienced $22 million of property casualty net favorable reserve development on prior accident years that benefited the combined ratio by 0.9 percentage points. On an all-lines basis by accident year, net favorable reserve development for the first 9 months of '25 on totaled $176 million, including favorable $236 million for '24, favorable $16 million for '23 and an unfavorable $76 million in aggregate for accident years prior to '23.

I'll conclude my comments with capital management highlights. We paid $134 million in dividends to shareholders during the third quarter of 2025. During the quarter, we repurchased approximately 404,000 shares at an average price per share of $149.75. We believe both our financial flexibility and our financial strength are in excellent shape. Parent company cash and marketable securities at quarter end was $5.5 billion. Debt to total capital remained under 10%.

On October 10, we terminated our existing $300 million line of credit agreement that was set to expire on February 4, 2026 and entered into a new $400 million unsecured revolving credit agreement. This new agreement has a 5-year term with 2 optional 1-year extensions and is fully subscribed among our 4 lenders. Our quarter end book value was a record high $98.76 per share, with $15.4 billion of GAAP consolidated shareholders' equity providing ample capacity for profitable growth of our insurance operations.

Now I'll turn the call back over to Steve.

Thanks, Mike. I think this quarter's strong results demonstrate that we have the people and plans in place to keep building on our success. Our associates continue to answer the call for our agents and the communities they serve, building strong relationships and informing smart underwriting decisions. In September, Fitch Ratings recognized our decade of delivering profitability and growth by upgrading our insurer financial strength ratings for all of our standard market property casualty and life insurance subsidiaries to AA-, very strong from A+, all with a stable outlook.

As our 75th anniversary celebration winds down, we are looking ahead to the future, and we are excited by the opportunities we see to keep living the golden rule, meeting the evolving needs of agents and policyholders and creating value for shareholders. I'll also note that Senior Vice President, Andy Schnell, is on the call and will be in future quarters. Following Theresa Hoffer's retirement, Andy joined Cincinnati Insurance 23 years ago and has worked his way up the accounting ranks, proving his business acumen and his leadership abilities. He, Theresa and Mike, all work closely over the past year to ensure a smooth transition that maintained our consistent accounting processes and procedures.

As a reminder, with Andy, Mike and me today are Steve Johnston, Steve Solaria and Marc Schambow. Chloe, please open the call for questions.

[Operator Instructions]

The first question comes from Michael Phillips with Oppenheimer.

I wanted to start with commercial auto, if I could, try to drill down a little bit. So kind of what's happening there for you guys. You've taken small bites, obviously really pretty small bites of the apple, KYD, I think, 5 quarters in a row. But how do we I guess how do we get comfortable with KYD charges at the same time your current picks are kind of coming down at the same time? Can you talk about that, please?

Yes, Mike, this is Steve Spray. I can start there. Let me just talk about maybe overall reserves in general because I think that's a question that we'd love to address it. And the way I look at it is we've had 30-plus years of all lines favorable development. And through the 9 months of this year were favorable. The quarter is favorable. Every quarter, we're getting -- I noticed we get movement to and fro. This quarter, commercial property work comp, very favorable.

Obviously, commercial auto and casualty were having a little bit of a prior year. I think the one way I get really comfortable with the data point that I'm getting comfortable with is, If you look at on an all-lines basis from each accident year from 2020 forward, our initial PIC for each of those accident years has developed favorably as of 9/30. Now commercial auto has had maybe a little bit of a noise in a [indiscernible] by exiting year. But we're profitable through 9 months commercial auto. And I just feel like the prudent approach that we have taken, the consistent approach, the consistent team we're just -- we're trying to stay ahead of that line of business that has a little bit of a temperature.

Okay. Steve, I guess that's it I mean a little bit of a temperature. We've seen some companies take some charges, some not, but some, I think, more have than those that haven't. And so when we see kind of the decrease in your current picks and maybe has some -- for that line specifically, Steve, they make some worry that maybe down the road, some of that could reverse back and those few wind charges could increase. Anything in particular on commercial auto, specifically that worries you or that you see that would get called for alarm there?

The one thing I look at there too is, as you know, Mike, we're a package underwriter, a packaged company, typically small to mid-market. We don't write a lot of transportation business. We don't have a big heavy auto fleet. And I think some of the challenges, especially with severity that you've seen in the industry over the last several years has really come from that segment.

So just in the book itself, I've got confidence over the long pull. And especially, again, we're profitable in 2025 here, both for the quarter and for the full 9 months in commercial auto. I don't know, Mike, may want to add something here.

Just real quick, Mike, just to put that $10 million of unfavorable development into perspective, about $7 million of it was from accident year 2019 and 2020. So a little bit older total reserves for commercial auto is approaching $1 billion. So when you kind of put it all together, like Steve said, I think we're -- we feel really good where we're at and with the reserving that we do.

Okay. Yes. Mike. That's good color. I guess last one then, if you look at your incur less detail by the line for Commercial Lines, and this could be just going on an anomaly. But is there anything you're seeing -- so the large losses with million up kind of picked up, it looks like the largest in quite a while. Anything you're seeing on the large claims that is worrisome or is this more of a quarterly now?

I would say -- this is Mike Sell again. So let me just answer that real quick. For the current accident year, we had about the same number of large losses in total. There was 44 new losses in the current year versus 45 last year. So one less large loss. And again, that would be for a current accident year basis. But it's about $34 million higher in the current year than last year. That was led, I'll say, by both the -- or at least the increase was led by commercial property, homeowner property -- or the commercial property was up $30 million, the homeowner was up about $27 million. But on the other side, commercial casualty was down $12 million and other commercial was down $12 million.

So you've got some ups and downs, I would say, from looking at the large losses, there was no indication of anything that was an unexpected concentration. I'll say of the large losses, whether it was by risk category, geographic region, agency or field marketing territory. So there's just going to be some volatility from quarter-to-quarter, but nothing too exciting to point out.

The next question comes from Paul Newsome with Piper Sandler.

Could you take Mike's question and general liability instead of commercial auto? And maybe give us some thoughts there. Obviously, everyone's referring back into selective bad quarter and there are issues in both of those lines, and it's fairly natural given that they've long curve themselves as appear views.

Paul, I appreciate the question. Kind of what I was talking about before, where I get the confidence, one thing I would say, again, maybe kind of a bigger picture is I think it's well documented across our country, how legal system abuse is impacting all of us, including our industry, including Cincinnati Insurance. So that is certainly adding some pressure there. But again, let me go back to what gives me the confidence, and I'll specifically speak to casualty as well. It's just, again, this consistent process, we have consistent team, the overall all-lines track record of 30-plus years of favorable development, again, favorable for the quarter, favorable for the full 9 months.

And then the other data point that I was really paying attention to for this quarter is just again, if you look at each of the accident years from 2020 to -- and forward, if you look at our initial pick for each of those accident years, it has developed favorably on an all-lines basis as of 9/30, and that holds true for casualty as well.

Fantastic. And then a completely different subject, actually got some questions just morning on the investment portfolio. Ordinarily, never asked about this because the credit quality and book has been extraordinarily high for a long time. But just kind of looking at a couple of months, it looks like there may be some subprime borrowers in there? And just curious if there's been any change in the credit quality profile and the thoughts that you have about guess what [indiscernible] or whatever you guys in there that might be a little different than what you've historically seen in the bond portfolio.

Thanks, Paul. This is Steve. Overall, the strategy hasn't changed. Our focus has been more on the higher quality bond area. If we were involved in the high-yield area, it would be in the BBs. But for the most part, we're buying investment-grade quality bonds, tending to keep quality in the portfolio as opposed to reach for yield where we don't need to.

The next question comes from Gregory Peters with Raymond James.

So the first question is just on the new business trends. And obviously, there's probably some price competition issues that are affecting some of your new business, but maybe you could speak to the results in the third quarter and what you think about new business going forward because it is a competitive marketplace.

Yes. Thanks, Greg. Steve Spray again here. If you look -- first of all, I would say feel really good about the new business numbers for all segments, all major -- our standard segments plus our E&S company on an absolute basis. And I -- admittedly, I hate saying there's a tough comp in the prior year. It sounds like an excuse. We don't do that around here. But if you kind of harken back to 2024, let me talk just about talk about personal lines first. For the last couple of years, we've been talking about this once in a generation, once in a lifetime, hard market in Personal Lines. And 2024 was probably the peak of that.

And we were able, as a company, because of our balance sheet, because of our financial strength, because of the relationships we have with our agents, we are able to take advantage of that hard market opportunity and really pick up the pace, I'd say, on new business growth or take advantage of that opportunity. As a matter of fact, over the last 3.5 years, we've doubled our Personal Lines net written premium as a company. So again, hard market there, and we were able to take advantage of that. That new business this year is still strong. California is making a little bit of an impact there. But just on an absolute basis, Personal Lines new business is strong.

Commercial Lines, same kind of thing going, if you look on an absolute basis, the new business dollars there, are, again, very strong. And you're right, there's pressure from a competitive standpoint. But our underwriters, both new and renewal are executing on our segmentation strategy and not giving up an ounce of profit over the long term for any short-term top line growth. So I just -- I feel on an absolute basis, with the numbers. I feel really good about the new business, given the market. And I also feel good about more importantly, how we're pricing and underwriting that business.

And then our company our E&S company, the new business, again, maybe under a little bit of pressure. But on an absolute basis, it's something that I'm very comfortable with and think that our runway by appointing more agencies continuing to expand our appetite and expertise. I just feel good about where we're heading for the future on that.

Yes. You brought up in your answer, California -- and you also mentioned the once-in-a-generation hard market in Personal Lines. Given the events of the first quarter, the big fire loss in California, can you talk about how you're viewing California and the opportunity for growth in that state, whether it's E&S, Personal or Commercial or maybe even admitted as you think about the plans for 2026.

Yes, absolutely. First, I'd comment that we've got great agents and policyholders in California. And as a company, we want to continue to be a stable, consistent market for them. As we've talked over the -- since the fire, we always do a deep dive on large losses and see if there's any lessons learned. And I think it's safe to say that we and the industry have an updated view of risk resulting from that fire and kind of cutting to the chase on that for you, Greg, it really is around just updating the model view, conflagration, the sustained level of wins, and it's giving us a different view of risk on aggregation.

And from my perspective, our E&S pricing and terms and conditions pre-fire even post fire, I look at them and say, very solid, really comfortable with where we were there. So we're focused on just a new view of aggregation and our plans are already in motion and being executed from that standpoint.

Now to your question on E&S or Admitted and then Commercial. As of 12/31 of '24, 77% of our homeowner premiums in California were already written on an E&S basis. You can expect that number will grow. We put some moratoriums in place for new business, while we were gaining our lessons learned, and we've begun writing some more new business in non-aggregation areas, as you might imagine. So I think E&S is going to continue to be a big portion of what we do in California going forward.

Now commercially, we are not active in California on an admitted basis. And when I say active, we're not appointing agencies in California from Admitted Commercial. We don't have associates on the ground in California calling on agents from an admitted standpoint. We did, just several months ago, enter California for commercial E&S business, and that's going well. It's early, but that's going well also.

I guess related to that answer, just on California, you said that E&S is still a focus for you for personal lines. Do you have any view on the regulatory framework around the sustainable insurance mechanism that they're trying to roll out. I guess the fact that you're focused still on E&S suggests that you're somewhat skeptical or cautious about that, but just curious if you have a view on that initiative by the politicians in the Department of Insurance.

Yes. That's something we're watching closely, and we're continuing to work with the California Department of Insurance to say, in areas where we're not wildfire prone, in areas where we do write admitted business. Our auto, our other coverages would be written on an admitted basis. The homeowner is primarily where you're going to find the E&S. We just continue to work with the California DOI to try to get to a win-win for everybody. We -- like I said before, we've got great agents and we've got great policyholders, and our claims staff just did an outstanding job through the fire. The feedback we got from agents and policyholders alike didn't surprise me, but it just validated everything we've done at this company, delivering on the promise for the last 75 years.

California was a microcosm of I think everything we do well when things go bad.

The next question comes from Mike Zaremski with BMW sic [ BMO ].

Okay. Circling back to -- I was trying to think of a joke at BMO, obviously. Shirking back to the capital investment portfolio questions. Steve, you started out saying talked about the strength of investment income from the rebalancing last year. I guess we can see the equity markets have been extremely strong year-to-date, which has helped you all. I'm just trying to understand is there a fast and hard kind of ratio that if the equity markets still keep going up, you'll need to do another rebalancing? And just related has Cincinnati's view of excess capital changed at all in recent quarters?

See, this is -- sorry, this is Steve Soloria. In regards to the equity portfolio, we have always managed and trimmed around growth in individual names or sector exposures, kind of adhering to our investment policy statement. We continue to evaluate it. Last year's move was a kind of a compilation of a lot of internal discussion, but a lot of external factors driving our action, our initial decision to trim was a typical one that we would have and it just kind of grew as we began to look at external factors like the upcoming election, potential tax rate changes and the implications for the capital gains we might have to pay.

So there were a lot of external factors driving it, which made it a big -- a larger bite of the apple, so to speak. I wouldn't take it off the table moving forward, but there -- those external factors aren't weighing on us right now. So we'll continue to kind of manage it more at the individual security and industry level where we need to just trim to manage the portfolio. I'll kind of leave the capital management discussion for different [indiscernible].

Yes. Got it. I guess just sticking with excess capital and the investment portfolio from the outside looking in a high level, Cincinnati would appear to have very large excess capital position. But would you not agree with that because the regulatory framework or your internal model would say, hey, you need to factor in a big equity market decline that stays there for a period of time. So you're really just effectively not holding excess because you want to have that money for potential worst times in the equity markets?

Thanks for the question. This is Mike. So really, our capital position of how we manage capital really has not -- I'll say, has not changed. We think of it there's 5 ways to invest your capital and our #1 is invest in the business. So we're holding enough capital to grow the business. We've gone through those details with whether it's -- Cincinnati Re, CGU, California, et cetera, et cetera, the E&S business, that's our #1 use of capital.

We do think, obviously, of dividends that we paid orders, buybacks and other things. But there are some regulatory requirements that we watch to make sure that we don't hold too much equity securities, and we're well within any parameters there. So I think it's been a winning strategy what Steve Solaria has done with the portfolio and looking at the results this year. I think it's been very exciting. And I'm excited to see what we do with that capital as we grow our business for the remainder of this year and '26, '27 and beyond.

Got it. And lastly, moving to the commercial competitive environment, probably not on E&S, I just say, traditional standard commercial. A lot of questions fielded all around kind of the cycle. No surprise, right? You talked about pricing power decelerating a bit sequentially. Should investors, I guess, be prepared for pricing to continue to decel on average in the coming years, just given the health of the industry in Cincinnati included? Or is there a dynamic on loss trend, right? You've got a lot of questions on casualty flare ups, right, a little additions to the reserves? Or is there a dynamic on on loss cost trend that we're not appreciating that might kind of keep this cycle from looking like many previous soft cycles?

Yes. Thanks, Mike. Yes, I'd say on the commercial standard, the admitted business, I would call the market, it's competitive, but I would still call it rational, stable. I think there are still loss headwinds for our industry that impact that commercial severe convective storm or just cat losses in general. Q3 was a light cat quarter. But let's look at a full year and just the trends that have been going on with catastrophes. I think the legal system, we talk about legal system abuse or social inflation, however you want to look at that. I think that is still facing us as an industry, and certainly here since insurance we're paying attention to it.

So I think we're still in a favorable rate environment. Now for us, specifically, at Cincinnati, it literally -- we talk about this all the time, and I think it's key is it's -- we're underwriting and pricing risk by risk. The next risk in front of us is how we're viewing it. Now maybe on a -- and I won't speak necessarily for the go forward for the industry. But I can tell you for Cincinnati, our net written premium growth for commercial lines here was -- I think we announced 5%.

And commercial lines, again, standard admitted commercial lines, 13 consecutive years of underwriting profit. And our underwriters working with our agents, executing on a segmentation strategy are just doing they're doing exactly what we ask of them. And as that book continues to perform well, I think it's reasonable to understand that, that the price adequacy of the book continues to improve. And just as we ask our underwriters to take appropriate action on the business that is, we'll call it, at least adequately priced. We tell them on the other hand, that business that's very adequately priced, do what we need to do to retain it.

So as that book becomes more and more adequately priced, and we are executing on that segmentation strategy. I think what you're seeing is some pressure on the average net rate. Does that make sense?

Yes. Yes, it does. I guess we're all trying to figure out if others are also feeling like they're re-underwritten well enough to kind of do the same. But clearly, you guys are in a great position.

Yes, Mike, I would -- I'd just make sure I'd make a point that it's -- for us, it's not a re-underwriting. This is the strategy that we've been executing really for the last decade that has served us well, and we're going to stick to it going forward, too. So it's profit first and stable, consistent financial strength for our agents and policyholders over the long pull, which comes with a modest underwriting profit.

The next question comes from Josh Shanker with Bank of America.

Obviously, the growth, even though it's decelerating, it's still better than most of your competitors. A lot of that is due to the significant increase in agency appointments and whatnot. Is there anything you can do to help us to sort of disaggregate how much of the growth is expansion into new agencies and how much is further penetration into the agencies you already have?

Yes, Josh, it's Steve again. We -- I forget the exact number that we disclosed as far as how much the new agency appointments have impacted new business. But what I would tell you there is we've got a proven strategy, I think, of really knowing how to underwrite agencies, and that agencies and do business with the most professional agencies go into an agency out in the field and find agencies where we're aligned and be very deliberate about expanding the distribution. And then we built deep relationships with them.

And when we onboard an agency, you've seen one agency, you've seen one agency to be perfectly candid that some will take off faster than others. But what we focus on is the relationship that we have with those agencies. And I guess a long-winded answer way of saying, this is a long-term thing for us. So can we see an uptick in new business quarter-to-quarter from the new agencies we appoint? Yes. But that's not what we're focused on. We're focused on these relationships and making sure that we're aligned and that we're deepening the relationship. We're giving each one of these agencies, what I call, the Cincinnati experience. And then over the long call, the premium, the growth will take care of itself.

[indiscernible] experience, I remember when I started covering the second, I think you had 1,600 agents. And in the last 9 months, you've appointed 355. Part of that experience was the direct relationship with the agents in every infant manner. At this level of growth, how are you maintaining that cultural part of what the Cincinnati Agency experience used to be?

Yes. Thanks, Josh. I think it's all relative. And you're right, we were at 1,600. Now we're at say roughly 2,300 agencies. And if you look at us relative to our peers, we still have an extremely exclusive contract, and agencies run in different circles. Agencies have different centers of influence. They write -- 2 agencies in the same town, obviously write different business. And we've got plenty of room to continue to expand the distribution to keep appointing agencies across the country in our footprint and not dilute that that franchise.

The franchise value, I think, is the -- like you said, the Cincinnati experience. And by that, I mean, associates on the ground in the community where the agents are calling on them on a regular basis, making decisions locally. That's the Cincinnati experience, and we can repeat that over -- even continuing to add more and more agencies. And we've seen over the last several years as we've added more agencies in our current footprint, that our relationships with our long-term partners stay solid.

In many cases, we continue to grow even more with those agencies. And then now we've picked up an additional partner, and we get access to the book of business that they have. So we're going to be -- I don't want to be willy-nilly about it, Josh, at all because it's anything but that. This is the same thing we've done for 75 years in partnering with professional agents. It's just that we are picking up the pace a bit.

Would you expect to have more agency appointments in 2026 than in 2025?

Yes. We haven't put out any goals on that. The last thing we want is just to be appointing an agency to will be appointing an agency. We ask every single one of our field reps, 185 of them across the country to know every single independent agent in their territory and make sure those agencies -- identify those agencies where we are most aligned and when it's time to make another appointment for whatever reason, they go ahead and do that. So we're not putting out any goals. We're not putting any additional requirements on the field reps or just adding more territories. That's one key to it is we're not going to -- our field territories right now, our field reps average, they call on an average of about 14 agencies. We don't see that changing over time. Again, the same Cincinnati experience, just more of the same.

Josh, let me just mention on Page 42 of our 10-Q, we do give some information on premiums by new appointed agencies in '25 and '24.

[Operator Instructions]

The next question comes from Meyer Shields with KBW.

Great. I wanted to get a sense as to how you're thinking about catastrophe reinsurance for 2025. And I don't know whether that thought process has changed from early in the year when we had the very significant fire losses to more recent series where catastrophes have been benign.

Yes. Thanks, Meyer, Steve Spray again. Obviously, we are in the throes of renewal season specifically for property cat cover, just as a reminder. Right now, we have a $200 million retention on any individual cat event. And then we buy 1.6 x of that $200 million of the tower, without committing to what we're going to do on 2020 or [indiscernible] '26 because that's not been finalized, I can say that we will remain consistent in the way that we purchase property cat cover, and that is for balance sheet protection.

We talked a little earlier about our strong capital position. We believe in underwriting and pricing, our own business and sharing in the losses. So over time, we've always continued as we've grown and as our capital position has grown, we've moved up in retention, and we continue to buy more on top of the program for that for -- again, for that balance sheet protection. And so that philosophy, that strategy will not change.

This concludes our question-and-answer session. I would like to turn the conference back over to Steve Spray, CEO, for any closing remarks.

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

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.