Cincinnati Financial's Q4 2024 Earnings Call: Contradictions in Reinsurance Strategy, Pricing, and Casualty Rates

These are the key contradictions discussed in Cincinnati Financial Corporation's latest 2024Q4 earnings call, specifically including: Reinsurance Strategy and Capacity, Pricing Strategy in Commercial Lines, and Commercial Casualty Rate Expectations:



Strong Financial Performance:
- Cincinnati Financial reported a combined ratio of 84.7% for Q4 2024, a 2.8 percentage points improvement compared to the previous year.
- This was due to a better-than-expected combined ratio resulting from favorable reserve development and strong premium growth in both property and casualty segments.

Premium Growth and Rate Increase:
- The company experienced 17% growth in consolidated property casualty net written premiums for the quarter, with an average renewal price increase across most lines of business.
- This was driven by diligent use of pricing precision tools, supporting risk segmentation on a policy-by-policy basis, and strategic appointment of new agencies.

Investment Income and Bond Yields:
- Investment income for the year increased by 15% compared to 2023, reaching $1 billion.
- This was attributed to higher bond yields, with the fourth quarter pretax average yield of 4.93% being 45 basis points higher than last year.

Reinsurance Program and Losses:
- Cincinnati Financial's reinsurance program increased the top of the property catastrophe treaty coverage to $1.5 billion, adding $300 million of coverage.
- Estimate of first quarter 2025 pretax catastrophe losses is between $450 million to $525 million, due to recent California wildfires, reflecting a strategic approach to risk management.

Capital Management and Dividend Increase:
- The company returned capital to shareholders through $490 million in dividends and share repurchases totaling 1.1 million shares.
- A 7% dividend increase was declared, reflecting the Board's confidence in the company's strategy, extending the streak of increasing dividends to 65 years.