Cincinnati Financial - Earnings Call - Q1 2025

Executive Summary

• Q1 2025 was dominated by severe catastrophe activity (California wildfires and widespread storms), driving a consolidated P&C combined ratio of 113.3% and a GAAP net loss of $90M (–$0.57 EPS) despite 14% growth in investment income and 11% net written premium growth.
• Non-GAAP operating EPS of –$0.24 was materially better than consensus (–$0.61), while total revenue of $2.57B missed consensus ($2.71B); Street EPS/Revenue comparisons are volatile for insurers given investment gains/losses flowing through revenue.
• Underlying profitability continued to improve: accident-year combined ratio ex-cat improved 60 bps YoY to 90.5%, and would have been ~2 pts better excluding reinsurance reinstatement premiums tied to the wildfires; commercial lines delivered a 91.9% combined ratio while personal lines absorbed extreme cats (151.3%).
• Management emphasized balance sheet strength (parent cash/marketable securities ~$5B; book value/share $87.78) and maintained a healthy 2025 premium growth posture; no additional cat reinsurance purchases planned beyond reinstatement at this time.

What Went Well and What Went Wrong

• What Went Well

  • Commercial lines execution: earned premiums +9% YoY, combined ratio 91.9% (–460 bps YoY), aided by lower cat loss share and favorable prior-year development; renewal pricing near low end of high-single-digit range.
  • Investment income resilience: pretax investment income +14% YoY (bond interest +24% YoY), helping temper underwriting volatility.
  • Strong production: consolidated P&C net written premiums +11% with double-digit new business and 137 new agency appointments in the quarter.
  • Management quote: “Our first-quarter 2025 combined ratio of 113.3% included 25 points related to natural catastrophe losses… our current accident year combined ratio before catastrophe loss effects continued to improve… about 2 points better without reinstatement premiums.”.

• What Went Wrong

  • Catastrophes: 25 points of cat losses in the combined ratio (3x 10-year Q1 average), with personal lines hit hardest (combined 151.3%; cat loss ratio +49.9 pts YoY).
  • Reinstatement premiums: ~$52M net effect, adding ~1.4 pts to consolidated current accident year loss ratio and ~8 pts to personal lines ex-cat combined ratio.
  • Equity portfolio mark-to-market: after-tax reduction of $56M contributed to GAAP net loss; total revenues down 13% YoY due to lower net investment gains.
  • Analyst concern: clarity on wildfire loss settlement and open claims; management reported gross loss ~$754M with ~65% gross paid (~$488M) and net wildfire loss at low end of range ($449M).

Transcript

Operator (participant)

Good morning, ladies and gentlemen. Thank you for standing by for the Cincinnati Financial Corporation first quarter 2025 earnings conference call. Please stay connected. This conference will begin in the next two minutes. Ladies and gentlemen, thank you for standing by for the Cincinnati Financial Corporation conference call. The conference is expected to begin at 11:02. Thank you. Good day and welcome to the Cincinnati Financial Corporation first quarter 2025 earnings conference call. All participants will be in the listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. 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.

Dennis McDaniel (Investor Relations Officer)

Hello, this is Dennis McDaniel at Cincinnati Financial. Thank you for joining us for our first 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, Theresa Hoffer. 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.

Steve Spray (President and CEO)

Good morning, and thank you for joining us today to hear more about our results. The first quarter of 2025 had its share of challenges. From the wildfires in California to freezing and flooding across the Plains to wind and water in the Midwest and East Coast, almost every area of the country was impacted by a weather-related catastrophe this quarter. While catastrophe losses can dampen earnings on a short-term basis, we know they present an opportunity for our claims service to shine and reinforce the noble purpose of our business. Our claims professionals again demonstrated the value of a Cincinnati policy by helping policyholders recover from damaged homes and businesses. I'm proud of the way they have responded, with prompt and personal service in handling each claim with care and empathy.

The effects of these catastrophes offset otherwise profitable results from our insurance operations and strong investment income that continued to grow at a double-digit percentage pace. As I look deeper into our results for the quarter, I see several areas of strong performance. I remain confident in our long-term plans and in our ability to execute on our proven strategy. In addition to growing investment income, property casualty premiums continued to increase at a nice pace and included strong renewal pricing. Our commercial lines insurance segment produced a superb combined ratio of 91.9%, continuing its steady improvement over the past three years. Our excess and surplus lines also had an outstanding quarter, including a combined ratio below 90%.

In terms of consolidated results on our income statement, we reported a net loss of $90 million for the first quarter of 2025, including recognition of $56 million on an after-tax basis for the decrease in fair value of equity securities still held. It also included a non-GAAP operating loss of $37 million, a swing of $309 million from a year ago. The change was driven by a $356 million increase in after-tax catastrophe losses. Our 113.3% first quarter 2025 property casualty combined ratio was 19.7 percentage points higher than the first quarter of last year, including an increase of 19.1 points for catastrophe losses. Or 90.5% accident year 2025 combined ratio before catastrophe losses improved by 0.6 percentage points compared with accident year 2024 for the first quarter.

Without the effects of reduced premiums from reinstating reinsurance treaties related to the California wildfires, it would have improved an additional 2 percentage points. During the first quarter of 2025, our catastrophe reinsurance program responded as intended for a large event. The estimated first quarter recovery from our primary property catastrophe reinsurance treaty for the wildfires was $429 million, based on our estimate of gross losses at the end of the quarter. Our consolidated property casualty net written premiums grew 11% for the quarter, including 14% growth in agency renewal premiums and 11% in new business premiums. We were satisfied with premium growth for the quarter, even with the unfavorable effect of the reinstatement premiums for our property catastrophe reinsurance treaty.

Our estimate of the net effect of all reinstatement premiums reduced first quarter 2025 premiums by $52 million, slowing growth of consolidated property casualty net written premiums by about 2 percentage points. Our objective is profitable premium growth, and it is supported by various efforts. Our underwriters focus on pricing and risk segmentation on a policy-by-policy basis as they make risk selection decisions. Combining that with average price increases should help us continue to improve our underwriting profitability. Estimated average renewal price increases for most lines of business during the first quarter were slightly lower than the fourth quarter of 2024. Commercial lines in total remained near the low end of the high single-digit percentage range, and excess and surplus lines remained near the high end of that range.

Our personal line segment included both personal auto and homeowner in the low double-digit range, with personal auto approaching the low end of that range. New business produced by agencies representing Cincinnati Insurance again contributed to premium growth. We continue the healthy pace of appointing agencies where we identify appropriate expansion opportunities consistent with our long-term growth strategy. I'll briefly comment on performance by insurance segment, highlighting premium growth and underwriting profitability compared with a year ago. Commercial lines grew net written premiums 8% with an excellent 91.9% combined ratio that improved by 4.6 percentage points, including 2.6 points from lower catastrophe losses. Personal lines grew net written premiums 13%, including growth in middle market accounts and Cincinnati Private Client. Its combined ratio was 151.3%, 57.4 percentage points higher than last year, primarily due to an increase of 49.9 points from higher catastrophe losses.

In addition, the effect of reinstatement premiums added approximately 8 percentage points to the combined ratio before catastrophe losses. The $64 million of reinstatement premiums included $63 million for our homeowner line of business and reduced personal lines premium growth by 11 full percentage points. Excess and surplus lines grew net written premiums 15% with a very profitable combined ratio of 88.3%, an improvement of 3.6 percentage points compared with a year ago. Both Cincinnati Re and Cincinnati Global experienced significant impacts from the California wildfires this quarter, resulting in an underwriting loss for Cincinnati Re and reducing Cincinnati Global's underwriting profit. Cincinnati Re grew first quarter 2025 net written premiums 26%, including an estimated favorable 6 percentage points from the $12 million net effect of reinstatement premiums related to the wildfires. It had a 137.4% combined ratio, which included 63.9 percentage points from catastrophe losses.

The $103 million of catastrophe losses Cincinnati Re reported for the quarter included $104 million for the wildfires. Cincinnati Global's combined ratio was 95.8% for the first quarter, 26 percentage points higher than last year, driven by an increase of 23.4 points from higher catastrophe losses, including $20 million for the wildfires. Its net written premiums decreased 9% from a year ago due to lower direct and facultative property premiums reflecting underwriting discipline in the face of a softening market. Our life insurance subsidiary continued to help temper earnings volatility that can occur in the property casualty industry with its 11% improvement in net income while growing earned premiums by 1%. I'll conclude with our primary measure of long-term financial performance, the value creation ratio. Our first quarter 2025 VCR was negative 0.5%.

While that is a disappointing short-term result, it's important to remember that we've always emphasized that performance over the long term is the main focus of this measure. Net income before investment gains or losses for the quarter contributed negative 0.3%. Slightly lower overall valuation of our investment portfolio and other items contributed negative 0.2%. Next, Chief Financial Officer Mike Sewell will highlight some additional aspects of our financial performance.

Mike Sewell (EVP and CFO)

Thank you, Steve, and thanks to all of you for joining us today. Investment income growth continued this quarter, up 14% compared with the first quarter of 2024. Bond interest income grew 24%, and net purchases of fixed maturity securities totaled $220 million for the first three months of the year. The first quarter pre-tax average yield of 4.92% for the fixed maturity portfolio was up 27 basis points compared with last year.

The average pre-tax yield for the total of purchased taxable and tax-exempt bonds during the first quarter of this year was 5.8%. Dividend income was down 7%, reflecting previously disclosed rebalancing of our investment portfolio during 2024. Valuation changes in aggregate for the first quarter were unfavorable for our equity portfolio and favorable for the bond portfolio. Before tax effects, the net loss was $72 million for the equity portfolio, partially offset by a net gain of $65 million for the bond portfolio. At the end of the first quarter, the total investment portfolio net appreciated value was approximately $6.7 billion. The equity portfolio was in a net gain position of $7.2 billion, while the fixed maturity portfolio was in a net loss position of $486 million. Cash flow, in addition to higher bond yields, again boosted investment income growth.

Cash flow from operating activities for the first three months of 2025 was $310 million, even after paying for most of the largest catastrophe event in our history. I'll briefly touch on expense management and our efforts to balance expense control with strategic business investments. The first quarter 2025 property casualty underwriting expense ratio increase of 0.2 percentage points was primarily due to the effect of reinstatement premiums that added 0.7 points. Regarding 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 three months of 2025, our net addition to property casualty loss and loss expense reserves was $488 million, including $454 million for the IBNR portion. During the first quarter, we experienced $91 million of property casualty net favorable reserve development on prior accident years that benefited the combined ratio by 4 percentage points. For our commercial casualty line of business, there was no material reserve development for any prior accident year during the quarter. On an all-lines basis by accident year, net reserve development for the first three months of 2025 included favorable $105 million for 2024, favorable $9 million for 2023, and an unfavorable $23 million in aggregate for accident years prior to 2023. I'll conclude my comments with capital management highlights. We paid $125 million in dividends to shareholders during the first quarter of 2025.

We also repurchased 300,000 shares at an average price per share of $139.96. We believe our financial flexibility and our financial strength are both in excellent shape. Parent company cash and marketable securities at quarter end was $5 billion. Debt to total capital remained under 10%, and our quarter end book value was $87.78 per share, with nearly $14 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.

Steve Spray (President and CEO)

Thanks, Mike. Despite a bumpy first quarter, we remain optimistic about the future of Cincinnati Financial. We're focused on our long-term strategies and are not swayed by short-term volatility. Looking beyond the catastrophes that impacted our business this quarter, we continue to see steady improvement in key metrics we use to evaluate the core of our book.

Our confidence is reinforced by what we hear from our appointed agencies as we meet with them at our annual sales meetings around the country. Agents are enthusiastic about their business and how we partner with them to serve their clients for our mutual success. We'll continue to focus on the execution of our proven strategy, seeking profitable growth and creating shareholder value over time. As a reminder, with Mike and me today are Steve Johnston, Steve Soloria, Marc Schambow, and Theresa Hoffer.

Darwin, please open the call for questions.

Operator (participant)

Certainly. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Michael Phillips with Oppenheimer. Please go ahead.

Michael Phillips (Managing Director and Senior Analyst)

Good morning. Thank you for the time. Mike, on your comments on the reserve movements, just to confirm, for commercial casualty, there was not any movements in between accident years, first off, and then I think it is the case. You mentioned lower emergence unknown claims. I guess I just want to confirm. Is that mainly property?

Mike Sewell (EVP and CFO)

Yeah. Lower emergence, at least on the commercial casualty, yeah, it was $1 million of favorable development. Really, between the years, there was nothing significant. Most of it came from accident year 2024, but the other previous accident years, it is kind of spread throughout.

Michael Phillips (Managing Director and Senior Analyst)

Okay. That lower emergence was property, right?

Mike Sewell (EVP and CFO)

Yes.

Michael Phillips (Managing Director and Senior Analyst)

Okay. Good. Thank you, Mike. Second question would be on, I guess, California specifically, but maybe broadly in your answer, if you could touch on it. Can you say how much of your California wildfire is still open claims and then how you think about that risk of those open claims given tariffs? I guess, more broadly, any comments on tariffs and the impact of your overall book? I do kind of want to focus a little bit more on the California fires. Thank you.

Mike Sewell (EVP and CFO)

Yeah. No, that's a great question.

Just kind of from a high level, we had previously disclosed a range, high, low, and then obviously here with the Q and the press release, we have tightened that up with our net loss from the California wildfires at the low end of that range, $449 million. Kind of if you look at that on a gross, I would probably at least what we're showing right now is that we've probably paid about 65% of the gross claims there. We have paid about $488 million. This is really on the primary side, so excluding Cincinnati Re type of a thing. Gross losses, $754 million, paying about $488 million. We have a large amount that we have paid, and we're collecting reinsurance on the rest.

Steve Spray (President and CEO)

Mike, this is Steve Spray. I might just add on that on the amount paid also.

The feedback, we obviously are in constant contact with our agents out there. Just as we would expect, but we never take it for granted, just the approach and the reaction and the way that our claims reps are handling these claims is just commendable. I mentioned noble business in my opening remarks, and that's what comes to mind when you think about how we're putting people's lives back together when things are at their worst. That's what we're in business for. You had mentioned the tariffs, and maybe I think I heard at the end they're on California and then maybe just in general. I could probably speak to I think they kind of both go hand in hand. As you know, and you've heard on other calls, there's just a lot of moving parts and uncertainty when it comes to the tariffs.

Obviously, we're monitoring very closely, not just for California, but just in general. One thing I would say is that I would maybe add to the tariff piece is just one thing I've learned over here maybe this first year in the role is that there's always macro pressures impacting our business environment. What I do know, what we do know, is that Cincinnati is prepared to respond. We're all here on one campus. I think we're in a good position to act accordingly. We've got a history of prudent, conservative reserving. If you just look at the pricing tools, the sophistication, the segmentation that we've been executing on it, I think we're in a really good position to respond to anything that any way that this ends up going.

Michael Phillips (Managing Director and Senior Analyst)

Okay. Yeah. Thank you, Steve. And thank you, Mike. Appreciate it.

Mike Sewell (EVP and CFO)

Appreciate you, Mike.

Operator (participant)

Our next question comes from Mike Zaremski with BMO. Please go ahead.

Mike Zaremski (Managing Director and Senior Equity Research Analyst)

Hey, good morning. Just quick follow-up on the tariffs. I know obviously complicated and changes by the day, but in terms of response, is there structurally, I know that one of your competitive advantages is having kind of a three-year contract on certain elements on commercial. Should we be thinking about that dynamic in terms of kind of your response would maybe be a tiny bit slower if the tariffs do end up being impactful to commercial property inflation?

Steve Spray (President and CEO)

I do not know if it would be any slower, Mike, but let me answer it this way. I think you should be thinking about it. We are thinking about it. A couple of statistics around the three-year policy. Is it about 75% of our commercial lines premiums are adjusted annually? That is a third of the book is renewing.

Commercial auto does not have a three-year guarantee lock. Umbrella does not have a three-year guarantee lock, and neither does workers' compensation. That leaves you really with the property and general liability on the major lines of business. The way I would think about it there is we have the tools today to segment and price that business better than we ever have. Our three-year package policies outperform a one-year policy. Intuitively, the underwriters know where to place that business. Again, peeling that back maybe even a little bit more, one of the things that I think could, for lack of a better term, hedge our bet there and help us is that even inside a three-year policy where the rate is guaranteed for three years, your exposures are adjusted annually, which is a big deal on both property and on the casualty piece.

Can act a bit as a proxy for rate or for pricing.

Mike Zaremski (Managing Director and Senior Equity Research Analyst)

Got it. That makes sense. Yeah. That's helpful. The exposure updated annually. In layman's terms, if the cost per sq ft increases by 5%, probably due to tariffs, then you're able to directly get that 5% through even if there's a three-year lock?

Steve Spray (President and CEO)

Yeah. Let me make sure I'm real clear on that. What we do when we issue that policy is we charge for and put on what's called an inflation guard. It's an escalator on the property values throughout the three-year term. There's a premium charge for it. On the casualty, we audit those premiums. Let's say on a construction account, let's say it's payroll or sales, that gets audited annually and gets adjusted accordingly.

Mike Zaremski (Managing Director and Senior Equity Research Analyst)

Okay. Got it. All right. Sorry to harp on that. That's very helpful.

Steve Spray (President and CEO)

Mike, real quick on that. Real quick while I'm thinking about that too, just so that if you again look at the tariffs and where we think let's just cut it back to inflation. Let's just say that inflation were to pick up because of these macro events. We really think it's going to impact, first and foremost, probably commercial and personal auto. If you go to commercial lines with the one-year policy we have in commercial lines, we can be a little more responsive with the pricing.

Mike Zaremski (Managing Director and Senior Equity Research Analyst)

Got it. Makes sense. Switching gears to home a bit and just kind of overall catastrophes, given the significant size of the catastrophes early on in the year due to California, is Cincinnati considering buying additional reinsurance temporarily to protect itself through the remainder of the contract reinsurance terms?

Steve Spray (President and CEO)

Obviously, we had a reinstatement here after this first event.

When we actually, on a gross basis, Mike, we went through about, I'll say, half of our property cat reinsurance tower for 2025. So that's all been reinstated. We do not have any plans right now to purchase anything additional. It is something that we always are looking at just as far as capital management and how to manage cat. Something we think about and talk about regularly, but nothing to report on to you this morning.

Mike Zaremski (Managing Director and Senior Equity Research Analyst)

Okay. Got it. Just a follow-up. Not that we focus on top-line growth, more about profitable growth. Now that folks have had more time to digest kind of the events in California, has your mood or outlook changed a bit in terms of the top-line growth trajectory in personal lines? I know a lot of that growth has emanated out of California.

I think we can see if we adjust your one-two numbers for some of the reinstatement stuff, it does look like there was a slowdown potentially in top-line growth in personal lines as well this quarter. Any thoughts there? Thanks.

Yeah. I would tell you zero dilution of enthusiasm for any of our lines of business countrywide. We've got a proven business model, Mike, with our agency distribution. We've got the underwriting talent expertise. We've got pricing sophistication and segmentation. You've probably heard me talk in the past about a once-in-a-lifetime opportunity in personal lines. We still think that that exists. After every major cat event, we do a deep dive. California, obviously, is no exception. We look for lessons learned, and then we adjust our plan accordingly. We've got some lessons learned already in California.

We've already taken a little bit of action on that, and that will continue to evolve, excuse me. I'm confident that you'll continue to see continued tweaks there. As far as top-line new business growth in personal lines, it's really being impacted by, again, this once-in-a-lifetime opportunity that I've been talking about the last two or three years. It's just getting to be a tougher comp year over year. On a pure new business dollar amount for personal lines, it's still very strong. Now, specifically to California, yes, it's true. After the loss, as we're doing the deep dive and the lessons learned, we've been more conservative on new business in workers' compensation or, excuse me, in California personal lines business here the first quarter, and that's put pressure on the new business growth.

I think Mike hit on the net written premium and what the reinstatement premiums did there. That brought down personal lines net written premium growth by 11 full points in the quarter.

Thank you, Steve.

Operator (participant)

Our next question comes from Josh Shanker. Our next question comes from Josh Shanker with Bank of America. Please go ahead.

Josh Shanker (Managing Director and U.S. Insurance Equity Research Analyst)

Thank you for taking my question. I think we've talked about this before, but I need an update on strategy a little bit. Over the past three quarters, you've taken about $180-$190 million of cat losses in the reinsurance segment. You generated about $600 million in premium per year in that segment. Reinsurance was supposed to be a diversifier. Is it still a diversifier?

Does it still make sense with the volatility that comes with it, especially as some people believe that property cat pricing is going to be declining in the foreseeable future? How do you think about those things?

Steve Spray (President and CEO)

Yeah. Thanks, Josh, for the question. Appreciate it. I can start out here, and then Mike can jump in if he would like. Yes. We think that it is still core to what we do. We are looking, and we've talked about this in the past. It's an assumed reinsurance operation, then have its own separate balance sheet. We are looking for non-correlated business. And if you just look at the wildfires, just kind of in general, the majority of the losses that Cincinnati really had in the wildfire, their wildfire business was on national programs that covered countrywide.

What they would do is they would limit any correlation to high net worth that we would have in California. You're right. It comes with volatility. Inception to date, I believe—and Mike can check me on this—I believe inception to date, our combined ratio in Cincinnati Re is 95.8. I think that's right. It has volatility with it. Look at the balance sheet that we have, and that we've continued to grow. We think that it provides diversifying revenue and profit streams for us.

Josh Shanker (Managing Director and U.S. Insurance Equity Research Analyst)

Thank you. I've covered the stock for a long time. I think when I first got involved in the story, John Schiff, Jr., was passing the helm to Ken. It really felt like a family operation, and maybe it still does.

When I see that you appointed 134 new agencies in the first quarter—congratulations on that, by the way—but how does that impact the culture of what Cincinnati Financial is?

Steve Spray (President and CEO)

Yeah. Thanks, Josh. I've been here 33 years, and I still look at it as got the family feel. Yeah. The key there, Josh, is that we appoint high-quality agencies that are aligned with Cincinnati, that we see value in the way they operate professionally in their community, and they see value in a company like Cincinnati that wants to make decisions locally, handle claims fast, fair, and personally. When we see alignment, appointing more agencies is really going to fuel the growth for the company into the future. The way you do it and keep it as a family feel is that we're still a regional company.

We build everything around a field marketing rep, a field marketing territory. Every single agent that we appoint, we talk about they need to get the Cincinnati experience. That means our local presence, starting with that field rep who's in their office, who's promoting all aspects of Cincinnati Insurance, but their primary function is to underwrite and price new commercial lines business on the spot. That ease of doing business. The local claims rep who's there, who builds a relationship, who handles those claims fast, fair, and personal. It's the same exact strategy that has served us well with 2,000 agents. It will serve us well as we continue to appoint more and more. I can't emphasize enough. It's not the number of agencies that we'll have over time that defines franchise value, I guess.

It's the quality of those agencies and the professionalism and the alignment that they have with Cincinnati. It's a long-winded answer, Josh, but we can continue to repeat what we do over and over again through expanded distribution.

Josh Shanker (Managing Director and U.S. Insurance Equity Research Analyst)

Thank you for the thorough answers.

Steve Spray (President and CEO)

Yeah. Thank you, Josh.

Operator (participant)

Thank you. Again, if you have a question, please press star, then one. The next question comes from Paul Newsome with Piper Sandler. Please go ahead.

Paul Newsome (Managing Director and Senior Research Analyst)

Hey, folks. Thanks for the call. Appreciate it. I was going to ask a question about topical issues this quarter. One was sort of a competitive environment sort of question. We've heard a lot about larger account being more competitive incrementally, some of the special lines in particular, really with even within the last quarter. I know Cincinnati is overwhelmingly a middle-market commercial writer, but you have been moving up towards the larger end.

Is it always to your experience that you're seeing some similar dynamics that other folks are that kind of middle market's holding in, but the larger you get, the more competitive it's been recently?

Steve Spray (President and CEO)

Yeah. I think that's very fair, Paul, and you've described it well. I always like to say, especially I'll just specifically talk to commercial lines, I'd say it's still rational and orderly, as you can see just by the pricing that we're getting. I think what's driving that is just that the headwinds that are out there with cat, legal system abuse, or social inflation, however you want to look at that, I don't see—I personally don't see an end. It'll get to an inflection point at some point, all things do. That's still putting headwind pressure on underwriting and pricing. I'd say that the commercial market space is rational and orderly.

When you get up into larger accounts, yeah, there's no doubt that the pressure or the competition increases there. I would say when we call larger accounts for commercial lines, is it getting into that shared and layered, which we are experiencing with our Lloyd's Syndicate? Our Lloyd's Syndicate CGU does write a lot of direct or a fair amount of direct, in fact, or shared and layered. That's what's driving their 9% written premiums down, is that market has gotten soft, has gotten competitive, and they're having to really show stringent underwriting discipline. It's putting pressure on that. Personal lines, you didn't ask about personal lines, but I'd throw it out there. That market has not—I haven't seen any waning in that. That's still both middle market and high net worth, I think, are both under a tremendous amount of pressure.

We expect that pricing will continue to earn in there, and our growth throughout the rest of the year will be strong.

Paul Newsome (Managing Director and Senior Research Analyst)

Right. Another hot-button question for the quarter has been reserve issues. You've talked a lot about cashing already. Could you maybe give us a few points on the other area that the commercial auto reserve issues and trends that seem to be kind of the other hot issue of the quarter, just kind of what you're seeing both from an internal as well as maybe from the perspective of the industry?

Mike Sewell (EVP and CFO)

Sure, Paul. This is Mike, and thanks for that question. Maybe from a high level, our $91 million of favorable development, it really was spread out. Most of it was from, as I mentioned in my previous remarks, 2024. Yeah, you go back only, we did have $13 million was reserve strengthening.

If you go back a little further to 2021 and prior. It is only $13 million that is spread out throughout the various years. Commercial had favorable development of $43 million. The largest favorable development was commercial property at $35 million. The commercial auto, which is what you just mentioned there, so $7 million of reserve strengthening. You got to also think about that $7 million. Our total reserve balance there is like $935 million. It is a very small, under 1% of reserve strengthening there. It was just really a little bit of a loss emergence that was higher than what we expected looking back at the years 2019 through 2021. The other years did not see much. That was really focused on there.

Yeah, you go back, you look at total personal lines, I'll say Cincy Re, E&S, or Cincinnati Global, all of those developed favorably somewhere between almost $10 million-$20 million. I think things were good. We're following a consistent process, and we're really happy with where we're at.

Paul Newsome (Managing Director and Senior Research Analyst)

Sneak one in really to the first question about the competitive environment. Excellence in surplus lines has been obviously great business for you guys. That's another hot-button topic of competitive issues. Anything you're seeing in your book that would be notable either individually from a competitive perspective or market-wise from a competitive perspective?

Steve Spray (President and CEO)

Yeah. Paul, I think it tracks what you're hearing with commercial lines, just the larger accounts you see more competitive pressure on. Our flow of business there and new business opportunities has stayed strong.

As you can see, the growth and the profitability has stayed very consistent over time, and just couldn't be more confident in that business too.

Paul Newsome (Managing Director and Senior Research Analyst)

Thank you very much, we always appreciate the help a lot.

Thank you, Paul. Appreciate it.

Operator (participant)

The next question comes from Meyer Shields with KBW. Please go ahead.

Meyer Shields (Managing Director)

Great. Thanks so much and good morning. Two, I hope, very quick questions. One, in industry-wise, like ISO FastTrack data, we're seeing some reflection of an unusually large decrease in personal auto physical damage and frequency. I'm wondering whether that's— Yeah.

Steve Spray (President and CEO)

Yeah. Meyer, Steve Spray. No, I can't say that we've seen any—I can't say we've seen any similar trend in the ISO physical damage or maybe even—I don't have those numbers in front of me to match up with what we have.

Meyer Shields (Managing Director)

Okay. Perfect. Fair enough. Second question is on Cincinnati Re. You had solid growth even excluding the reinstatement premiums. I was hoping you gave us a sense in terms of whether that growth is more casualty or property-focused.

Steve Spray (President and CEO)

Mike can dig in here. I can tell you we have kind of pared back over the last several years on the property piece. In Cincinnati Re, property is about 33% of what we do. Casualty is roughly 42%, and specialties another 25%. There can be some seasonality or some noise there too. Meyer with the—oh, and Cincy Re with the premiums just based on the estimated primary ceded premium and then what we actually take in.

Mike Sewell (EVP and CFO)

Yeah. Yeah. I would agree with that, Steve. If I'm looking at, let's say, the earned premiums between property, casualty, specialty, for the first quarter, we were really about right on top of where we were at on a year-to-date basis for 2024 between those breakouts. In the first quarter, have not seen a drift from year-to-date 2024 when it comes to property, casualty, or specialty within Cincy Re.

Meyer Shields (Managing Director)

Okay. Fantastic. Thank you so much.

Steve Spray (President and CEO)

Thank you, Meyer.

Operator (participant)

The next question is a follow-up from Mike Zaremski with BMO. Please go ahead.

Mike Zaremski (Managing Director and Senior Equity Research Analyst)

Hey, thanks. Sorry to ask maybe what are perceived to be negative questions in the context of great overall results, but just curious, anything in personal lines, maybe umbrella, other personal lines with large losses or anything that came through with the loss ratio there you'd like to call out?

Steve Spray (President and CEO)

Yeah. Sure, Mike. And good catch there.

I would chalk it up as normal volatility, severity. If you look in the supplemental there on the other portion, in this case, it was one inland marine claim that is driving that. It is about 14 points of that current accident year ex-CAT.

Mike Zaremski (Managing Director and Senior Equity Research Analyst)

Got it. Inland marine, just thanks for the color. Just to clarify, what type of policy is that?

Steve Spray (President and CEO)

Yeah. It is a watercraft.

Mike Zaremski (Managing Director and Senior Equity Research Analyst)

Water. Yes, I apologize.

Steve Spray (President and CEO)

Beyond that, I would not want to go any deeper on an individual claim.

Mike Zaremski (Managing Director and Senior Equity Research Analyst)

Okay. All right. Thank you so much.

Steve Spray (President and CEO)

Thank you. 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, Dorwen. Thank you all for joining us today.

We hope to see some of you at our annual meeting of shareholders this Saturday, May 3, at the Cincinnati Art Museum. You're also welcome to listen to our webcast of the meeting available at investors.cinfin.com. We also look forward to speaking with all of you again on our second quarter call. Have a great day.

Operator (participant)

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