Cincinnati Financial - Earnings Call - Q2 2025

Executive Summary

• Strong quarter with broad-based improvement: non-GAAP operating EPS rose to $1.97, up 53% YoY, and GAAP diluted EPS reached $4.34 driven by higher underwriting profit and $374M after-tax equity gains. Total revenues grew 28% to $3.248B on 16% earned premium growth and 18% higher investment income.
• Material beats vs consensus: EPS $1.97 vs $1.39* and revenue $3.25B vs $2.79B*, helped by a 3.6-pt YoY improvement in the P&C combined ratio to 94.9% and 18% higher pretax investment income.
• Personal lines headwinds eased but remain CAT-exposed (combined ratio 102.0%) while Commercial (92.9%) and E&S (91.1%) were solidly profitable; prior-year reserve releases contributed 2.6 pts to the consolidated loss ratio.
• Capital and risk actions: record book value per share of $91.46 and VCR of 5.2% for Q2; added a new $300M layer above the $1.5B property CAT program (43% placed) with $300M retention to bolster peak-event protection into hurricane season.
• Potential stock reaction catalysts: clear EPS/revenue beats vs S&P consensus*, recovery from Q1 CAT losses (Q2 P&C combined ratio 94.9% vs 113.3% in Q1), and visible investment income tailwind from higher bond yields.

What Went Well and What Went Wrong

• What Went Well

  • Combined ratio improvement and underwriting leverage: P&C combined ratio improved to 94.9% from 98.5% YoY, with expense ratio down 1.8 pts to 28.6% as earned premium growth outpaced expenses.
  • Investment income momentum: Pretax investment income rose 18% to $285M on 24% higher bond interest; average fixed-maturity pretax yield increased to 4.93%.
  • Segment execution: Commercial (92.9% CR) and E&S (91.1% CR) delivered profitable growth; Personal lines combined ratio improved 4.9 pts YoY despite higher catastrophe losses. CEO: “Our commercial lines and excess and surplus lines insurance segments again produced combined ratios below 93%”.

• What Went Wrong

  • Persistent CAT pressure in Personal lines: Personal lines combined ratio 102.0% included a 25.4-pt CAT load; six-month combined ratio rose 24.3 pts due to CATs and reinstatement premiums.
  • CAT frequency elevated: 20 catastrophes in Q2 (including Texas floods) drove >$0.5B catastrophe claims paid YTD, keeping first-half P&C combined ratio above 100% at 103.8%.
  • New business softness in Personal lines: Agency new business fell $22M in Q2 (incl. ~$13M in California private client), reflecting targeted retrenchment and risk recalibration post-wildfires.

Transcript

Operator (participant)

Ladies and gentlemen, good morning. You are connected to the Cincinnati Financial Corporation Conference Call. We request that you please stay connected. This conference will begin within the next two minutes. We thank you for your patience. Ladies and gentlemen, good morning. You are connected to the Cincinnati Financial Corporation Earnings Conference Call. We request that you please stay connected. This conference will begin within the next two minutes. We thank you for your patience. Good day and welcome to the Cincinnati Financial Corporation ond quarter 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 now like to turn the conference over to Dennis McDaniel, Investor Relations Officer. Please go ahead.

Dennis McDaniel (Head of Investor Relations)

Hello, this is Dennis McDaniel at Cincinnati Financial. Thank you for joining us for our second quarter 2025 earnings conference call. Like 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, Mark Shambo and Senior Vice President of Corporate Finance, Teresa Hopper. 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. I'm pleased to report strong operating performance. Because we are confident in the long-term direction and strategy of our insurance business, we didn't lose focus after the California wildfires early in the year. We stayed anchored to our agent-centered strategy, continuing to balance profitability and growth. We also continued to benefit from rebalancing our investment portfolio in the second half of last year and reported very strong investment income growth in the second quarter of this year. Our commercial lines and excess and surplus lines insurance segments again produced combined ratios below 93%. Second quarter 2025 results for Cincinnati Re and Cincinnati Global were also outstanding, each with a combined ratio below 85%.

Spring and summer storms added 23.8 percentage points to our personal lines combined ratio, and its combined ratio was still just two percentage points shy of an underwriting profit for the quarter. The second half of the year is typically more profitable for our personal lines business. Over the past five years, we've seen an average improvement of eight points in the second half of the year for that segment. Net income of $685 million for the second quarter of 2025 more than doubled our result from a year ago and included recognition of $380 million on an after-tax basis for the increase in fair value of equity securities still held. Non-GAAP operating income of $311 million for the second quarter was up 52%.

Our 94.9% second quarter 2025 property casualty combined ratio improved by 3.6 percentage points compared with second quarter last year, despite a one-point increase in catastrophe losses. The 85.1% accident year 2025 combined ratio before catastrophe losses for the second quarter improved by 3.1 percentage points compared with the accident year 2024. Our consolidated property casualty net written premiums grew 11% for the quarter, including 16% growth in agency renewal premiums. New business written premiums continued to grow in our commercial and excess and surplus lines segments. However, they decreased by $22 million in our personal lines segment, in part from a $13 million reduction in California as we slowed growth in some parts of that state. Steady premium growth and reinsurance market opportunities prompted us to add an additional layer of $300 million on top of our property catastrophe reinsurance program.

Expanded coverage totaling $129 million, or 43% of the layer, was placed with reinsurers for an estimated ceded premium cost of less than $5 million. We continue to focus on our profitable premium growth objectives that are supported by various efforts, including superior claim service and fostering relationships with the best independent insurance agents in our industry. Our underwriters excel in 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 second quarter were lower than the first quarter of 2025, but still at a level we believe was healthy. Commercial lines in total averaged increases near the high end of 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 and personal auto in the high single-digit range. Moving on to highlight second quarter performance by insurance segment, I'll note premium growth and underwriting profitability compared with a year ago. Commercial lines grew net written premiums 9% with an excellent 92.9% combined ratio that improved by 6.2 percentage points, including 2.3 points from lower catastrophe losses. Personal lines grew net written premiums 20%, including growth in middle market accounts and Cincinnati Private Client. Its combined ratio was 102%, 4.9 percentage points better than last year, despite an increase of 2.9 points from higher catastrophe losses. Excess and Surplus lines grew net written premiums 12% with a nice profit margin. That segment produced a combined ratio of 91.1%, an improvement of 4.3 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 second quarter 2025 net written premiums decreased by 21%, reflecting pricing discipline where market conditions softened. Its combined ratio was 82.8%. Cincinnati Global's combined ratio was 78.4%, along with premium growth of 45% as it continues to benefit from product expansion in recent years. Our life insurance subsidiary had another strong quarter, including 8% net income growth. In addition, term life insurance earned premiums grew 3%. I'll end my commentary with a summary of our primary measure of long-term financial performance, the value creation ratio. Our VCR was 5.2% for the second quarter of 2025. Net income before investment gains or losses for the quarter contributed 2.3%. Higher overall valuation of our investment portfolio and other items contributed 2.9%.

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

Mike Sewell (Executive VP and CFO)

Thank you, Steve, and thanks to all of you for joining us today. We reported excellent 18% growth in investment income in the second quarter of 2025, reflecting efforts during 2024 to rebalance our investment portfolio. Bond interest income grew 24%, and purchases of fixed maturity securities totaled $492 million for the quarter and $712 million for the first six months of this year. The second quarter pre-tax average yield of 4.93% for the fixed maturity portfolio was up 29 basis points compared with last year. The average pre-tax yield for the total of purchased taxable and tax-exempt bonds during the second quarter of this year was 5.82%. Dividend income was up 1%, and purchases of equity securities totaled $56 million for the quarter and $61 million on a year-to-date basis. 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 $480 million for the equity portfolio and $16 million for the bond portfolio. At the end of the second quarter, the total investment portfolio net appreciated value was approximately $7.2 billion. The equity portfolio was in a net gain position of $7.6 billion, while the fixed maturity portfolio was in a net loss position of $458 million. Cash flow, in addition to higher bond yields, contributed to investment income growth. Cash flow from operating activities for the first six months of 2025 was $1.1 billion. That's down $44 million from a year ago due to paying $442 million more for catastrophe losses in the first half of this year. As usual, I'll briefly comment on expense management and our efforts to balance expense control with strategic business investments.

The second quarter of 2025 property casualty underwriting expense ratio decreased by 1.8 percentage points, primarily due to growth in earned premiums outpacing the growth in expenses. The 28.6% expense ratio contributed to strong results for the quarter, but I don't expect it to remain that low in the short term. There are several factors, such as the magnitude and timing of various expenses, that can cause variation between quarters. 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 updated estimated ultimate losses and loss expenses by accident year and line of business.

For the first six months of 2025, our net addition to property casualty loss and loss expense reserves was $829 million, including $711 million for the IBNR portion. During the second quarter, we experienced $63 million of property casualty net favorable reserve development on prior accident years that benefited the combined ratio by 2.6 percentage points. On an all lines basis by accident year, net favorable reserve development for the first six months of 2025 totaled $154 million, including a favorable $183 million for 2024, favorable $12 million for 2023, and an unfavorable $41 million in aggregate for accident years prior to 2023. I'll conclude my comments with capital management highlights. We paid $133 million in dividends to shareholders during the second quarter of 2025. No shares were repurchased during the quarter. We believe both our financial flexibility and our financial strength are stellar.

The parent company cash and marketable securities at the end of the quarter was $5.1 billion. Debt to total capital remained under 10%. Our quarter-end book value was a record high, $91.46 per share, with $14.3 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.

Steve Spray (President and CEO)

Thanks, Mike. We're continuing to follow the same bold vision our founders created 75 years ago. A company built for independent agents. Doing business face-to-face, handling claims fast, fair, and with empathy. Having the expertise and financial strength to grow through all market cycles. It had value in 1950. It has value today, and I'm confident it will have value for decades to come. As we've been celebrating our anniversary, we've also been recognizing the many associates who've contributed to our success. I want to take a moment to thank one of them now. Teresa Hopper will retire in September after 45 years of service. Her remarkable career includes joining our company as a clerical associate. Earning an undergraduate, and a graduate degree in the evenings, and then advancing through the finance ranks to become an executive officer, and treasurer for some of our insurance subsidiaries.

Her hard work and dedication have benefited all of us. Thank you, Teresa, for your many years of leadership and friendship. We wish you all the best in this next chapter of your life. As a reminder, with Teresa, Mike, and me today are Steve Johnston, Steve Soloria, and Mark Shambo. Dorwen, please open the call for questions.

Operator (participant)

Certainly. Thank you. We will now begin the question and answer session. To ask a question, you may press Star, then 1 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 2. At this time, we will pause momentarily to assemble our roster. The first question comes from Michael Phillips with Morgan Stanley. Please go ahead.

Mike Phillips (Managing Director)

Thanks. Good morning. It's Mike Phillips with Oppenheimer. First question, I wanted to parse out some differences in your commentary on the commercial lines renewal pricing. Where in the press release, you give some commentary, you give a little more detail by line in the queue. In the queue, your commentary hasn't changed much. High single digit for commercial casualty, high single digit for commercial property, kind of mid-single digit for commercial auto. And that's no different than prior quarters, at least not last quarter. This quarter, and Steve said it in the opening comments, you've moved from commercial renewal pricing of high single digit to kind of mid-single digit. I guess understand the differences between those two commentaries. First off, and then. It feels like maybe. Mid-single digit pricing for commercial might be kind of wher loss trends are. I don't know if you agree with that or not.

And so if so, what does that mean for future margin expansion? Thank you.

Steve Spray (President and CEO)

Yeah, Mike, you're right. It's kind of nuanced there. What we're saying on commercial lines is that we've moved to the kind of the high end of the mid-single digit. It's just trying to point out candidly that it just was down a bit from the first quarter, just to, again, just for total transparency. One thing that I, a couple of things I would, I guess, maybe point out the way I'm looking at it is the net rate changes remain very strong in commercial lines. To kind of answer the second part of your question, maybe other than workers' compensation. We believe that that rate is at least matching or outpacing loss costs. Now, again, that's prospective. Everything we do is prospective on the pricing.

The other thing I would point out is if you just look at the results in commercial lines, and we've got now 13 and a half consecutive years of underwriting profit, the 92.9 here in the first six months. In prior calls, you've heard me talk a lot about the pricing sophistication and the segmentation that our underwriters, working with our agents, have just been executing on beautifully. If you think about that book and the performance that we've had there and moving towards more price adequacy. I think that's what's putting a little bit of pressure on the overall average net rate change. What I focus more on, though, again, is the segmentation. Are we retaining that business that's most adequately priced. Then are we being aggressive, working with our agents on the business that we feel needs the most rate action.

Mike Phillips (Managing Director)

Okay, Steve, thank you. That's helpful. The second question kind of is related to reserves and maybe specifically commercial casualty. I'm going to go back to year-end data, but kind of couple that with what we've seen so far this year. Where year-end, you took some releases in GL in recent accident years, and I think now you've taken a little bit more in the recent accident years. Mike said 2024 favorable, 2023 favorable. I don't know what lines that was, but at least in GL, you've taken some favorable development in the recent accident years. So I guess just could you give us comfort in how you can take those releases in the recent accident years for GL and how that might not be too soon. Are you moving some things around by accident year? Just some comfort around those recent accident years for general liability. Thank you.

Mike Sewell (Executive VP and CFO)

Yeah, this is Mike Sewell. Thanks for the question. I do gain, first of all, a lot of comfort with our reserving process. It's a consistent approach with some of the same actuaries doing the work. And then when I look at the numbers, and I do see it by year, we do not lay it all out exactly, but on the commercial casualty, as you noticed, it was $2 million favorable. If I am looking at the accident years, a large piece of it, $14 million, was favorable for the 2024 year. If I start to look down, 2023 was basically flat, 2022, 2021. I will call those two years were flat together. Going back to the years 2020 and prior, it was reserve strengthening of $10 million.

When you take a look at all that, the total reserves that are outstanding on that line, very little movement, but it is a little bit across the board. Your observation is correct that there is a little bit more for this quarter that was coming from the most recent current accident year.

Steve Spray (President and CEO)

Hey, Mike, Steve Spray, I might just add. Agree, obviously, completely with what Mike Sewell just said. From my seat, the way I have been looking at this, here this, my first year on the job, and even prior to that, is just, and what I appreciate so much is that Mike said the consistent process, the consistent team. If you kind of just move up a layer, the way I have been looking at it is just the track record that we have as a company, 30-plus years of overall favorable reserve development.

Commercial lines this year, in total, we have got favorable reserve development. Every quarter, and I think I talked about this on the last quarter call, every quarter in this line or that line, you are going to see some movement. I guess that is the nature of reserving. The thing I most appreciate is that our team here, the consistent team, follows that consistent process. When they see something, they are quick to act. I think that is what you are seeing. The prudence that we are carrying with a lot of the uncertainty, both in, say, casualty and then in commercial auto, you can see the same thing.

Mike Phillips (Managing Director)

Okay. Thanks, guys. I'll stick to the two. Appreciate your comments.

Steve Spray (President and CEO)

Thank you, Mike.

Operator (participant)

Thank you. Our next question is from Mike Zarembski with . Please go ahead.

Mike Zarembski (Managing Director)

Hey, thanks. Good morning. On the expense ratio, which was much better than expected, I believe. Steven, the preparer marks. You said that there were some one-time items. So just, I guess, should we be still thinking that the guide on the expense ratio is kind of trying to get below 30, or should we run rate some of this better than expected, or half of it, or just trying to see if there's anything really changed there? Thanks.

Steve Spray (President and CEO)

Yeah, no, that's a great question, Mike, and I appreciate that. It was a little bit better than what we were probably thinking. There was some timing for some actual expenses. Really, the large piece of it was, and we've been trying to do this, we've been trying to grow premium growth faster than expense growth. Expenses are going to go up. We watch that very carefully. In between quarters, you may have certain expenses that might hit here or there. I would say as a run rate, we're trying to be below 30% on an ongoing basis. Once we're there, and I think we're kind of right there, I'm going to set my targets on a 29% or below. We're not going to give up. We're going to consistently work towards lowering that ratio.

Mike Sewell (Executive VP and CFO)

Hey, Mike.

Mike Zarembski (Managing Director)

Hey, guys.

Steve Spray (President and CEO)

Mike, just to add on one data point that Mike mentioned, I'll just, I think, emphasize on the growth. Four out of the last five years as a company overall, we've had double-digit net written premium growth. And the one year we didn't was at 9.5%. That is certainly, as Mike pointed out, that's helping the cause.

Mike Zarembski (Managing Director)

Okay, got it. Yeah, I'm sorry. That was Mike in the preparer marks that made the expense ratio comment. Got it. Operating leverage is key. Got it. Pivoting to just maybe a dual question on commercial lines. The action year loss ratio in work comp appears to be picked at a much higher level than in recent quarters and years. Anything going on there? I know you guys addressed some of the unfavorable, but commercial auto continues to be a hotspot for you all, and I feel like for many in the industry as well. Any additional comments you'd like to make on commercial auto as well? Thanks.

Steve Spray (President and CEO)

Sure. On work comp, and Mike might want to add something as well, I would just say, again, it's a long-tail line. It's just our prudent approach there that we've talked about in the past. On commercial auto, it's along the lines still kind of what I was saying to, on Mike Phillips' question earlie. Is it's just, we are seeing, I think, the industry, and that's pretty well documented, and we as well, we're seeing more attorney involvement in auto accidents. I think that social inflation, legal system abuse, however you want to put it, that's putting some pressure on that. I kind of move up a layer and just look from quarter to quarter what our actuaries do when they see something and how quickly they act, and how that's just served us well over time.

I think that's what you've got going on here in commercial auto as well. Matter of fact, the most recent accident years, 2024 and 2025, case incurred, patent case look really good right now, and you can see that. We're adding IBNR to it. We're being prudent. There's uncertainty. As you have come to expect from us, I think we're taking the appropriate action.

Mike Zarembski (Managing Director)

On workers' comp, just to follow up, that's a big change in the pick. One of your peers who also has a lot of contractors maybe said that frequency has become less of a good guy, just anything there? Thank you.

Steve Spray (President and CEO)

Yeah, no, I can't say we've seen anything different in the way of frequency there, Mike. But as you know, yeah, our commercial book is, we write a lot of construction, but if you look at our workers' compensation premiums as a total of our commercial, it's just, I think it's 6%-8% of our total commercial lines business. So it probably has a little less impact than maybe some of the peers that you follow.

Mike Zarembski (Managing Director)

Thank you.

Operator (participant)

Thank you. Our next question comes from.

Steve Spray (President and CEO)

Thank you, Mike.

Operator (participant)

Our next question comes from Greg Peters with Raymond James. Please go ahead.

Greg Peters (Managing Director)

Thank you. Good morning, everyone. Let's pivot over to the personal lines business. You called out in your script and in the release some changes that are happening inside your private client business. Maybe you can give us an idea where, as this reset continues, where it's going to, where the final resting spot is, if you will, in terms of your expectations on exposures in California and elsewhere.

Steve Spray (President and CEO)

Yeah, sure. Thanks, Greg. Appreciate it. First thing I would say is I feel confident in saying we'll do everything we can to support our California agents and policyholders. As I mentioned, since the wildfires occurred in that first quarter, like we do on any large loss, individual event, or catastrophe, we do a deep dive and objectively look at any lessons learned. I think it's fair to say that we've got lessons learned out of California, and we're already implementing some of those actions right now. Without getting into a lot of detail, I would say again, it's fair to say or safe to say it's around model recalibration, around aggregation, and just our view of risk.

Again, I feel confident that we're going to be able to do everything we can to support a lot of great California policyholders we have and the great agency plant that we have there.

Greg Peters (Managing Director)

Related to that, you talked about the reinstatement costs going through your personal lines business after recoveries. Curious on the recovery piece. Did you sell your subrogation rights? Or where, because a portion of that fire looks like it's going to rest with some of the liability rests with the utility?

Steve Spray (President and CEO)

Yeah, I would just answer that, that we have not sold our subrogation rights.

Greg Peters (Managing Director)

Got it. Okay. Hey. In your prepared remarks, you talked about some changes to or some additional reinsurance you bought. Can we go back to your comments on the reinsurance? I guess the reason why I'm asking is just trying to put all the pieces together as we go into the hurricane season, and what I should think about the potential for event exposure your company might have. Because it sounds like you bought some additional cover on to raise the, extend the tower. Just give us a, remind me of the summary version of what's going on there.

Steve Spray (President and CEO)

Yeah, absolutely. Again, Steve Spray. What we did is we purchased. At 71, we purchased an additional $300 million. X of $1.5 billion on top of the property cat reinsurance program. Very consistent with our approach. When we look at the property cat reinsurance, the way we approach that is for balance sheet protection. We just felt, with the growth that we have talked about here this morning. Good growth, that it was prudent, especially in this marketplace where we thought it was attractive to go out and. Try to purchase some more on top. We went out. It is a subscription market. We went out with, I think, with an aggressive rate. I think we filled. We said $129 million of the $300 million or 43% of it. That is kind of the story there. On California, on the primary business.

As it stands now, we have used about half of that property cat, the $1.5 billion pre-excuse me, 71 and reinstated those layers. Those layers are there for the remainder of the year.

Greg Peters (Managing Director)

For the California piece, what's your net? Can you remind me what your net retention is on just the hurricane risk when you think about Southeast and Gulf Coast exposures on a per event basis? And just one other, I assume on the cap bond, the additional layer you bought, you said subscription, so that wasn't done through, that wasn't done through the cap bond market, correct? That was done traditional risk transfer?

Steve Spray (President and CEO)

Yeah, that was traditional reinsurance on the 300X of $1.5 billion. And then on the. Yeah. So you had mentioned you were kind of bifurcating wildfire and hurricane. The property cat.

Greg Peters (Managing Director)

Yeah, I want to pivot.

Steve Spray (President and CEO)

Is an all.

Yeah.

Yeah, it's an all-perils contract, Greg, and we have a $300 million retention on that. Whether it's wildfire, whether it's severe convective storm, earthquake, or hurricane as an example, we have a $300 million retention, but those perils all apply to that property cat treaty.

Greg Peters (Managing Director)

Got it. Thanks for the clarifications.

Steve Spray (President and CEO)

Yeah, my pleasure. Thanks for the question.

Operator (participant)

Thank you. Our next question comes from Mei Yao with KBW. Please go ahead.

Hi, it's Jane for Mei. Thank you for taking my question. My first question is just a follow-up on the loss trend. Have you observed any shifts in loss trend that you can call out either upward or downward over the recent period? Any comment you can add will be great. Thank you.

Steve Spray (President and CEO)

Yeah, no, I don't think we have anything to report back on any change in the loss trend up or down during the quarter. Thank you for the question.

Got it. My second question is on the growth. So commercial property still have decent return. Property rates now softens and casualty rates are selling. How do you view the relative growth prospect between property and casualty?

Yeah, sure. Thank you. We're a package writer as a company. When we work with our agents, the other thing I think you're hearing a lot in the marketplace about is a softening property market. We're seeing that too on really large properties. We're seeing it probably most prevalently in our Lloyd’s syndicate and CGU out of London. They do a lot of direct, fact, shared and layered business. That business we're seeing some pressure on. Our small to middle market commercial package business and commercial property business, we're still seeing healthy rate there. I think that's because the things that you see when you turn the TV on at night, severe convective storms haven't let up. That's keeping pressure on property. Social inflation, legal system abuse, that's keeping pressure on general liability umbrella as well as auto liability.

We're still seeing healthy net rate for our mix of business and what we do.

Yeah, thank you for the comment.

Yeah, thank you.

Operator (participant)

Thank you. The next question is from Josh Shanker with Bank of America. Please go ahead.

Josh Shanker (Managing Director)

Yeah, thank you. First of all, looking at the growth, particularly in commercial, among other companies that report, I think you're the first company to report accelerating growth in the second quarter versus the first quarter. I don't know if that's a trend, but can you talk about what you're doing? Is this taking a larger share in agencies that you already have? Is this the newer agencies you've appointed? Is this lines of business that you are finding you can underwrite now that you didn't have that capability in the past?

Steve Spray (President and CEO)

Yeah, thank you, Josh. I think everything we do around here is an and strategy. I think it's all of the above. We've got such deep relationships with all the agents we do business with. You're right. We've been adding high-quality agencies at a faster clip. There's no doubt that that is certainly accelerating both the net written premium growth as well as our new business. Our E&S company continues to grow. We've added five new products at Lloyd’s that we just for agents of Cincinnati Insurance Company as they come through our in-house broker, Sea Super. I think we just have a lot of good momentum with our agents. We keep focused on what we do well, Josh, blocking and tackling one account at a time, calling on agents, doing business face-to-face. It just all really goes to it, and it's just been continuing to pick up momentum.

Josh Shanker (Managing Director)

Pivoting to reinsurance, you bought more, obviously, and you sold less. Can you talk about what your inbound reinsurance strategy is going to be going forward into if we replayed 1Q25? Has anything changed about your exposures that you'd have a different outcome?

Steve Spray (President and CEO)

Okay. On Cincy, first thing I would say is they are executing exactly as we want them to. It is an assumed model, an allocated capital model. They're seeing pricing in the marketplace that they don't feel, from their view of risk, is where they want it to be. So they've pulled back, underwriting discipline. About half of the, I guess, of the pullback is coming from property, and the other half is coming from casualty. Pretty balanced. Their inception-to-date combined ratio, which is what we focus most on, Josh, is 95.2%. That's on about $3.5 billion of premium. They're executing exactly the way we designed from the get-go and the way that we plan on doing it going forward as well. When we feel that things are opportunistic, they'll grow it.

If we don't feel we can get the risk-adjusted return, then there may be some quarters when they back off.

Josh Shanker (Managing Director)

Is the shape of the portfolio today notably different than it was six months ago, such that the California wildfires would have a different result?

Steve Spray (President and CEO)

No, not. At this point. If you're talking about the primary business, I think, on the homeowner, [Crosstalk]but that's all part of the.

Josh Shanker (Managing Director)

I'm talking about the combined ratio. Selling less and buying more.

Steve Spray (President and CEO)

Yeah, I would say right now, for the last six months, it would be little changed.

Josh Shanker (Managing Director)

Okay. Thank you.

Steve Spray (President and CEO)

Yeah, thank you, Josh.

Operator (participant)

Thank you. Again, if you have a question, please press star, then one. We have a follow-up question from the line of Mike Zarembski with BMO. Please go ahead.

Mike Zarembski (Managing Director)

Hey, great. Thanks for taking the follow-up. Back to the competitive marketplace commentary. On the property market specifically, you mentioned that your colleagues in the Lloyd’s Syndicate and CGU are seeing meaningful competitive pressures there in property. Do you or they have a view on, assuming a normal, I guess, weather season, whether the rate of decline should dissipate? Or do you have any kind of forward-looking view on whether this level of competition kind of makes sense and your profits are becoming less healthy, or is it irrational?

Steve Spray (President and CEO)

Yeah, I don't know if I—there's a lot of capacity that's come in, and a lot of capital has come into that space, Mike. I don't know if I would be able to opine on going forward. I would say that, again. The discipline, and you look at the results we've gotten out of CGU. Just a ton of confidence in the way they're underwriting all lines of business, but for what we're talking about here, direct and fact. The other thing that CGU has been doing since inception is just they've really reshaped that book too. Diversifying both geographically and then by product line. Has been quite impressive, and I think that's going to bode well for us into the future. That's a big reason why you saw the growth that we've seen at CGU here in the first half of the year.

Mike Zarembski (Managing Director)

Got it. As a follow-up back to the competitive environment, on the kind of core package part of your portfolio, I think you painted a picture of, it's a lot of things, but ultimately, there's a good amount of inflation in the system between weather and social, etc. It sounded like you don't feel like we're going to enter a soft marketplace. I guess some of the data points and some of the investors are voting that there is the potential for a soft market, and I think it's just off the backs of carrier profitability being excellent, which is also intertwined with interest rates. Any additional comments you'd want to make in terms of just kind of why the SME market probably would be less likely to follow the pace of what you're seeing in the syndicated kind of property market?

Steve Spray (President and CEO)

Yeah. The only thing I would—the only thing I would say there is I'll speak for Cincinnati Insurance Company in my 34 years here. I think the concept of a rising or lowering tide, raising or lowering all boats, for us, it's just not in the dialogue. It's risk by risk. It is using the subjective part, I guess you could say, of underwriting. Both for our new business field underwriters out in the field working with our agents face-to-face, looking at the risks, and then the same thing with our renewal underwriters. I'll go back to kind of what we talked about earlier. It's risk by risk when it comes to pricing. We're using sophisticated tools. We are using our actuarial team and the data and the pricing precision to segment our book. If you look at our commercial lines results, the price adequacy will follow those results.

The pricing in that commercial book, we feel pretty good right now. That's probably what's putting pressure a little bit on the net rate change. That being said, you can still see we're getting good rate through there for all the reasons I think you mentioned: social inflation, weather. Along those lines. I'm not saying that other carriers aren't going to have a different view of a risk. If they do, we're just so confident in the way we're pricing and the way we're underwriting that we'll have to make a decision risk by risk. If somebody takes a different view and it's considerably less than ours or we don't think we can make a risk-adjusted return, then we're walking away. We've been executing on that. I just have to give a shout-out to our underwriters and our field reps.

They have been executing on that, working with our agents beautifully now for, candidly, the last 12 or 13 years. Adding agencies. Continuing to build out our E&S operations, continuing to give our agents more access to Lloyd's, more efficient, more effective access to Lloyd's, growing personal lines, getting it profitable. Just feel really good about where we are and where we're headed. We're going to stay focused.

Mike Zarembski (Managing Director)

Appreciate it. Thank you.

Steve Spray (President and CEO)

Thank you, Mike.

Operator (participant)

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

Mike Phillips (Managing Director)

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

Operator (participant)

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