Q1 2024 Earnings Summary
- Strong overall growth with net written premiums up 11%, driven by strong growth in Personal Lines, indicating plenty of opportunity to grow the company.
- Cincinnati Global achieved an excellent combined ratio of 69.8% and has been a top quartile Lloyd's underwriter for three consecutive years, reflecting strong performance and diversification efforts.
- Cincinnati Re's combined ratio improved significantly, with the inception-to-date combined ratio decreasing from 101.2% in 2022 to 94.5% currently, demonstrating successful de-risking and reshaping of the portfolio.
- Persistently high inflation in insurance-related costs, particularly in commercial property, continues to impact claims, with inflation rates higher than the general CPI.
- Recognition of increased uncertainty in commercial casualty and workers' compensation is leading to higher loss picks and increased reserves, which may suggest potential for higher losses.
- Business mix shifts at Cincinnati Re and Cincinnati Global towards proportional reinsurance are structurally increasing the underlying loss ratios, potentially impacting profitability despite reduced volatility.
-
Commercial Casualty Loss Picks
Q: Any changes to loss picks due to uncertainty?
A: Management is confident in their loss picks for commercial casualty but is reflecting additional uncertainty in the current accident year loss ratio. They note that rates are exceeding loss cost trends, but they recognize the need for caution due to uncertainty. -
Cincinnati Re and Global Loss Ratios
Q: Why did Cincinnati Re and Global loss ratios increase?
A: The underlying loss ratio for Cincinnati Re and Cincinnati Global increased due to a shift in business mix towards more pro rata reinsurance, resulting in a higher attritional loss pick but reduced volatility. This strategy has led to a less risky portfolio with strong results, including zero catastrophe losses and significant favorable reserve development. -
Commercial Lines Growth
Q: How is growth in Commercial Lines business?
A: The company is experiencing double-digit overall growth of 11%, with strong new business in Commercial Lines. They maintain underwriting and pricing discipline, focusing on adequate rates on a risk-by-risk basis, which offers ample opportunity for growth without compromising profitability. -
Personal Auto Profitability
Q: When will personal auto become profitable?
A: Management feels positive about their position in personal auto, expecting to reap benefits from pricing actions. The current accident year loss ratio has stabilized, and they are bullish on Personal Lines, supported by product and geographic diversification. -
Commercial Property Claim Inflation
Q: Is claim inflation for commercial property decelerating?
A: The company continues to see inflation in commercial property claims, especially in insurance-related items like building materials and wages, which have higher inflation rates than general CPI. While the rate of increase is slowing, they remain cautious in their outlook.