CINCINNATI FINANCIAL CORP (CINF)·Q1 2025 Earnings Summary

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) .

Financial Results

Estimates vs Actuals (S&P Global)

• Q1 2025: EPS beat (–$0.24 vs –$0.61); revenue miss ($2.566B vs $2.706B). Q4 2024: EPS beat; revenue slight miss. Q3 2024: slight EPS miss; revenue beat (note investment gains/losses can swing “revenue”). Values with asterisk are from S&P Global.

Segment Performance (Q1 YoY)

Key KPIs

Guidance Changes

No formal numeric revenue/EPS/combined ratio guidance was issued.

Earnings Call Themes & Trends

Management Commentary

• Strategic posture: “The confidence we have in our pricing capabilities and segmentation strategy allows us to keep our focus on our long-term profitable growth plans… We believe we can continue growing premiums at a healthy pace throughout 2025.” .
• On Q1 cats and underlying: “Our… combined ratio… included 25 points related to natural catastrophe losses… our [ex-cat] combined ratio… continued to improve… about 2 points better without… reinstatement premiums.” .
• Reinsurance response: “Estimated first quarter recovery from our primary property catastrophe reinsurance treaty for the wildfires was $429 million…” .
• Investment income/yield: “Bond interest income grew 24%… fixed maturity portfolio pretax yield 4.92%… average pretax yield on purchased bonds 5.8%.” .
• Capital management: “We paid $125 million in dividends… repurchased 300,000 shares at an average price of $139.96… debt to total capital remained under 10%.” .

Q&A Highlights

• Wildfire loss progress and exposure: Net wildfire loss at low end of prior range ($449M net); 65% of gross claims paid ($488M) on ~$754M gross losses; reinsurance collections underway .
• Pricing mechanics under tariffs/inflation: Management emphasized annual exposure adjustments (inflation guard on property; audited exposures on casualty) mitigate 3-year rate locks; 75% of commercial premiums adjust annually .
• Cat reinsurance strategy: After reinstating about half of the 2025 cat tower used by the event, no current plans to add cover; will continue monitoring .
• Reinsurance segment role: Despite volatility in Q1, Cincinnati Re remains a diversifier with inception-to-date ~95.8% combined ratio (management’s figure) .
• Reserves: $91M favorable prior-year development in Q1; modest $7M strengthening in commercial auto for 2019–2021 years on higher-than-expected emergence; overall process consistent .

Estimates Context

• Q1 2025 EPS beat: Primary EPS –$0.24 vs –$0.61 consensus; revenue miss: $2.566B vs $2.706B consensus. Q4 2024 EPS beat (3.14 vs 1.88); revenue slight miss. Q3 2024 slight EPS miss (1.42 vs 1.48) and revenue beat ($3.320B vs $2.530B). Street “revenue” for insurers can be distorted by the inclusion of investment gains/losses. Values retrieved from S&P Global.
• Estimate revisions may bias upward for core underwriting metrics ex-cat given improving accident-year ex-cat combined ratio and firm pricing, but headline EPS remains cat-sensitive .

Estimates table provided above (asterisked).

Key Takeaways for Investors

• Underlying momentum intact: Accident-year ex-cat combined ratio improved to 90.5% despite a historically severe cat quarter; commercial lines delivered a 91.9% combined ratio .
• CAT overshadowed fundamentals: 25 cat points (3x 10-yr Q1 average) and reinstatement premiums drove the loss; personal lines bore the brunt (homeowner cat ratio +48.2 pts YoY) .
• Capital strength provides optionality: ~$5B parent cash, low leverage, and book value/share of $87.78 mitigate earnings volatility and support ongoing growth and capital return .
• Pricing still constructive: Renewal pricing remains firm across segments (commercial low end high-single-digit; PL low-double-digit; E&S high end high-single-digit), supporting margin repair as earned-in rate catches up .
• Reinsurance program effective: Large recoveries expected and full reinstatement completed; no incremental purchases planned currently, but management remains vigilant .
• Near-term trading: EPS beat vs consensus (smaller loss) but headline revenue miss and elevated cat sensitivity could amplify volatility; focus on ex-cat margin trajectory, personal lines remediation in CA, and cadence of cat activity through storm season .
• Medium term: Continued investment income tailwind from higher bond yields and sustained premium growth from agency expansion should support earnings normalization as cat activity reverts toward longer-term averages .

Notes:

• All company figures and quotes are sourced from CINF’s Q1 2025 8-K/press release and supplemental data and the Q1 2025 earnings call transcript . Prior-quarter context from Q4 2024 and Q3 2024 press releases .
• Asterisked estimate values in tables are from S&P Global (consensus) and are provided for context. Values retrieved from S&P Global.