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CINCINNATI FINANCIAL CORP (CINF)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 was strong operationally: consolidated P&C GAAP combined ratio improved to 84.7% (vs. 87.5% YoY; 97.4% in Q3), with non‑GAAP operating EPS rising to $3.14 (vs. $2.28 YoY) on higher underwriting profit and investment income growth .
  • GAAP diluted EPS fell to $2.56 (vs. $7.50 YoY) driven by a $107M after‑tax decrease in the fair value of equity securities still held; investment income grew 17% YoY in Q4, led by 28% higher bond interest income .
  • Net written premiums grew 17% YoY in Q4 (commercial +8%, personal +30%, E&S +14%), supported by high single‑digit renewal pricing in commercial/E&S and low double‑digit in personal auto; combined ratio gains were broad except E&S, which saw higher prior‑year case incurred losses .
  • Near‑term watch: management estimates Q1 2025 pretax catastrophe losses of ~$450–$525M net of reinsurance (largely California wildfires) and a $50–$60M net premium headwind; the property catastrophe treaty top‑of‑program increased from $1.2B to $1.5B effective Jan 1, 2025 .

What Went Well and What Went Wrong

What Went Well

  • Underwriting: P&C combined ratio improved 280 bps YoY to 84.7% in Q4; underwriting profit rose 40% YoY to $352M, aided by favorable prior‑year reserve development (1.0 point in Q4) and stronger current accident year loss ratios ex‑cat .
  • Topline momentum: Q4 net written premiums +17% YoY to $2.243B; personal lines earned premiums +30% YoY and personal combined ratio improved to 80.2% (vs. 84.7% YoY) as rate actions and pricing precision took hold .
  • Investment income: pretax investment income +17% YoY in Q4 (+28% bond interest); full‑year investment income exceeded $1B, supporting book value per share growth to $89.11 (+16% YoY) and a 19.8% value creation ratio for 2024 .
  • Quote: “Underwriting profit for the quarter increased 40% over 2023’s strong result… Our full‑year 2024 combined ratio improved 1.5 points to 93.4%” — CEO Steve Spray .

What Went Wrong

  • Equity mark‑to‑market: Q4 GAAP EPS fell to $2.56 from $7.50 YoY due to a $107M after‑tax decline in fair value of equity securities still held (unrealized), overshadowing operating strength .
  • E&S margin pressure: E&S combined ratio rose 330 bps YoY to 93.1% (Q4) on higher current accident year loss ratio ex‑cat and unfavorable prior‑year case incurred losses; underwriting profit declined to $12M from $16M YoY .
  • Cat loss mix: Q4 cat losses added 5.0 points (vs. 1.9 points YoY), particularly pressuring personal lines earlier in the year; management guided sizable wildfire losses for Q1 2025 .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Total Revenues ($USD Millions)$3,356 $3,320 $2,538
Earned Premiums – Consolidated ($USD Millions)$2,064 $2,297 $2,365
Net Income ($USD Millions)$1,183 $820 $405
Diluted EPS ($USD)$7.50 $5.20 $2.56
Non‑GAAP Operating EPS ($USD)$2.28 $1.42 $3.14
Investment Income, net ($USD Millions)$239 $258 $280
P&C GAAP Combined Ratio (%)87.5% 97.4% 84.7%

Segment breakdown (Q4 2024 vs. Q4 2023):

Segment MetricQ4 2023Q4 2024
Commercial – Earned Premiums ($USD Millions)$1,080 $1,160
Commercial – Underwriting Profit ($USD Millions)$85 $181
Commercial – Combined Ratio (%)92.2% 84.5%
Personal – Earned Premiums ($USD Millions)$560 $726
Personal – Underwriting Profit ($USD Millions)$88 $145
Personal – Combined Ratio (%)84.7% 80.2%
E&S – Earned Premiums ($USD Millions)$148 $168
E&S – Underwriting Profit ($USD Millions)$16 $12
E&S – Combined Ratio (%)89.8% 93.1%
Life Insurance – Net Income ($USD Millions)$10 $28
Life Insurance – Earned Premiums ($USD Millions)$80 $81

KPIs – trend across recent quarters:

KPIQ2 2024Q3 2024Q4 2024
Net Written Premiums – Consolidated ($USD Millions)$2,459 $2,293 $2,243
Agency New Business Written Premiums ($USD Millions)$407 $406 $382
P&C GAAP Combined Ratio (%)98.5% 97.4% 84.7%
Investment Income, net ($USD Millions)$242 $258 $280
Book Value per Share ($)$81.79 $88.32 $89.11
Value Creation Ratio (%)2.2% 9.0% 1.8%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Pretax catastrophe losses (net of RI)Q1 2025N/A~$450–$525MNew disclosure
Net premium revenue impactQ1 2025N/A-$50–$60MNew disclosure
Property catastrophe treaty top‑of‑program2025$1.2B$1.5BRaised coverage
Quarterly dividend2025 (payable April)$0.81 (Q4 declared) +7% increaseRaised (percentage disclosed)

Earnings Call Themes & Trends

TopicQ2 2024 (prior)Q3 2024 (prior)Q4 2024 (current)Trend
Pricing environmentCommercial/E&S high single‑digit; personal auto low double‑digit; homeowner high single‑digit Slightly higher than Q2 in commercial; strong personal rates Similar to Q3; commercial slightly lower but still high single‑digit; personal auto low double‑digit; homeowner high single‑digit Stable to firm
Reserving & social inflationAdded reserves to older commercial casualty AYs; ~10 pts higher IBNR vs pre‑pandemic Emphasized prudence amid macro uncertainty; core loss ratios elevated Personal auto BI case incurred up (2023/2022 AYs); E&S prior‑year case incurred emerging higher Continued caution
Personal lines market“Generational” opportunity; strong growth in both middle‑market and Private Client Strong net written premiums; cat losses pressured quarterly margin 77% CA homeowner premiums non‑admitted; wildfire focus; balanced growth Growth with nuanced risk management
Investment strategyRebalanced equity portfolio; added bonds; strong cash flow Net gains on equities/bonds lifted VCR; continued bond purchases Q4 bond interest +28%; dividends -4% given prior rebalancing; investment income >$1B FY Income tailwinds from rates
Reinsurance program & capacity——Raised cat program to $1.5B; reinstatement costs; strong reinsurer relationships; Cincinnati Re staying the course Enhanced balance sheet protection
E&S dynamicsUnfavorable PYD; margin pressure Unfavorable PYD; casualty mix ~90% Combined ratio up; renewal pricing high single‑digit Growth with elevated loss levels

Management Commentary

  • “Non‑GAAP operating income finished the year strong, increasing 26% to $1.197 billion… Underwriting profit for the quarter increased 40% over 2023’s strong result… Our full‑year 2024 combined ratio improved 1.5 points to 93.4%” — Steve Spray, CEO .
  • “Investment income reached $1 billion for the year and significantly contributed… Bond interest income grew 28% for the fourth quarter… pretax average yield of 4.93% for the fixed maturity portfolio” — Michael Sewell, CFO .
  • “We estimate first quarter 2025 pretax catastrophe losses of approximately $450 million to $525 million net of reinsurance… adding another $300 million of coverage, increasing the top of the program from $1.2 billion to $1.5 billion” — Steve Spray .
  • “Book value per share climbed 16%… to $89.11… Value creation ratio for 2024 was 19.8%” — Company release .

Q&A Highlights

  • California wildfires impact and reinsurance: net cat loss estimate $450–$525M; premium revenue headwind $50–$60M; program reinstatements and higher top‑of‑program coverage disclosed .
  • CA homeowner exposure: 77% of homeowner premiums in CA are non‑admitted; post‑event strategy review underway; focus on fair, empathetic claims handling .
  • Pricing cycle: rates still entering the book; policy‑by‑policy pricing precision; commercial lines still high single‑digit increases; workers’ comp mid single‑digit down .
  • Reserving: personal auto BI case incurred rising in 2023/2022 AYs; E&S casualty case incurred emerging higher; maintained prudent IBNR additions .
  • Commercial property: Q4 strength driven by a drop in large losses; caution on quarterly volatility .
  • Workers’ comp: pricing deterioration persists; management remains cautious despite favorable calendar‑year results .

Estimates Context

  • Wall Street consensus (S&P Global) for Q4 2024 EPS and revenue was not available due to data access limits during this session; as a result, beat/miss vs consensus cannot be determined here. Analysts may reassess segment assumptions (e.g., E&S loss ratio, personal lines growth trajectory) and Q1 2025 outlook given wildfire guidance and reinsurance program changes .
  • Non‑GAAP operating EPS rose 38% YoY to $3.14; GAAP diluted EPS fell to $2.56 primarily due to unrealized equity losses, providing a clear distinction between operating performance and mark‑to‑market effects .

Key Takeaways for Investors

  • Operating strength: Q4 combined ratio of 84.7% and underwriting profit +40% YoY underscore improving core profitability, particularly in commercial and personal lines .
  • Rate and growth: Net written premiums +17% YoY with high single‑digit renewal pricing in commercial/E&S and low double‑digit in personal auto support continued topline momentum into 2025 .
  • Investment income tailwinds: Bond yields and net purchases lifted investment income (+17% in Q4; >$1B FY), contributing to book value growth and VCR delivery (19.8% FY) .
  • Near‑term catalyst/risk: Q1 2025 wildfire cat loss guidance ($450–$525M) and reduced premium revenue (-$50–$60M) may drive estimate revisions and sentiment; enhanced cat protection (top‑of‑program $1.5B) mitigates balance sheet risk .
  • E&S watch: Elevated loss ratios (Q4 combined 93.1%) and unfavorable prior‑year case incurred losses warrant monitoring, though pricing remains firm and underwriting discipline intact .
  • Personal lines execution: Significant improvement (Q4 combined 80.2%) with strong growth; CA exposure largely non‑admitted provides flexibility on pricing/terms .
  • Capital & dividends: Book value per share at $89.11; debt‑to‑capital 5.5%; Board declared a 7% dividend increase, extending a multi‑decade dividend growth streak .

All values and statements above are sourced from company filings and earnings materials as cited. Where Street consensus comparison was requested, S&P Global consensus was unavailable at time of analysis due to access limits.