Cincinnati Financial Earnings Call Transcript

DATE

Tuesday, Feb. 10, 2026 at 11 a.m. ET

CALL PARTICIPANTS

• President and Chief Executive Officer — Stephen Michael Spray
• Executive Vice President and Chief Financial Officer — Michael James Sewell
• Chief Investment Officer — Steve Soloria

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TAKEAWAYS

• Net Income -- $2,400,000,000 for 2025, representing 4% growth; fourth quarter net income was $676,000,000, up 67%, including $145,000,000 after-tax from increased fair value of equity securities held.
• Non-GAAP Operating Income -- $531,000,000 for the quarter, a 7% increase; for the year, up 5%.
• Property-Casualty Combined Ratio -- 85.2% in the quarter and 94.9% for the year, with the annual ratio rising 1.5 points due to a 1.6-point increase in catastrophe losses; current accident year combined ratio before catastrophe losses improved 0.4 points.
• Net Written Premium Growth -- Consolidated property-casualty net written premiums grew 5% in the quarter; commercial lines grew 7%, personal lines 14%, and excess and surplus lines 11% for the year.
• Segment Combined Ratios (Full Year) -- Commercial lines improved to 91.1% (down 2.1 points), personal lines increased to 103.6% (up 6.1 points), and excess and surplus lines improved to 88.4% (down 5.6 points).
• Catastrophe Loss Ratio Changes -- Commercial lines catastrophe loss ratio decreased 1.9 points, personal lines increased 7.1 points, and excess and surplus lines decreased 1 point for the year.
• Retention Rates -- Commercial lines retention remained in the upper 80% range; personal lines in the low to mid-90% range, both slightly lower than the prior year.
• Reinsurance Program Updates -- 2026 property catastrophe treaty increased program top to $2,000,000,000 from $1,800,000,000 (effective 07/01/2025); retention for a $2,000,000,000 event reduced to $523,000,000 from $803,000,000; per-risk treaties renewed with a premium rate decrease of approximately 7% for 2026.
• Value Creation Ratio (VCR) -- 18.8% for 2025, exceeding the five-year target range of 10%-13%.
• Investment Income -- Rose 9% in the quarter and 14% for the year; bond interest income was up 10% in the quarter, with $1,600,000,000 in net fixed maturity purchases; equity portfolio had a fourth quarter pretax net gain of $181,000,000, and the bond portfolio had a $24,000,000 net gain.
• Cash Flow from Operating Activities -- $3,100,000,000 for 2025, an increase of 17%.
• Capital Management -- $730,000,000 returned to shareholders: $525,000,000 in dividends and $205,000,000 in share repurchases, with 1,400,000 shares bought at a $151 average price.
• Book Value per Share -- Record high of $102.35, with consolidated shareholders' equity at $15,900,000,000.
• AI and Automation Initiatives -- Establishment of an internal AI center of excellence and deployment of generative AI tools, including a proprietary underwriting chatbot; management expects these efforts to enhance efficiency and profitability.

SUMMARY

Cincinnati Financial Corporation (NASDAQ:CINF) reported substantial improvement in fourth quarter and annual results, with net income growth, strong investment gains, and an improved property-casualty combined ratio despite heightened catastrophe losses. The company renewed and expanded its reinsurance coverage, reducing potential net retention on large catastrophe events for the coming year while securing lower per-risk premium rates. Investment income increases and capital deployment strategies were highlighted as contributing to higher returns and record book value. Management discussed broad-based adoption of intelligent automation, including generative AI, as a structural driver of future process efficiency and underwriting precision.

• Management noted commercial auto renewal rates increased by a mid-single-digit percentage in the quarter, and stated confidence that pricing "is exceeding loss costs" in most business lines except workers' compensation.
• On capital management, the company ended the quarter with $5,600,000,000 in parent company cash and marketable securities, and reported debt to total capital remained under 10%.
• Release of property-casualty reserves produced $196,000,000 in net favorable development during the year, improving the combined ratio by 2.0 points; the majority related to recent accident years.
• Management described ongoing discipline in risk selection, especially in competitive market conditions, and reaffirmed a strategy focused on maintaining underwriting standards rather than competing primarily on rate.
• The company reported it is "well into" its personal lines derisking process, with metrics exceeding internal expectations for the stage.
• The fourth quarter underwriting expense ratio declined by 0.2 points due to increased earned premiums outpacing other expense growth, offset by higher agency profit-sharing commissions.

INDUSTRY GLOSSARY

• Combined Ratio: A key insurance profitability metric calculated as (claims + expenses) divided by premiums earned; values below 100% indicate underwriting profit.
• Catastrophe (CAT) Loss Ratio: The portion of claims and expenses arising from catastrophe events as a percentage of earned premiums.
• Value Creation Ratio (VCR): The ratio of value creation for shareholders, incorporating net income, investment gains or losses, and changes in book value.
• Reinstatement Premium: The additional premium paid to restore reinsurance coverage following a loss event during a policy term.
• Excess and Surplus (E&S) Lines: Insurance provided for unique or high-risk situations not covered by standard insurance markets, often requiring bespoke terms.
• IBNR (Incurred But Not Reported): Claims that have occurred but have not yet been reported to the insurer and are included in the estimate of loss reserves.

Full Conference Call Transcript

Dennis McDaniel: Hello. This is Dennis McDaniel at Cincinnati Financial Corporation. Thank you for joining us for our fourth quarter and full year 2025 earnings conference call. Late yesterday, we issued a news release on our results along with our supplemental financial package, including our year-end investment portfolio. To find copies of any of these documents, please visit our investor website investors.cinf.com. The shortest route to the information is the quarterly results near the middle of the investor overview page. On this call, you will first hear from President and Chief Executive Officer Stephen Michael Spray, and then from Executive Vice President and Chief Financial Officer Michael James 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 Steven Johnston, Chief Investment Officer Steve Soloria, Cincinnati Insurance's Chief Claims Officer, Mark Shambo, and Senior Vice President of Corporate Finance, Andy Schnell. 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 will turn over the call to Stephen Michael Spray.

Stephen Michael Spray: Good morning, and thank you for joining us today to hear more about our results. We had another excellent quarter of operating performance that again demonstrated the resilience of our proven operating model and the long-term strategy that drives our insurance business. Investment results were also part of that excellent performance, including investment income growth, and another quarter with net investment gains. Operating performance was very strong for the fourth quarter and boosted full year results enough to outperform last year in several key areas, despite starting 2025 with the largest catastrophe loss in our company's history. Net income of $2,400,000,000 for full year 2025 was 4% higher than 2024.

Fourth quarter net income of $676,000,000 rose 67% and included recognition of $145,000,000 on an after-tax basis for the increase in fair value of equity securities still held. Non-GAAP operating income for the quarter increased 7% to $531,000,000. For full year 2025, it was up 5% from a year ago. Our fourth quarter 2025 property-casualty combined ratio was an outstanding 85.2%. It lowered the full year combined ratio to 94.9%, near the midpoint of our long-term average target range. The full year ratio was 1.5 percentage points higher than last year, driven by an increase of 1.6 points in the catastrophe loss ratio.

On a current accident year basis measured at 12 months before catastrophe losses, the combined ratio improved by 0.4 percentage points. The loss and loss expense portion would have improved slightly if not for the unfavorable effect of 0.3 points from reinsurance reinstatement premiums. Consolidated property-casualty net written premiums continued to grow, but at a slower pace, 5% for the quarter. That reflects our pricing discipline in the insurance marketplace as our underwriters carefully consider risks on a policy-by-policy basis and use pricing precision tools to segment those risks as part of their underwriting decisions.

Estimated average renewal price increases for most lines of business during the fourth quarter were lower than 2025, but still at a level we believe was healthy. Our standard and excess and surplus commercial lines business averaged increases in the mid-single-digit percentage range. Our personal lines segment included homeowner in the low double-digit range and personal auto in the high single-digit range. We believe our relationships with independent agencies are as strong as ever and that they will continue to trust us with their high-quality new business. The fourth quarter 2025 decrease in new business written was driven by our personal lines segment that had unusually large amounts the past two years.

However, the $92,000,000 for the quarter was still 62% more than the average of the three years prior to 2023. Policy retention rates in 2025 were similar to 2024. Our commercial lines segment was down slightly, but still in the upper 80% range. Our personal lines segment was also down slightly but still in the low to mid-90% range. Performance by insurance segment is the next area I will highlight, focusing on full year 2025 results compared with 2024. But first, I will note that all operating units had an excellent fourth quarter profitability, each with combined ratios below 90%.

Commercial lines' 91.1% combined ratio for the year improved by 2.1 percentage points, including a decrease of 1.9 points in the catastrophe loss ratio. Its net written premiums grew 7%. Personal lines' 103.6% combined ratio for 2025 increased by 6.1 percentage points, including an increase of 7.1 points in the catastrophe loss ratio. Its net written premiums grew 14%. Excess and surplus lines' 88.4% combined ratio for the year improved by 5.6 percentage points, including a decrease of 1 point in the catastrophe loss ratio. Its net written premiums grew 11%. Both Cincinnati Re and Cincinnati Global produced strong results and again demonstrated the benefits of diversifying risk to improve income stability.

Cincinnati Re's combined ratio for the year was 95.9%. Its 1% decrease in net written premiums reflects changing reinsurance market conditions. Cincinnati Global's combined ratio for 2025 was 79.2% with premium growth of 10%, benefiting from product expansion. Our life insurance subsidiary increased annual net income by 16% and grew term life insurance earned premiums by 3%. Moving on to our reinsurance ceded programs. On January 1, we again renewed each of our primary property-casualty treaties that transfer part of our risk to reinsurers. For our per-risk treaties, terms and conditions for 2026 are fairly similar to 2025, other than an average premium rate decrease of approximately 7%.

The primary objective of our property catastrophe treaty is to protect our balance sheet. The treaty's main change this year is increasing the top of the program to $2,000,000,000, compared with $1,800,000,000 effective 07/01/2025. Should we experience a 2026 catastrophe event totaling $2,000,000,000 in losses, we will retain $523,000,000 compared with $803,000,000 for an event of that magnitude during 2025. We expect 2026 ceded premiums for these treaties in total to be approximately $204,000,000 with the increase from the actual $192,000,000 in 2025 driven by additional coverage and subject premium growth. As usual, I will conclude my prepared remarks with the value creation ratio.

Our 18.8% full year 2025 VCR exceeded our five-year annual average target range of 10% to 13%. On a full year basis, net income before investment gains or losses contributed 9.1%. Higher overall valuation of our investment portfolio and other items contributed 9.7%. Now Chief Financial Officer, Michael James Sewell, will highlight investment results and other important points about our financial performance.

Michael James Sewell: Thank you, Steve. Thanks to all of you for joining us today. Investment income was a significant contributor to higher net income and improved operating results, rising 9% for the fourth quarter and 14% for the full year 2025 compared with the same periods of last year. Bond interest income grew 10% for the fourth quarter and net purchases of fixed maturity securities totaled $1,600,000,000 for the full year 2025. The fourth quarter pretax average yield of 4.92% for the fixed maturity portfolio was similar to last year. The average pretax yield for the total of purchased taxable and tax-exempt bonds during 2025 was 5.6%.

Dividend income for the quarter matched last year even without the repeat of a $6,000,000 special dividend from December 2024. Net purchases of equity securities totaled $74,000,000 for the year. Valuation changes in aggregate for the fourth quarter and the year were favorable for both the equity portfolio and our bond portfolio. Before tax effects, the fourth quarter net gain was $181,000,000 for the equity portfolio, and $24,000,000 for the bond portfolio. At the end of the fourth quarter, the total investment portfolio net appreciated value was approximately $8,400,000,000. The equity portfolio was in a net gain position of $8,500,000,000 while the fixed maturity portfolio was in a net loss position of $181,000,000.

Cash flow from successful insurance and investment activities continue to fuel investment income. Cash flow from operating activities for full year 2025 was $3,100,000,000, up 17%. Regarding expense management, our strategy continues to seek a good balance between controlling expenses and investing in our business. Our fourth quarter 2025 property-casualty underwriting expense ratio decreased by 0.2 percentage points as an increase in agency profit-sharing commissions was offset by growth in earned premiums outpacing growth in other expenses. Turning to 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. Then we updated estimated ultimate losses and loss expenses by accident year and line of business. During 2025, our net addition to property-casualty loss and loss expense reserves was $1,300,000,000, including $1,100,000,000 for the IBNR portion. For current accident year loss and loss expenses before catastrophe effects and measured at 12 months, several of our major lines of business had 2025 ratios better than 2024. The main exception was commercial casualty rising 4.2 percentage points. That reflects ongoing uncertainty including potential negative effects of legal system abuse we and others in the industry have noted in recent years.

We remain confident with our pricing and risk selection for this line of business. For prior accident years, we experienced $196,000,000 of property-casualty net favorable reserve development during 2025 that benefited the combined ratio by 2.0 percentage points. On an all-lines basis by accident year, net reserves developed during 2025 included a favorable $275,000,000 for 2024, favorable $8,000,000 for 2023, and an unfavorable $87,000,000 in aggregate for accident years prior to 2023. As usual, I will conclude with capital management highlights. For the full year 2025, we returned capital to shareholders totaling $730,000,000 including $525,000,000 of dividends paid and $205,000,000 of share repurchases.

We repurchased approximately 1,400,000 shares at an average price of $151 per share, including 651,000 shares during the fourth quarter at $157 per share. We continue to believe our financial flexibility and our financial strength are both in an excellent position. Parent company cash and marketable securities at quarter-end was $5,600,000,000. Debt to total capital remained under 10%. Our quarter-end book value was a record high $102.35 per share with $15,900,000,000 of GAAP consolidated shareholders' equity providing plenty of capacity for profitable growth of our insurance operations. Now I will turn the call back over to Steve.

Stephen Michael Spray: Thanks, Mike. Before we get to Q&A, I want to share our efforts related to intelligent automation. As most of you have heard us say before, our vision is to be the best company serving independent agents. Strategies we undertake must ladder up to improving the experience for the independent agents we serve and their clients. We are embracing intelligent automation to improve processes across our technology ecosystem. Generative AI is certainly a part of it, but it is only one aspect. Our work began with improvements to our data architecture, giving us a rich understanding of our risks and how we could shape our entire insurance portfolio for the future.

We use workflow tools in each insurance segment that organize data and automate certain activities in writing new business or in other transactions. That experience formed a deep pool of talented associates with the knowledge, skills, and desire to continue our journey into generative AI. Most importantly, these associates are also insurance experts. We have created an AI center of excellence which is harnessing cloud provider large language models to create internal solutions that can then be easily replicated throughout our company for fast scalability. We have a number of projects completed and even more on the roadmap. Let me share an example.

Using generative AI, we created a proprietary chatbot that our commercial lines underwriters use to obtain reference information and find answers that assist with underwriting decisions. We are concentrating on using GenAI to gain efficiency that leads to meaningful productivity gains for our associates. We are optimizing their efforts, allowing them to add more value to our business, deepening relationships, sharing expertise, and focusing their energy on the most complex underwriting and claims decisions. As we continue to weave GenAI into our business, we expect to see additional impacts to our profitability and growth. As a reminder, with Mike and me today are Steve Johnston, Steve Soloria, Mark Chambeau, and Andy Snell. Jordan, please open the call for questions.

Operator: As a reminder, if you would like to ask a question, press star followed by the number one on your telephone keypad. Your first question comes from Michael Wayne Phillips from Oppenheimer. Your line is live.

Michael Wayne Phillips: Thank you. Good morning, everybody. I guess I do want to start with the commercial casualty line. Mike, I heard your comments on the uncertainty and the legal system abuse. It is, you know, I think it has been pretty common for everybody for a while. I guess, pricing seems to be getting softer for commercial casualty for the industry, maybe not necessarily for you, but at least for your peers. I guess just as we think about 2026, and your 2025 number of, I guess, 76.8 or 77%, you know, how much confidence do you have in that number not continuing to creep up from here or hopefully holding flat or maybe improving?

Just, you know, confidence around that given what is a bit of a softer market today than it was the last couple of years. Thanks. Second question is on your tech investments, and you have talked to this for a while. And, you know, one of the benefits that you have talked about is more accurate pricing. I guess, do you see that those investments, and the one comment of more accurate pricing, is that more applicable to you in lines versus commercial lines, or is it kind of the same? Do you apply that to both? Should it be applied to both? And, you know, how do you think about that from the two sides of the fence there?

Thank you. Okay. Thank you, Steve. Appreciate the help.

Stephen Michael Spray: Yeah. Mike, Steve Spray. Let me, I can start, and then if Mike wants to add some additional thoughts, he can as well. Just to your, to the softness in the pricing. I think we did see, just I will speak to maybe overall commercial pricing there in the fourth quarter. We did see it start to get more competitive pretty, you know, pretty, pretty quickly in the fourth quarter. On a package basis, all lines. Now most of that was driven by commercial property, but I think, you know, again, as a package company, the auto and the casualty kind of got drawn into that.

I just, I can understand somewhat the property softening just given the results of the industry, and you can see Cincinnati Financial Corporation's results as well. I just think there are loss cost headwinds, particularly in casualty, as Mike mentioned on the legal system abuse. Commercial auto. So I think that the pricing is going to hold up. We are confident in the future. For 2026, confident that our rates, our pricing are exceeding loss costs in all lines except for workers' compensation.

The only other thing I might add there, Mike, and we talked about it in prior quarters, is if you look at the average rate increase for Cincinnati Financial Corporation, I will just speak to Cincinnati Financial Corporation, it just does not tell the entire picture. Our underwriters, both on new and renewals, have been executing now for years on, you know, using sophisticated tools they have to segment the business, the accounts we write, risk by risk.

And when you get into a market like we are in, and you have commercial results like we have, fourteen consecutive years of underwriting profit, I think it only stands to reason that the average net rate is going to be under pressure. We have fewer accounts that are underpriced or that need aggressive action. And then on the business that is most adequately priced, we are coaching our teams to make sure they do whatever they need to do to keep that business. And so sometimes, the market gets a little softer, we have to give up a little rate on that.

But again, in my opening remarks, I said we are still confident in the risk selection and the overall pricing we think is very healthy in the commercial book too. Yeah. We definitely apply it to both. Like I just mentioned, our overall combined ratio as a company now, fourteen consecutive years of underwriting profit. And for someone who has been here for thirty-four plus years and grew up as an underwriter, I can tell you we have always had this culture of continuous improvement. We have gotten better at risk selection. We have gotten better at loss control, loss mitigation. We have gotten better at claims management. But from my seat, that has always been linear.

And the pricing sophistication and segmentation that we instituted back roughly 2011, 2012, that has been exponential in the improvement and the results of Cincinnati Insurance. And it is in commercial lines. It is in personal lines. It runs through other areas of our business as well. It has probably been more pronounced in the improvement in commercial lines over the years, but the sophisticated pricing, probably even more important in middle market personal lines and specifically personal auto. So, you know, if you can see the ex-cat accident year continuing to improve in personal lines, and that is heading in the right direction. And we need that too.

Cat has been, we have had a lot of volatility, a lot of variability around cat. And we think there is still room for improvement across all lines of business, actually. But probably more importantly in personal lines. Thank you, Mike.

Stephen Michael Spray: Thank you, Mike.

Operator: Your next question comes from the line of Jon Paul Newsome from Piper Sandler. Your line is live.

Jon Paul Newsome: Good morning. Thanks for the call. Hope you guys are well. I want a little bit on the commercial competition question that Mike asked. And maybe some thoughts, is it still very much large versus small with the competition you are seeing in the fourth quarter incrementally changing towards still just the large folks, or are we seeing it creep down into smaller accounts over time. And, similarly, I want to see if there are any thoughts you had or observations you had related to the kind of source of that incremental competition.

Is it, you know, is it just across the board or are we seeing some emergence of some folks that maybe are not necessarily terribly disciplined in their carriers or MGAs or whoever. That makes a lot of sense. Second question, different, where are we in the process for derisking on the personal lines side? You know, you mentioned California. I think it is maybe, I mean, it is just a little bit broader than that. But where are we in that process? Are we kind of done? Are we a few quarters to go before all this works itself out? Then you cannot still get out of some of those policies we need. Yeah.

On what a really bad day can look like and aggregations.

Stephen Michael Spray: Yeah. Paul, I would say yes. It is still, it is still, I would say, leaning towards larger accounts. And then even there, I would be saying more specifically towards large property. But like I mentioned, you know, it has gotten more competitive in the middle market space, for sure, and I think that is what you are seeing there too. But let me, let me maybe, let me maybe put this in perspective a little bit too and see if this helps. If you look over the last three or four years, we were in an unprecedented hard market, I would say for my career, particularly in personal lines.

And with our financial strength, we were able to really help our agents continue to write business through that hard market and be there in a really dislocated market. Let me just give you a, let me give you, I hate the tough comp thing because it sounds like an excuse, so that is not what I am driving at here. 2024 was just an extraordinary year when it comes to new business, both for personal lines and commercial lines. And if you look at, if you just look at 2025 over 2023, commercial lines new business up 31%. 2025 over 2023 for personal lines new business were up 14%. 2025 over 2023 for E&S, up 30%.

If you consolidate those three, 2025 was up over 25% over 2023. So on an actual basis, we are still really pleased with the new business. We are able to write it at pricing that we feel is adequate and that we are, that it is healthy and that we are happy with. So a little bit of this, a little bit of this softening is just coming off, I would say, a pretty extraordinary hard market. And again, we were able to grow through that because of the relationships we have with our agents because of our financial strength.

You know, Cincinnati Insurance Company since 2018 on an all lines basis, we doubled net written premiums since 2018 from just a little over $5,000,000,000 to now over $10,000,000,000 in net written premium. Personal lines more than doubled in the last four years. So that just kind of frames it, Paul, hopefully, the way we are looking at it, the way I am looking at it, really strong growth for the company. I think this is a natural slowdown. And one thing I can promise you is we are going to maintain discipline through all cycles when it comes to risk selection and pricing.

And I could not be, I could not be more proud of the underwriters, both on the new business and on the renewal and the way they are executing with what I think are the most professional agents in the business. Paul, we are, we are well into the process. I would not be able to give you a view on we are a quarter or two or three or four away. I can just tell you from my perspective, we are well into it. On the metrics we are using, we are exceeding the expectations that we have for ourselves at this point in the process. We had moratoriums on certain areas for new business.

We are working with the state of California and we will continue to do that as well. But as far as lessons learned, California, I think it really boils down to just a new view of risk, I think both for us and for the industry. And so that is where our focus has been: terms, conditions, and pricing on our E&S homeowner business in California, whether it is post-loss or pre-loss. We still feel really good about where we are there.

Jon Paul Newsome: Great. Appreciate the help as always. Thank you, guys.

Stephen Michael Spray: Thank you, Paul.

Operator: Your next question comes from the line of Michael David Zaremski from BMO Capital Markets. Your line is live.

Michael David Zaremski: Hey, great. Thanks. In terms of the new reinsurance program that you detailed, should we embed a lower top line impact to the income statement, maybe specifically on personal lines? Okay. That is a good clarification then. Okay. So we should not be, I should not be kind of impacting the premium, the cost for that in the model. Okay? It is good to hear about the upside protection. Going to be switching gears to, you know, workers' comp. You know, the answer might just be, you know, you guys are booking really conservatively on an accident year basis, but, you know, if I just look at what you are booking at, it continues to increase year over year.

Obviously, a lot of reserve releases. But is anything changing on comp that we should be aware of? Up for it? And can we lastly just, going back to the commercial lines competitive environment. I guess if we think about your comments about casualty is still an issue for the industry in terms of inflation there. Property is well priced. I guess if you all had a crystal ball for the industry, if you do not want to speak to Cincinnati Financial Corporation, would you expect pricing to continue moderating just a tad from the property side? Or I do not know if you guys are willing to go on record there.

You know, we can see that you guys might not be playing full offense right now based on the kind of agency appointments and top line growth. But just curious if you feel the competitive environment, the rate of change on price has kind of moderated and we are kind of in stable-ish territory?

Michael James Sewell: You know, this is Mike, and thanks for the question, Mike. The CAT program is really applicable to both commercial and personal. So in 2025, you saw a huge benefit that the CAT program had on our personal lines side. So, you know, I would say maybe it matters on which one gets hit first depending on what, you know, the cat is. But we still have a reinstatement, one reinstatement, generally speaking, on the overall cat program. So that would cover us for a second loss.

But as Steve mentioned, if we do have a $2,000,000,000 loss this year compared to last year, that would be 2026 compared to 2025, we would have a lower amount that we would be out in the current year with the improved coverage up to $2,000,000,000. Mike, Steve Spray, the only thing I might add is that, as I said in my prepared remarks too, the overall rate on that property cat program was down 7%, even with the additional coverage. Yeah. I would say, let me start and see if you want to add on. But, you know, as it relates to release of reserves, you know, it has been consistent.

And, you know, I know, not that I am surprised, but, you know, each year, we have been having favorable development. You know, we have had the many years of favorable development. We did have $20,000,000 of favorable development in the fourth quarter with $65,000,000 for the year. For the quarter, I would say the $20,000,000, it was spread really throughout, you know, if you look back the last ten plus years, the most favorable was 2024, 2023 accident years. That was $4,000,000 and $3,000,000 between those two. If you look at it on a year-to-date basis, the $65,000,000 of favorable development primarily came from accident year 2023, 2022, and 2020.

The other accident years were, even the most recent accident year on the year-to-date basis for 2024, that was a favorable $2,000,000, dollars of favorable development. So we continue to reserve the way we do, conservatively, and, you know, we will just, you know, I will watch what our actuaries do.

Stephen Michael Spray: Mike, I might just add on the, kind of on the day-to-day business underwriting and pricing of comp. We have made, that is another area we have made great strides over the last fifteen years, is our expertise and then our appetite. We just, right or wrong, we just felt that the rate environment was not where we wanted it to be, so we have been cautious. We have been careful, conservative, in comp. You know, it is, you can see it. I think it is now roughly a little over $240,000,000 of premium.

So it has less impact on the overall commercial lines book, but we stand ready to help our agents write work comp where we feel like we can get the risk-adjusted return. I think the future will bode well for us on comp. You know, one of the other things is some of our biggest state, well, our biggest state, Ohio, is obviously a monopolistic state. We do not write workers' compensation here, and we are not active for work comp in California. And some of our other larger states, Texas, they are a little more minimal as well. So that is just kind of a view from, like I say, the business side. Yeah. Mike, let me make sure.

I am glad you mentioned this, but make sure we are playing full offense. We always are. We have got such a winning strategy and model that has been proven over time. We are on full offense. We are adding more products, whether it be on the standard side for commercial and personal, our small business platform, our E&S company continues to grow. We are adding product out of Lloyd's to help our agents write more business with us as well. We are adding agencies across the country, the high-quality agencies. That will continue. So we will continue to play offense.

But playing offense, winning offense is not going to be in pulling back on risk selection or probably even worse, cutting rate. That is not going to be part of the equation, so we are going to have to, along with, I think, the best agents in the, like I said, in the country, it can always come down to a price. We have got to be able to convey value that we think we bring as a company, that I know our agents bring in their communities. And that is where we are going to, that is where we are going to win.

And if price becomes more and more of an equation, we just have to get, we are going to have to get more at-bats and kind of weed through all that. As far as looking forward on competition, I said it kind of early on here, just with the headwinds on loss costs, primarily around casualty, general liability, umbrella, management liability has been under pressure, commercial auto, I just do not see that market, that is my opinion, I do not see that market continuing to have pressure on pricing. I just do not think it makes sense. Now, it may go there, and I think it will have an impact on us.

Because if it gets to a point where, again, on a risk-by-risk basis, if we do not feel we can get a risk-adjusted return, we are going to turn away from those in the short term because we are playing a long, we are playing a long game here.

Michael David Zaremski: Thank you, Steve. Thank you, Mike.

Operator: As a reminder, if you would like to ask a question, you can press star plus 1 on your telephone keypad. Your next question comes from the line of Charles Gregory Peters from Raymond James. Your line is live.

Charles Gregory Peters: Hey. Good afternoon. This is Mitch on behalf of Greg. Thanks for taking my questions. So you mentioned in an earlier response that you expect commercial auto pricing to hold up. Can you give us an update on where commercial auto renewal pricing was in the quarter? And based on current claims, how much additional rate you believe might be required to sustain underwriting margins in 2026? Thanks. Turning over to the investment portfolio, you mentioned reinvestment yields are running about 70 basis points above the book yield. How are you guys expecting that to translate to net investment income growth in 2026 considering the declining rate environment?

Stephen Michael Spray: Yeah. Thanks, Mitch. Well, commercial auto rate for the fourth quarter was up mid-single digits. We think it, on a pricing, is prospective, looking forward, we think that and we are confident that our commercial auto pricing is exceeding loss costs. One thing that I think is a little unique with us, Mitch, is that I mentioned earlier too, is we are a package writer. And so we do not, you know, monoline auto is not a big product for Cincinnati Insurance Company. We are also not a heavy transportation writer, long-haul trucking risks. It is not to say we do not have one or two in our portfolio, but that is not a focus of ours.

So I think our commercial auto over the last, I will say, seven, eight years has been a little more predictable and a little more, you know, as of year-end 2025, commercial auto, even with some ads in accident year 2025, on a calendar year basis, we were slightly profitable in commercial auto. So, you know, for us, feel good about commercial auto. And, again, it is part of the package.

Steve Soloria: Thanks, Mitch. This is Steve Soloria. We are thinking that the longer maturity rates are going to kind of hold steady from where they are. So we are expecting to be able to put money to work there pretty consistently. The insurance side has given us a lot of cash to work with. But from a market standpoint, the Fed seems to be kind of cautious on what they are going to do on the short end. So we think on the long end, we will continue to get yields in the ballpark of where we have been right now. So we are pretty comfortable that we will see solid growth going into 2026 and beyond.

Operator: Thank you. That concludes our question and answer session. I will now turn the call over to Stephen Michael Spray, CEO, for closing remarks.

Stephen Michael Spray: Thank you, Jordan, and thank you all for joining us today. We look forward to speaking with you again on our first quarter 2026 call.

Operator: That concludes today's meeting. You may now disconnect.

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