Cincinnati Financial Corporation (NASDAQ:CINF) Q2 2025 Earnings Call Transcript

Cincinnati Financial Corporation (NASDAQ:CINF) Q2 2025 Earnings Call Transcript July 29, 2025

Operator: Good day, and welcome to the Cincinnati Financial Corporation Second Quarter Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I’d now like to turn the conference over to Dennis McDaniel, Investor Relations Officer. Please go ahead.

Dennis E. McDaniel: Hello. This is Dennis McDaniel at Cincinnati Financial. Thank you for joining us for our second quarter 2025 earnings conference call. Late 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, Marc Schambow; and Senior Vice President of Corporate Finance, Theresa Hoffer. 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.

Stephen Michael Spray: 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 continue 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 2 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 8 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 1 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 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 line 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’s 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.

Michael James Sewell: 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 ’25, reflecting efforts during 2024 to rebalance our investment portfolio. Noninterest income grew 24% and net purchases of fixed maturity securities totaled $492 million for the quarter and $712 million for the first 6 months of this year. The second quarter pretax average yield of 4.93% for the fixed maturity portfolio was up 29 basis points compared with last year. The average pretax 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 net 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.

Then 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 ’25 totaled $154 million, including a favorable $183 million for ’24, favorable $12 million for ’23 and an unfavorable $41 million in aggregate for accident years prior to ’23. 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%. And 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.

Stephen Michael Spray: 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 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. Theresa Hoffer 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, Theresa, 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 Theresa, Mike and me today are Steve Johnston, Steve Soloria and Marc Schambow. Dorman, please open the call for questions.

Q&A Session

Operator: [Operator Instructions] The first question comes from Michael Phillips with Morgan Stanley.

Michael Wayne Phillips: It’s Mike Phillips from 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 gave some commentary, you give a little more detail by line in the Q. In the Q, 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 your opening comments, you’ve moved from commercial renewal pricing of high single digit to kind of mid-single digit. I guess I 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 where 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?

Stephen Michael Spray: Yes, Mike, you’re right. It’s kind of nuanced there. What we’re seeing on commercial lines is that we’ve moved to the kind of the high end of the mid-single digits. So 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 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, we’ve got now 13.5 consecutive years of underwriting profit, the 92.9% here in the first six months.

And 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. And 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? And then are we being aggressive working with our agents on the business that we feel needs the most rate action.

Michael Wayne Phillips: Okay, Steve. That’s helpful. 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 at 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 on how you can take those releases in the recent accident years for GL? I know that might not be too soon. Are you moving things around by accident year, but just some comfort around those recent accident years for general liability.

Michael James Sewell: Yes. 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 don’t lay it all out exactly. But on the commercial casualty, as you noticed, it was $2 million favorable. If I’m looking at the accident years, the large piece of it, $14 million was favorable for the 2024 year. But if I start to look down, 2023, it was basically flat, ’22, ’21, I’ll call those two years were flat together. And going back to the years 2020 and prior, it was reserve strengthening of $10 million. So when you take a look at all that, the total reserves that are outstanding on that line, very little movement, but it’s a little bit across the board.

But your observation is correct that there is a little bit more for this quarter that was coming from the most recent current accident year.

Stephen Michael Spray: Mike, Steve Spray. I might just add, I agree, obviously, completely with what Mike Sewell just said. But from my seat, I’ve been looking at this here this my last — in 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. And if you kind of just move up a layer, the way I’ve 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’ve 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’re going to see some movement.

I guess that’s the nature of reserving. The thing I most appreciate is that our team here, the consistent team follows that consistent process. And when they see something, they’re quick to act. And I think that’s what you’re seeing and the prudence that we are carrying with a lot of the uncertainty, both in, say, in casualty and then in commercial auto, you can see the same thing.

Operator: Our next question is from Mike Zaremski with BMO.

Michael David Zaremski: On the expense ratio, which was much better than expected, I believe, Steve, in the prepared remarks, you said that there were some onetime items. So just I guess, is the — 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.

Michael James Sewell: Yes. No, that’s a great question, Mike, and I appreciate that. And so it was a little bit better than what we were probably thinking. But again, there is some timing for some actual expenses. But really, the large piece of it was — and we’ve been trying to do this is we’ve been trying to grow premium growth faster than expense growth. And expenses are going to — they’re going to go up. And so we watch that very carefully. But in between quarters, you may have certain expenses that might hit here or there. But I would say, as a run rate, we’re trying to be below 30% on an ongoing basis. And 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. So we’re not going to give up. We’re going to consistently work towards lowering that ratio.

Stephen Michael Spray: Mike, just to add on one data point that Mike mentioned, just I think, emphasize on the growth. 4 out of the last 5 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%. So that is certainly, as Mike pointed out, that’s helping the cause.

Michael David Zaremski: Okay. Got it. I’m sorry, that was Mike in the prepared remarks that made the expense ratio comments. Got it. So operating leverage is key. Got it. Pivoting to just maybe a dual question on commercial lines. The accident 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? And then 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. So any additional comments you’d like to make on commercial auto as well?

Stephen Michael Spray: Sure. On work comp, and Mike may want to add something as well. I would just say, again, it’s just — 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 earlier is it’s just — it’s — we are seeing — I think the industry, that’s pretty well documented and we as well. We’re seeing more attorney involvement in auto accidents. So I think that social inflation, legal system abuse, however you want to put it, that’s putting some pressure on that. But again, 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.

And I think that’s what you’ve got going on here in commercial auto as well. As matter of fact, the most recent accident years, ’24 and ’25, case incurred paid in case look really good right now, and you can see that. So — but we’re adding IBNR to it. We’re being prudent. There’s uncertainty. And so as you have come to expect from us, I think we’re taking the appropriate action.

Michael David Zaremski: So on workers’ comp, just a follow-up, that’s a big change in the pick. So 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?

Stephen Michael Spray: Yes. No, I can’t say we’ve seen anything different in the way of frequency there, Mike. But as you know, yes, 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 — it’s — I think it’s 6%, 8% of our total commercial lines business. So that probably has a less — a little less impact than maybe some of the peers that you follow.

Operator: Our next question comes from Greg Peters with Raymond James.

Charles Gregory Peters: Let’s pivot over to the personal lines business. And 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?

Stephen Michael Spray: Yes, 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. And as I mentioned since the wildfires occurred in the 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. So 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 you can — it’s — again, it’s fair to say or safe to say it’s around model recalibration, around aggregation and just our view of risk. So 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.

Charles Gregory Peters: 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 subro rights? Or where — because the a portion of that fire looks like it’s going to rest with some of the liability rest with the utility?

Stephen Michael Spray: Yes. I would just answer that, that we have not sold our subro rights.

Charles Gregory Peters: Got it. Okay. In your prepared remarks, you talked about some changes to some additional reinsurance you bought — can we go back to your comments on the reinsurance? And 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 per 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 — remind me of the summary version of what’s going on there.

Stephen Michael Spray: Yes, absolutely. Again, Steve Spray. So what we did is we purchased at 7/1, we purchased an additional $300 million 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’ve 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’s a subscription market. So we went out with a — I think, with an aggressive rate. I think we filled — we said $129 million of the $300 million or 43% of it.

So that’s kind of the story there. And then on California, on the primary business, we as it stands now, we’ve used about half of that property cat, the $1.5 billion pre — excuse me, $71 million and reinstated those layers. So those players are there for the remainder of the year.

Charles Gregory Peters: And just — and then for — that’s the California piece. What’s your net — can you remind me what your net retention is on the — 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 cat bond, the additional layer you bought that you said subscription, so that wasn’t done through — that wasn’t done through the cat bond market, correct? That was done traditional risk transfer.

Stephen Michael Spray: Yes, that was traditional reinsurance on the 300x of $1.5 billion. And then on the — yes, so you had mentioned you were kind of bifurcating wildfire and hurricane. The property, — is it all yes, that’s an all-perils contract, Greg, and we have a $300 million retention on that. So 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.

Operator: Our next question comes from [ Meyer Ya ] with KBW.

Unidentified Analyst: This is [ Jing Li ] on for Meyer. 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 color you can add would be great.

Stephen Michael Spray: Yes. No, I don’t think that we have anything to report back on any change in the loss trend up or down during the quarter. But thank you for the question.

Unidentified Analyst: Got it. My second question is on the growth. So commercial properties still have decent return. Property rates now softened and casualty rates accelerate. How do you view the relative growth prospect between property and casualty?

Stephen Michael Spray: Yes, 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 a softening property market. And 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. So that’s that business, we’re seeing some pressure on. But our small to middle market commercial package business and commercial property business, we’re still seeing healthy rate there. And I think that’s because the things that you see when you turn the TV on a night, severe convective storms haven’t let up. So that’s keeping pressure on property, social inflation, legal system abuse, that’s keeping pressure on general liability umbrella as well as auto liability. So we’re still seeing healthy net rate for our mix of business and what we do.

Operator: The next question is from Josh Shanker with Bank of America.

Joshua David Shanker: First of all, looking at the growth, particularly in commercial, among other companies that have reported, 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?

Stephen Michael Spray: Yes. Thank you, Josh. I think it’s — everything we do around here is an A strategy. So I think it’s all of the above. We’ve got such deep relationships with all the agents we do business with. But you’re right, we’ve been adding high-quality agencies at a faster clip. There’s no doubt that, that is 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, a Cincinnati Insurance Company as they come through our in- house broker, C-SUPR. So I think we just have a lot of — we 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’s just all really goes to it, and it’s just been continuing to pick up momentum.

Joshua David Shanker: And 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? And two, if we replayed 1Q ’25, has anything changed about your exposures that you would have a different outcome?

Stephen Michael Spray: Okay. On Cinci Re, first thing I would say is they are executing exactly as we want them to. It’s 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. So pretty balanced. But 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. So 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. And when we feel that things are opportunistic, they’ll grow it. And if we don’t feel we can get the risk-adjusted return, then there may be some quarters when they back off.

Joshua David Shanker: Has the shape of the portfolio today notably different than it was 6 months ago, such that the California wildfires would have a different result?

Stephen Michael Spray: No, not at this point, you’re talking about the primary business, I think, on the homeowner, but that part of that…

Joshua David Shanker: Selling less and buying more.

Stephen Michael Spray: Yes. I would say right now, for the last 6 months, it would be a little changed.

Operator: [Operator Instructions] We have a follow-up question from the line of Mike Zaremski with BMO.

Michael David Zaremski: 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 like 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 you’re just profits are becoming less healthy? Or is it irrational?

Stephen Michael Spray: Yes. 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 in fact. And 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. And that’s a big reason why you saw the growth that we’ve seen at CGU here in the first half of the year.

Michael David Zaremski: Got it. And 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 just — there’s a good amount of inflation in the system between weather and social, et cetera. So it sounds like you’re — you don’t feel like we’re going to enter a soft marketplace. I guess the — 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. So any additional comments you 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?

Stephen Michael Spray: Yes. 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 — it’s not in the dialogue. It’s risk by risk. It is using the subjective — 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. And then I’ll go back to kind of what we talked about earlier. It’s risk by risk when it comes to pricing, and we’re using sophisticated tools. We are using our actuarial team and the data and the pricing precision to segment our book.

And if you look at our commercial lines results, the price adequacy will follow those results. And the pricing in that commercial book, we feel pretty good right now. And so that’s what — 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. But I just — I’m not saying that other carriers aren’t going to have a different view of a risk. And 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 where we don’t think we can make a risk-adjusted return, then we’re walking away.

And 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. So — but adding agencies continuing to build out our E&S operations, continuing to give our agents more access to Lloyd’s, to 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 and we’re going to stay focused.

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

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

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