Cincinnati Financial Corporation (NASDAQ:CINF) Q3 2025 Earnings Call Transcript

Cincinnati Financial Corporation (NASDAQ:CINF) Q3 2025 Earnings Call Transcript October 28, 2025

Operator: Good day, and welcome to the Cincinnati Financial Corporation 2025 Third Quarter Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Dennis McDaniel, Investor Relations Officer. Please go ahead.

Dennis McDaniel: Hello. This is Dennis McDaniel at Cincinnati Financial. Thank you for joining us for our third 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, 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’ll turn over the call to Steve.

Stephen Spray: Good morning, and thank you for joining us today to hear more about our results. We had an excellent quarter of operating performance and remain confident in the long-term direction and strategy of our insurance business. We also reported very strong investment income growth in the third quarter of this year, with ongoing benefits from rebalancing our investment portfolio in the second half of last year. Net income of $1.1 billion for the third quarter of 2025 included recognition of $675 million on an after-tax basis for the increase in fair value of equity securities still held. Non-GAAP operating income of $449 million for the third quarter more than doubled the third quarter from a year ago. Our 88.2% third quarter 2025 property casualty combined ratio improved by 9.2 percentage points compared with third quarter last year, including a decrease of 9.3 points for catastrophe losses.

The 84.7% accident year 2025 combined ratio before catastrophe losses for the third quarter improved by 2.1 percentage points compared with accident year 2024. Although the pace of growth slowed, our consolidated property casualty net written premiums still grew at a healthy 9% for the quarter. Our underwriters continue to emphasize pricing and risk segmentation on a policy-by-policy basis in their underwriting decisions. Estimated average renewal price increases for most lines of business during the third quarter were lower than the second quarter of 2025, but still at a level we believe was healthy. Commercial lines in total averaged increases in 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. Additional support for our premium growth objectives includes outstanding claim service and strong relationships with independent insurance agents who enthusiastically partner with us. Next, I’ll highlight third quarter performance by insurance segment compared with a year ago. In addition to premium growth, underwriting profitability for each area was excellent. Commercial Lines grew net written premiums 5% with a 91.1% combined ratio that improved by 1.9 percentage points, including 2.8 points from lower catastrophe losses. Personal Lines grew net written premiums 14%, including growth in middle market accounts and Cincinnati Private Client.

Its combined ratio was 88.2%, 22.1 percentage points better than last year, including a decrease of 19.5 points from lower catastrophe losses. Excess and surplus lines grew net written premiums 11% and produced a combined ratio of 89.8%, an improvement of 5.5 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, third quarter 2025 net written premiums decreased by 2%, primarily due to changing conditions in the property market. Its combined ratio was 80.8%. Cincinnati Global’s combined ratio was 61.2%, along with premium growth of 6% as it continues to benefit from product expansion in recent years. Our life insurance subsidiary had another strong quarter, including 40% net income growth.

In addition, term life insurance earned premiums grew 5%. I’ll end my comments with a summary of our primary measure of long-term financial performance, the value creation ratio. Our VCR was 8.9% for the third quarter of 2025. Net income before investment gains or losses for the quarter contributed 3.1%. Higher overall valuation of our investment portfolio and other items contributed 5.8%. Now I’ll turn it over to Chief Financial Officer, Mike Sewell, for additional insights regarding our financial performance.

Michael J. Sewell: Thank you, Steve, and thanks to all of you for joining us today. We reported growth of 14% in investment income in the third quarter of ’25, reflecting efforts during 2024 to rebalance our investment portfolio in addition to strong cash flow from insurance operations. Bond interest income grew 21% and net purchases of fixed maturity securities totaled $232 million for the quarter and $944 million for the first 9 months of this year. The third quarter pretax average yield of 5.10% for the fixed maturity portfolio was up 30 basis points compared with last year. The average pretax yield for the total of purchased taxable and tax-exempt bonds during the third quarter of this year was 5.52%. Dividend income was up 1% and net purchases of equity securities totaled $57 million for the quarter and $118 million on a year-to-date basis.

Valuation changes in aggregate for the third quarter were favorable for both our equity portfolio and our bond portfolio. Before tax effects, the net gain was $846 million for the equity portfolio and $242 million for the bond portfolio. At the end of the third quarter, the total investment portfolio net appreciated value was approximately $8.2 billion. The equity portfolio was in a net gain position of $8.4 billion, while the fixed maturity portfolio was in a net loss position of $217 million. Cash flow, in addition to higher bond yields, contributed to investment income growth. Cash flow from operating activities for the first 9 months of 2025 was $2.2 billion, up 8%. Turning to expense management. Our third quarter 2025 property casualty underwriting expense ratio decreased by 0.5 percentage points, primarily due to growth in earned premiums outpacing growth in expenses.

For 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. We then updated estimated ultimate losses and loss expenses by accident year and line of business. For the first 9 months of 2025, our net addition to property casualty loss and loss expense reserves was $1.1 billion, including $900 million for the IBNR portion. During the third quarter, we experienced $22 million of property casualty net favorable reserve development on prior accident years that benefited the combined ratio by 0.9 percentage points. On an all lines basis by accident year, net favorable reserve development for the first 9 months of ’25 totaled $176 million, including favorable $236 million for ’24, favorable $16 million for ’23 and an unfavorable $76 million in aggregate for accident years prior to ’23.

I’ll conclude my comments with capital management highlights. We paid $134 million in dividends to shareholders during the third quarter of 2025. During the quarter, we repurchased approximately 404,000 shares at an average price per share of $149.75. We believe both our financial flexibility and our financial strength are in excellent shape. Parent company cash and marketable securities at quarter end was $5.5 billion. Debt to total capital remained under 10%. On October 10, we terminated our existing $300 million line of credit agreement that was set to expire on February 4, 2026 and entered into a new $400 million unsecured revolving credit agreement. This new agreement has a 5-year term with 2 optional 1-year extensions and is fully subscribed among our 4 lenders.

Our quarter end book value was a record high, $98.76 per share, with $15.4 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 Spray: Thanks, Mike. I think this quarter’s strong results demonstrate that we have the people and plans in place to keep building on our success. Our associates continue to answer the call for our agents and the communities they serve, building strong relationships and informing smart underwriting decisions. In September, Fitch Ratings recognized our decade of delivering profitability and growth by upgrading our insurer financial strength ratings for all of our standard market property casualty and life insurance subsidiaries to AA-, very strong from A+, all with a stable outlook. As our 75th anniversary celebration winds down, we are looking ahead to the future, and we are excited by the opportunities we see to keep living the golden rule, meeting the evolving needs of agents and policyholders and creating value for shareholders.

I’ll also note that Senior Vice President, Andy Schnell, is on the call and will be in future quarters. Following Theresa Hoffer’s retirement, Andy joined Cincinnati Insurance 23 years ago and has worked his way up the accounting ranks, proving his business acumen and his leadership abilities. He, Theresa and Mike, all worked closely over the past year to ensure a smooth transition that maintained our consistent accounting processes and procedures. As a reminder, with Andy, Mike and me today are Steve Johnston, Steve Soloria and Marc Schambow. Chloe, please open the call for questions.

Q&A Session

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

Michael Phillips: I wanted to start with commercial auto, if I could, try to drill down a little bit. So kind of what’s happening there for you guys. You’ve taken small bites, obviously really pretty small bites of the apple, PYD, I think, 5 quarters in a row. But how do we — I guess how do we get comfortable with PYD charges at the same time your current picks are kind of coming down at the same time? Can you talk about that, please?

Stephen Spray: Yes, Mike, this is Steve Spray. I can start there. Let me just talk about maybe overall reserves in general because I think that’s a question that we’d love to address. And the way I look at it is we’ve had 30-plus years of all lines favorable development. And through the 9 months of this year were favorable. The quarter is favorable. Every quarter, we’re getting — I noticed we get movement to and fro. This quarter, commercial property work comp, very favorable. Obviously, commercial auto and casualty, we’re having a little bit of a prior year. I think the one way I get really comfortable — the data point that I’m getting comfortable with is, if you look at on an all-lines basis from each accident year from 2020 forward, our initial pick for each of those accident years has developed favorably as of 9/30.

Now commercial auto has had maybe a little bit of a noise in it there by accident year. But we’re profitable through 9 months on commercial auto. And I just feel like the prudent approach that we have taken, the consistent approach, the consistent team, we’re just — we’re trying to stay ahead of that line of business that has a little bit of a temperature.

Michael Phillips: Okay. Steve, I guess that’s it — I mean a little bit of a temperature. We’ve seen some companies take some charges, some not, but some, I think, more have than those that haven’t. And so when we see kind of the decrease in your current picks that maybe has some — for that line specifically, Steve, they make some worry that maybe down the road, some of that could reverse back and those PYD charges could increase. Anything in particular on commercial auto specifically that worries you or that you see that would give calls for alarm there?

Stephen Spray: Yes. The one thing I look at there, too is, as you know, Mike, we’re a package underwriter, a package company, typically small to mid-market. We don’t write a lot of transportation business. We don’t have a big heavy auto fleet. And I think some of the challenges, especially with severity that you’ve seen in the industry over the last several years has really come from that segment. So just in the book itself, I’ve got confidence over the long [ pole ]. And especially, again, we’re profitable in 2025 here, both for the quarter and for the full 9 months in commercial auto. I don’t know, Mike, if you want to add something here.

Michael J. Sewell: Just real quick, Mike, just to put that $10 million of unfavorable development into perspective, about $7 million of it was from accident year 2019 and 2020. So a little bit older. Total reserves for commercial auto is approaching $1 billion. So when you kind of put it all together, like Steve said, I think we’re — we feel really good where we’re at and with the reserving that we do.

Michael Phillips: Okay. Yes. No, Mike. That’s good color. I guess last one then, if we look at your — the incurred loss detail by line for commercial lines, and this could be just an anomaly. But is there anything you’re seeing — so the large losses, $5 million and up kind of picked up. It looks like the largest in quite a while. Anything you’re seeing on the large claims that is worrisome? Or is this more of a quarterly anomaly?

Michael J. Sewell: I would say — this is Mike Sell again. So let me just answer that real quick. For the current accident year, we had about the same number of large losses in total. There was 44 new losses in the current year versus 45 last year. So one less large loss. And again, that would be for a current accident year basis. But it’s about $34 million higher in the current year than last year. That was led, I’ll say, by both the — or at least the increase was led by commercial property, homeowner — or the commercial property was up $30 million, the homeowner was up about $27 million. But on the other side, commercial casualty was down $12 million and other commercial was down $12 million. So you’ve got some ups and downs, I would say, from looking at the large losses, there was no indication of anything that was an unexpected concentration.

I’ll say of the large losses, whether it was by risk category, geographic region, agency or field marketing territory. So there’s just going to be some volatility from quarter-to-quarter, but nothing too exciting to point out.

Operator: The next question comes from Paul Newsome with Piper Sandler.

Jon Paul Newsome: Could you take Mike’s question and insert general liability instead of commercial auto and maybe give us some thoughts there? Obviously, everyone is referring back to the selective bad quarter and their issues in both of those lines and it’s fairly natural given that they’ve long throw themselves as peer of yours.

Stephen Spray: Yes. Paul, I appreciate the question. Kind of what I was talking about before, where I get the confidence. One thing I would say, again, maybe kind of a bigger picture is I think it’s well documented across our country, how legal system abuse is impacting all of us, including our industry, including Cincinnati Insurance. So that is certainly adding some pressure there. But again, let me go back to what gives me the confidence, and I’ll specifically speak to casualty as well is just, again, a consistent process, we have consistent team, the overall all-lines track record of 30-plus years of favorable development, again, favorable for the quarter, favorable for the full 9 months. And then the other data point that I was really paying attention to for this quarter is just again, if you look at each of the accident years from 2020 and forward, if you look at our initial pick for each of those accident years, it has developed favorably on an all-lines basis as of 9/30, and that holds true for casualty as well.

Jon Paul Newsome: Fantastic. And then a completely different subject, actually got some questions this morning on the investment portfolio. Ordinarily, I never ask about this because the credit quality in the book has been extraordinarily high for a long time. But just kind of looking at a couple of months, it looks like there may be some subprime borrowers in there. And just curious if there’s been any change in the credit quality profile and any thoughts that you have about, I guess, like PrimaLend or whatever you got in there that might be a little different than what you’ve historically seen in the bond portfolio.

Stephen Spray: Thanks, Paul. This is Steve. Overall, the strategy hasn’t changed. Our focus has been more on the higher quality bond area. If we were involved in the high-yield area, it would be in the BBs. But for the most part, we’re buying investment-grade quality bonds, attending to keep quality in the portfolio as opposed to reach for yield where we don’t need to.

Operator: The next question comes from Gregory Peters with Raymond James.

Charles Peters: So the first question is just on the new business trends. And obviously, there’s probably some price competition issues that are affecting some of your new business, but maybe you could speak to the results in the third quarter and what you think about new business going forward because it is a competitive marketplace.

Stephen Spray: Yes. Thanks, Greg. Steve Spray again here. If you look — first of all, I would say, feel really good about the new business numbers for all segments, all majors of our standard segments plus our E&S company on an absolute basis. And I — admittedly, I hate saying there’s a tough comp in the prior year. It sounds like an excuse. We don’t do that around here. But if you kind of harken back to 2024, let me talk about talk about personal lines first. For the last couple of years, we’ve been talking about this once in a generation, once-in-a-lifetime hard market in personal lines. And 2024 was probably the peak of that. And we were able, as a company, because of our balance sheet, because of our financial strength, because of the relationships we have with our agents, we are able to take advantage of that hard market opportunity and really pick up the pace, I’d say, on new business growth or take advantage of that opportunity.

A matter of fact, over the last 3.5 years, we’ve doubled our personal lines net written premium as a company. So again, hard market there, and we were able to take advantage of that. That new business this year is still strong. California is making a little bit of an impact there. But just on an absolute basis, personal lines new business is strong. Commercial lines, same kind of thing going. If you look at on an absolute basis, the new business dollars there are, again, very strong. And you’re right, there’s pressure from a competitive standpoint. But our underwriters, both new and renewal, are executing on our segmentation strategy and not giving up an ounce of profit over the long term for any short-term top line growth. So I just — I feel on an absolute basis with the numbers, I feel really good about the new business, given the market.

And I also feel good about, more importantly, how we’re pricing and underwriting that business. And then our E&S company, the new business, again, maybe under a little bit of pressure. But on an absolute basis, it’s something that I’m very comfortable with and think that our runway by appointing more agencies continuing to expand our appetite and expertise. I just feel good about where we’re heading for the future on that.

Charles Peters: Yes. You brought up in your answer California, and you also mentioned the once-in-a-generation hard market in personal lines. Given the events of the first quarter, the big fire loss in California, can you talk about how you’re viewing California and the opportunity for growth in that state, whether it’s E&S, personal or commercial or maybe even admitted as you think about the plans for 2026?

Stephen Spray: Yes, absolutely. First, I’d comment that we’ve got great agents and policyholders in California. And as a company, we want to continue to be a stable, consistent market for them. As we’ve talked over the — since the fire, we always do a deep dive on large losses and see if there’s any lessons learned. And I think it’s safe to say that we and the industry have an updated view of risk resulting from that fire. And kind of cutting to the chase on that for you, Greg, it really is around just updating the model view, conflagration, the sustained level of wins, and it’s giving us a different view of risk on aggregation. And from my perspective, our E&S pricing in terms and conditions pre-fire even post fire, I look at them and say, very solid, really comfortable with where we were there.

So we’re focused on just a new view of aggregation, and our plans are already in motion and being executed from that standpoint. Now to your question on E&S Or Admitted and then commercial. As of 12/31 of ’24, 77% of our homeowner premiums in California were already written on an E&S basis. You can expect that number will grow. We put some moratoriums in place for new business, while we were gaining our lessons learned, and we’ve begun writing some more new business in non-aggregation areas, as you might imagine. So I think E&S is going to continue to be a big portion of what we do in California going forward. Now commercially, we are not active in California on an admitted basis. And when I say active, we don’t — we’re not appointing agencies in California from admitted commercial.

We don’t have associates on the ground in California calling on agents from an admitted standpoint. We did, just several months ago, enter California for commercial E&S business, and that’s going well. It’s early, but that’s going well also.

Charles Peters: I guess related to that answer, just on California, you said that E&S is still a focus for you for personal lines. Do you have any view on the regulatory framework around the sustainable insurance mechanism that they’re trying to roll out? I guess the fact that you’re focused still on E&S suggests that you’re somewhat skeptical or cautious about that, but just curious if you have a view on that initiative by the politicians and the Department of Insurance.

Stephen Spray: Yes. That’s something we’re watching closely, and we’re continuing to work with the California Department of Insurance to say, in areas where we’re not wildfire prone, in areas where we do write admitted business, our auto, our other coverages would be written on an admitted basis. The homeowners is primarily where you’re going to find the E&S and just continue to work with the California DOI to try to get to a win-win for everybody. We — like I said before, we’ve got great agents, and we’ve got great policyholders, and our claims staff just did an outstanding job through the fire. The feedback we got from agents and policyholders alike — didn’t surprise me, but it just validated everything we’ve done at this company, delivering on the promise for the last 75 years. California was a microcosm of, I think, everything we do well when things go bad.

Operator: The next question comes from Mike Zaremski with BMW sic [ BMO ].

Michael Zaremski: Circling back to — I was trying to think of a joke at BMO, obviously. Circling back to the capital investment portfolio questions. Steve, you started out saying — talking about the strength of investment income from the rebalancing last year, I guess we can see the equity markets have been extremely strong year-to-date, which has helped you all. I’m just trying to understand is, there a fast and hard kind of ratio that if the equity markets still keep going up, you’ll need to do another rebalancing? And just related has Cincinnati’s view of excess capital changed at all in recent quarters?

Steven Soloria: Steve, this is — sorry, this is Steve Soloria. In regards to the equity portfolio, we have always managed and trimmed around growth in individual names or sector exposures, kind of adhering to our investment policy statements. We continue to evaluate it. Last year’s move was kind of a compilation of a lot of internal discussion, but a lot of external factors driving our action. Our initial decision to trim was a typical one that we would have, and it just kind of grew as we began to look at external factors like the upcoming election, potential tax rate changes and the implications for the capital gains we might have to pay. So there were a lot of external factors driving it, which made it a big — a larger bite of the apple, so to speak.

I wouldn’t take it off the table moving forward, but there — those external factors aren’t weighing on us right now. So we’ll continue to kind of manage it more at the individual security and industry level where we need to just trim to manage the portfolio. I’ll kind of leave the capital management discussion for a different audience.

Michael Zaremski: Yes. Got it. I guess just sticking with excess capital in the U.S. portfolio. From the outside looking in a high level, Cincinnati would appear to have very large excess capital position. But would you not agree with that because the regulatory framework or your internal model would say, hey, you need to factor in a big equity market decline that stays there for a period of time. So you’re really just effectively not holding excess because you want to have that money for potential worst times in the equity markets?

Michael J. Sewell: Thanks for the question. This is Mike Sewell. Really, our capital position of how we manage capital really has not — I’ll say, has not changed. We think of it there’s 5 ways to invest your capital. And our #1 is invest in the business. So we’re holding enough capital to grow the business. We’ve gone through those details with whether it’s Cinci Re, CGU, California, et cetera, et cetera, E&S business. That’s our #1 use of capital. We do think, obviously, of dividends that we pay to shareholders, buybacks and other things. But there are some regulatory requirements that we watch to make sure that we don’t hold too much equity securities, and we’re well within any parameters there. So I think it’s been a winning strategy what Steve Solaria has done with the portfolio.

And looking at the results this year, I think it’s been very exciting, and I’m excited to see what we do with that capital as we grow our business for the remainder of this year and ’26, ’27 and beyond.

Michael Zaremski: Got it. And lastly, moving to the commercial competitive environment, probably not E&S, let’s just say, traditional standard commercial. A lot of questions fielded all around on kind of the cycle. No surprise, right? You talked about pricing power decelerating a bit sequentially. Should investors, I guess, be prepared for pricing to continue to decel on average in the coming years, just given the health of the industry and Cincinnati included? Or is there a dynamic on loss trend, right? You’ve got a lot of questions on casualty flare-ups and a little additions to reserves? Or is there a dynamic on loss cost trend that we’re not appreciating that might kind of keep this cycle from looking like many previous soft cycles?

Stephen Spray: Yes. Thanks, Mike. Yes, I’d say on the commercial standard, the admitted business, I would call the market — it’s competitive, but I would still call it rational, stable. I think there are still loss headwinds for our industry that impact that commercial, severe convective storm or just cat losses in general. Q3 was a light cat quarter, but let’s look at a full year and just the trends that have been going on with catastrophes. I think the legal system, we talk about legal system abuse or social inflation, however you want to look at that. I think that is still facing us as an industry and certainly here at Cincinnati Insurance, we’re paying attention to it. So I think we’re still in a favorable rate environment.

Now for us, specifically at Cincinnati, it literally — we talk about this all the time, and I think it’s key is it’s — we’re underwriting and pricing risk by risk. The next risk in front of us is how we’re viewing it. Now maybe on a — and I won’t speak necessarily for the go forward for the industry. But I can tell you for Cincinnati, our net written premium growth for commercial lines here was, I think we announced 5%. And commercial lines, again, standard admitted commercial lines, 13 consecutive years of underwriting profit. And our underwriters working with our agents, executing on a segmentation strategy or just doing — they’re doing exactly what we ask of them. And as that book continues to perform well, I think it’s reasonable to understand that the price adequacy of the book continues to improve.

And just as we ask our underwriters to take appropriate action on the business that is, we’ll call it, least adequately priced. We tell them to, on the other hand, that business that’s very adequately priced, do what we need to do to retain it. So as that book becomes more and more adequately priced, and we are executing on that segmentation strategy. I think what you’re seeing is some pressure on the average net rate. Does that make sense?

Michael Zaremski: Yes. Yes, it does. I guess, we’re all trying to figure out if others are also feeling like they’ve re-underwritten well enough to kind of do the same. But clearly, you guys are in a great position.

Stephen Spray: Yes, Mike, I would make — I’d just make sure I’d make a point that it’s — for us, it’s not a re-underwriting. This is what — this is the strategy that we’ve been executing really for the last decade that has served us well, and we’re going to stick to it going forward, too. So it’s profit first and stable, consistent financial strength for our agents and policyholders over the long pull, which comes with a modest underwriting profit.

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

Joshua Shanker: Obviously, the growth, even though it’s decelerating, it’s still better than most of your competitors. A lot of that is due to the significant increase in agency appointments and whatnot. Is there anything you can do to help us to sort of disaggregate how much of the growth is expansion into new agencies and how much is further penetration into the agencies you already have?

Stephen Spray: Yes, Josh, it’s Steve again. We — I forget the exact number that we disclosed as far as how much the new agency appointments have impacted new business. But what I will tell you there is we’ve got a proven strategy, I think, of really knowing how to underwrite agencies and that agencies and do business with the most professional agencies go into an agency out in the field and find agencies where we’re aligned and be very deliberate about expanding the distribution. And then we build deep relationships with them. And when we onboard an agency, you’ve seen one agency, you’ve seen one agency to be perfectly candid, that some will take off faster than others. But what we focus on is the relationship that we have with those agencies.

I guess a long-winded answer way of saying this is a long-term thing for us. So can we see an uptick in new business quarter-to-quarter from the new agencies we appoint? Yes. But that’s not what we’re focused on. We’re focused on these relationships and making sure that we’re aligned and that we’re deepening the relationship. We’re giving each one of these agencies, what I call, the Cincinnati experience and then over the long haul, the premium, the growth will take care of itself.

Joshua Shanker: The Cincinnati experience, I remember when I started covering the second, I think you had 1,600 agents. And in the last 9 months, you’ve appointed 355. Part of that experience was the direct relationship with the agents in a very intimate manner. At this level of growth, how are you maintaining that cultural part of what the Cincinnati agency experience used to be?

Stephen Spray: Yes. Thanks, Josh. I think it’s all relative. And you’re right, we were at 1,600. Now we’re at say roughly 2,300 agencies. And if you look at us relative to our peers, we still have an extremely exclusive contract. And agencies run in different circles. Agencies have different centers of influence. They write — 2 agencies in the same town obviously write different business. And we’ve got plenty of room to continue to expand the distribution to keep appointing agencies across the country in our footprint and not dilute that franchise. The franchise value, I think, is the — like you said, the Cincinnati experience. And by that, I mean, associates on the ground in the community where the agents are calling on them on a regular basis, making decisions locally.

That’s the Cincinnati experience. And we can repeat that over — even continuing to add more and more agencies. And we’ve seen over the last several years as we’ve added more agencies in our current footprint, that our relationships with our long-term partners stay solid. In many cases, we continue to grow even more with those agencies. And then now we’ve picked up an additional partner and we get access to the book of business that they have. So we’re going to be — I don’t want to be willy-nilly about it, Josh, at all because it’s anything but that. This is the same thing we’ve done for 75 years in partnering with professional agents. It’s just that we are picking up the pace a bit.

Joshua Shanker: Would you expect to have more agency appointments in 2026 than in 2025?

Stephen Spray: Yes. We haven’t put out any goals on that. The last thing we want is just to be appointing an agency to be appointing an agency. We ask every single one of our field reps, 185 of them across the country to know every single independent agent in their territory and make sure those agencies identify those agencies where we are most aligned. And when it’s time to make another appointment for whatever reason, they go ahead and do that. So we’re not putting out any goals. We’re not putting any additional requirements on the field reps or just adding more territories. That’s one key to it is we’re not going to — our field territories right now, our field reps average — they call on an average of about 14 agencies. We don’t see that changing over time. Again, the same Cincinnati experience, just more of the same.

Michael J. Sewell: Josh, let me just mention on Page 42 of our 10-Q, we do give some information on premiums by new appointed agencies in ’25 and ’24.

Operator: [Operator Instructions] The next question comes from Meyer Shields with KBW.

Meyer Shields: Great. I wanted to get a sense as to how you’re thinking about catastrophe reinsurance for 2026. And I don’t know whether that thought process has changed from early in the year when we had these very significant fire losses to more recent periods where catastrophes have been benign.

Stephen Spray: Yes. Thanks, Meyer. Steve Spray again. Obviously, we are in the throes of renewal season, specifically for property cat cover. Just as a reminder, right now, we have a $200 million retention on any individual cat event and then we buy 1.6 x of that $200 million of the tower. Without committing to what we’re going to do on 01/01/26 because that’s not been finalized, I can say that we will remain consistent in the way that we purchase property cat cover, and that is for balance sheet protection. We talked a little earlier about our strong capital position. We believe in underwriting and pricing our own business and sharing in the losses. So over time, we’ve always continued as we’ve grown and as our capital position has grown, we’ve moved up in retention, and we continue to buy more on top of the program for that — again, for that balance sheet protection. And so that philosophy, that strategy will not change.

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

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

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