辛辛納提金融 (CINF) 2002 Q3 法說會逐字稿

Good afternoon. My name is Carlitinha. I will be your conference facilitator today. At this time, I would like to welcome everyone to the Cinncinati Financial Corporation third quarter 2002 conference call. All lines have been placed on mute to prevent any background noise. There will be a Q&A period. If you would like to ask a question during this time, simply press star, then the number 1 on your telephone keypad. If you would like to withdraw your question, press the key. Thank you. You may begin your conference.

Thank you and welcome everyone to Cincinnati third quarter financial car. You should have received your copy by FAX. If you haven't received your copy it's available on our website at www.cinfin.com or you can call your offices at 513-564-6700 and we'll get it to you immediately. Jack Schiff Jr. our chairman and chief executive officer will begin, followed by Ken Stecher and Jim Miller after which there will be Q&A. So with that let me turn the call over to Jack.

Thank you, to preface our remarks, please note some of the matters we will be discussing today are forward-looking. These forward-looking statements involve certain risks and uncertainty. With respect to these risks and uncertainties we direct your attention to our news release and our various filings with the SEC. You'll have to agree this quarter turned out all right. Earnings came in ahead of expectations for several reasons including premium growth from a combination of firm pricing in both commercial and personal lines and our approach to the marketplace. A healthy gain investment in come and loss at an acceptable level helped along by favorable weather for our policyholders.

We found it especially satisfying when strong results cross so many areas of our business. Briefly, total net written premiums for the third quarter were up 17%, with commercial lines up 19% and personal lines up 12%. New business premium growth, almost 28%, as we continue to gain opportunities to write our agent's best account at appropriate prices. Our combined ratio came in at 97.4%, compared with 108.9% a year ago. Giving us a 100.3% for the nine months versus 104.0% for the first nine months of last year. Investment income grew 7.1% in the quarter, despite the prevailing market conditions, which are less than favorable, as you know.

Many companies in our equity portfolio continue to increase their dividends, which is particularly valuable when the bond market is under such pressure. In total, net operating earnings per share were very strong, 51 cents, including just two cents for catastrophe losses. That compares with 23 cents and five cents per share from catastrophes in the last year's third quarter. Further, book value on the quarter at 34.14 cents compared with 37.07 cents at year-end.

I should point out our portfolio did not fare so well in the third quarter, no surprise there. But as of Wednesday's close, our large holdings had regained some value, we estimate book value will be approximately 1 dollar to two dollars higher on that basis. You all know what's happening in the market this year. While we're not immune in our portfolio has some of the same issues, we believe it's a testament to our approach that book value declined less than 10% through the end of the quarter, with much of that potentially recouped. So all in all, nine month results are very much on track of where we want it to be at this point. We're confident and committed to keeping up our efforts so we can go beyond our performance objectives for the year. Last quarter, we talked at length about reasons we were expecting improved performance in the second-half of this year and beyond.

The results for this quarter really support our line of reasoning, and I want to point out a few specific illustrations. First, is our commitment to the agents. We always look to them to provide -- correction, we always look to provide them with the products and services they need to serve their customers, the policyholders. To do that effectively, we make decisions about new -- about both new and renewal business that are risk specific rather than broad-based. This relationship business, you don't walk away from entire lines of business.

On a case-by-case basis, we look for equitable solutions that allow us to select the risks we can cover at an adequate price. An example is we carefully positioned changes to our general liability coverage that we discussed last quarter. Including our aggregate limit supply. In September these changes were in effect in a few states and will move into additional states over the coming a quarters. We are trying to be consistent, predictable and reasonable carrier that our agents need so they can serve their communities.

While we are seeking adequate pricing for the risks we cover, we are also working very hard to do so responsibly and make it possible for our agents to be successful in the marketplace. Second, the process is well under way to develop, submit, gain approval, and reach the effective dates of homeowner rate and policy changes on a state by state basis. For example, in many Midwestern states, we're planning the second round of rate increases, including one effective September 1st 2002. Coverage and rate changes are applied to new business and approved state and to existing business as they come up for renewal.

While we got a late start attacking our homeowner losses, we do expect to see substantial benefit long before we've worked through the three year policy cycle. In the meantime, our re-underwriting program in our homeowner's line is moving ahead. So far this year our personal lines group has done a more intensive review of 64 agencies, setting specific goals and monitoring progress for their book of business. Over time, this program should continue to increase the quality of businesses we get from the agents.

Third, we're focusing on the service we provide the agencies and the level of personal attention we can give new and renewable business. We subdivided seven Marketing territories this year the last of which will be staffed in a few weeks which will bring the number of marketing territories to 83 for the property casualty side, up from 76 at the end of 2,000. We haven't stopped with the field marketing staff. Over the past three years our employment base has increased by about 20%. We have been investing in our future across-the-board in marketing, claims, information technology, underwriting, all these areas help support the opportunities we see our Company and their shareholders. Please now let me turn things over to Ken to talk about the financials.

Thank you, Jack. Once again, it's a pleasure to be speaking with all of you today. Before I turn to the insurance results, we reported a $10.6 million net capital loss after taxes this quarter versus a loss of $1.9 million last year.