辛辛納提金融 (CINF) 2010 Q4 法說會逐字稿

Good morning. My name is Simon, and I will be your conference operator today. At this time, I would like to welcome everyone to the Cincinnati Financial fourth-quarter 2010 conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions).

Mr. McDaniel, you may begin your conference.

Hello. This is Dennis McDaniel, Investor Relations Officer for Cincinnati Financial. Thank you for joining us for our fourth-quarter and full-year 2010 earnings conference call.

Late yesterday, we issued a news release on our results, along with our supplemental financial package. To find copies of any of these documents, please visit our investor website, www.CinFin.com/investors. The shortest route to the information is in the far right column via the quarterly results Quick Link.

On this call you will first hear from Ken Stecher, President and Chief Executive Officer, and Chief Financial Officer, Steve Johnston. 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 Chairman, Jack Schiff Jr.; Executive Vice President of Sales and Marketing, J.F. Scherer; Principal Accounting Officer, Eric Mathews; Chief Investment Officer, Marty Hollenbeck; and Chief Claims Officer, Marty Mullen.

First, 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.

With that, I will turn the call over to Ken.

Good morning. Thank you for joining us today to hear more about our fourth-quarter and full-year results. Our fourth-quarter results were good, the highest quarterly operating income in three years. For the year, we outperformed 2009's combined ratio and operating income, covering our shareholder dividend through operating results.

After paying our $0.40 per share quarterly dividend, we grew book value per share $0.11 during the quarter, despite a significant decline in bond portfolio valuations for us and others in our industry. Part of the book value growth was from appreciation of our equity holdings, further demonstrating how our portfolio mix contributes to long-term shareholder value creation.

For the year, our value creation ratio was 11.1%. That is within a percentage point of our targeted range for the annual average in any five-year period. We believe that several initiatives to improve our insurance profitability and premium growth will drive stronger value creation over the next several quarters. We've increased our shareholder dividend now for 50 consecutive years, and will continue working to reward shareholders and other stakeholders for years to come.

Investment income for the fourth quarter was up 2% compared with the third quarter. Steve will provide more details on that, plus portfolio valuation changes.

I will just note that we expect lower prevailing interest rates to continue to pressure investment income trends for us and other companies. Our relatively higher concentration in stocks means we have additional opportunities for growth of dividend income in addition to capital appreciation.

Given the pressure on interest income, we recognize the need to continue to execute on strategic initiatives to improve underwriting results and profitably grow our business. We intend to do just that in order to achieve our performance objectives.

We successfully executed our 2010 premium growth initiatives, growing net written premiums by 2%, after ending 2009 with a 3% premium decline.

We reached a record high for new business written premiums at $414 million, an increase of $9 million or 2% over 2009. Personal lines drove the $9 million increase in new business, contributing $15 million, and total net written premiums for personal lines grew steadily, ending the year up 9%, including 10% in the fourth quarter. Personal lines market conditions have improved, increasing the impact of our initiatives for improved pricing precision, easier-to-use policy processing technology for our agents and expansion into new states and agencies.

Targeted rate increases helped grow renewal written premiums by 7% for the year. Those increases should continue to improve combined ratios over the next several quarters as the written premium increase is earned.

For our commercial lines segment, net written premiums were down $26 million or 1%, which is a nice improvement from the 6% decline in 2009. While we are still seeing commercial renewal pricing declines in the low single digits, we continue to benefit from entering into new states. In 2010, net written premium growth from five states entered since late 2008 was $29 million. The drag from audit premium returns diminished as the year progressed, and the effect was nearly flat by year-end. We expect to see positive contributions from audit premiums in future quarters as our general liability and Workers' Compensation lines benefit from the recovering economy.

We've made very satisfactory progress in developing and delivering on several important information technology initiatives. Agents continue to comment favorably on our commercial lines policy processing technology. The system now is available in a total of 30 states, as we achieved the goal we communicated to you a year ago of deploying to 19 states in 2010.

Our excess and surplus lines net written premiums rose 47% to $58 million in 2010. As the year progressed, we saw more standard lines companies writing business that was formerly in the E&S market. We demonstrated discipline by scaling back on new business, increasing it by only $3 million compared with an $18 million increase the year before. For renewing excess and surplus lines policies, we obtained price increases averaging in the low to mid-single-digit range.

On our life insurance subsidiary also continued to register growth, with earned premiums up 10% and fixed annuity deposit premiums up 11%.

Turning to underwriting results, for most of our property and casualty lines of business, we maintained a healthy level of profitability. For all lines other than Workers' Compensation, homeowner and excess and surplus lines, the 2010 combined ratio averaged 95%. That profitable core of business represented almost 80% of our property casualty premium volume. On an all-lines basis, the 2010 combined ratio improved 2.8 percentage points to 101.7%.

We continue to develop pricing precision tools to keep the healthy lines profitable and to improve the unprofitable ones. We continue to believe that property casualty underwriting performance is our most powerful lever to growing operating earnings.

We are now using predictive modeling tools incorporating pricing analytics to increase pricing precision in our major personal lines of business and for Workers' Compensation. We plan to add the remaining major commercial lines of business during 2011, and that will support our goal of underwriting each line of business at a profitable level. Existing tools for pricing precision will continue to be improved, including further integration into our processing systems and workflows.

In late 2010, we implemented another round of significant rate increases for our homeowner line. We plan similar increases in 2011 to continue moving this line to profitability as rate increases are earned.

We have previously discussed additional Workers' Compensation initiatives, focusing on claims handling and loss control, that we believe are working and improving results for that line of business.

Our excess and surplus lines' 2010 combined ratio improved 40 percentage points to 115.4%. Startup expenses are leveling off, and our progress toward underwriting profitability is meeting our expectations.

In summary, we have successfully achieved completion or reached major milestones for several initiatives during the past two years. That builds confidence that we will continue to execute our strategy for ongoing profit improvement and growth. You will hear more in future quarters about new initiatives and our progress on several that are ongoing.

Now Steve will give you his perspective on results for the fourth quarter and the year.

Thank you, Ken. The fourth quarter was profitable, with property casualty underwriting, life insurance operations and investments all contributing to strong operating earnings. 2010 was noteworthy in that Cincinnati Financial increased our dividend to shareholders for the 50th consecutive year. That puts us in an exclusive group with approximately 10 other publicly-traded companies that have a 50-year or longer track record.

The strong fourth quarter resulted in operating earnings that covered our shareholder dividend, both for the quarter and the full year. Our value creation ratio goal is to average between 12% and 15% annually over a five-year period. For 2010, the VCR was 11.1%, and for 2009, it was 19.7%.

The fourth-quarter combined ratio of 93.1 improved the full-year combined ratio by 2.8 points to 101.7. Catastrophe losses contributed just 0.7 of the loss ratio points for the quarter and 5.1 points for the full year.

The full-year underwriting expense ratio was 32.8, no change from 2009 and slightly better than the estimated range of 33% to 34% we provided in our first-quarter conference call.

Property casualty reserves for prior accident years developed very favorably, benefiting the fourth-quarter combined ratio by 17.6 points. For all of 2010, our accident-year reserves developed favorably by 10.3 loss ratio points compared with 2009 favorable development of 6.4 points.

Our reserving philosophy remains unchanged. We have a very consistent approach, resulting now in 22 consecutive years of favorable development on prior-accident years' reserves. We continue to target total reserves in the upper half of the actuarial range, and we believe that our carried reserves are in virtually the same position within the actuarial range at the end of 2010 as they were at the end of 2009.

Nearly all of the favorable development was for accident years 2007 through 2009, with the majority of it coming in our commercial casualty line of business. Our updated loss reserve estimate shows each of these accident years developing favorably by an average of about seven points. There is no assurance that accident year 2010 will develop similarly, but we can assure you that we have been consistent in our reserving practices.

Now for some detail on investments. Our diversified approach to investments produced solid results for both the quarter and the year. Pretax investment income decreased slightly to $130.1 million for the quarter from $130.9 million a year ago. For the full year, pretax investment income increased $17 million to $518 million. Higher average invested assets, due in part to healthy operating cash flow, more than offset declining portfolio yields. Unrealized gains before tax for our $3 billion equity portfolio grew 30% during the fourth quarter to over $750 million.

Considerable attention has been given recently to the health of municipal bond issuers. I would like to give you a quick profile of our holdings. Our municipal bond portfolio is approximately 63% of shareholders' equity. It consists of approximately 1,000 securities, with 95% rated A or higher. Approximately two thirds of the portfolio is general obligations, of which only $3 million worth are state issues. And one third of the portfolio is in revenue bonds.

Despite the fourth-quarter selloff, our municipal portfolio was trading at over 103% of book value at year-end. Additionally, we have no foreign sovereign debt exposure. And as a reminder, our entire portfolio is listed and updated quarterly on our website.

Liquidity, the balance sheet and our financial condition continue to strengthen, putting us in a solid position to grow profitably. Even after a dividend of $220 million paid to the holding company during 2010, statutory surplus for the property casualty insurance group grew by $129 million to approximately $3.8 billion at year-end 2010.

At the holding company level, we continue to have just over $1 billion in cash and marketable securities, and our debt to total capital ratio also improved to 14.3%.

Summing everything up, the contributions to book value per share for the quarter are as follows - Property casualty underwriting profit contributed $0.20. Life insurance operations added $0.08. Investment income, other than life insurance and reduced by noninsurance items, contributed $0.47. The change in unrealized plus realized capital gains from the fixed income portfolio reduced book value per share by $0.99.

The change in unrealized plus realized capital gains from the equity portfolio provided growth of $0.75. And we paid to our shareholders $0.40 per share in dividends. Totaling it all up, book value increased by $0.11 during the fourth quarter and by $1.66, or 5.7%, for the full year to $30.91 per share.

That concludes my prepared comments and I will turn it back over to Ken.

Thanks, Steve. Before we move on to questions, let me conclude by saying we like how our assets are structured, as we see several advantages with our higher mix in equity securities. At the same time, we remain confident that our reserves are strong due to the consistency of our approach.

We ended the year with our usual high-quality balance sheet and with A.M. Best's A+ (Superior) rating just affirmed on December 13. Combining a strong balance sheet with the strength of our agency relationships and superior service, along with our profit improvement and growth initiatives, positions us well to profitably grow our business and create long-term value for shareholders.

We appreciate the opportunity to share optimism for the future and to hear your questions. Jack Schiff, J.F. Scherer, Eric Mathews, Marty Mullen and Marty Hollenbeck are here with Steve and me, and we are all available to respond. Simon, we are ready for you to open the call for questions.

(Operator Instructions) Caroline Steers, Macquarie.

I was wondering if you could please just first comment on cat losses so far in the first quarter, and just whether there has been any uptick in claims versus what you saw last year.

Actually, the first quarter, we've had very little cat activity so far this quarter.

So the winter weather hasn't been a big problem for you.

No, there hasn't been a cat declared yet for this winter storm of the last several days. The claims certainly are premature at this point. We can anticipate the normal type of winter weather claims from this ice and snowstorm of collapse and water and plumbing freeze losses. But at this point, it is too early to tell how severe the storm damage will be.

So it doesn't really seem, quite yet, out of the normalized amount you might see typically in the first quarter?

That's correct.

Okay. And then just on development, I was just hoping that maybe you guys could just break that down a little bit, by line and by year. And then just go over how you think about favorable development going into 2011, whether it is for Cincinnati specific or just the industry.

Good question. It was a very favorable quarter. I think for the year, it was reasonably consistent. We had 10.4 points of favorable development, 10.4 points on the loss ratio. If you remember, a year ago, we did some strengthening on Workers' Comp. And if we were to take Workers' Comp out of both years, there would have been 10.1 points in favorable development in 2010 and 9.1 points of favorable development in 2009. So I think it is a steady approach.

Commercial casualty led the way this year with about 27 points for the full year in favorable development. Last year, commercial casualty also led the way with about 22 points of favorable development.

I think the key thing to keep in mind is we have a very steady approach here. Our claims management -- I mean, some of the things I look is one is the consistency in our claims management. Marty Mullen, who just took over 2.5 years ago, is only the fourth head of Claims in the 60 years Company history. The senior management in our claims department has over 30 years of experience. The headquarters supervisors, over 20 years of experience, on average. And the people in the field average right around 13 years of experience. So it is a very consistent approach that I don't think would result in changes in claims reporting patterns or settlement rates.

That's one thing I look at. Another thing is the position in the actuarial range. As we look at it, we feel that we are in virtually the same position reserve-wise in the actuarial range at the end of 2010 that we were at the end of 2009. So we feel it is a pretty steady long-term approach to setting reserves.

Okay, great. And then just a quick numbers question. How much cash do you guys currently have at the holding company?

We have that -- might get back to you a little later in the call. It's going to take us a few minutes to pull the sheet on that.

Okay, great. Thank you.

Vincent DeAugustino, Stifel Nicolaus.

I guess just two questions. Looking at snowfall accumulation and I guess getting back on the topic of first-quarter cats, I was just curious how much inches of accumulation -- either from a single event or, say, in like a week or so -- how many inches would it take before you guys would expect to see a meaningful increase in roof collapse type claims, for either homeowners or CMP in your core states? And then just one follow-up. Thank you.

It is a pretty difficult question to answer specifically because of the type of snow it is hitting those particular areas, heavy snow, light snow, if there is windblown snow, if it is drifting. A lot of those issues apply to the type of damages you can expect from collapse. As well as the type of construction in the different areas that we have, the types of roofs, flat roofs. And then certainly on commercial roofs, the age of the buildings is certainly a factor. So all of those will interplay into how much -- what the frequency rate might be of the impact of the high snow banks on the roofs.

Okay. I guess changing gears then, I guess there's a second quarter of strong term life premium growth. Do you think we are at the point yet where consumers are loosening up a bit and picking up coverage that they may have let lapse over the course of the recession? Or can we just chalk that up to Cincinnati-specific expansion growth into new areas or agency appointments --? Thank you.

We continue to get a nice amount of premiums from our property and casualty agents. That represents about 70% of our life premiums. The term insurance improvement I think is reflective of some improvement in rates on our part, making our products more attractive. We also see because the economy is a bit poor, people would invest more in term insurance than they would in cash value-based life insurance. So I think for us, the improvement is probably less industry-specific than it is just that we continue to improve our penetration and our success in our agency force.

Great. Thank you.

Real quick, I might provide answer to the earlier question of Caroline Steers. We have about $38 million in cash at CFC Holding Company only. And it would be $385 million total consolidated for the Group in cash. And we can go on to the next question now.

Scott Heleniak, RBC Capital Markets.

Just had a couple quick questions on personal lines. First, I noticed there was an uptick in severity in some of the claims; you had some large claims in the quarter. Just wondering if you could give a little bit of detail on what you are seeing there, and whether that has continued into 2011 -- first.

You are right on. We did have some large losses in the personal lines side. We had some fires towards the end of the year, around Christmas time, a couple large fires. We also had more than a usual number of UM claims. So I think you are right on target. We do not see it as a trend; really haven't seen it in the first quarter that I'm aware of.

Okay. And then also in personal lines, wondering -- you are getting nice price increases. I was wondering if you had some detail on what kind of price increases you are getting in auto versus homeowners, and where your policies in force count stands now, what kind of growth you are seeing there, as well. I don't know if you have any of those metrics to share.

You are right - we are getting good premium growth. I think it is more on the homeowners side than the auto. In the upper single digits for the homeowners; the lower single digits for the auto. We are seeing growth in policy count still and maintaining our persistency ratios, even with the rate increases. I don't have an exact policy count number. We look more at the trend, and the trend has been moving up.

In terms of where we are, we feel we still need rate. We feel we received -- attained rate adequacy in several of our states, and we're getting close in others. But we are going to continue to need to move the rates higher. But I think we are heading in the right direction. It is going to take us a little while to earn these rate increases. But we feel we are moving in the right direction for the personal lines segment.

So the rate increases you referenced, those will be applicable for this year, or was that fourth quarter? I mean, you expect that number to stick this year as well?

We tend to take the rate increases in personal lines during the late third and fourth quarter. So (multiple speakers) in the next round through the same time in 2011.

Okay. Next question -- this is probably for J.F. -- notice that when you look at the states, the growth in Texas ramped up pretty significantly in 2010. And just wondering how you were able to ramp up that growth in that particular state that quickly, if you've learned anything. I know it is obviously a bigger market, but just wondering how you are seeing that business ramp up a little bit quicker than some of the other states that you expanded in the past few years, if there is anything behind that.

Yes, Scott, exactly. Our new business in Texas was $21 million -- $21.4 million. And then Colorado, another new state, was $8.7 million. I think Texas is, as much as anything, purely a function of size -- the population. We've got 33 locations in Texas now we've appointed. That has been quicker -- two years ago, I probably wouldn't have anticipated perhaps it being that quick. We have five territories now, which is five experienced field reps down there. We will be adding a sixth this upcoming year. The receptivity in Texas from those agencies has just been excellent.

We've done some things pretty aggressively. We placed field claims representatives in the state really before we had any real financial justification to do it. We didn't have that many claims, but we wanted to have Cincinnati field claims reps prepared to handle claims from the very beginning of our relationship with our agents there. We have loss control on the ground there. So we ramped up, if you will, our infrastructure, which for us are individuals working out of their homes, pretty quickly in response to just how responsive the agents were to our model.

So we are pleased with how things have gone there. Our two territories in Colorado improved this year over last, where we've added a third territory there, and are taking the same approach there. We want field claims reps, loss control folks there, so that we know what we are writing. We get great service right from the very beginning. And then our agencies, in an effort to persuade us not to overappoint agencies in their area, will focus on growing their book of business with our company.

So new states on the drawing board this year, we hope to see some progress in, would be Oregon, where we will have two territories here shortly, and then Connecticut. So we are very pleased with how things have gone in the new states for us, and we've done it -- nothing special -- Cincinnati model all the way.

Okay. That's very helpful.

I have some policy count information for you, if you would like that.

Oh, sure.

On automobile, at the end of 2009, we had 269,000 policies. At the end of 2010, it is 290,000. And for homeowner, 359,000 at the end of 2009; 379,000 at the end of 2010.

Okay. All right. The only other question I had left was just on investment portfolio. I know you touched a little bit on your municipal exposure, and obviously equities have had a pretty strong run here the past few months and into this year.

Just wondering how you are looking about equities and munis right now, and whether you will be adding or trimming to these net exposures, given what is going on in the marketplace right now. Or is it just status quo?

I don't think we are going to actively downsize either of those two portfolios. As you probably know, the muni market in the fourth quarter was the worst in almost 17 years. So arguably, there is some value to be had there, depending on which side of the argument you are on.

And equities, the type of equities we buy, dividend-paying, dividend-growing stocks, we feel do well through most all market cycles. And they certainly tend to outperform in down cycles. Any addition there is going to be within some constraints that we place on the size of the equity portfolio as it relates to several internal metrics. So I don't see a significant downsizing, no.

Okay. Thanks.

Joshua Shanker, Deutsche Bank.

My question was if we go in a little bit into the favorable development and talk about the vintage of what is maturing and whatnot.

Good to hear from you this morning. We are seeing most of the favorable development coming from accident years 2007, 2008 and 2009, that happened in 2010.

By line, commercial casualty was the one with the most favorable development. But all in all, it has been favorable overall. It is part of a consistent approach, a place where we feel we are in the same position in the actuarial range at the beginning and the end of the year. Our consistent approach has now resulted in our 10-K showing 22 years in a row of favorable development.

But in specific answer to your question, during 2010, the favorable development came from accident years 2009, 2008, 2007 for the most part. And each one of them has averaged about 7 points of favorable development from the position at which they started.

And given the methodology, I know you obviously certify that reserves are your best approximation of where they should be at the moment, but do you have thoughts on the trend continuing and whatnot?

I think the fact that we feel that the reserves are at the same position in the actuarial range now that they were at the beginning of the year tends to give us a feeling that we would see favorable development again as we go forward.

And if I think back, I know a lot of you guys have been there for a while. What is different now about reserving than maybe was around 10, 15 years ago? It seems like that Cincinnati showing favorable development is somewhat of a newer trend. And in fact, in the past, you've had higher ROEs on core business, but lower favorable development. And now we are having lower ROEs on core business, but a lot of favorable development. Has something changed at the company?

We don't think it has changed. It is consistent. As we say, it's been 22 years now that we've had favorable development. So maybe some that have been here longer than I might want to comment. But I will tell you, it seems like a very consistent approach, both from the actuarial side and the methodology there.

And then as I was mentioning earlier, the people in our claims department have been in place literally for decades. The transition between managers has always been very smooth and measured, and not something that I would see -- with probably an exception here or there -- generating any changes in the procedures.

Josh, when you are talking about ROEs, are you referring to just our profitability as a total retained earnings, shareholders' equity? Because back in the -- before we started to sell off the equities and the financial stocks, we had a lot of unrealized appreciation. And that drove down our total profits to shareholders' equity quite a bit, because obviously, we are earning less on those investments. So are you referring to that, are you looking at that?

I'm looking at very long-term history here, and trying to break out ROE from what I would say is core underwriting results, versus ROE from overall underwriting results. And the contribution from favorable development is obviously quite high right now, much, much higher than it has ever been anytime I'm seeing in the past.

One other thing that has been transpiring is we have been moving more -- a larger percentage of our business is commercial lines versus personal. That has been transitioning over the last 10 to 15 years. And obviously, the commercial lines are much longer-tail lines, and so that may be part of it. I don't have any further to offer at this point.

No, that would explain some of the change absolutely. Well, congratulations on a very good quarter.

(Operator Instructions) Ian Gutterman, Adage Capital.

I guess I wanted to ask a little bit different question on reserves, and then I had some personal lines questions. But I guess, to be honest, you guys have always had an outstanding reputation for your reserves. I don't know -- if I recall, you've never had a reserve shortfall. So I'm not questioning the integrity of your reserves at all.

But I'm wondering if you could just help me understand -- when I hear numbers like 27 points out of commercial casualty one year and 22 the next, so that's 50 points total. If I heard that from some of your competitors, my eyebrows would raise, right? Just how could there be so much redundancy.

So can you help me understand just a little bit about maybe how you reserve a little bit differently from other companies, or just how your process may be different, that we get such large emergence at one time from a line like that? Is this going back -- I know you said it's mostly your recent accident years, but 50 cumulative points makes me think maybe it's going back five or 10 years.

I'll take the first shot at it, and I think Marty has some comments as well. It has been a consistent approach. Again, I think the claims management has been consistent. Within the actuarial area, we have some pretty sophisticated models that regress in multiple dimensions, utilize paid losses to take out some of the variability that may be there in case reserves.

And just basically what we had seen -- and I don't think we are alone in this -- in the commercial casualty area, we have just seen things, both paid losses and incurred, in the more recent periods just develop much more favorably than the models predicted they would have a couple of years ago.

Okay. I know there are some companies who have practices of putting -- essentially being higher above the midpoint of the range in the early years, and being -- but gradually being a little bit less above the midpoint as time goes by. Do you guys do something like that, that would sort of automatically predispose you to being more conservative upfront and letting things emerge over time?

I tend to look at the total amount that is carried at the end of the year and at the beginning of the year, where it falls within the actuarial range of estimates and look for consistency there. And that is what we are seeing. That is why we got the number we did, is we felt comfortable that things have developed favorably, more favorably than the models would have projected, but that we feel we are in the same position in the range at the end of 2010 that we were at the end of 2009.

Okay. Fair enough.

If I could add a few comments to Steve's. As far as the case reserving and the philosophy that has always been maintained over the 30 years that I've been with Cincinnati, is to look at the claim files -- first of all, take into perspective that a majority of our commercial book is in the GL side, or at least 50% -- close to 50 -- is on the general liability side, with commercial casualty and then, ultimately, the umbrella and limits that we write to support our insureds under that umbrella limit.

When you look at claim files [from issues] of liability, but also taking a keen approach to severity issues that exist in the file, we think it is really important to recognize the severity of the injury and damages at the outset of the case, to lay those very heavily in that initial reserving process. That is the safest and the most disciplined way of looking at these large GL cases from a severity perspective.

And I think over the years of our claims staff having the experience in handling those types of cases that develop positively from a perspective as those years mature. But there has been no change at all as far as the way we've approached the initial reserving of those cases in that general liability line that lead themselves to a severity outlook.

Okay. So it sounds like part of it is actually you've been able to manage the claims. Obviously, part of it is the macro environment has been favorable. But it sounds like part of it is also you've been able to manage your claims better than the initial case.

Well, we evaluate those cases based on the severity and liability issues that exist, but we hope to arrive at a better outcome if the case falls within the better defense posture. But fortunately over the years, again, based on the type of experience we have in the field and the counts that we use, we feel like we generate the best results in the industry.

Okay. Very good. No, you have; it's been very impressive. Just moving on to personal lines real quick, the accident year ex the cats bumped up a bit. I know you said large loss is a little bit, but it also looks like the auto loss ratio was up about maybe 10 points from the past couple quarters. Was there anything unusual there? Was it non-cat weather?

You're right. It was stubborn in the fourth quarter. We think we are doing the right things. We are taking the rate increases on the risk that we think need rate increases, more moderate on those that we don't. More rate on the home, less rate on the auto, but positive on both lines.

During the fourth quarter, we saw a rash of large fires around the holiday season. And we also saw an uptick in the number of uninsured motorist claims on the auto side, and even the physical damage was up. It was up in really every line on the personal lines side in the fourth quarter.

We don't see it as a trend. Again, I think we think we are doing the right things and we are confident that things will trend in the positive direction over time.

So there is nothing that would indicate it was from the agencies that are new to personal lines or anything like that?

No, we're not seeing that.

Okay, great. And just the last thing, as far as the winter storms this week. I know, as you said, it is obviously too early to have a great sense. But just -- I assume your phones are ringing off the hooks at the claims center. Do you have any sense from that, as far as just the amount of inbound call activity -- how that will compare to some other events?

Fortunately, we have the advantage of with our field staff being an actual -- living in the areas that service the agencies, we get a lot of our intelligence from the field staff living in those communities. And I have to be honest, to date, we've had very positive results. They got a lot of snow, they got some ice, but things haven't trended as bad as they were predicted to be in most of our areas.

Now, the unknowns are the areas of northern Illinois, Chicago, Wisconsin. Those are kind of areas unreported so far because of the significant snowfall they did receive. The early indications of some of our other Midwest territories has trended on the positive. So, so far, so good, but we know there is a lot to be said yet for what is in the Northern Territories.

I hope you don't have any of those cars that got abandoned on Lakeshore Drive, because it sounded like they are going to be total losses, because people can't find them anywhere. So good luck, guys. Thanks. Good quarter.

Marty had a great answer. I think one thing that could delay it, when you have that much snow and it starts to melt, it refreezes multiple times, and then water would start to back up.

Yes, I could tell you, I live in Chicago, and we had that last night. We had to be clearing out some snow out of our attic that started to melt. So it will take a little time, I think, here. But, so (multiple speakers).

As Marty said, things have seemed to be somewhat optimistic, but we can't tell for sure.

Yes. Okay, great. Thank you, guys.

(Operator Instructions) There appears to be no further questions at this time. Mr. Stecher, I turn the call back over to you.

Thank you, Simon. Thank you for joining us today. We appreciate your interest in Cincinnati Financial Corporation and look forward to speaking with you again on our first-quarter call. Have a great day.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.