Cincinnati Financial Earnings Call Nuggets: Expense Ratio, Personal Lines
Michael Zaremski – Credit Suisse: So, in regards to expenses, I know, you guys have been guiding to a lower expense ratio for a little while now. The decline was fairly pronounced this past quarter. Could you talk about whether there were one-time items impacting the ratio and would you expect further improvement?
Michael J. Sewell – CFO, SVP and Treasurer: This is Mike Sewell, and thanks for the question, Mike. Some of that we are controlling our expenses. As you’ve heard, we’ve got our other than commissions and our salary and wages, we’re controlling those costs, keeping those flat. There was really not a one-time hit that was in there. One of the items that’s really helping the ratio is everything that we’ve been doing to drive written premiums and to increase those which in turn will affect the expense ratio. So there’s really a combination of increasing written premiums and then controlling cost, overall on the non-salary and commissions.
Michael Zaremski – Credit Suisse: Do those comments hold true for the loss and loss adjustment expense ratio as well which was pretty low?
Steven J. Johnston – President and CEO: Mike, this is Steve, and yes, I think, they’re related and related to the level of loss activity and paid loss activity, and specifically which was down 1.3% for non-cat losses.
Michael Zaremski – Credit Suisse: Lastly, how are you guys thinking about the trade-off dynamics between retention new business growth and getting increased rate and I asked because your retention levels have stayed pretty steady and certain competitors have decided to look retentions fall in order to improve overall margins?
Steven J. Johnston – President and CEO: I will start out here. I think that we look at business for the long term, we have great relationships with our agents, we have a definite fundamental purpose to improve our underwriting profit. So, we are taking rate where we think it’s needed. We think it’s very much on a risk-by-risk basis, and we feel that we are gaining price adequacy, we got rate in the lines that we felt needed at the most with workers comp leading the way with just over 10% increase, the smaller commercial property policies that renew annually, we got real high single digit increases there. So, we think we are getting the rate when we need it but we also think we are conveying the value that we bring as a company in terms of our service, our products, our field representation and it’s allowing us, I think, to benefit from maintaining pretty good retention. As we look at it, retention is a bit lower on the risk that we would like to not be on. So, I guess, also if we look at the three-year policies, the retention there is quite high when they come off of their three year policy, we’ve got quite a bit of loyalty there.
Vincent DeAugustino – Stifel Nicolaus: If I look at Personal Lines on the statutory commission ratio it looks like that’s grown a few points over the last few quarters and I am just curious you might be able to talk about that. I know, there was some changes to the agent compensation structure, but I thought that was going to be along the lines of pretty much being aggregate neutral?
Steven J. Johnston – President and CEO: I’ll take a shot at that first. This is Steve. I think, couple things; one, we pay a little higher commission rate on our homeowners and we have been getting more rate on homeowners, which has allowed the premium to grow a little bit faster there in homeowners, so that’s going to shift the mix a little bit in that direction. I think, the other, and you’re right, we definitely target the profit sharing commission to remain pretty steady, and we think that’s the case, so I think basically what we’ve seen is maybe just a bit of a shift in the mix of our commissions.
Vincent DeAugustino – Stifel Nicolaus: Perfect. That’s actually really helpful. Just following up again on the personal lines side, looking at the personal auto, I know, there were some adjustments that had flown through the core loss ratio last quarter, so my first question is just to make sure if there was any adjustments that I should be looking at this quarter, but if not, it looks like there was about a 5.3 point increase year-over-year in the core loss ratio, and just because ISO data seems to be trending towards higher inflation, and we’re starting to hear some commentary from some of the larger auto players, I was just curious, of your thoughts in terms of loss cost inflation on auto.
Steven J. Johnston – President and CEO: What we’re seeing, and really this applies to personal auto, it applies to commercial auto and really across our portfolio, and this is Steve again, we are seeing really pretty benign trends across the board. We have seen frequency down a bit, and severity up a bit, but all-in-all as we look at our trend, picking different time periods to look at trends, it’s been very benign overall in the total paid loss trends. So, we feel that with the rate increases that we’re getting on a written basis, we’re making some ground.
Vincent DeAugustino – Stifel Nicolaus: So for personal auto in 1Q 12, I should just look at the core loss ratio that’s moving around due to normal variability that should be expected?
Steven J. Johnston – President and CEO: I think there’s some noise there.
Vincent DeAugustino – Stifel Nicolaus: Then if I could slide one last one in. Would you happen to know what the new money yield is on the bond portfolio?
Martin H. Hollenbeck – CIO, SVP, Assistant Secretary and Assistant Treasurer: First quarter corporates, we were to hike threes, we were close to four. Municipal is about 2.625, and in government bonds – agencies around a 3.2 level.