CINCINNATI, Feb. 3, 2016 /PRNewswire/ -- Cincinnati
Financial Corporation (Nasdaq: CINF) today reported:
- Fourth-quarter 2015 net income of $156
million, or 94 cents per
share, compared with $167 million, or
$1.02 per share, in the fourth
quarter of 2014.
- Full-year 2015 net income of $634
million, or $3.83 per share,
up 21 percent from $525 million, or
$3.18, in 2014. Operating income of
$589 million, or $3.56 per share, up 34 percent from $440 million, or $2.66 per share.
- $11 million decrease in
fourth-quarter 2015 net income reflected the after-tax net effect
of two primary items: $45
million reduction in net realized investment gains that
offset $28 million of improvement in
the contribution from property casualty underwriting. The
underwriting improvement effect was partially offset by a
$14 million unfavorable impact from
natural catastrophe losses.
- $39.20 book value per share at
December 31, 2015, down 94 cents or 2 percent since December 31, 2014.
- 3.4 percent value creation ratio for full-year 2015, compared
with 12.6 percent for 2014.
Financial
Highlights
|
|
(Dollars in millions
except per share data)
|
Three months ended
December 31,
|
Twelve months ended
December 31,
|
|
2015
|
|
2014
|
|
% Change
|
|
2015
|
|
2014
|
|
% Change
|
Revenue
Data
|
|
|
|
|
|
|
|
|
|
|
|
|
Earned
premiums
|
|
$
|
1,148
|
|
|
$
|
1,086
|
|
|
6
|
|
$
|
4,480
|
|
|
$
|
4,243
|
|
|
6
|
Investment income, net of expenses
|
|
150
|
|
|
140
|
|
|
7
|
|
572
|
|
|
549
|
|
|
4
|
Total
revenues
|
|
1,263
|
|
|
1,262
|
|
|
0
|
|
5,142
|
|
|
4,945
|
|
|
4
|
Income Statement
Data
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
156
|
|
|
$
|
167
|
|
|
(7)
|
|
$
|
634
|
|
|
$
|
525
|
|
|
21
|
Realized
investment gains and losses, net
|
|
(26)
|
|
|
19
|
|
|
nm
|
|
45
|
|
|
85
|
|
|
(47)
|
Operating income*
|
|
$
|
182
|
|
|
$
|
148
|
|
|
23
|
|
$
|
589
|
|
|
$
|
440
|
|
|
34
|
Per Share Data
(diluted)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
0.94
|
|
|
$
|
1.02
|
|
|
(8)
|
|
$
|
3.83
|
|
|
$
|
3.18
|
|
|
20
|
Realized
investment gains and losses, net
|
|
(0.16)
|
|
|
0.13
|
|
|
nm
|
|
0.27
|
|
|
0.52
|
|
|
(48)
|
Operating income*
|
|
$
|
1.10
|
|
|
$
|
0.89
|
|
|
24
|
|
$
|
3.56
|
|
|
$
|
2.66
|
|
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book
value
|
|
|
|
|
|
|
|
$
|
39.20
|
|
|
$
|
40.14
|
|
|
(2)
|
Cash
dividend declared
|
|
$
|
0.92
|
|
|
$
|
0.44
|
|
|
109
|
|
$
|
2.30
|
|
|
$
|
1.76
|
|
|
31
|
Diluted
weighted average shares outstanding
|
|
165.7
|
|
|
165.3
|
|
|
0
|
|
165.6
|
|
|
165.1
|
|
|
0
|
*
|
The Definitions of
Non-GAAP Information and Reconciliation to Comparable GAAP Measures
defines and reconciles measures presented in this release that are
not based on U. S. Generally Accepted Accounting
Principles.
|
**
|
Forward-looking
statements and related assumptions are subject to the risks
outlined in the company's safe harbor statement.
|
Insurance Operations Fourth-Quarter Highlights
- 87.0 percent fourth-quarter 2015 property casualty combined
ratio, improved from 90.4 percent for fourth-quarter 2014.
Full-year 2015 property casualty combined ratio at 91.1%, with net
written premiums up 5 percent.
- 7 percent increase in fourth-quarter net written premiums,
including higher pricing and growth initiatives.
- $140 million fourth-quarter 2015
property casualty new business written premiums. Agencies appointed
since the beginning of 2014 contributed $12
million or 9 percent of total fourth-quarter new business
written premiums.
- 6 cents per share contribution
from life insurance operating income, matching a year ago.
Investment and Balance Sheet Highlights
- 7 percent or $10 million rise in
fourth-quarter 2015 pretax investment income, including 14 percent
growth for stock portfolio dividends and 4 percent growth for bond
interest income.
- Less than 1 percent full-year increase in fair value of
invested assets at December 31, 2015,
including a 3 percent decrease for the stock portfolio and a 2
percent increase for the bond portfolio.
- $1.747 billion parent company
cash and marketable securities at year-end 2015, down 2 percent
from a year ago.
Achieving Planned Results
Steven J. Johnston, president and chief
executive officer, commented: "Operating income for the fourth
quarter rose 23 percent over last year's result, bringing our
full-year operating income to $589
million.
"Property casualty insurance underwriting was the key to our
performance. Underwriting profits before taxes increased 43 percent
for the quarter and 108 percent for the year. These strong overall
results reflect the positive execution of our strategies to balance
growth and profitability.
"The combined ratio of 87.0 percent for the fourth quarter
improved 3.4 points over last year's healthy result. Our 2015
full-year results surpassed those of the last seven years with a
combined ratio of 91.1 percent, benefiting from sound underwriting
judgment, lower catastrophe losses and steady favorable prior
accident year reserve development. At the same time, our recent
premium growth represents a solid achievement, including net
written premium growth of 5 percent for the year.
"Our long-term investment approach continued to boost operating
results. Pretax investment income rose to $150 million for the quarter and $572 million for the year, up 7 percent and 4
percent, respectively."
Focusing on Profitable Growth
"We believe our
full-year property casualty net written premium growth is again
ahead of the industry average. Thanks to the success achieved by
our associates and independent agency partners, we nearly reached
our goal of $5 billion in direct
written premiums by year-end 2015.
"Our growth initiatives are on track. New business for personal
insurance rose 21 percent for the year, including an increase of
$4 million from agencies' high net
worth clients. Cincinnati Re(SM), our reinsurance assumed operation
which we began to expand in 2015, profitably increased full-year
property casualty net written premiums by 1 percent.
"We continue to refine pricing precision on all accounts. Our
ability to price on a policy-by-policy basis will support our
efforts to maintain appropriate pricing as we navigate a
challenging market environment in 2016. The right price, bolstered
by our hallmarks of strong agency relationships and overwhelming
claims service, will help our agents attract and retain
high-quality business."
Returning Capital to Shareholders
"Our property
casualty statutory surplus, a healthy $4.4
billion at December 31,
provides ample capacity to move forward with our growth plans. A
strong balance sheet gives us the flexibility to invest in our
business while still paying shareholder dividends as a consistent,
long-term strategy. The board of directors' recent actions to pay a
special cash dividend at the end of 2015 and to increase our
indicated annual dividend for the 56th consecutive year
demonstrates their confidence in our future."
Insurance
Operations Highlights
|
Consolidated
Property Casualty Insurance Results
|
|
(Dollars in
millions)
|
Three months ended
December 31,
|
|
Twelve months ended
December 31,
|
|
|
2015
|
|
2014
|
|
% Change
|
|
2015
|
|
2014
|
|
% Change
|
Earned
premiums
|
|
$
|
1,095
|
|
|
$
|
1,035
|
|
|
6
|
|
$
|
4,271
|
|
|
$
|
4,045
|
|
|
6
|
Fee
revenues
|
|
2
|
|
|
1
|
|
|
100
|
|
8
|
|
|
6
|
|
|
33
|
Total
revenues
|
|
1,097
|
|
|
1,036
|
|
|
6
|
|
4,279
|
|
|
4,051
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss
expenses
|
|
616
|
|
|
622
|
|
|
(1)
|
|
2,572
|
|
|
2,627
|
|
|
(2)
|
Underwriting
expenses
|
|
338
|
|
|
314
|
|
|
8
|
|
1,321
|
|
|
1,238
|
|
|
7
|
Underwriting profit
|
|
$
|
143
|
|
|
$
|
100
|
|
|
43
|
|
$
|
386
|
|
|
$
|
186
|
|
|
108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios as a percent
of earned premiums:
|
|
|
|
|
|
Pt. Change
|
|
|
|
|
|
Pt. Change
|
Loss and loss
expenses
|
|
56.3
|
%
|
|
60.1
|
%
|
|
(3.8)
|
|
60.2
|
%
|
|
65.0
|
%
|
|
(4.8)
|
Underwriting
expenses
|
|
30.7
|
|
|
30.3
|
|
|
0.4
|
|
30.9
|
|
|
30.6
|
|
|
0.3
|
Combined ratio
|
|
87.0
|
%
|
|
90.4
|
%
|
|
(3.4)
|
|
91.1
|
%
|
|
95.6
|
%
|
|
(4.5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
|
|
|
% Change
|
Agency renewal
written premiums
|
|
$
|
925
|
|
|
$
|
906
|
|
|
2
|
|
$
|
3,925
|
|
|
$
|
3,794
|
|
|
3
|
Agency new business
written premiums
|
|
140
|
|
|
122
|
|
|
15
|
|
532
|
|
|
503
|
|
|
6
|
Cincinnati Re net
written premiums
|
|
33
|
|
|
—
|
|
|
nm
|
|
33
|
|
|
—
|
|
|
nm
|
Other written
premiums
|
|
(43)
|
|
|
(41)
|
|
|
(5)
|
|
(129)
|
|
|
(154)
|
|
|
16
|
Net
written premiums
|
|
$
|
1,055
|
|
|
$
|
987
|
|
|
7
|
|
$
|
4,361
|
|
|
$
|
4,143
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios as a percent
of earned premiums:
|
|
|
|
|
|
Pt. Change
|
|
|
|
|
|
Pt. Change
|
Current accident year before
catastrophe losses
|
|
58.9
|
%
|
|
58.3
|
%
|
|
0.6
|
|
60.4
|
%
|
|
61.7
|
%
|
|
(1.3)
|
Current accident year
catastrophe losses
|
|
1.5
|
|
|
(0.2)
|
|
|
1.7
|
|
4.1
|
|
|
5.7
|
|
|
(1.6)
|
Prior accident years before
catastrophe losses
|
|
(3.8)
|
|
|
2.7
|
|
|
(6.5)
|
|
(3.9)
|
|
|
(1.8)
|
|
|
(2.1)
|
Prior accident years
catastrophe losses
|
|
(0.3)
|
|
|
(0.7)
|
|
|
0.4
|
|
(0.4)
|
|
|
(0.6)
|
|
|
0.2
|
Loss and loss expense ratio
|
|
56.3
|
%
|
|
60.1
|
%
|
|
(3.8)
|
|
60.2
|
%
|
|
65.0
|
%
|
|
(4.8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current accident year
combined ratio before
|
|
|
|
|
|
|
|
|
|
|
|
|
catastrophe
losses
|
|
89.6
|
%
|
|
88.6
|
%
|
|
1.0
|
|
91.3
|
%
|
|
92.3
|
%
|
|
(1.0)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 7 percent and 5 percent growth in fourth-quarter and full-year
2015 property casualty net written premiums, including 3 percent
and 1 percent from Cincinnati Re. The increase in premiums also
reflects other growth initiatives, modest average price increases
and a higher level of insured exposures.
- 15 percent and 6 percent increase in fourth-quarter and
full-year 2015 new business premiums written by agencies, compared
with a year ago, including 1 percent for each period from agencies'
high net worth clients. Full-year 2015 new business premiums, up
$29 million in total, included a
$27 million increase in standard
market property casualty production from agencies appointed since
the beginning of 2014 and a $5
million increase for excess and surplus lines.
- 1,526 agency relationships in 1,956 reporting locations
marketing standard market property casualty insurance products at
December 31, 2015, compared with
1,466 agency relationships in 1,884 reporting locations at year-end
2014. The 114 new agency appointments made during 2015 were
slightly more than planned.
- 3.4 percentage-point fourth-quarter 2015 combined ratio
improvement, driven by 6.5 points more benefit from prior accident
year reserve development before catastrophes that offset an
increase of 2.1 points for higher losses from natural
catastrophes.
- 4.5 percentage-point improvement in full-year 2015 combined
ratio, compared with 2014, including 1.4 points from lower natural
catastrophe losses and 0.9 points from lower noncatastrophe
weather-related losses.
- 4.1 and 4.3 percentage-point fourth-quarter and full-year 2015
benefit from favorable prior accident year reserve development of
$44 million and $184 million, compared with 2.0 points or
$22 million of unfavorable
fourth-quarter 2014 development and 2.4 points or $98 million of favorable development for
full-year 2014. The unfavorable development reported for the
fourth-quarter of 2014 was primarily due to higher estimates of
IBNR losses and loss expenses for our commercial casualty line of
business.
- 1.3 percentage-point improvement, to 60.4 percent, for the
full-year 2015 ratio of current accident year losses and loss
expenses before catastrophes, largely due to lower noncatastrophe
weather-related losses and a 0.5 point decrease in the ratio for
current accident year losses of $1
million or more per claim.
- 0.3 percentage-point increase in the full-year 2015
underwriting expense ratio, as strategic investments for profitable
growth offset higher earned premiums and expense management
efforts.
Commercial Lines
Insurance Results
|
|
|
|
|
(Dollars in
millions)
|
Three months ended
December 31,
|
|
Twelve months ended
December 31,
|
|
|
2015
|
|
2014
|
|
% Change
|
|
2015
|
|
2014
|
|
% Change
|
Earned
premiums
|
|
$
|
761
|
|
|
$
|
730
|
|
|
4
|
|
$
|
2,996
|
|
|
$
|
2,856
|
|
|
5
|
Fee
revenues
|
|
1
|
|
|
1
|
|
|
0
|
|
4
|
|
|
4
|
|
|
0
|
Total
revenues
|
|
762
|
|
|
731
|
|
|
4
|
|
3,000
|
|
|
2,860
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss
expenses
|
|
419
|
|
|
454
|
|
|
(8)
|
|
1,708
|
|
|
1,812
|
|
|
(6)
|
Underwriting
expenses
|
|
242
|
|
|
228
|
|
|
6
|
|
947
|
|
|
902
|
|
|
5
|
Underwriting profit
|
|
$
|
101
|
|
|
$
|
49
|
|
|
106
|
|
$
|
345
|
|
|
$
|
146
|
|
|
136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios as a percent
of earned premiums:
|
|
|
|
|
|
Pt. Change
|
|
|
|
|
|
Pt. Change
|
Loss and loss
expenses
|
|
55.1
|
%
|
|
62.3
|
%
|
|
(7.2)
|
|
57.0
|
%
|
|
63.5
|
%
|
|
(6.5)
|
Underwriting
expenses
|
|
31.7
|
|
|
31.3
|
|
|
0.4
|
|
31.6
|
|
|
31.6
|
|
|
0.0
|
Combined ratio
|
|
86.8
|
%
|
|
93.6
|
%
|
|
(6.8)
|
|
88.6
|
%
|
|
95.1
|
%
|
|
(6.5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
|
|
|
% Change
|
Agency renewal
written premiums
|
|
$
|
649
|
|
|
$
|
645
|
|
|
1
|
|
$
|
2,756
|
|
|
$
|
2,678
|
|
|
3
|
Agency new business
written premiums
|
|
97
|
|
|
86
|
|
|
13
|
|
365
|
|
|
360
|
|
|
1
|
Other written
premiums
|
|
(34)
|
|
|
(32)
|
|
|
(6)
|
|
(96)
|
|
|
(116)
|
|
|
17
|
Net
written premiums
|
|
$
|
712
|
|
|
$
|
699
|
|
|
2
|
|
$
|
3,025
|
|
|
$
|
2,922
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios as a percent
of earned premiums:
|
|
|
|
|
|
Pt. Change
|
|
|
|
|
|
Pt. Change
|
Current accident year before
catastrophe losses
|
|
58.2
|
%
|
|
58.9
|
%
|
|
(0.7)
|
|
58.6
|
%
|
|
60.7
|
%
|
|
(2.1)
|
Current accident year
catastrophe losses
|
|
1.4
|
|
|
(0.1)
|
|
|
1.5
|
|
3.5
|
|
|
4.8
|
|
|
(1.3)
|
Prior accident years before
catastrophe losses
|
|
(4.1)
|
|
|
4.4
|
|
|
(8.5)
|
|
(4.7)
|
|
|
(1.5)
|
|
|
(3.2)
|
Prior accident years
catastrophe losses
|
|
(0.4)
|
|
|
(0.9)
|
|
|
0.5
|
|
(0.4)
|
|
|
(0.5)
|
|
|
0.1
|
Loss and loss expense ratio
|
|
55.1
|
%
|
|
62.3
|
%
|
|
(7.2)
|
|
57.0
|
%
|
|
63.5
|
%
|
|
(6.5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current accident year
combined ratio before
|
|
|
|
|
|
|
|
|
|
|
|
|
catastrophe
losses
|
|
89.9
|
%
|
|
90.2
|
%
|
|
(0.3)
|
|
90.2
|
%
|
|
92.3
|
%
|
|
(2.1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 2 percent and 4 percent growth in fourth-quarter and full-year
2015 commercial lines net written premiums, reflecting growth
initiatives, a higher level of insured exposures and price
increases. Fourth-quarter and full-year 2015 commercial lines
average renewal price increases at a percentage in the
low-single-digit range.
- $5 million or 1 percent rise in
full-year 2015 new business written by agencies, driven by
production from agencies appointed since the beginning of 2014 that
offset effects of a softening commercial insurance
market.
- 6.8 percentage-point improvement in fourth-quarter 2015
combined ratio, driven by 8.5 points more benefit from prior
accident year reserve development before catastrophes that offset
an increase of 2.0 points for higher losses from natural
catastrophes.
- 6.5 percentage-point improvement in the full-year 2015 combined
ratio, including 1.2 points from lower natural catastrophe losses
and 2.1 points from lower incurred losses and loss expenses for our
largest commercial line of business, commercial
casualty.
- 4.5 and 5.1 percentage-point fourth-quarter and full-year 2015
benefit from favorable prior accident year reserve development of
$34 million and $154 million, compared with 3.5 points or
$26 million of unfavorable
fourth-quarter 2014 development and 2.0 points or $57 million of favorable development for
full-year 2014.
- 2.1 percentage-point improvement, to 58.6 percent, for the
full-year 2015 ratio of current accident year losses and loss
expenses before catastrophes, largely due to a 1.5 point decrease
in the ratio for current accident year losses of $1 million or more per claim.
Personal Lines
Insurance Results
|
|
|
|
|
(Dollars in
millions)
|
Three months ended
December 31,
|
|
Twelve months ended
December 31,
|
|
|
2015
|
|
2014
|
|
% Change
|
|
2015
|
|
2014
|
|
% Change
|
Earned
premiums
|
|
$
|
280
|
|
|
$
|
266
|
|
|
5
|
|
$
|
1,097
|
|
|
$
|
1,041
|
|
|
5
|
Fee
revenues
|
|
1
|
|
|
0
|
|
|
0
|
|
3
|
|
|
2
|
|
|
50
|
Total
revenues
|
|
281
|
|
|
266
|
|
|
6
|
|
1,100
|
|
|
1,043
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss
expenses
|
|
184
|
|
|
148
|
|
|
24
|
|
789
|
|
|
740
|
|
|
7
|
Underwriting
expenses
|
|
79
|
|
|
75
|
|
|
5
|
|
323
|
|
|
293
|
|
|
10
|
Underwriting (loss) profit
|
|
$
|
18
|
|
|
$
|
43
|
|
|
(58)
|
|
$
|
(12)
|
|
|
$
|
10
|
|
|
nm
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios as a percent
of earned premiums:
|
|
|
|
|
|
Pt. Change
|
|
|
|
|
|
Pt. Change
|
Loss and loss
expenses
|
|
65.7
|
%
|
|
55.8
|
%
|
|
9.9
|
|
71.9
|
%
|
|
71.1
|
%
|
|
0.8
|
Underwriting
expenses
|
|
28.3
|
|
|
27.9
|
|
|
0.4
|
|
29.4
|
|
|
28.1
|
|
|
1.3
|
Combined ratio
|
|
94.0
|
%
|
|
83.7
|
%
|
|
10.3
|
|
101.3
|
%
|
|
99.2
|
%
|
|
2.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
|
|
|
% Change
|
Agency renewal
written premiums
|
|
$
|
245
|
|
|
$
|
233
|
|
|
5
|
|
$
|
1,041
|
|
|
$
|
1,005
|
|
|
4
|
Agency new business
written premiums
|
|
27
|
|
|
24
|
|
|
13
|
|
111
|
|
|
92
|
|
|
21
|
Other written
premiums
|
|
(6)
|
|
|
(8)
|
|
|
25
|
|
(24)
|
|
|
(29)
|
|
|
17
|
Net
written premiums
|
|
$
|
266
|
|
|
$
|
249
|
|
|
7
|
|
$
|
1,128
|
|
|
$
|
1,068
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios as a percent
of earned premiums:
|
|
|
|
|
|
Pt. Change
|
|
|
|
|
|
Pt. Change
|
Current accident year before
catastrophe losses
|
|
62.4
|
%
|
|
56.1
|
%
|
|
6.3
|
|
64.9
|
%
|
|
63.4
|
%
|
|
1.5
|
Current accident year
catastrophe losses
|
|
2.0
|
|
|
(0.9)
|
|
|
2.9
|
|
6.5
|
|
|
8.8
|
|
|
(2.3)
|
Prior accident years before
catastrophe losses
|
|
1.5
|
|
|
1.1
|
|
|
0.4
|
|
0.8
|
|
|
(0.1)
|
|
|
0.9
|
Prior accident years
catastrophe losses
|
|
(0.2)
|
|
|
(0.5)
|
|
|
0.3
|
|
(0.3)
|
|
|
(1.0)
|
|
|
0.7
|
Loss and loss expense ratio
|
|
65.7
|
%
|
|
55.8
|
%
|
|
9.9
|
|
71.9
|
%
|
|
71.1
|
%
|
|
0.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current accident year
combined ratio before
|
|
|
|
|
|
|
|
|
|
|
|
|
catastrophe
losses
|
|
90.7
|
%
|
|
84.0
|
%
|
|
6.7
|
|
94.3
|
%
|
|
91.5
|
%
|
|
2.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 7 percent and 6 percent growth in fourth-quarter and full-year
2015 personal lines net written premiums, including growth in new
business and higher renewal written premiums that benefited from
rate increases.
- 3 percent increase in full-year 2015 earned premiums in
aggregate from our five highest volume states where we offer
personal lines policies and that represent approximately half of
our personal lines premiums, while rising 8 percent for all other
states in aggregate as we progress toward geographic
diversification.
- 13 percent and 21 percent increase in fourth-quarter and
full-year 2015 new business written premium, including increases of
approximately $1 million and
$4 million, respectively, from
agencies' high net worth clients.
- 10.3 percentage-point rise in fourth-quarter 2015 combined
ratio, including 3.2 points from higher natural catastrophe losses
and 6.3 points from higher current accident year losses and loss
expenses before catastrophes, largely from our personal auto line
of business.
- 2.1 percentage-point rise in the full-year 2015 combined ratio,
including increases in the underwriting expense ratio and in the
ratio for losses of $1 million or
more per claim that offset decreases in ratios of 1.6 points from
lower natural catastrophe losses and 1.7 points from lower
noncatastrophe weather-related losses.
- 1.3 and 0.5 percentage-point fourth-quarter and full-year 2015
unfavorable prior accident year reserve development of $4 million and $5
million, compared with 0.6 points or $1 million of unfavorable fourth-quarter 2014
development and 1.1 points or $12
million of favorable development for full-year
2014.
- 1.5 percentage-point increase, to 64.9 percent, for the
full-year 2015 ratio of current accident year losses and loss
expenses before catastrophes, including a 2.2 point increase in the
ratio for current accident year losses of $1
million or more per claim that offset lower noncatastrophe
weather-related losses.
- 1.3 percentage-point increase in the full-year 2015
underwriting expense ratio, largely due to strategic investments
such as staff additions to support expansion in high net worth
markets.
Excess and Surplus
Lines Insurance Results
|
|
|
|
|
(Dollars in
millions)
|
Three months ended
December 31,
|
|
Twelve months ended
December 31,
|
|
|
2015
|
|
2014
|
|
% Change
|
|
2015
|
|
2014
|
|
% Change
|
Earned
premiums
|
|
$
|
44
|
|
|
$
|
39
|
|
|
13
|
|
$
|
168
|
|
|
$
|
148
|
|
|
14
|
Fee
revenues
|
|
—
|
|
|
—
|
|
|
—
|
|
1
|
|
|
—
|
|
|
nm
|
Total
revenues
|
|
44
|
|
|
39
|
|
|
13
|
|
169
|
|
|
148
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss
expenses
|
|
8
|
|
|
20
|
|
|
(60)
|
|
70
|
|
|
75
|
|
|
(7)
|
Underwriting
expenses
|
|
14
|
|
|
11
|
|
|
27
|
|
48
|
|
|
43
|
|
|
12
|
Underwriting profit
|
|
$
|
22
|
|
|
$
|
8
|
|
|
175
|
|
$
|
51
|
|
|
$
|
30
|
|
|
70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios as a percent
of earned premiums:
|
|
|
|
|
|
Pt. Change
|
|
|
|
|
|
Pt. Change
|
Loss and loss
expenses
|
|
18.9
|
%
|
|
49.0
|
%
|
|
(30.1)
|
|
41.9
|
%
|
|
50.5
|
%
|
|
(8.6)
|
Underwriting
expenses
|
|
29.2
|
|
|
28.8
|
|
|
0.4
|
|
28.1
|
|
|
28.9
|
|
|
(0.8)
|
Combined ratio
|
|
48.1
|
%
|
|
77.8
|
%
|
|
(29.7)
|
|
70.0
|
%
|
|
79.4
|
%
|
|
(9.4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
|
|
|
% Change
|
Agency renewal
written premiums
|
|
$
|
31
|
|
|
$
|
28
|
|
|
11
|
|
$
|
128
|
|
|
$
|
111
|
|
|
15
|
Agency new business
written premiums
|
|
16
|
|
|
12
|
|
|
33
|
|
56
|
|
|
51
|
|
|
10
|
Other written
premiums
|
|
(3)
|
|
|
(1)
|
|
|
(200)
|
|
(9)
|
|
|
(9)
|
|
|
0
|
Net
written premiums
|
|
$
|
44
|
|
|
$
|
39
|
|
|
13
|
|
$
|
175
|
|
|
$
|
153
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios as a percent
of earned premiums:
|
|
|
|
|
|
Pt. Change
|
|
|
|
|
|
Pt. Change
|
Current accident year before
catastrophe losses
|
|
51.3
|
%
|
|
62.1
|
%
|
|
(10.8)
|
|
62.1
|
%
|
|
68.1
|
%
|
|
(6.0)
|
Current accident year
catastrophe losses
|
|
0.2
|
|
|
2.9
|
|
|
(2.7)
|
|
0.5
|
|
|
1.8
|
|
|
(1.3)
|
Prior accident years before
catastrophe losses
|
|
(32.5)
|
|
|
(16.1)
|
|
|
(16.4)
|
|
(20.6)
|
|
|
(19.6)
|
|
|
(1.0)
|
Prior accident years
catastrophe losses
|
|
(0.1)
|
|
|
0.1
|
|
|
(0.2)
|
|
(0.1)
|
|
|
0.2
|
|
|
(0.3)
|
Loss and loss expense ratio
|
|
18.9
|
%
|
|
49.0
|
%
|
|
(30.1)
|
|
41.9
|
%
|
|
50.5
|
%
|
|
(8.6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current accident year
combined ratio before
|
|
|
|
|
|
|
|
|
|
|
|
|
catastrophe
losses
|
|
80.5
|
%
|
|
90.9
|
%
|
|
(10.4)
|
|
90.2
|
%
|
|
97.0
|
%
|
|
(6.8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 13 percent and 14 percent growth in fourth-quarter and
full-year 2015 excess and surplus lines net written premiums,
including average renewal price increases at a percentage near the
high end of a low-single-digit range – down slightly from a
mid-single-digit range in the third quarter of 2015.
- 10 percent increase in full-year 2015 new business written
premiums, slowing from 21 percent in full-year 2014 as a result of
careful underwriting in a highly competitive market.
- 29.7 percentage-point improvement in fourth-quarter 2015
combined ratio, largely due to 16.4 points more benefit from prior
accident year reserve development before catastrophes.
- 9.4 percentage-point combined ratio improvement for full-year
2015, primarily due to improved experience in the ratio for current
accident year losses and loss expenses before catastrophe
losses.
Life Insurance
Results
|
|
|
|
|
(Dollars in
millions)
|
Three months ended
December 31,
|
|
Twelve months ended
December 31,
|
|
2015
|
|
2014
|
|
% Change
|
|
2015
|
|
2014
|
|
% Change
|
Term life
insurance
|
|
$
|
33
|
|
|
$
|
32
|
|
|
3
|
|
$
|
136
|
|
|
$
|
131
|
|
|
4
|
Universal life
insurance
|
|
11
|
|
|
10
|
|
|
10
|
|
39
|
|
|
35
|
|
|
11
|
Other life insurance,
annuity, and disability income
products
|
|
9
|
|
|
9
|
|
|
0
|
|
34
|
|
|
32
|
|
|
6
|
Earned
premiums
|
|
53
|
|
|
51
|
|
|
4
|
|
209
|
|
|
198
|
|
|
6
|
Investment income,
net of expenses
|
|
38
|
|
|
36
|
|
|
6
|
|
150
|
|
|
144
|
|
|
4
|
Other
income
|
|
1
|
|
|
2
|
|
|
(50)
|
|
5
|
|
|
6
|
|
|
(17)
|
Total revenues,
excluding realized investment gains
and
losses
|
|
92
|
|
|
89
|
|
|
3
|
|
364
|
|
|
348
|
|
|
5
|
Contract holders'
benefits incurred
|
|
61
|
|
|
53
|
|
|
15
|
|
236
|
|
|
229
|
|
|
3
|
Underwriting expenses
incurred
|
|
16
|
|
|
21
|
|
|
(24)
|
|
66
|
|
|
63
|
|
|
5
|
Total benefits and
expenses
|
|
77
|
|
|
74
|
|
|
4
|
|
302
|
|
|
292
|
|
|
3
|
Net income before
income tax and realized
investment
gains, net
|
|
15
|
|
|
15
|
|
|
0
|
|
62
|
|
|
56
|
|
|
11
|
Income tax
|
|
5
|
|
|
5
|
|
|
0
|
|
22
|
|
|
20
|
|
|
10
|
Net income before
realized investment gains, net
|
|
$
|
10
|
|
|
$
|
10
|
|
|
0
|
|
$
|
40
|
|
|
$
|
36
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- $11 million or 6 percent increase
in full-year 2015 earned premiums, including a 4 percent increase
for term life insurance, our largest life insurance product
line.
- $4 million increase in full-year
2015 profit, primarily due to more favorable mortality
experience.
- $32 million or 4 percent
full-year 2015 decrease to $872
million in GAAP shareholders' equity for The Cincinnati Life
Insurance Company, largely reflecting a decrease in fair value of
the fixed-maturity portfolio due to the effects of rising interest
rates and widening credit spreads.
Investment and
Balance Sheet Highlights
|
Investment
Results
|
|
|
|
|
|
(Dollars in
millions)
|
|
Three months ended
December 31,
|
|
Twelve months ended
December 31,
|
|
2015
|
|
2014
|
|
% Change
|
|
2015
|
|
2014
|
|
% Change
|
Investment income,
net of expenses
|
|
$
|
150
|
|
|
$
|
140
|
|
|
7
|
|
$
|
572
|
|
|
$
|
549
|
|
|
4
|
Investment interest
credited to contract holders'
|
|
(22)
|
|
|
(21)
|
|
|
(5)
|
|
(86)
|
|
|
(83)
|
|
|
(4)
|
Realized investment
gains and losses, net
|
|
(40)
|
|
|
32
|
|
|
(225)
|
|
70
|
|
|
133
|
|
|
(47)
|
Investment
profit
|
|
$
|
88
|
|
|
$
|
151
|
|
|
(42)
|
|
$
|
556
|
|
|
$
|
599
|
|
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
109
|
|
|
$
|
105
|
|
|
4
|
|
$
|
428
|
|
|
$
|
417
|
|
|
3
|
Dividends
|
|
42
|
|
|
37
|
|
|
14
|
|
150
|
|
|
138
|
|
|
9
|
Other
|
|
1
|
|
|
—
|
|
|
nm
|
|
3
|
|
|
2
|
|
|
50
|
Less
investment expenses
|
|
2
|
|
|
2
|
|
|
0
|
|
9
|
|
|
8
|
|
|
13
|
Investment income,
pretax
|
|
150
|
|
|
140
|
|
|
7
|
|
572
|
|
|
549
|
|
|
4
|
Less income
taxes
|
|
35
|
|
|
33
|
|
|
6
|
|
135
|
|
|
130
|
|
|
4
|
Total investment
income, after-tax
|
|
$
|
115
|
|
|
$
|
107
|
|
|
7
|
|
$
|
437
|
|
|
$
|
419
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
returns:
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax
rate
|
|
23.5
|
%
|
|
23.6
|
%
|
|
|
|
23.6
|
%
|
|
23.7
|
%
|
|
|
Average invested assets plus cash and cash
equivalents
|
|
$
|
14,525
|
|
|
$
|
14,229
|
|
|
|
|
$
|
14,515
|
|
|
$
|
13,951
|
|
|
|
Average yield
pretax
|
|
4.13
|
%
|
|
3.94
|
%
|
|
|
|
3.94
|
%
|
|
3.94
|
%
|
|
|
Average yield
after-tax
|
|
3.17
|
|
|
3.01
|
|
|
|
|
3.01
|
|
|
3.00
|
|
|
|
Fixed-maturity
returns:
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax
rate
|
|
27.2
|
%
|
|
27.0
|
%
|
|
|
|
27.1
|
%
|
|
27.0
|
%
|
|
|
Average amortized
cost
|
|
$
|
9,360
|
|
|
$
|
8,898
|
|
|
|
|
$
|
9,098
|
|
|
$
|
8,755
|
|
|
|
Average yield
pretax
|
|
4.66
|
%
|
|
4.72
|
%
|
|
|
|
4.70
|
%
|
|
4.76
|
%
|
|
|
Average yield
after-tax
|
|
3.39
|
|
|
3.45
|
|
|
|
|
3.43
|
|
|
3.48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- $10 million or 7 percent rise in
fourth-quarter 2015 pretax investment income, including 14 percent
growth in equity portfolio dividends and 4 percent growth in
interest income.
- $40 million and $52 million fourth-quarter and full-year 2015
impact from other-than-temporary impairments to net realized
investment gains and losses, compared with $23 million and $24
million for fourth-quarter and full-year 2014.
- $102 million or 5 percent
fourth-quarter 2015 net increase in pretax net unrealized
investment portfolio gains, including a $212
million increase for the equity portfolio. The
fourth-quarter effect of net realized gains from investment
portfolio security sales or called bonds was
immaterial.
- $625 million or 23 percent
full-year 2015 net decrease in pretax net unrealized investment
portfolio gains, including a $362
million decrease for the equity portfolio. The total
decrease included the effect of $121
million of pretax net realized gains from investment
portfolio security sales or called bonds during full-year 2015,
including $103 million from the
equity portfolio.
Balance Sheet
Highlights
|
|
|
|
|
|
(Dollars in millions
except share data)
|
|
At December
31,
|
|
At December
31,
|
|
2015
|
|
2014
|
Balance sheet
data:
|
|
|
|
|
Total
investments
|
|
$
|
14,423
|
|
|
$
|
14,386
|
|
Total
assets
|
|
18,888
|
|
|
18,748
|
|
Short-term debt
|
|
35
|
|
|
49
|
|
Long-term debt
|
|
786
|
|
|
786
|
|
Shareholders' equity
|
|
6,427
|
|
|
6,573
|
|
Book
value per share
|
|
39.20
|
|
|
40.14
|
|
Debt-to-total-capital ratio
|
|
11.3
|
%
|
|
11.3
|
%
|
- $14.967 billion in consolidated
cash and invested assets at December 31,
2015, down $10 million from
$14.977 billion at year-end
2014.
- $9.650 billion bond portfolio at
December 31, 2015, with an average
rating of A2/A. Fair value decreased $106
million or 1 percent during the fourth quarter of 2015.
- $4.706 billion equity portfolio
was 32.6 percent of total investments, including $1.768 billion in pretax net unrealized gains at
December 31, 2015. Fourth-quarter
2015 increase in fair value of $180
million or 4 percent.
- $4.413 billion of statutory
surplus for the property casualty insurance group at December 31, 2015, down $59 million from $4.472
billion at year-end 2014, after declaring $447 million in dividends to the parent company.
The ratio of net written premiums to property casualty statutory
surplus for the 12 months ended December 31,
2015, was 1.0-to-1, up from 0.9-to-1 at year-end 2014.
- Value creation ratio of 3.4 percent for full-year 2015 included
contributions of 8.9 percentage points from net income before net
realized investment gains, partially offset by unfavorable effects
of investment portfolio realized gains and changes in unrealized
gains of 2.6 points from our bond portfolio and 2.9 points from our
stock portfolio.
For additional information or to register for our conference
call webcast, please visit cinfin.com/investors.
Cincinnati Financial Corporation offers business, home and auto
insurance, our main business, through The Cincinnati Insurance
Company and its two standard market property casualty companies.
The same local independent insurance agencies that market those
policies may offer products of our other subsidiaries, including
life and disability income insurance, fixed annuities and surplus
lines property and casualty insurance. For additional information
about the company, please visit cinfin.com.
Mailing
Address:
|
Street
Address:
|
P.O. Box
145496
|
6200 South Gilmore
Road
|
Cincinnati, Ohio
45250-5496
|
Fairfield, Ohio
45014-5141
|
Safe Harbor Statement
This is our "Safe Harbor"
statement under the Private Securities Litigation Reform Act of
1995. Our business is subject to certain risks and uncertainties
that may cause actual results to differ materially from those
suggested by the forward-looking statements in this report. Some of
those risks and uncertainties are discussed in our 2014 Annual
Report on Form 10-K, Item 1A, Risk Factors, Page 33.
Factors that could cause or contribute to such differences
include, but are not limited to:
- Unusually high levels of catastrophe losses due to risk
concentrations, changes in weather patterns, environmental events,
terrorism incidents or other causes
- Increased frequency and/or severity of claims or development of
claims that are unforeseen at the time of policy issuance
- Inadequate estimates, assumptions or reliance on third-party
data used for critical accounting estimates
- Declines in overall stock market values negatively affecting
the company's equity portfolio and book value
- Domestic and global events resulting in capital market or
credit market uncertainty, followed by prolonged periods of
economic instability or recession, that lead to:
- Significant or prolonged decline in the fair value of a
particular security or group of securities and impairment of the
asset(s)
- Significant decline in investment income due to reduced or
eliminated dividend payouts from a particular security or group of
securities
- Significant rise in losses from surety and director and officer
policies written for financial institutions or other insured
entities
- Prolonged low interest rate environment or other factors that
limit the company's ability to generate growth in investment income
or interest rate fluctuations that result in declining values of
fixed-maturity investments, including declines in accounts in which
we hold bank-owned life insurance contract assets
- Recession or other economic conditions resulting in lower
demand for insurance products or increased payment
delinquencies
- Difficulties with technology or data security breaches,
including cyberattacks, that could negatively affect our ability to
conduct business and our relationships with agents, policyholders
and others
- Disruption of the insurance market caused by technology
innovations such as driverless cars that could decrease consumer
demand for insurance products
- Delays, inadequate data developed internally or from third
parties, or performance inadequacies from ongoing development and
implementation of underwriting and pricing methods, including
telematics and other usage-based insurance methods, or technology
projects and enhancements expected to increase our pricing
accuracy, underwriting profit and competitiveness
- Increased competition that could result in a significant
reduction in the company's premium volume
- Changing consumer insurance-buying habits and consolidation of
independent insurance agencies that could alter our competitive
advantages
- Inability to obtain adequate ceded reinsurance on acceptable
terms, amount of reinsurance coverage purchased, financial strength
of reinsurers and the potential for nonpayment or delay in payment
by reinsurers
- Inability to defer policy acquisition costs for any business
segment if pricing and loss trends would lead management to
conclude that segment could not achieve sustainable
profitability
- Inability of our subsidiaries to pay dividends consistent with
current or past levels
- Events or conditions that could weaken or harm the company's
relationships with its independent agencies and hamper
opportunities to add new agencies, resulting in limitations on the
company's opportunities for growth, such as:
- Downgrades of the company's financial strength ratings
- Concerns that doing business with the company is too
difficult
- Perceptions that the company's level of service, particularly
claims service, is no longer a distinguishing characteristic in the
marketplace
- Inability or unwillingness to nimbly develop and introduce
coverage product updates and innovations that our competitors offer
and consumers expect to find in the marketplace
- Actions of insurance departments, state attorneys general or
other regulatory agencies, including a change to a federal system
of regulation from a state-based system, that:
- Impose new obligations on us that increase our expenses or
change the assumptions underlying our critical accounting
estimates
- Place the insurance industry under greater regulatory scrutiny
or result in new statutes, rules and regulations
- Restrict our ability to exit or reduce writings of unprofitable
coverages or lines of business
- Add assessments for guaranty funds, other insurance‑related
assessments or mandatory reinsurance arrangements; or that impair
our ability to recover such assessments through future surcharges
or other rate changes
- Increase our provision for federal income taxes due to changes
in tax law
- Increase our other expenses
- Limit our ability to set fair, adequate and reasonable
rates
- Place us at a disadvantage in the marketplace
- Restrict our ability to execute our business model, including
the way we compensate agents
- Adverse outcomes from litigation or administrative
proceedings
- Events or actions, including unauthorized intentional
circumvention of controls, that reduce the company's future ability
to maintain effective internal control over financial reporting
under the Sarbanes-Oxley Act of 2002
- Unforeseen departure of certain executive officers or other key
employees due to retirement, health or other causes that could
interrupt progress toward important strategic goals or diminish the
effectiveness of certain longstanding relationships with insurance
agents and others
- Events, such as an epidemic, natural catastrophe or terrorism,
that could hamper our ability to assemble our workforce at our
headquarters location
Further, the company's insurance businesses are subject to the
effects of changing social, global, economic and regulatory
environments. Public and regulatory initiatives have included
efforts to adversely influence and restrict premium rates, restrict
the ability to cancel policies, impose underwriting standards and
expand overall regulation. The company also is subject to public
and regulatory initiatives that can affect the market value for its
common stock, such as measures affecting corporate financial
reporting and governance. The ultimate changes and eventual
effects, if any, of these initiatives are uncertain.
Cincinnati
Financial Corporation
Condensed Consolidated Balance Sheets (unaudited)
|
|
|
|
|
|
(Dollars in millions
except per share data)
|
|
December
31,
|
|
December
31,
|
|
|
2015
|
|
2014
|
Assets
|
|
|
|
|
Investments
|
|
|
|
|
Fixed maturities, at fair value (amortized cost: 2015—$9,324;
2014—$8,871)
|
|
$
|
9,650
|
|
|
$
|
9,460
|
|
Equity securities, at fair value (cost: 2015—$2,938;
2014—$2,728)
|
|
4,706
|
|
|
4,858
|
|
Other invested assets
|
|
67
|
|
|
68
|
|
Total
investments
|
|
14,423
|
|
|
14,386
|
|
Cash and cash
equivalents
|
|
544
|
|
|
591
|
|
Investment
income receivable
|
|
129
|
|
|
123
|
|
Finance
receivable
|
|
62
|
|
|
75
|
|
Premiums
receivable
|
|
1,431
|
|
|
1,405
|
|
Reinsurance
recoverable
|
|
542
|
|
|
545
|
|
Prepaid
reinsurance premiums
|
|
54
|
|
|
29
|
|
Deferred
policy acquisition costs
|
|
616
|
|
|
578
|
|
Land, building
and equipment, net, for company use (accumulated
depreciation:
2015—$459;
2014—$446)
|
|
185
|
|
|
194
|
|
Other
assets
|
|
154
|
|
|
70
|
|
Separate
accounts
|
|
748
|
|
|
752
|
|
Total assets
|
|
$
|
18,888
|
|
|
$
|
18,748
|
|
Liabilities
|
|
|
|
|
Insurance
reserves
|
|
|
|
|
Loss and loss expense reserves
|
|
$
|
4,718
|
|
|
$
|
4,485
|
|
Life policy and investment contract reserves
|
|
2,583
|
|
|
2,497
|
|
Unearned
premiums
|
|
2,201
|
|
|
2,082
|
|
Other
liabilities
|
|
717
|
|
|
648
|
|
Deferred
income tax
|
|
638
|
|
|
840
|
|
Note
payable
|
|
35
|
|
|
49
|
|
Long-term debt
and capital lease obligations
|
|
821
|
|
|
822
|
|
Separate
accounts
|
|
748
|
|
|
752
|
|
Total liabilities
|
|
12,461
|
|
|
12,175
|
|
|
|
|
|
|
Shareholders'
Equity
|
|
|
|
|
Common stock,
par value—$2 per share; (authorized: 2015 and 2014—500 million
shares;
issued and outstanding: 2015 and 2014—198.3 million
shares)
|
|
397
|
|
|
397
|
|
Paid-in
capital
|
|
1,232
|
|
|
1,214
|
|
Retained
earnings
|
|
4,762
|
|
|
4,505
|
|
Accumulated other
comprehensive income
|
|
1,344
|
|
|
1,744
|
|
Treasury stock at
cost (2015—34.4 million share and 2014—34.6 million
shares)
|
|
(1,308)
|
|
|
(1,287)
|
|
Total shareholders'
equity
|
|
6,427
|
|
|
6,573
|
|
Total liabilities and
shareholders' equity
|
|
$
|
18,888
|
|
|
$
|
18,748
|
|
|
|
|
|
|
Cincinnati
Financial Corporation
Condensed Consolidated Statements of Income
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions
except per share data)
|
Three months ended
December 31,
|
|
Twelve months ended
December 31,
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Revenues
|
|
|
|
|
|
|
|
Earned
premiums
|
$
|
1,148
|
|
|
$
|
1,086
|
|
|
$
|
4,480
|
|
|
$
|
4,243
|
|
Investment income, net of expenses
|
150
|
|
|
140
|
|
|
572
|
|
|
549
|
|
Realized
investment gains and losses, net
|
(40)
|
|
|
32
|
|
|
70
|
|
|
133
|
|
Fee
revenues
|
3
|
|
|
3
|
|
|
13
|
|
|
12
|
|
Other
revenues
|
2
|
|
|
1
|
|
|
7
|
|
|
8
|
|
Total
revenues
|
1,263
|
|
|
1,262
|
|
|
5,142
|
|
|
4,945
|
|
|
|
|
|
|
|
|
|
Benefits and
Expenses
|
|
|
|
|
|
|
|
Insurance losses and contract holders' benefits
|
677
|
|
|
675
|
|
|
2,808
|
|
|
2,856
|
|
Underwriting, acquisition and insurance expenses
|
354
|
|
|
334
|
|
|
1,387
|
|
|
1,301
|
|
Interest
expense
|
13
|
|
|
13
|
|
|
53
|
|
|
53
|
|
Other
operating expenses
|
3
|
|
|
4
|
|
|
13
|
|
|
14
|
|
Total benefits and
expenses
|
1,047
|
|
|
1,026
|
|
|
4,261
|
|
|
4,224
|
|
|
|
|
|
|
|
|
|
Income Before
Income Taxes
|
216
|
|
|
236
|
|
|
881
|
|
|
721
|
|
|
|
|
|
|
|
|
|
Provision for
Income Taxes
|
|
|
|
|
|
|
|
Current
|
51
|
|
|
53
|
|
|
231
|
|
|
159
|
|
Deferred
|
9
|
|
|
16
|
|
|
16
|
|
|
37
|
|
Total provision for
income taxes
|
60
|
|
|
69
|
|
|
247
|
|
|
196
|
|
|
|
|
|
|
|
|
|
Net
Income
|
$
|
156
|
|
|
$
|
167
|
|
|
$
|
634
|
|
|
$
|
525
|
|
|
|
|
|
|
|
|
|
Per Common
Share
|
|
|
|
|
|
|
|
Net
income—basic
|
$
|
0.95
|
|
|
$
|
1.03
|
|
|
$
|
3.87
|
|
|
$
|
3.21
|
|
Net
income—diluted
|
0.94
|
|
|
1.02
|
|
|
3.83
|
|
|
3.18
|
|
Definitions of Non-GAAP Information and
Reconciliation to Comparable GAAP Measures
(See attached
tables for reconciliations; prior-period reconciliations available
at cinfin.com/investors.)
Cincinnati Financial Corporation prepares its public financial
statements in conformity with accounting principles generally
accepted in the United States of
America (GAAP). Statutory data is prepared in accordance
with statutory accounting rules as defined by the National
Association of Insurance Commissioners' (NAIC) Accounting Practices
and Procedures Manual, and therefore is not reconciled to GAAP
data.
Management uses certain non-GAAP and non-statutory financial
measures to evaluate its primary business areas – property casualty
insurance, life insurance and investments. Management uses these
measures when analyzing both GAAP and non-GAAP measures to improve
its understanding of trends in the underlying business and to help
avoid incorrect or misleading assumptions and conclusions about the
success or failure of company strategies. Management adjustments to
GAAP measures generally: apply to non-recurring events that are
unrelated to business performance and distort short-term results;
involve values that fluctuate based on events outside of
management's control; or relate to accounting refinements that
affect comparability between periods, creating a need to analyze
data on the same basis.
- Operating income: Operating income is calculated by excluding
net realized investment gains and losses (defined as realized
investment gains and losses after applicable federal and state
income taxes) from net income. Management evaluates operating
income to measure the success of pricing, rate and underwriting
strategies. While realized investment gains (or losses) are
integral to the company's insurance operations over the long term,
the determination to realize investment gains or losses in any
period may be subject to management's discretion and is independent
of the insurance underwriting process. Also, under applicable GAAP
accounting requirements, gains and losses can be recognized from
certain changes in market values of securities without actual
realization. Management believes that the level of realized
investment gains or losses for any particular period, while it may
be material, may not fully indicate the performance of ongoing
underlying business operations in that period.
For these reasons, many investors and shareholders consider
operating income to be one of the more meaningful measures for
evaluating insurance company performance. Equity analysts who
report on the insurance industry and the company generally focus on
this metric in their analyses. The company presents operating
income so that all investors have what management believes to be a
useful supplement to GAAP information.
- Value creation ratio: This is a measure of shareholder value
creation that management believes captures the contribution of the
company's insurance operations, the success of its investment
strategy and the importance placed on paying cash dividends to
shareholders. The value creation ratio measure is made up of two
primary components: (1) rate of growth in book value per share plus
(2) the ratio of dividends declared per share to beginning book
value per share. Management believes this non-GAAP measure is a
useful supplement to GAAP information, providing a meaningful
measure of long-term progress in creating shareholder value. It is
intended to be all-inclusive regarding changes in book value per
share, and uses originally reported book value per share in cases
where book value per share has been adjusted, such as adoption of
Accounting Standards Updates with a cumulative effect of a change
in accounting.
- Statutory accounting rules: For public reporting, insurance
companies prepare financial statements in accordance with GAAP.
However, insurers also must calculate certain data according to
statutory accounting rules as defined in the NAIC's Accounting
Practices and Procedures Manual, which may be, and has been,
modified by various state insurance departments. Statutory data is
publicly available, and various organizations use it to calculate
aggregate industry data, study industry trends and compare
insurance companies.
- Written premium: Under statutory accounting rules, property
casualty written premium is the amount recorded for policies issued
and recognized on an annualized basis at the effective date of the
policy. Management analyzes trends in written premium to assess
business efforts. Earned premium, used in both statutory and GAAP
accounting, is calculated ratably over the policy term. The
difference between written and earned premium is unearned
premium.
Cincinnati
Financial Corporation
Balance Sheet
Reconciliation
|
|
|
|
|
|
(Dollars are per
share)
|
|
Three months ended
December 31,
|
|
Twelve months ended
December 31,
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Value creation
ratio:
|
|
|
|
|
|
|
|
|
End of
period book value
|
|
$
|
39.20
|
|
|
$
|
40.14
|
|
|
$
|
39.20
|
|
|
$
|
40.14
|
|
Less
beginning of period book value
|
|
38.77
|
|
|
39.01
|
|
|
40.14
|
|
|
37.21
|
|
Change
in book value
|
|
0.43
|
|
|
1.13
|
|
|
(0.94)
|
|
|
2.93
|
|
Dividend
declared to shareholders
|
|
0.92
|
|
|
0.44
|
|
|
2.30
|
|
|
1.76
|
|
Total
value creation
|
|
$
|
1.35
|
|
|
$
|
1.57
|
|
|
$
|
1.36
|
|
|
$
|
4.69
|
|
|
|
|
|
|
|
|
|
|
Value creation ratio
from change in book value*
|
|
1.1
|
%
|
|
2.9
|
%
|
|
(2.3)
|
%
|
|
7.9
|
%
|
Value creation ratio
from dividends declared to
shareholders**
|
|
2.4
|
|
|
1.1
|
|
|
5.7
|
|
|
4.7
|
|
Value creation
ratio
|
|
3.5
|
%
|
|
4.0
|
%
|
|
3.4
|
%
|
|
12.6
|
%
|
|
|
|
|
|
|
|
|
|
*
Change in book value divided by the beginning of period book
value
|
|
|
**
Dividend declared to shareholders divided by beginning of period
book value
|
|
|
Net Income
Reconciliation
|
|
(Dollars in millions
except per share data)
|
|
Three months ended
December 31,
|
|
Twelve months ended
December 31,
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Net
income
|
|
$
|
156
|
|
|
$
|
167
|
|
|
$
|
634
|
|
|
$
|
525
|
|
Realized
investment gains and losses, net
|
|
(26)
|
|
|
19
|
|
|
45
|
|
|
85
|
|
Operating income
|
|
182
|
|
|
148
|
|
|
589
|
|
|
440
|
|
Less
catastrophe losses
|
|
(9)
|
|
|
6
|
|
|
(105)
|
|
|
(133)
|
|
Operating income before catastrophe losses
|
|
$
|
191
|
|
|
$
|
142
|
|
|
$
|
694
|
|
|
$
|
573
|
|
|
|
|
|
|
|
|
|
|
Diluted per share
data:
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
0.94
|
|
|
$
|
1.02
|
|
|
$
|
3.83
|
|
|
$
|
3.18
|
|
Realized
investment gains and losses, net
|
|
(0.16)
|
|
|
0.13
|
|
|
0.27
|
|
|
0.52
|
|
Operating income
|
|
1.10
|
|
|
0.89
|
|
|
3.56
|
|
|
2.66
|
|
Less
catastrophe losses
|
|
(0.05)
|
|
|
0.04
|
|
|
(0.63)
|
|
|
(0.81)
|
|
Operating income before catastrophe losses
|
|
$
|
1.15
|
|
|
$
|
0.85
|
|
|
$
|
4.19
|
|
|
$
|
3.47
|
|
|
|
|
|
|
|
|
|
|
Cincinnati
Financial Corporation
|
|
Property Casualty
Operations Reconciliation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in
millions)
|
Three months ended
December 31, 2015
|
|
Consolidated*
|
Commercial
|
Personal
|
E&S
|
Premiums:
|
|
|
|
|
|
|
|
|
|
|
|
|
Written
premiums
|
|
$
|
1,055
|
|
|
|
$
|
712
|
|
|
|
$
|
266
|
|
|
|
$
|
44
|
|
|
Unearned
premiums change
|
|
40
|
|
|
|
49
|
|
|
|
14
|
|
|
|
0
|
|
|
Earned
premiums
|
|
$
|
1,095
|
|
|
|
$
|
761
|
|
|
|
$
|
280
|
|
|
|
$
|
44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statutory
ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
ratio
|
|
88.6
|
%
|
|
|
88.6
|
%
|
|
|
95.1
|
%
|
|
|
50.7
|
%
|
|
Contribution from catastrophe losses
|
|
1.2
|
|
|
|
1.0
|
|
|
|
1.8
|
|
|
|
0.1
|
|
|
Combined
ratio excluding catastrophe losses
|
|
87.4
|
%
|
|
|
87.6
|
%
|
|
|
93.3
|
%
|
|
|
50.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commission expense ratio
|
|
19.7
|
%
|
|
|
19.5
|
%
|
|
|
17.9
|
%
|
|
|
28.8
|
%
|
|
Other
underwriting expense ratio
|
|
12.6
|
|
|
|
14.0
|
|
|
|
11.5
|
|
|
|
3.0
|
|
|
Total
expense ratio
|
|
32.3
|
%
|
|
|
33.5
|
%
|
|
|
29.4
|
%
|
|
|
31.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP
ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
ratio
|
|
87.0
|
%
|
|
|
86.8
|
%
|
|
|
94.0
|
%
|
|
|
48.1
|
%
|
|
Contribution from catastrophe losses
|
|
1.2
|
|
|
|
1.0
|
|
|
|
1.8
|
|
|
|
0.1
|
|
|
Prior
accident years before catastrophe losses
|
|
(3.8)
|
|
|
|
(4.1)
|
|
|
|
1.5
|
|
|
|
(32.5)
|
|
|
Current
accident year combined ratio before catastrophe losses
|
|
89.6
|
%
|
|
|
89.9
|
%
|
|
|
90.7
|
%
|
|
|
80.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in
millions)
|
Twelve months ended
December 31, 2015
|
|
Consolidated*
|
Commercial
|
Personal
|
E&S
|
Premiums:
|
|
|
|
|
|
|
|
|
|
|
|
|
Written
premiums
|
|
$
|
4,361
|
|
|
|
$
|
3,025
|
|
|
|
$
|
1,128
|
|
|
|
$
|
175
|
|
|
Unearned
premiums change
|
|
(90)
|
|
|
|
(29)
|
|
|
|
(31)
|
|
|
|
(7)
|
|
|
Earned
premiums
|
|
$
|
4,271
|
|
|
|
$
|
2,996
|
|
|
|
$
|
1,097
|
|
|
|
$
|
168
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statutory
ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
ratio
|
|
90.6
|
%
|
|
|
88.3
|
%
|
|
|
100.0
|
%
|
|
|
71.9
|
%
|
|
Contribution from catastrophe losses
|
|
3.7
|
|
|
|
3.1
|
|
|
|
6.2
|
|
|
|
0.4
|
|
|
Combined
ratio excluding catastrophe losses
|
|
86.9
|
%
|
|
|
85.2
|
%
|
|
|
93.8
|
%
|
|
|
71.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commission expense ratio
|
|
18.5
|
%
|
|
|
18.3
|
%
|
|
|
17.7
|
%
|
|
|
27.2
|
%
|
|
Other
underwriting expense ratio
|
|
11.9
|
|
|
|
13.0
|
|
|
|
10.4
|
|
|
|
2.8
|
|
|
Total
expense ratio
|
|
30.4
|
%
|
|
|
31.3
|
%
|
|
|
28.1
|
%
|
|
|
30.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP
ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
ratio
|
|
91.1
|
%
|
|
|
88.6
|
%
|
|
|
101.3
|
%
|
|
|
70.0
|
%
|
|
Contribution from catastrophe losses
|
|
3.7
|
|
|
|
3.1
|
|
|
|
6.2
|
|
|
|
0.4
|
|
|
Prior
accident years before catastrophe losses
|
|
(3.9)
|
|
|
|
(4.7)
|
|
|
|
0.8
|
|
|
|
(20.6)
|
|
|
Current
accident year combined ratio before catastrophe losses
|
|
91.3
|
%
|
|
|
90.2
|
%
|
|
|
94.3
|
%
|
|
|
90.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollar amounts shown
are rounded to millions; certain amounts may not add due to
rounding. Ratios are calculated based on dollar amounts in
thousands.
|
*Consolidated
property casualty data includes results from our Cincinnati Re
operations.
|
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SOURCE Cincinnati Financial Corporation