CINCINNATI, July 30, 2019 /PRNewswire/ -- Cincinnati
Financial Corporation (Nasdaq: CINF) today reported:
- Second-quarter 2019 net income of $428
million, or $2.59 per share,
compared with $217 million, or
$1.32 per share, in the second
quarter of 2018.
- $7 million or 5% increase in
non-GAAP operating income* to $140
million, or 85 cents per
share, compared with $133 million, or
81 cents per share, in the second
quarter of last year.
- $211 million increase in
second-quarter 2019 net income, primarily due to the after-tax net
effect of a $204 million increase in
net investment gains and a $9 million
increase in after-tax property casualty underwriting income.
- $55.92 book value per share at
June 30, 2019, a record high, up
$7.82 or 16.3% since year-end.
- 18.6% value creation ratio for the first six months of 2019,
compared with negative 1.1% for the 2018 period.
Financial Highlights
(Dollars in millions,
except per share data)
|
Three months ended
June 30,
|
Six months ended June
30,
|
|
2019
|
|
2018
|
|
% Change
|
|
2019
|
|
2018
|
|
% Change
|
Revenue
Data
|
|
|
|
|
|
|
|
|
|
|
|
|
Earned
premiums
|
|
$
|
1,384
|
|
|
$
|
1,294
|
|
|
7
|
|
$
|
2,717
|
|
|
$
|
2,554
|
|
|
6
|
Investment income, net of expenses
|
|
160
|
|
|
154
|
|
|
4
|
|
317
|
|
|
304
|
|
|
4
|
Total
revenues
|
|
1,913
|
|
|
1,558
|
|
|
23
|
|
4,072
|
|
|
2,782
|
|
|
46
|
Income Statement
Data
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
428
|
|
|
$
|
217
|
|
|
97
|
|
$
|
1,123
|
|
|
$
|
186
|
|
|
504
|
Investment gains and losses, after-tax
|
|
288
|
|
|
84
|
|
|
243
|
|
811
|
|
|
(67)
|
|
|
nm
|
Non-GAAP
operating income*
|
|
$
|
140
|
|
|
$
|
133
|
|
|
5
|
|
$
|
312
|
|
|
$
|
253
|
|
|
23
|
Per Share Data
(diluted)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
2.59
|
|
|
$
|
1.32
|
|
|
96
|
|
$
|
6.81
|
|
|
$
|
1.12
|
|
|
508
|
Investment gains and losses, after-tax
|
|
1.74
|
|
|
0.51
|
|
|
241
|
|
4.92
|
|
|
(0.41)
|
|
|
nm
|
Non-GAAP
operating income*
|
|
$
|
0.85
|
|
|
$
|
0.81
|
|
|
5
|
|
$
|
1.89
|
|
|
$
|
1.53
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book
value
|
|
|
|
|
|
|
|
$
|
55.92
|
|
|
$
|
48.68
|
|
|
15
|
Cash
dividend declared
|
|
$
|
0.56
|
|
|
$
|
0.53
|
|
|
6
|
|
$
|
1.12
|
|
|
$
|
1.06
|
|
|
6
|
Diluted
weighted average shares outstanding
|
|
165.2
|
|
|
164.5
|
|
|
0
|
|
164.9
|
|
|
165.0
|
|
|
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 Second-Quarter Highlights
- 96.5% second-quarter 2019 property casualty combined ratio,
improved from 97.2% for the second quarter of 2018.
- 9% growth in second-quarter net written premiums, reflecting
price increases and premium growth initiatives.
- $212 million second-quarter 2019
property casualty new business written premiums, up 17%. Agencies
appointed since the beginning of 2018 contributed $25 million or 12% of total new business written
premiums.
- $8 million of life insurance
subsidiary net income, down $9
million from the second quarter of 2018, and 7% growth in
second-quarter 2019 term life insurance earned premiums.
Investment and Balance Sheet Highlights
- 4% or $6 million increase in
second-quarter 2019 pretax investment income, including a 14%
increase for stock portfolio dividends and a 1% decrease for bond
interest income.
- Three-month increase of 4% in fair value of total investments
at June 30, 2019, including a 7%
increase for the stock portfolio and a 3% increase for the bond
portfolio.
- $2.939 billion parent company
cash and marketable securities at June 30,
2019, up 19% from year-end 2018.
Diversification Improving Results
Steven J. Johnston, president and chief
executive officer, commented: "Higher insurance underwriting
profits in the second quarter – up 33% – supported by steadily
rising income from our investment portfolio improved our non-GAAP
operating income 5% compared with last year's second quarter
result.
"Spring storms across the country impacted our policyholders,
including powerful tornadoes that hit in Dayton, Ohio, just a short drive from our
headquarters office, resulting in nearly $130 million in losses. I'm proud of our
associates who jumped into action, comforting those who had
experienced damage and getting them moving toward recovery.
"Despite a 2.9-point ratio increase in weather-related
catastrophe losses, our second-quarter combined ratio of 96.5%
improved 0.7 points compared with last year's result.
"In the past five years, our E&S net written premiums have
nearly doubled, we launched Cincinnati ReSM and we
acquired Cincinnati Global. Those areas were among our most
profitable during the second quarter and contributed to our
performance exceeding last year's results. Supporting our
belief that our focus on diversification and segmentation is
paying off, our first half 2019 combined ratio of 94.8% is our best
result in the past six years."
Balancing Growth and Profitability
"Second-quarter
property casualty new business written premiums topped $200 million for the first time in any single
quarter, growing 17% compared with last year, as production from
recently appointed agencies accelerates.
"Total property casualty net written premiums saw double-digit
growth for the first six months, increasing 10% compared with the
first half of 2018. Overall renewal pricing trends developed
satisfactorily with standard and excess and surplus commercial
lines policies averaging percentage increases in the
low-single-digit range and personal lines experiencing rate change
percentages that averaged in the mid-single-digit range.
"By seeking increased pricing on those accounts that need it
most and remaining very competitive on our agents' best-performing
accounts, we are able to maintain a nice balance between growth and
profitability."
Book Value at Record High
"At June 30, our book value again reached a record
high, increasing 16.3% since December 31,
2018. Consolidated cash and total investments also reached a
new high, topping $19 billion.
"Our ample capital allows us to execute on our long-term
strategies and, at the same time continue to pay dividends to
shareholders. Our value creation ratio, which considers the
dividends we pay as well as growth in book value, was 18.6% for the
first half of 2019, above our 10% to 13% average annual target for
this measure."
Insurance
Operations Highlights
|
Consolidated
Property Casualty Insurance Results
|
(Dollars in
millions)
|
Three months ended
June 30,
|
Six months ended June
30,
|
|
|
2019
|
|
2018
|
|
% Change
|
|
2019
|
|
2018
|
|
% Change
|
Earned
premiums
|
|
$
|
1,317
|
|
|
$
|
1,230
|
|
|
7
|
|
|
$
|
2,584
|
|
|
$
|
2,430
|
|
|
6
|
|
Fee
revenues
|
|
2
|
|
|
3
|
|
|
(33)
|
|
|
5
|
|
|
6
|
|
|
(17)
|
|
Total
revenues
|
|
1,319
|
|
|
1,233
|
|
|
7
|
|
|
2,589
|
|
|
2,436
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss
expenses
|
|
863
|
|
|
821
|
|
|
5
|
|
|
1,653
|
|
|
1,612
|
|
|
3
|
|
Underwriting
expenses
|
|
408
|
|
|
376
|
|
|
9
|
|
|
797
|
|
|
759
|
|
|
5
|
|
Underwriting profit
|
|
$
|
48
|
|
|
$
|
36
|
|
|
33
|
|
|
$
|
139
|
|
|
$
|
65
|
|
|
114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios as a percent
of earned premiums:
|
|
|
|
|
|
Pt. Change
|
|
|
|
|
|
Pt. Change
|
Loss and loss
expenses
|
|
65.6
|
%
|
|
66.7
|
%
|
|
(1.1)
|
|
|
64.0
|
%
|
|
66.3
|
%
|
|
(2.3)
|
|
Underwriting
expenses
|
|
30.9
|
|
|
30.5
|
|
|
0.4
|
|
|
30.8
|
|
|
31.2
|
|
|
(0.4)
|
|
Combined ratio
|
|
96.5
|
%
|
|
97.2
|
%
|
|
(0.7)
|
|
|
94.8
|
%
|
|
97.5
|
%
|
|
(2.7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
|
|
|
% Change
|
Agency renewal
written premiums
|
|
$
|
1,186
|
|
|
$
|
1,150
|
|
|
3
|
|
|
$
|
2,316
|
|
|
$
|
2,233
|
|
|
4
|
|
Agency new business
written premiums
|
|
212
|
|
|
181
|
|
|
17
|
|
|
393
|
|
|
340
|
|
|
16
|
|
Other written
premiums
|
|
78
|
|
|
18
|
|
|
333
|
|
|
148
|
|
|
34
|
|
|
335
|
|
Net
written premiums
|
|
$
|
1,476
|
|
|
$
|
1,349
|
|
|
9
|
|
|
$
|
2,857
|
|
|
$
|
2,607
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios as a percent
of earned premiums:
|
|
|
|
|
|
Pt. Change
|
|
|
|
|
|
Pt. Change
|
Current accident year before
catastrophe losses
|
|
60.9
|
%
|
|
62.2
|
%
|
|
(1.3)
|
|
|
61.5
|
%
|
|
63.5
|
%
|
|
(2.0)
|
|
Current accident year
catastrophe losses
|
|
11.1
|
|
|
7.1
|
|
|
4.0
|
|
|
8.4
|
|
|
6.1
|
|
|
2.3
|
|
Prior accident years before
catastrophe losses
|
|
(5.3)
|
|
|
(2.6)
|
|
|
(2.7)
|
|
|
(5.4)
|
|
|
(3.0)
|
|
|
(2.4)
|
|
Prior accident years
catastrophe losses
|
|
(1.1)
|
|
|
0.0
|
|
|
(1.1)
|
|
|
(0.5)
|
|
|
(0.3)
|
|
|
(0.2)
|
|
Loss and loss expense ratio
|
|
65.6
|
%
|
|
66.7
|
%
|
|
(1.1)
|
|
|
64.0
|
%
|
|
66.3
|
%
|
|
(2.3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current accident year
combined ratio before catastrophe
losses
|
|
91.8
|
%
|
|
92.7
|
%
|
|
(0.9)
|
|
|
92.3
|
%
|
|
94.7
|
%
|
|
(2.4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- $127 million or 9% growth of
second-quarter 2019 property casualty net written premiums, and
six-month growth of 10%, reflecting premium growth initiatives and
price increases. Second-quarter growth included contributions of 2%
from Cincinnati Re and 3% from Cincinnati Global Underwriting
Ltd.SM, formerly known as MSP.
- $31 million or 17% increase in
second-quarter 2019 new business premiums written by agencies and
six-month growth of 16%. The second-quarter growth included an
$11 million increase in standard
market property casualty production from agencies appointed since
the beginning of 2018.
- 92 new agency appointments in the first six months of 2019,
including 37 that market only our personal lines products.
- 0.7 percentage-point improvement in the second-quarter 2019
combined ratio and a 2.7 percentage-point improvement for the
six-month period, despite increases for losses from natural
catastrophes of 2.9 points for the second quarter of 2019 and 2.1
points the six-month period.
- 6.4 percentage-point second-quarter 2019 benefit from favorable
prior accident year reserve development of $84 million, compared with 2.6 points or
$31 million for second-quarter
2018.
- 5.9 percentage-point six-month 2019 benefit from favorable
prior accident year reserve development, compared with 3.3 points
for the first six months of 2018.
- 2.0 percentage-point decrease, to 61.5%, for the six-month 2019
ratio of current accident year losses and loss expenses before
catastrophes, including a decrease of 0.7 points in the ratio for
current accident year losses of $1
million or more per claim, and lower noncatastrophe
weather-related losses representing approximately 0.6 points of the
decrease.
- 0.4 percentage-point decrease in the first-half 2019
underwriting expense ratio, compared with the same period of 2018,
keeping generally in line with our longer-term historical average
and reflecting higher earned premiums and ongoing expense
management.
Commercial Lines
Insurance Results
|
(Dollars in
millions)
|
Three months ended
June 30,
|
Six months ended June
30,
|
|
|
2019
|
|
2018
|
|
% Change
|
|
2019
|
|
2018
|
|
% Change
|
Earned
premiums
|
|
$
|
823
|
|
|
$
|
812
|
|
|
1
|
|
|
$
|
1,633
|
|
|
$
|
1,602
|
|
|
2
|
|
Fee
revenues
|
|
1
|
|
|
—
|
|
|
nm
|
|
2
|
|
|
2
|
|
|
0
|
|
Total
revenues
|
|
824
|
|
|
812
|
|
|
1
|
|
|
1,635
|
|
|
1,604
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss
expenses
|
|
550
|
|
|
510
|
|
|
8
|
|
|
1,031
|
|
|
1,029
|
|
|
0
|
|
Underwriting
expenses
|
|
262
|
|
|
255
|
|
|
3
|
|
|
516
|
|
|
513
|
|
|
1
|
|
Underwriting profit
|
|
$
|
12
|
|
|
$
|
47
|
|
|
(74)
|
|
|
$
|
88
|
|
|
$
|
62
|
|
|
42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios as a percent
of earned premiums:
|
|
|
|
|
|
Pt. Change
|
|
|
|
|
|
Pt. Change
|
Loss and loss
expenses
|
|
66.8
|
%
|
|
62.9
|
%
|
|
3.9
|
|
|
63.1
|
%
|
|
64.2
|
%
|
|
(1.1)
|
|
Underwriting
expenses
|
|
31.8
|
|
|
31.3
|
|
|
0.5
|
|
|
31.6
|
|
|
32.0
|
|
|
(0.4)
|
|
Combined ratio
|
|
98.6
|
%
|
|
94.2
|
%
|
|
4.4
|
|
|
94.7
|
%
|
|
96.2
|
%
|
|
(1.5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
|
|
|
% Change
|
Agency renewal
written premiums
|
|
$
|
767
|
|
|
$
|
758
|
|
|
1
|
|
|
$
|
1,566
|
|
|
$
|
1,529
|
|
|
2
|
|
Agency new business
written premiums
|
|
137
|
|
|
118
|
|
|
16
|
|
|
257
|
|
|
222
|
|
|
16
|
|
Other written
premiums
|
|
(25)
|
|
|
(20)
|
|
|
(25)
|
|
|
(48)
|
|
|
(41)
|
|
|
(17)
|
|
Net
written premiums
|
|
$
|
879
|
|
|
$
|
856
|
|
|
3
|
|
|
$
|
1,775
|
|
|
$
|
1,710
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios as a percent
of earned premiums:
|
|
|
|
|
|
Pt. Change
|
|
|
|
|
|
Pt. Change
|
Current accident year before
catastrophe losses
|
|
61.2
|
%
|
|
61.3
|
%
|
|
(0.1)
|
|
|
62.1
|
%
|
|
63.7
|
%
|
|
(1.6)
|
|
Current accident year
catastrophe losses
|
|
12.7
|
|
|
6.8
|
|
|
5.9
|
|
|
8.4
|
|
|
5.3
|
|
|
3.1
|
|
Prior accident years before
catastrophe losses
|
|
(6.1)
|
|
|
(4.9)
|
|
|
(1.2)
|
|
|
(6.5)
|
|
|
(4.2)
|
|
|
(2.3)
|
|
Prior accident years
catastrophe losses
|
|
(1.0)
|
|
|
(0.3)
|
|
|
(0.7)
|
|
|
(0.9)
|
|
|
(0.6)
|
|
|
(0.3)
|
|
Loss and loss expense ratio
|
|
66.8
|
%
|
|
62.9
|
%
|
|
3.9
|
|
|
63.1
|
%
|
|
64.2
|
%
|
|
(1.1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current accident year
combined ratio before catastrophe
losses
|
|
93.0
|
%
|
|
92.6
|
%
|
|
0.4
|
|
|
93.7
|
%
|
|
95.7
|
%
|
|
(2.0)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- $23 million or 3% increase in
second-quarter 2019 commercial lines net written premiums,
including higher renewal and new business written premiums. Four
percent increase in six-month net written premiums.
- $9 million or 1% increase in
second-quarter renewal written premiums, with commercial lines
average renewal pricing increases in the low-single-digit percent
range, and including commercial auto increases in the
high-single-digit range.
- $19 million or 16% increase in
second-quarter 2019 new business written by agencies, reflecting
growth for each major line of business. For the six-month period,
the increase was also 16 percent.
- 4.4 percentage-point second-quarter 2019 combined ratio
increase, reflecting an increase of 5.2 points for losses from
natural catastrophes.
- 1.5 percentage-point improvement in the six-month 2019 combined
ratio, despite increases for losses from natural catastrophes of
2.8 points
- 7.1 percentage-point second-quarter 2019 benefit from favorable
prior accident year reserve development of $58 million, compared with 5.2 points or
$42 million for second-quarter
2018.
- 7.4 percentage-point six-month 2019 benefit from favorable
prior accident year reserve development, compared with 4.8 points
for the first six months of 2018.
Personal Lines
Insurance Results
|
(Dollars in
millions)
|
Three months ended
June 30,
|
Six months ended June
30,
|
|
|
2019
|
|
2018
|
|
% Change
|
|
2019
|
|
2018
|
|
% Change
|
Earned
premiums
|
|
$
|
348
|
|
|
$
|
331
|
|
|
5
|
|
|
$
|
692
|
|
|
$
|
656
|
|
|
5
|
|
Fee
revenues
|
|
1
|
|
|
2
|
|
|
(50)
|
|
|
2
|
|
|
3
|
|
|
(33)
|
|
Total
revenues
|
|
349
|
|
|
333
|
|
|
5
|
|
|
694
|
|
|
659
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss
expenses
|
|
240
|
|
|
269
|
|
|
(11)
|
|
|
490
|
|
|
507
|
|
|
(3)
|
|
Underwriting
expenses
|
|
104
|
|
|
96
|
|
|
8
|
|
|
203
|
|
|
193
|
|
|
5
|
|
Underwriting profit (loss)
|
|
$
|
5
|
|
|
$
|
(32)
|
|
|
nm
|
|
$
|
1
|
|
|
$
|
(41)
|
|
|
nm
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios as a percent
of earned premiums:
|
|
|
|
|
|
Pt. Change
|
|
|
|
|
|
Pt. Change
|
Loss and loss
expenses
|
|
68.9
|
%
|
|
81.1
|
%
|
|
(12.2)
|
|
|
70.7
|
%
|
|
77.2
|
%
|
|
(6.5)
|
|
Underwriting
expenses
|
|
30.0
|
|
|
29.0
|
|
|
1.0
|
|
|
29.4
|
|
|
29.5
|
|
|
(0.1)
|
|
Combined ratio
|
|
98.9
|
%
|
|
110.1
|
%
|
|
(11.2)
|
|
|
100.1
|
%
|
|
106.7
|
%
|
|
(6.6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
|
|
|
% Change
|
Agency renewal
written premiums
|
|
$
|
365
|
|
|
$
|
342
|
|
|
7
|
|
|
$
|
647
|
|
|
$
|
606
|
|
|
7
|
|
Agency new business
written premiums
|
|
47
|
|
|
46
|
|
|
2
|
|
|
82
|
|
|
85
|
|
|
(4)
|
|
Other written
premiums
|
|
(10)
|
|
|
(7)
|
|
|
(43)
|
|
|
(18)
|
|
|
(13)
|
|
|
(38)
|
|
Net
written premiums
|
|
$
|
402
|
|
|
$
|
381
|
|
|
6
|
|
|
$
|
711
|
|
|
$
|
678
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios as a percent
of earned premiums:
|
|
|
|
|
|
Pt. Change
|
|
|
|
|
|
Pt. Change
|
Current accident year before
catastrophe losses
|
|
62.1
|
%
|
|
66.6
|
%
|
|
(4.5)
|
|
|
61.4
|
%
|
|
65.5
|
%
|
|
(4.1)
|
|
Current accident year
catastrophe losses
|
|
11.0
|
|
|
9.6
|
|
|
1.4
|
|
|
10.9
|
|
|
9.3
|
|
|
1.6
|
|
Prior accident years before
catastrophe losses
|
|
(3.2)
|
|
|
4.3
|
|
|
(7.5)
|
|
|
(2.3)
|
|
|
2.1
|
|
|
(4.4)
|
|
Prior accident years
catastrophe losses
|
|
(1.0)
|
|
|
0.6
|
|
|
(1.6)
|
|
|
0.7
|
|
|
0.3
|
|
|
0.4
|
|
Loss and loss expense ratio
|
|
68.9
|
%
|
|
81.1
|
%
|
|
(12.2)
|
|
|
70.7
|
%
|
|
77.2
|
%
|
|
(6.5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current accident year
combined ratio before catastrophe
losses
|
|
92.1
|
%
|
|
95.6
|
%
|
|
(3.5)
|
|
|
90.8
|
%
|
|
95.0
|
%
|
|
(4.2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- $21 million or 6% increase in
second-quarter 2019 personal lines net written premiums, driven by
higher renewal written premiums that benefited from rate increases
averaging in the mid-single-digit percent range, including personal
auto increases near the low end of the high-single-digit range. Net
written premiums from our agencies' high net worth clients grew
35%. Five percent increase in six-month net written premiums.
- $1 million or 2% increase in
second-quarter 2019 new business written by agencies, and a
six-month decrease of 4%, reflecting pricing discipline.
- 11.2 percentage-point improvement in the second-quarter 2019
combined ratio and improvement of 6.6 points for the six-month
period, primarily due to better experience in the ratio for current
accident year loss and loss expenses before catastrophe losses and
favorable reserve development on prior accident years.
- 4.2 percentage-point second-quarter 2019 benefit from favorable
prior accident year reserve development of $14 million, compared with unfavorable
development of 4.9 points or $17
million for second-quarter 2018.
- 1.6 percentage-point six-month 2019 benefit from favorable
prior accident year reserve development, compared with unfavorable
development of 2.4 points for the first six months of 2018.
Excess and Surplus
Lines Insurance Results
|
(Dollars in
millions)
|
Three months ended
June 30,
|
Six months ended June
30,
|
|
|
2019
|
|
2018
|
|
% Change
|
|
2019
|
|
2018
|
|
% Change
|
Earned
premiums
|
|
$
|
67
|
|
|
$
|
57
|
|
|
18
|
|
|
$
|
130
|
|
|
$
|
113
|
|
|
15
|
|
Fee
revenues
|
|
—
|
|
|
1
|
|
|
nm
|
|
|
1
|
|
|
1
|
|
|
0
|
|
Total
revenues
|
|
67
|
|
|
58
|
|
|
16
|
|
|
131
|
|
|
114
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss
expenses
|
|
29
|
|
|
29
|
|
|
0
|
|
|
62
|
|
|
50
|
|
|
24
|
|
Underwriting
expenses
|
|
21
|
|
|
16
|
|
|
31
|
|
|
41
|
|
|
33
|
|
|
24
|
|
Underwriting profit
|
|
$
|
17
|
|
|
$
|
13
|
|
|
31
|
|
|
$
|
28
|
|
|
$
|
31
|
|
|
(10)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios as a percent
of earned premiums:
|
|
|
|
|
|
Pt. Change
|
|
|
|
|
|
Pt. Change
|
Loss and loss
expenses
|
|
45.1
|
%
|
|
48.5
|
%
|
|
(3.4)
|
|
|
48.3
|
%
|
|
44.0
|
%
|
|
4.3
|
|
Underwriting
expenses
|
|
31.0
|
|
|
29.1
|
|
|
1.9
|
|
|
31.4
|
|
|
29.3
|
|
|
2.1
|
|
Combined ratio
|
|
76.1
|
%
|
|
77.6
|
%
|
|
(1.5)
|
|
|
79.7
|
%
|
|
73.3
|
%
|
|
6.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
|
|
|
% Change
|
Agency renewal
written premiums
|
|
$
|
54
|
|
|
$
|
50
|
|
|
8
|
|
|
$
|
103
|
|
|
$
|
98
|
|
|
5
|
|
Agency new business
written premiums
|
|
28
|
|
|
17
|
|
|
65
|
|
|
54
|
|
|
33
|
|
|
64
|
|
Other written
premiums
|
|
(4)
|
|
|
(3)
|
|
|
(33)
|
|
|
(8)
|
|
|
(6)
|
|
|
(33)
|
|
Net
written premiums
|
|
$
|
78
|
|
|
$
|
64
|
|
|
22
|
|
|
$
|
149
|
|
|
$
|
125
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios as a percent
of earned premiums:
|
|
|
|
|
|
Pt. Change
|
|
|
|
|
|
Pt. Change
|
Current accident year before
catastrophe losses
|
|
50.8
|
%
|
|
56.9
|
%
|
|
(6.1)
|
|
|
53.1
|
%
|
|
55.8
|
%
|
|
(2.7)
|
|
Current accident year
catastrophe losses
|
|
0.7
|
|
|
1.0
|
|
|
(0.3)
|
|
|
0.5
|
|
|
1.4
|
|
|
(0.9)
|
|
Prior accident years before
catastrophe losses
|
|
(6.2)
|
|
|
(9.6)
|
|
|
3.4
|
|
|
(5.2)
|
|
|
(13.3)
|
|
|
8.1
|
|
Prior accident years
catastrophe losses
|
|
(0.2)
|
|
|
0.2
|
|
|
(0.4)
|
|
|
(0.1)
|
|
|
0.1
|
|
|
(0.2)
|
|
Loss and loss expense ratio
|
|
45.1
|
%
|
|
48.5
|
%
|
|
(3.4)
|
|
|
48.3
|
%
|
|
44.0
|
%
|
|
4.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current accident year
combined ratio before catastrophe
losses
|
|
81.8
|
%
|
|
86.0
|
%
|
|
(4.2)
|
|
|
84.5
|
%
|
|
85.1
|
%
|
|
(0.6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- $14 million or 22% increase in
second-quarter 2019 excess and surplus lines net written premiums,
including higher renewal written premiums that benefited from rate
increases averaging in the low-single-digit percent range. Nineteen
percent increase in six-month net written premiums.
- $11 million increase in
second-quarter new business written by agencies, reflecting more
opportunities in the marketplace for insurance companies to obtain
higher premium rates, plus our additional marketing efforts.
- 1.5 percentage-point improvement in the second-quarter 2019
combined ratio and an increase of 6.4 points for the six-month
period, with the six-month increase primarily due to less favorable
prior accident year reserve development.
- 6.4 percentage-point second-quarter 2019 benefit from favorable
prior accident year reserve development of $5 million, compared with 9.4 points or
$4 million for second-quarter
2018.
- 5.3 percentage-point six-month 2019 benefit from favorable
prior accident year reserve development, compared with 13.2 points
for the first six months of 2018.
Life Insurance
Subsidiary Results
|
|
(Dollars in
millions)
|
Three months ended
June 30,
|
Six months ended June
30,
|
|
2019
|
|
2018
|
|
% Change
|
|
2019
|
|
2018
|
|
% Change
|
Term life
insurance
|
|
$
|
47
|
|
|
$
|
44
|
|
|
7
|
|
|
$
|
92
|
|
|
$
|
85
|
|
|
8
|
|
Universal life
insurance
|
|
10
|
|
|
9
|
|
|
11
|
|
|
20
|
|
|
18
|
|
|
11
|
|
Other life insurance,
annuity, and disability income products
|
|
10
|
|
|
11
|
|
|
(9)
|
|
|
21
|
|
|
21
|
|
|
0
|
|
Earned premiums
|
|
67
|
|
|
64
|
|
|
5
|
|
|
133
|
|
|
124
|
|
|
7
|
|
Investment income,
net of expenses
|
|
38
|
|
|
38
|
|
|
0
|
|
|
76
|
|
|
76
|
|
|
0
|
|
Investment gains and
losses, net
|
|
(1)
|
|
|
—
|
|
|
nm
|
|
|
(2)
|
|
|
—
|
|
|
nm
|
|
Fee
revenues
|
|
1
|
|
|
1
|
|
|
0
|
|
|
2
|
|
|
2
|
|
|
0
|
|
Total
revenues
|
|
105
|
|
|
103
|
|
|
2
|
|
|
209
|
|
|
202
|
|
|
3
|
|
Contract holders'
benefits incurred
|
|
73
|
|
|
62
|
|
|
18
|
|
|
143
|
|
|
125
|
|
|
14
|
|
Underwriting expenses
incurred
|
|
22
|
|
|
19
|
|
|
16
|
|
|
44
|
|
|
39
|
|
|
13
|
|
Total benefits and expenses
|
|
95
|
|
|
81
|
|
|
17
|
|
|
187
|
|
|
164
|
|
|
14
|
|
Net income before
income tax
|
|
10
|
|
|
22
|
|
|
(55)
|
|
|
22
|
|
|
38
|
|
|
(42)
|
|
Income tax
|
|
2
|
|
|
5
|
|
|
(60)
|
|
|
4
|
|
|
8
|
|
|
(50)
|
|
Net income of the
life insurance subsidiary
|
|
$
|
8
|
|
|
$
|
17
|
|
|
(53)
|
|
|
$
|
18
|
|
|
$
|
30
|
|
|
(40)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- $3 million or 5% increase in
second-quarter 2019 earned premiums. Growth was largely due to a
second-quarter 2019 increase of 7% and a six-month increase of 8%
for term life insurance, our largest life insurance product
line.
- $12 million or 40% decrease in
six-month 2019 life insurance subsidiary net income, primarily due
to increased mortality expense.
- $131 million or 12% six-month
2019 increase to $1.188 billion in
GAAP shareholders' equity for the life insurance subsidiary,
primarily from an increase in unrealized investment gains.
Investment and
Balance Sheet Highlights
|
Investments
Results
|
(Dollars in
millions)
|
|
Three months ended
June 30,
|
Six months ended June
30,
|
|
2019
|
|
2018
|
|
% Change
|
|
2019
|
|
2018
|
|
% Change
|
Investment income,
net of expenses
|
|
$
|
160
|
|
|
$
|
154
|
|
|
4
|
|
|
$
|
317
|
|
|
$
|
304
|
|
|
4
|
|
Investment interest
credited to contract holders'
|
|
(25)
|
|
|
(24)
|
|
|
(4)
|
|
|
(49)
|
|
|
(48)
|
|
|
(2)
|
|
Investment gains and
losses, net
|
|
364
|
|
|
105
|
|
|
247
|
|
|
1,027
|
|
|
(86)
|
|
|
nm
|
|
Investments
profit
|
|
$
|
499
|
|
|
$
|
235
|
|
|
112
|
|
|
$
|
1,295
|
|
|
$
|
170
|
|
|
nm
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
111
|
|
|
$
|
112
|
|
|
(1)
|
|
|
$
|
222
|
|
|
$
|
222
|
|
|
0
|
|
Dividends
|
|
50
|
|
|
44
|
|
|
14
|
|
|
96
|
|
|
86
|
|
|
12
|
|
Other
|
|
2
|
|
|
1
|
|
|
100
|
|
|
5
|
|
|
2
|
|
|
150
|
|
Less
investment expenses
|
|
3
|
|
|
3
|
|
|
0
|
|
|
6
|
|
|
6
|
|
|
0
|
|
Investment income,
pretax
|
|
160
|
|
|
154
|
|
|
4
|
|
|
317
|
|
|
304
|
|
|
4
|
|
Less income
taxes
|
|
25
|
|
|
23
|
|
|
9
|
|
|
49
|
|
|
46
|
|
|
7
|
|
Total investment
income, after-tax
|
|
$
|
135
|
|
|
$
|
131
|
|
|
3
|
|
|
$
|
268
|
|
|
$
|
258
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
returns:
|
|
|
|
|
|
|
|
|
|
|
|
|
Average invested
assets plus cash and cash
equivalents
|
|
$
|
18,648
|
|
|
$
|
17,271
|
|
|
|
|
$
|
18,194
|
|
|
$
|
17,352
|
|
|
|
Average yield
pretax
|
|
3.43
|
%
|
|
3.57
|
%
|
|
|
|
3.48
|
%
|
|
3.50
|
%
|
|
|
Average yield
after-tax
|
|
2.90
|
|
|
3.03
|
|
|
|
|
2.95
|
|
|
2.97
|
|
|
|
Effective tax
rate
|
|
15.6
|
|
|
15.2
|
|
|
|
|
15.6
|
|
|
15.3
|
|
|
|
Fixed-maturity
returns:
|
|
|
|
|
|
|
|
|
|
|
|
|
Average amortized
cost
|
|
$
|
10,783
|
|
|
$
|
10,458
|
|
|
|
|
$
|
10,738
|
|
|
$
|
10,433
|
|
|
|
Average yield
pretax
|
|
4.12
|
%
|
|
4.28
|
%
|
|
|
|
4.13
|
%
|
|
4.26
|
%
|
|
|
Average yield
after-tax
|
|
3.43
|
|
|
3.58
|
|
|
|
|
3.45
|
|
|
3.56
|
|
|
|
Effective tax
rate
|
|
16.6
|
|
|
16.3
|
|
|
|
|
16.6
|
|
|
16.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- $6 million or 4% rise in
second-quarter 2019 pretax investment income, including a 14%
increase in equity portfolio dividends and a 1% decrease in
interest income.
- $564 million second-quarter 2019
pretax total investment gains, summarized on the table below.
Changes in unrealized gains or losses reported in other
comprehensive income, in addition to investment gains and losses
reported in net income, are useful for evaluating total investment
performance over time and are major components of changes in book
value and the value creation ratio.
(Dollars in
millions)
|
|
Three months ended
June 30,
|
|
Six months ended June
30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Investment gains and
losses on equity securities sold, net
|
|
$
|
11
|
|
|
$
|
4
|
|
|
$
|
23
|
|
|
$
|
7
|
|
Unrealized gains and
losses on equity securities still held, net
|
|
355
|
|
|
101
|
|
|
999
|
|
|
(97)
|
|
Investment gains and
losses on fixed-maturity securities, net
|
|
(1)
|
|
|
2
|
|
|
1
|
|
|
6
|
|
Other
|
|
(1)
|
|
|
(2)
|
|
|
4
|
|
|
(2)
|
|
Subtotal - investment
gains and losses reported in net income
|
|
364
|
|
|
105
|
|
|
1,027
|
|
|
(86)
|
|
Change in unrealized
investment gains and losses - fixed maturities
|
|
200
|
|
|
(80)
|
|
|
442
|
|
|
(301)
|
|
Total
|
|
$
|
564
|
|
|
$
|
25
|
|
|
$
|
1,469
|
|
|
$
|
(387)
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet
Highlights
|
(Dollars in millions,
except share data)
|
At June
30,
|
At December
31,
|
|
2019
|
|
2018
|
Total
investments
|
|
$
|
18,603
|
|
|
$
|
16,732
|
|
Total
assets
|
|
24,337
|
|
|
21,935
|
|
Short-term debt
|
|
37
|
|
|
32
|
|
Long-term debt
|
|
788
|
|
|
788
|
|
Shareholders' equity
|
|
9,131
|
|
|
7,833
|
|
Book
value per share
|
|
55.92
|
|
|
48.10
|
|
Debt-to-total-capital ratio
|
|
8.3
|
%
|
|
9.5
|
%
|
|
|
|
|
|
- $19.406 billion in consolidated
cash and total investments at June 30,
2019, an increase of 11% from $17.516
billion at year-end 2018.
- $11.320 billion bond portfolio at
June 30, 2019, with an average rating
of A2/A. Fair value increased $298
million during the second quarter of 2019, including
$69 million in net purchases of
fixed-maturity securities.
- $7.012 billion equity portfolio
was 37.7% of total investments, including $3.541 billion in appreciated value before taxes
at June 30, 2019. Second-quarter 2019
increase in fair value of $441
million or 7%.
- $5.325 billion of statutory
surplus for the property casualty insurance group at June 30, 2019, up $406
million from $4.919 billion at
year-end 2018, after declaring $300
million in dividends to the parent company. For the 12
months ended June 30, 2019, the ratio
of net written premiums to surplus was 1.0-to-1, matching year-end
2018.
- $3.04 second-quarter 2019
increase in book value per share, including additions of
$0.86 from net income before
investment gains, $2.73 from
investment portfolio net investment gains or changes in unrealized
gains for fixed-maturity securities and $0.01 for other items, partially offset by a
deduction of $0.56 from dividends
declared to shareholders.
- Value creation ratio of 18.6% for the first six months of 2019,
including 4.0% from net income before investment gains, which
includes underwriting and investment income, 14.7% from investment
portfolio net investment gains and changes in unrealized gains for
fixed-maturity securities, in addition to negative 0.1% from other
items.
For additional information or to register for our conference
call webcast, please visit cinfin.com/investors.
About Cincinnati Financial
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 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 2018 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
- 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
- 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
- Our inability to integrate Cincinnati Global and its
subsidiaries into our on-going operations, or disruptions to our
on-going operations due to such integration
- 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; disrupt our relationships with agents,
policyholders and others; cause reputational damage, mitigation
expenses and data loss and expose us to liability under federal and
state laws
- 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 and Statements of Income
(unaudited)
|
(Dollars in
millions)
|
|
|
|
|
June
30,
|
|
December 31,
|
|
|
|
|
|
2019
|
|
2018
|
Assets
|
|
|
|
|
|
|
|
Investments
|
|
|
|
|
$
|
18,603
|
|
|
$
|
16,732
|
|
Cash and
cash equivalents
|
|
|
|
|
803
|
|
|
784
|
|
Premiums
receivable
|
|
|
|
|
1,913
|
|
|
1,644
|
|
Reinsurance recoverable
|
|
|
|
|
515
|
|
|
484
|
|
Deferred
policy acquisition costs
|
|
|
|
|
786
|
|
|
738
|
|
Other
assets
|
|
|
|
|
1,717
|
|
|
1,553
|
|
Total
assets
|
|
|
|
|
$
|
24,337
|
|
|
$
|
21,935
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Insurance reserves
|
|
|
|
|
$
|
8,807
|
|
|
$
|
8,486
|
|
Unearned
premiums
|
|
|
|
|
2,896
|
|
|
2,516
|
|
Deferred
income tax
|
|
|
|
|
932
|
|
|
627
|
|
Long-term debt and lease obligations
|
|
|
|
|
847
|
|
|
834
|
|
Other
liabilities
|
|
|
|
|
1,724
|
|
|
1,639
|
|
Total
liabilities
|
|
|
|
|
15,206
|
|
|
14,102
|
|
|
|
|
|
|
|
|
|
Shareholders'
Equity
|
|
|
|
|
|
|
|
Common
stock and paid-in capital
|
|
|
|
|
1,683
|
|
|
1,678
|
|
Retained
earnings
|
|
|
|
|
8,566
|
|
|
7,625
|
|
Accumulated other comprehensive income
|
|
|
|
|
364
|
|
|
22
|
|
Treasury
stock
|
|
|
|
|
(1,482)
|
|
|
(1,492)
|
|
Total shareholders'
equity
|
|
|
|
|
9,131
|
|
|
7,833
|
|
Total liabilities and
shareholders' equity
|
|
|
|
|
$
|
24,337
|
|
|
$
|
21,935
|
|
|
|
|
|
|
|
|
|
(Dollars in millions,
except per share data)
|
Three months ended
June 30,
|
|
Six months ended June
30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Revenues
|
|
|
|
|
|
|
|
Earned
premiums
|
$
|
1,384
|
|
|
$
|
1,294
|
|
|
$
|
2,717
|
|
|
$
|
2,554
|
|
Investment income, net of expenses
|
160
|
|
|
154
|
|
|
317
|
|
|
304
|
|
Investment gains and losses, net
|
364
|
|
|
105
|
|
|
1,027
|
|
|
(86)
|
|
Other
revenues
|
5
|
|
|
5
|
|
|
11
|
|
|
10
|
|
Total
revenues
|
1,913
|
|
|
1,558
|
|
|
4,072
|
|
|
2,782
|
|
|
|
|
|
|
|
|
|
Benefits and
Expenses
|
|
|
|
|
|
|
|
Insurance losses and contract holders' benefits
|
936
|
|
|
883
|
|
|
1,796
|
|
|
1,737
|
|
Underwriting, acquisition and insurance expenses
|
430
|
|
|
395
|
|
|
841
|
|
|
798
|
|
Interest
expense
|
13
|
|
|
13
|
|
|
26
|
|
|
26
|
|
Other
operating expenses
|
4
|
|
|
3
|
|
|
12
|
|
|
7
|
|
Total benefits and
expenses
|
1,383
|
|
|
1,294
|
|
|
2,675
|
|
|
2,568
|
|
|
|
|
|
|
|
|
|
Income Before
Income Taxes
|
530
|
|
|
264
|
|
|
1,397
|
|
|
214
|
|
|
|
|
|
|
|
|
|
Provision for
Income Taxes
|
102
|
|
|
47
|
|
|
274
|
|
|
28
|
|
|
|
|
|
|
|
|
|
Net
Income
|
$
|
428
|
|
|
$
|
217
|
|
|
$
|
1,123
|
|
|
$
|
186
|
|
|
|
|
|
|
|
|
|
Per Common
Share:
|
|
|
|
|
|
|
|
Net
income—basic
|
$
|
2.62
|
|
|
$
|
1.33
|
|
|
$
|
6.89
|
|
|
$
|
1.13
|
|
Net
income—diluted
|
2.59
|
|
|
1.32
|
|
|
6.81
|
|
|
1.12
|
|
|
|
|
|
|
|
|
|
Definitions of Non-GAAP Information and
Reconciliation to Comparable GAAP Measures
(See attached tables for reconciliations;
additional 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 for insurance company regulation in
the United States of America 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 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 results 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; supplement reporting segment disclosures with
disclosures for a subsidiary company or for a combination of
subsidiaries or reporting segments; or relate to accounting
refinements that affect comparability between periods, creating a
need to analyze data on the same basis.
- Non-GAAP operating income: Non-GAAP operating income is
calculated by excluding investment gains and losses (defined as
investment gains and losses after applicable federal and state
income taxes) and other significant non-recurring items from net
income. Management evaluates non-GAAP operating income to measure
the success of pricing, rate and underwriting strategies. While
investment gains (or losses) are integral to the company's
insurance operations over the long term, the determination to
realize investment gains or losses on fixed-maturity securities
sold 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 are
recognized from certain changes in market values of securities
without actual realization. Management believes that the level of
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
non-GAAP 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 non-GAAP
operating income so that all investors have what management
believes to be a useful supplement to GAAP information.
- Consolidated property casualty insurance results: To supplement
reporting segment disclosures related to our property casualty
insurance operations, we also evaluate results for those operations
on a basis that includes results for our property casualty
insurance and brokerage services subsidiaries. That is the total of
our commercial lines, personal lines and our excess and surplus
lines segments plus our reinsurance assumed operations known as
Cincinnati Re and our London-based
global specialty underwriter known as Cincinnati Global.
- Life insurance subsidiary results: To supplement life insurance
reporting segment disclosures related to our life insurance
operation, we also evaluate results for that operation on a basis
that includes life insurance subsidiary investment income, or
investment income plus investment gains and losses, that are also
included in our investments reporting segment. We recognize that
assets under management, capital appreciation and investment income
are integral to evaluating the success of the life insurance
segment because of the long duration of life products.
|
Cincinnati
Financial Corporation
|
|
Net Income
Reconciliation
|
|
(Dollars in millions,
except per share data)
|
Three months ended
June 30,
|
Six months ended June
30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Net income
|
|
$
|
428
|
|
|
$
|
217
|
|
|
$
|
1,123
|
|
|
$
|
186
|
|
Less:
|
|
|
|
|
|
|
|
|
Investment gains and losses, net
|
|
364
|
|
|
105
|
|
|
1,027
|
|
|
(86)
|
|
Income
tax on investment gains and losses
|
|
(76)
|
|
|
(21)
|
|
|
(216)
|
|
|
19
|
|
Investment gains and losses, after-tax
|
|
288
|
|
|
84
|
|
|
811
|
|
|
(67)
|
|
Non-GAAP operating
income
|
|
$
|
140
|
|
|
$
|
133
|
|
|
$
|
312
|
|
|
$
|
253
|
|
|
|
|
|
|
|
|
|
|
Diluted per share
data:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
2.59
|
|
|
$
|
1.32
|
|
|
$
|
6.81
|
|
|
$
|
1.12
|
|
Less:
|
|
|
|
|
|
|
|
|
Investment gains and losses, net
|
|
2.20
|
|
|
0.64
|
|
|
6.23
|
|
|
(0.52)
|
|
Income
tax on investment gains and losses
|
|
(0.46)
|
|
|
(0.13)
|
|
|
(1.31)
|
|
|
0.11
|
|
Investment gains and losses, after-tax
|
|
1.74
|
|
|
0.51
|
|
|
4.92
|
|
|
(0.41)
|
|
Non-GAAP
operating income
|
|
$
|
0.85
|
|
|
$
|
0.81
|
|
|
$
|
1.89
|
|
|
$
|
1.53
|
|
|
|
|
|
|
|
|
|
|
|
Life Insurance
Reconciliation
|
|
(Dollars in
millions)
|
Three months ended
June 30,
|
Six months ended June
30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Net income of the
life insurance subsidiary
|
|
$
|
8
|
|
|
$
|
17
|
|
|
$
|
18
|
|
|
$
|
30
|
|
Investment gains and
losses, net
|
|
(1)
|
|
|
—
|
|
|
(2)
|
|
|
—
|
|
Income tax on
investment gains and losses
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Non-GAAP operating
income
|
|
9
|
|
|
17
|
|
|
20
|
|
|
30
|
|
|
|
|
|
|
|
|
|
|
Investment income,
net of expenses
|
|
(38)
|
|
|
(38)
|
|
|
(76)
|
|
|
(76)
|
|
Investment income
credited to contract holders'
|
|
25
|
|
|
24
|
|
|
49
|
|
|
48
|
|
Income tax excluding
tax on investment gains and
losses,
net
|
|
2
|
|
|
5
|
|
|
4
|
|
|
8
|
|
Life insurance
segment profit (loss)
|
|
$
|
(2)
|
|
|
$
|
8
|
|
|
$
|
(3)
|
|
|
$
|
10
|
|
|
|
|
|
|
|
|
|
|
Property Casualty
Insurance Reconciliation
|
(Dollars in
millions)
|
Three months ended
June 30, 2019
|
|
Consolidated
|
Commercial
|
Personal
|
E&S
|
|
Other*
|
Premiums:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Written
premiums
|
|
$
|
1,476
|
|
|
|
$
|
879
|
|
|
|
$
|
402
|
|
|
|
$
|
78
|
|
|
|
$
|
117
|
|
Unearned
premiums change
|
|
(159)
|
|
|
|
(56)
|
|
|
|
(54)
|
|
|
|
(11)
|
|
|
|
(38)
|
|
Earned
premiums
|
|
$
|
1,317
|
|
|
|
$
|
823
|
|
|
|
$
|
348
|
|
|
|
$
|
67
|
|
|
|
$
|
79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting
profit
|
|
$
|
48
|
|
|
|
$
|
12
|
|
|
|
$
|
5
|
|
|
|
$
|
17
|
|
|
|
$
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in
millions)
|
Six
months ended June 30, 2019
|
|
Consolidated
|
Commercial
|
Personal
|
E&S
|
|
Other*
|
Premiums:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Written
premiums
|
|
$
|
2,857
|
|
|
|
$
|
1,775
|
|
|
|
$
|
711
|
|
|
|
$
|
149
|
|
|
|
$
|
222
|
|
Unearned
premiums change
|
|
(273)
|
|
|
|
(142)
|
|
|
|
(19)
|
|
|
|
(19)
|
|
|
|
(93)
|
|
Earned
premiums
|
|
$
|
2,584
|
|
|
|
$
|
1,633
|
|
|
|
$
|
692
|
|
|
|
$
|
130
|
|
|
|
$
|
129
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting
profit
|
|
$
|
139
|
|
|
|
$
|
88
|
|
|
|
$
|
1
|
|
|
|
$
|
28
|
|
|
|
$
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in
millions)
|
Three months ended
June 30, 2018
|
|
Consolidated
|
Commercial
|
Personal
|
E&S
|
Other*
|
Premiums:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Written
premiums
|
|
$
|
1,349
|
|
|
|
$
|
856
|
|
|
|
$
|
381
|
|
|
|
$
|
64
|
|
|
|
$
|
48
|
|
Unearned
premiums change
|
|
(119)
|
|
|
|
(44)
|
|
|
|
(50)
|
|
|
|
(7)
|
|
|
|
(18)
|
|
Earned
premiums
|
|
$
|
1,230
|
|
|
|
$
|
812
|
|
|
|
$
|
331
|
|
|
|
$
|
57
|
|
|
|
$
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting profit
(loss)
|
|
$
|
36
|
|
|
|
$
|
47
|
|
|
|
$
|
(32)
|
|
|
|
$
|
13
|
|
|
|
$
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in
millions)
|
Six months ended June
30, 2018
|
|
Consolidated
|
Commercial
|
Personal
|
E&S
|
Other*
|
Premiums:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Written
premiums
|
|
$
|
2,607
|
|
|
|
$
|
1,710
|
|
|
|
$
|
678
|
|
|
|
$
|
125
|
|
|
|
$
|
94
|
|
Unearned
premiums change
|
|
(177)
|
|
|
|
(108)
|
|
|
|
(22)
|
|
|
|
(12)
|
|
|
|
(35)
|
|
Earned
premiums
|
|
$
|
2,430
|
|
|
|
$
|
1,602
|
|
|
|
$
|
656
|
|
|
|
$
|
113
|
|
|
|
$
|
59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting profit
(loss)
|
|
$
|
65
|
|
|
|
$
|
62
|
|
|
|
$
|
(41)
|
|
|
|
$
|
31
|
|
|
|
$
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollar amounts shown
are rounded to millions; certain amounts may not add due to
rounding. Ratios are calculated based on dollar amounts in
thousands.
|
*Included in Other
are the results of Cincinnati Re and our London-based global
specialty underwriter known as Cincinnati Global, acquired on
February 28, 2019.
|
Cincinnati
Financial Corporation
|
|
|
Other
Measures
|
|
- 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 measure is
useful, 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.
- Written premium: Under statutory accounting
rules in the U.S., 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. The difference between
written and earned premium is unearned premium.
|
|
Value Creation
Ratio Calculations
|
|
(Dollars are per
share)
|
Three months ended
June 30,
|
Six months ended June
30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Value creation
ratio:
|
|
|
|
|
|
|
|
|
End of
period book value*
|
|
$
|
55.92
|
|
|
$
|
48.68
|
|
|
$
|
55.92
|
|
|
$
|
48.68
|
|
Less
beginning of period book value
|
|
52.88
|
|
|
48.42
|
|
|
48.10
|
|
|
50.29
|
|
Change
in book value
|
|
3.04
|
|
|
0.26
|
|
|
7.82
|
|
|
(1.61)
|
|
Dividend
declared to shareholders
|
|
0.56
|
|
|
0.53
|
|
|
1.12
|
|
|
1.06
|
|
Total
value creation
|
|
$
|
3.60
|
|
|
$
|
0.79
|
|
|
$
|
8.94
|
|
|
$
|
(0.55)
|
|
|
|
|
|
|
|
|
|
|
Value creation ratio
from change in book value**
|
|
5.7
|
%
|
|
0.5
|
%
|
|
16.3
|
%
|
|
(3.2)
|
%
|
Value creation ratio
from dividends declared to shareholders***
|
|
1.1
|
|
|
1.1
|
|
|
2.3
|
|
|
2.1
|
|
Value creation
ratio
|
|
6.8
|
%
|
|
1.6
|
%
|
|
18.6
|
%
|
|
(1.1)
|
%
|
|
|
|
|
|
|
|
|
|
*
Book value per share is calculated by dividing end of period total
shareholders' equity by end of period shares outstanding
|
|
|
** Change in
book value divided by the beginning of period book value
|
|
|
*** Dividend declared
to shareholders divided by beginning of period book
value
|
|
|
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SOURCE Cincinnati Financial Corporation