CINCINNATI, Feb. 10, 2021 /PRNewswire/ -- Cincinnati
Financial Corporation (Nasdaq: CINF) today reported:
- Fourth-quarter 2020 net income of $1.049
billion, or $6.47 per share,
compared with net income of $626
million, or $3.79 per share,
in the fourth quarter of 2019, after recognizing a $767 million fourth-quarter 2020 after-tax
increase in the fair value of equity securities still held.
- Full-year 2020 net income of $1.216
billion, or $7.49 per share,
compared with $1.997 billion, or
$12.10 per share, in 2019.
- $59 million or 29% increase in
fourth-quarter 2020 non-GAAP operating income* to $262 million, or $1.61 per share, compared with $203 million, or $1.23 per share, in the fourth quarter of last
year.
- $161 million or 23% decrease in
full-year 2020 non-GAAP operating income to $533 million, or $3.28 per share, down from $694 million, or $4.20 per share, with after-tax property casualty
underwriting profit down $175
million.
- $423 million increase in
fourth-quarter 2020 net income reflected the after-tax net effect
of a $364 million increase in net
investment gains and a $54 million
increase in after-tax property casualty underwriting profit.
- $67.04 book value per share at
December 31, 2020, up $6.49 or 10.7% since year-end 2019.
- 14.7% value creation ratio for full-year 2020, compared with
30.5% for 2019.
Financial Highlights
(Dollars in millions
except per share data)
|
Three months ended
December 31,
|
Twelve months ended
December 31,
|
|
|
|
2020
|
|
2019
|
|
% Change
|
|
2020
|
|
2019
|
|
% Change
|
|
Revenue
Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earned
premiums
|
|
$
|
1,520
|
|
|
$
|
1,441
|
|
|
5
|
|
$
|
5,980
|
|
|
$
|
5,604
|
|
|
7
|
|
Investment income, net of expenses
|
|
172
|
|
|
168
|
|
|
2
|
|
670
|
|
|
646
|
|
|
4
|
|
Total
revenues
|
|
2,694
|
|
|
2,152
|
|
|
25
|
|
7,536
|
|
|
7,924
|
|
|
(5)
|
|
Income Statement
Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
1,049
|
|
|
$
|
626
|
|
|
68
|
|
$
|
1,216
|
|
|
$
|
1,997
|
|
|
(39)
|
|
Investment gains and losses, after-tax
|
|
787
|
|
|
423
|
|
|
86
|
|
683
|
|
|
1,303
|
|
|
(48)
|
|
Non-GAAP
operating income*
|
|
$
|
262
|
|
|
$
|
203
|
|
|
29
|
|
$
|
533
|
|
|
$
|
694
|
|
|
(23)
|
|
Per Share Data
(diluted)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
6.47
|
|
|
$
|
3.79
|
|
|
71
|
|
$
|
7.49
|
|
|
$
|
12.10
|
|
|
(38)
|
|
Investment gains and losses, after-tax
|
|
4.86
|
|
|
2.56
|
|
|
90
|
|
4.21
|
|
|
7.90
|
|
|
(47)
|
|
Non-GAAP
operating income*
|
|
$
|
1.61
|
|
|
$
|
1.23
|
|
|
31
|
|
$
|
3.28
|
|
|
$
|
4.20
|
|
|
(22)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book
value
|
|
|
|
|
|
|
|
$
|
67.04
|
|
|
$
|
60.55
|
|
|
11
|
|
Cash
dividend declared
|
|
$
|
0.60
|
|
|
$
|
0.56
|
|
|
7
|
|
$
|
2.40
|
|
|
$
|
2.24
|
|
|
7
|
|
Diluted
weighted average shares outstanding
|
|
162.1
|
|
|
165.3
|
|
|
(2)
|
|
162.4
|
|
|
165.1
|
|
|
(2)
|
|
|
* 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 Highlights
- 87.3% fourth-quarter 2020 property casualty combined ratio,
improved from 91.6% for the fourth quarter of 2019. Full-year 2020
property casualty combined ratio at 98.1%, with net written
premiums up 6%.
- 7% growth in fourth-quarter 2020 net written premiums,
reflecting price increases and premium growth initiatives.
- $185 million fourth-quarter 2020
property casualty new business written premiums. Agencies appointed
since the beginning of 2019 contributed $18
million or 10% of total fourth-quarter new business written
premiums.
- $15 million of fourth-quarter
2020 life insurance subsidiary net income, up $6 million from the same period in 2019, and 6%
growth in fourth-quarter 2020 term life insurance earned
premiums.
Investment and Balance Sheet Highlights
- 2% or $4 million increase in
fourth-quarter 2020 pretax investment income, including 7% growth
for stock portfolio dividends and 2% growth in interest
income.
- 9% full-year increase in fair value of total investments at
December 31, 2020, including a 14%
increase for the stock portfolio and a 5% increase for the bond
portfolio.
- $3.771 billion parent company
cash and marketable securities at year-end 2020, up 14% from a year
ago.
Fourth Quarter Improves Full-Year
Results
Steven J. Johnston, chairman,
president and chief executive officer, commented: "Spring storms in
the Midwest, hurricanes in the Southeast and wildfires in the West:
across our country, weather-related catastrophes were relentless in
2020. In the midst of a global pandemic, our experienced claims
professionals rose to the occasion, responding quickly and
compassionately.
"We finished the year with a fourth-quarter catastrophe loss
impact that was 2.1 percentage points higher than our
fourth-quarter 10-year average. Despite that increase, we were able
to improve our quarterly combined ratio by 4.3 points compared with
the fourth quarter of 2019. A fourth-quarter combined ratio of
87.3% improved our combined ratio from 101.8% at nine months to
98.1% for the full-year. Underwriting profit increased 57% for the
quarter and helped us earn a 2020 full-year amount of $119 million.
"This year, it was more important than ever to keep our
attention centered on our proven strategies to enhance the
profitability of our core book of business. To look through the
noise caused by catastrophes or inherent variability in updating
estimates for loss reserves, we track our underwriting results
before catastrophe losses and before development of reserves for
prior accident years. That measure improved from a year ago, by a
satisfying 4.2%, to 87.7% for the year."
Focused on Growth
"A steady rise in renewal premiums
led the way to what we believe will again be net written premium
growth ahead of the industry average. We successfully managed
commercial lines pricing, improving it as the year progressed to
see average increases in the mid-single-digit percent range in the
fourth quarter. We also have an advantage in our three-year
commercial package policy, which reduces administrative burdens for
agents and policyholders and supports commercial lines retention as
the market firms.
"Our personal lines operations saw 5% growth in net written
premiums for both the quarter and the full year. As we introduced
greater pricing precision in more states through the rollout of The
Cincinnati Casualty Company, our agents responded with enthusiasm,
increasing new business premiums written by 25% for the quarter and
10% for the year.
"The pandemic put a spotlight on the importance of life
insurance, and we were able to support agencies in providing a
total account solution for their clients through The Cincinnati
Life Insurance Company. Strong renewal premiums drove a 7% increase
in full-year 2020 earned premiums, including a 6% increase for term
life insurance.
"Remaining focused on geographic and product diversification,
more recent additions to our insurance portfolio also contributed:
the excess and surplus lines segment increased its net written
premiums 15% for the year while Cincinnati Global Underwriting
Ltd.SM and Cincinnati Re® each contributed 1%
to overall growth in 2020."
Confidence in the Future
"Positive contributions from
both our insurance operations and investment performance increased
our book value nearly 11% to a record $67.04 per share at December 31, 2020. We finished the year with a
value creation ratio of 14.7%, ahead of our long-term objective of
a 10% to 13% annual average.
"Achieving these positive results in a year that brought a
global pandemic, a record number of catastrophe events and
historically low interest rates, demonstrates the strength of our
relationships with the independent agents who represent us, the
mastery demonstrated by our associates in underwriting on an
account by account basis and the benefits realized by our
dedication to data and analytics. We believe more opportunities lie
ahead to deliver meaningful shareholder value into the future as we
continue to serve agents and their communities."
Insurance
Operations Highlights
|
|
Consolidated
Property Casualty Insurance Results
|
|
|
|
(Dollars in
millions)
|
Three months ended
December 31,
|
|
Twelve months ended
December 31,
|
|
|
|
2020
|
|
2019
|
|
% Change
|
|
2020
|
|
2019
|
|
% Change
|
|
Earned
premiums
|
|
$
|
1,449
|
|
|
$
|
1,374
|
|
|
5
|
|
$
|
5,691
|
|
|
$
|
5,334
|
|
|
7
|
|
Fee
revenues
|
|
2
|
|
|
3
|
|
|
(33)
|
|
9
|
|
|
11
|
|
|
(18)
|
|
Total
revenues
|
|
1,451
|
|
|
1,377
|
|
|
5
|
|
5,700
|
|
|
5,345
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss
expenses
|
|
829
|
|
|
835
|
|
|
(1)
|
|
3,837
|
|
|
3,352
|
|
|
14
|
|
Underwriting
expenses
|
|
435
|
|
|
423
|
|
|
3
|
|
1,744
|
|
|
1,652
|
|
|
6
|
|
Underwriting profit
|
|
$
|
187
|
|
|
$
|
119
|
|
|
57
|
|
$
|
119
|
|
|
$
|
341
|
|
|
(65)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios as a percent
of earned premiums:
|
|
|
|
|
|
Pt. Change
|
|
|
|
|
|
Pt. Change
|
|
Loss and loss
expenses
|
|
57.3
|
%
|
|
60.8
|
%
|
|
(3.5)
|
|
67.4
|
%
|
|
62.8
|
%
|
|
4.6
|
|
Underwriting
expenses
|
|
30.0
|
|
|
30.8
|
|
|
(0.8)
|
|
30.7
|
|
|
31.0
|
|
|
(0.3)
|
|
Combined ratio
|
|
87.3
|
%
|
|
91.6
|
%
|
|
(4.3)
|
|
98.1
|
%
|
|
93.8
|
%
|
|
4.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
|
|
|
% Change
|
|
Agency renewal
written premiums
|
|
$
|
1,145
|
|
|
$
|
1,084
|
|
|
6
|
|
$
|
4,740
|
|
|
$
|
4,519
|
|
|
5
|
|
Agency new business
written premiums
|
|
185
|
|
|
193
|
|
|
(4)
|
|
799
|
|
|
778
|
|
|
3
|
|
Other written
premiums
|
|
64
|
|
|
31
|
|
|
106
|
|
325
|
|
|
219
|
|
|
48
|
|
Net
written premiums
|
|
$
|
1,394
|
|
|
$
|
1,308
|
|
|
7
|
|
$
|
5,864
|
|
|
$
|
5,516
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios as a percent
of earned premiums:
|
|
|
|
|
|
Pt. Change
|
|
|
|
|
|
Pt. Change
|
|
Current accident year before
catastrophe losses
|
|
54.4
|
%
|
|
60.5
|
%
|
|
(6.1)
|
|
57.0
|
%
|
|
60.9
|
%
|
|
(3.9)
|
|
Current accident year
catastrophe losses
|
|
5.7
|
|
|
3.5
|
|
|
2.2
|
|
12.7
|
|
|
6.6
|
|
|
6.1
|
|
Prior accident years before
catastrophe losses
|
|
(1.8)
|
|
|
(3.0)
|
|
|
1.2
|
|
(1.7)
|
|
|
(4.1)
|
|
|
2.4
|
|
Prior accident years
catastrophe losses
|
|
(1.0)
|
|
|
(0.2)
|
|
|
(0.8)
|
|
(0.6)
|
|
|
(0.6)
|
|
|
0.0
|
|
Loss and loss expense ratio
|
|
57.3
|
%
|
|
60.8
|
%
|
|
(3.5)
|
|
67.4
|
%
|
|
62.8
|
%
|
|
4.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current accident year
combined ratio before
|
|
|
|
|
|
|
|
|
|
|
|
|
|
catastrophe
losses
|
|
84.4
|
%
|
|
91.3
|
%
|
|
(6.9)
|
|
87.7
|
%
|
|
91.9
|
%
|
|
(4.2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 7% and 6% growth in fourth-quarter and full-year 2020 property
casualty net written premiums, reflecting premium growth
initiatives and price increases. Contributions to growth for both
2020 periods included 1% from Cincinnati Global, while Cincinnati
Re's contribution was 2% in the fourth-quarter and 1% for full-year
2020.
- 4% decrease in fourth-quarter and a 3% increase in full-year
2020 new business premiums written by agencies, compared with a
year ago. The full-year increase included a $52 million increase in standard market property
casualty production from agencies appointed since the beginning of
2019.
- 191 new agency appointments in full-year 2020, including 58
that market only our personal lines products.
- 4.3 percentage-point fourth-quarter 2020 combined ratio
improvement, despite an increase of 1.4 points for losses from
catastrophes and 0.9 points of pandemic-related losses and
expenses.
- 4.3 percentage-point increase in full-year 2020 combined ratio,
compared with 2019, including an increase of 6.1 points for losses
from catastrophes and 1.5 points of pandemic-related losses and
expenses.
- 2.8 and 2.3 percentage-point fourth-quarter and full-year 2020
benefit from favorable prior accident year reserve development of
$40 million and $131 million, compared with 3.2 points or
$45 million for fourth-quarter 2019
and 4.7 points or $248 million of
favorable development for full-year 2019.
- 3.9 percentage-point improvement, to 57.0%, for the full-year
2020 ratio of current accident year losses and loss expenses before
catastrophes, including a decrease of 0.6 points in the ratio for
current accident year losses of $1
million or more per claim.
- 0.3 percentage-point decrease in the full-year 2020
underwriting expense ratio, primarily due to elevated catastrophe
losses resulting in a lower level of profit-sharing commissions for
agencies.
Commercial Lines
Insurance Results
|
|
|
|
(Dollars in
millions)
|
Three months ended
December 31,
|
|
Twelve months ended
December 31,
|
|
|
|
2020
|
|
2019
|
|
% Change
|
|
2020
|
|
2019
|
|
% Change
|
|
Earned
premiums
|
|
$
|
878
|
|
|
$
|
852
|
|
|
3
|
|
$
|
3,476
|
|
|
$
|
3,319
|
|
|
5
|
|
Fee
revenues
|
|
—
|
|
|
2
|
|
|
(100)
|
|
3
|
|
|
5
|
|
|
(40)
|
|
Total
revenues
|
|
878
|
|
|
854
|
|
|
3
|
|
3,479
|
|
|
3,324
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss
expenses
|
|
512
|
|
|
489
|
|
|
5
|
|
2,336
|
|
|
2,030
|
|
|
15
|
|
Underwriting
expenses
|
|
270
|
|
|
268
|
|
|
1
|
|
1,079
|
|
|
1,053
|
|
|
2
|
|
Underwriting profit
|
|
$
|
96
|
|
|
$
|
97
|
|
|
(1)
|
|
$
|
64
|
|
|
$
|
241
|
|
|
(73)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios as a percent
of earned premiums:
|
|
|
|
|
|
Pt. Change
|
|
|
|
|
|
Pt. Change
|
|
Loss and loss
expenses
|
|
58.4
|
%
|
|
57.4
|
%
|
|
1.0
|
|
67.3
|
%
|
|
61.2
|
%
|
|
6.1
|
|
Underwriting
expenses
|
|
30.8
|
|
|
31.4
|
|
|
(0.6)
|
|
31.0
|
|
|
31.7
|
|
|
(0.7)
|
|
Combined ratio
|
|
89.2
|
%
|
|
88.8
|
%
|
|
0.4
|
|
98.3
|
%
|
|
92.9
|
%
|
|
5.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
|
|
|
% Change
|
|
Agency renewal
written premiums
|
|
$
|
759
|
|
|
$
|
719
|
|
|
6
|
|
$
|
3,122
|
|
|
$
|
2,998
|
|
|
4
|
|
Agency new business
written premiums
|
|
113
|
|
|
129
|
|
|
(12)
|
|
515
|
|
|
510
|
|
|
1
|
|
Other written
premiums
|
|
(32)
|
|
|
(29)
|
|
|
(10)
|
|
(103)
|
|
|
(98)
|
|
|
(5)
|
|
Net
written premiums
|
|
$
|
840
|
|
|
$
|
819
|
|
|
3
|
|
$
|
3,534
|
|
|
$
|
3,410
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios as a percent
of earned premiums:
|
|
|
|
|
|
Pt. Change
|
|
|
|
|
|
Pt. Change
|
|
Current accident year before
catastrophe losses
|
|
58.8
|
%
|
|
62.0
|
%
|
|
(3.2)
|
|
59.2
|
%
|
|
61.7
|
%
|
|
(2.5)
|
|
Current accident year
catastrophe losses
|
|
3.8
|
|
|
0.1
|
|
|
3.7
|
|
10.8
|
|
|
5.3
|
|
|
5.5
|
|
Prior accident years before
catastrophe losses
|
|
(3.5)
|
|
|
(3.9)
|
|
|
0.4
|
|
(2.3)
|
|
|
(5.0)
|
|
|
2.7
|
|
Prior accident years
catastrophe losses
|
|
(0.7)
|
|
|
(0.8)
|
|
|
0.1
|
|
(0.4)
|
|
|
(0.8)
|
|
|
0.4
|
|
Loss and loss expense ratio
|
|
58.4
|
%
|
|
57.4
|
%
|
|
1.0
|
|
67.3
|
%
|
|
61.2
|
%
|
|
6.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current accident year
combined ratio before
|
|
|
|
|
|
|
|
|
|
|
|
|
|
catastrophe
losses
|
|
89.6
|
%
|
|
93.4
|
%
|
|
(3.8)
|
|
90.2
|
%
|
|
93.4
|
%
|
|
(3.2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 3% and 4% growth in fourth-quarter and full-year 2020
commercial lines net written premiums, including price increases
and growth initiatives. Fourth-quarter and full-year 2020
commercial lines average renewal pricing increases in the
mid-single-digit percent range, with the fourth-quarter increase
higher than third-quarter 2020.
- 12% or $16 million decrease in
fourth-quarter 2020 new business written premiums, reflecting
increased competition that resulted in fewer opportunities to write
policies at pricing levels we believe are adequate.
- 1% or $5 million increase in
full-year 2020 new business written by agencies, including
$39 million from agencies appointed
since the beginning of 2019.
- 0.4 percentage-point fourth-quarter 2020 combined ratio
increase, including an increase of 3.8 points for losses from
catastrophes.
- 5.4 percentage-point increase in the full-year 2020 combined
ratio, including an increase of 5.9 points for losses from
catastrophes.
- 4.2 and 2.7 percentage-point fourth-quarter and full-year 2020
benefit from favorable prior accident year reserve development of
$36 million and $95 million, compared with 4.7 points or
$39 million for fourth-quarter 2019
and 5.8 points or $192 million of
favorable development for full-year 2019.
- 2.5 percentage-point improvement, to 59.2%, for the full-year
2020 ratio of current accident year losses and loss expenses before
catastrophes, including a decrease of 1.0 points 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,
|
|
|
|
2020
|
|
2019
|
|
% Change
|
|
2020
|
|
2019
|
|
% Change
|
|
Earned
premiums
|
|
$
|
373
|
|
|
$
|
358
|
|
|
4
|
|
$
|
1,463
|
|
|
$
|
1,404
|
|
|
4
|
|
Fee
revenues
|
|
1
|
|
|
1
|
|
|
0
|
|
4
|
|
|
4
|
|
|
0
|
|
Total
revenues
|
|
374
|
|
|
359
|
|
|
4
|
|
1,467
|
|
|
1,408
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss
expenses
|
|
195
|
|
|
251
|
|
|
(22)
|
|
977
|
|
|
985
|
|
|
(1)
|
|
Underwriting
expenses
|
|
108
|
|
|
104
|
|
|
4
|
|
443
|
|
|
415
|
|
|
7
|
|
Underwriting profit
|
|
$
|
71
|
|
|
$
|
4
|
|
|
nm
|
|
$
|
47
|
|
|
$
|
8
|
|
|
488
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios as a percent
of earned premiums:
|
|
|
|
|
|
Pt. Change
|
|
|
|
|
|
Pt. Change
|
|
Loss and loss
expenses
|
|
52.3
|
%
|
|
70.2
|
%
|
|
(17.9)
|
|
66.8
|
%
|
|
70.2
|
%
|
|
(3.4)
|
|
Underwriting
expenses
|
|
29.0
|
|
|
29.1
|
|
|
(0.1)
|
|
30.3
|
|
|
29.6
|
|
|
0.7
|
|
Combined ratio
|
|
81.3
|
%
|
|
99.3
|
%
|
|
(18.0)
|
|
97.1
|
%
|
|
99.8
|
%
|
|
(2.7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
|
|
|
% Change
|
|
Agency renewal
written premiums
|
|
$
|
317
|
|
|
$
|
309
|
|
|
3
|
|
$
|
1,364
|
|
|
$
|
1,312
|
|
|
4
|
|
Agency new business
written premiums
|
|
45
|
|
|
36
|
|
|
25
|
|
174
|
|
|
158
|
|
|
10
|
|
Other written
premiums
|
|
(8)
|
|
|
(9)
|
|
|
11
|
|
(35)
|
|
|
(35)
|
|
|
0
|
|
Net
written premiums
|
|
$
|
354
|
|
|
$
|
336
|
|
|
5
|
|
$
|
1,503
|
|
|
$
|
1,435
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios as a percent
of earned premiums:
|
|
|
|
|
|
Pt. Change
|
|
|
|
|
|
Pt. Change
|
|
Current accident year before
catastrophe losses
|
|
46.3
|
%
|
|
63.0
|
%
|
|
(16.7)
|
|
52.1
|
%
|
|
62.4
|
%
|
|
(10.3)
|
|
Current accident year
catastrophe losses
|
|
3.4
|
|
|
10.0
|
|
|
(6.6)
|
|
16.0
|
|
|
9.7
|
|
|
6.3
|
|
Prior accident years before
catastrophe losses
|
|
2.6
|
|
|
(2.5)
|
|
|
5.1
|
|
(0.7)
|
|
|
(2.1)
|
|
|
1.4
|
|
Prior accident years
catastrophe losses
|
|
0.0
|
|
|
(0.3)
|
|
|
0.3
|
|
(0.6)
|
|
|
0.2
|
|
|
(0.8)
|
|
Loss and loss expense ratio
|
|
52.3
|
%
|
|
70.2
|
%
|
|
(17.9)
|
|
66.8
|
%
|
|
70.2
|
%
|
|
(3.4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current accident year
combined ratio before
|
|
|
|
|
|
|
|
|
|
|
|
|
|
catastrophe
losses
|
|
75.3
|
%
|
|
92.1
|
%
|
|
(16.8)
|
|
82.4
|
%
|
|
92.0
|
%
|
|
(9.6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 5% growth for both fourth-quarter and full-year 2020 personal
lines net written premiums, largely due to higher renewal written
premiums that benefited from rate increases. Full-year 2020 net
written premiums from our agencies' high net worth clients grew
27%, to $519 million.
- 25% and 10% increase in fourth-quarter and full-year 2020 new
business premiums written by agencies, compared with a year ago,
reflecting expanded use of pricing precision tools.
- 18.0 percentage-point improvement in fourth-quarter 2020
combined ratio, including decreases of 16.7 points in the ratio for
current accident year losses and loss expenses before catastrophes
and 6.3 points from losses from catastrophes.
- 2.7 percentage-point improvement in the full-year 2020 combined
ratio, despite an increase for losses from catastrophes of 5.5
points.
- 2.6 percentage-point fourth-quarter 2020 unfavorable prior
accident year reserve development of $10
million and 1.3 point full-year 2020 benefit from favorable
development of $18 million, compared
with favorable prior reserve development of 2.8 points or
$9 million for fourth-quarter 2019
and 1.9 points or $27 million for
full-year 2019.
- 10.3 percentage-point improvement, to 52.1%, for the full-year
2020 ratio of current accident year losses and loss expenses before
catastrophes, despite an increase of 0.4 points in the ratio for
current accident year losses of $1
million or more per claim.
Excess and Surplus
Lines Insurance Results
|
|
|
|
(Dollars in
millions)
|
Three months ended
December 31,
|
|
Twelve months ended
December 31,
|
|
|
|
2020
|
|
2019
|
|
% Change
|
|
2020
|
|
2019
|
|
% Change
|
|
Earned
premiums
|
|
$
|
87
|
|
|
$
|
76
|
|
|
14
|
|
$
|
325
|
|
|
$
|
278
|
|
|
17
|
|
Fee
revenues
|
|
1
|
|
|
—
|
|
|
nm
|
|
2
|
|
|
2
|
|
|
0
|
|
Total
revenues
|
|
88
|
|
|
76
|
|
|
16
|
|
327
|
|
|
280
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss
expenses
|
|
49
|
|
|
41
|
|
|
20
|
|
199
|
|
|
142
|
|
|
40
|
|
Underwriting
expenses
|
|
24
|
|
|
22
|
|
|
9
|
|
94
|
|
|
85
|
|
|
11
|
|
Underwriting profit
|
|
$
|
15
|
|
|
$
|
13
|
|
|
15
|
|
$
|
34
|
|
|
$
|
53
|
|
|
(36)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios as a percent
of earned premiums:
|
|
|
|
|
|
Pt. Change
|
|
|
|
|
|
Pt. Change
|
|
Loss and loss
expenses
|
|
56.6
|
%
|
|
54.4
|
%
|
|
2.2
|
|
61.3
|
%
|
|
51.1
|
%
|
|
10.2
|
|
Underwriting
expenses
|
|
26.6
|
|
|
28.5
|
|
|
(1.9)
|
|
28.7
|
|
|
30.4
|
|
|
(1.7)
|
|
Combined ratio
|
|
83.2
|
%
|
|
82.9
|
%
|
|
0.3
|
|
90.0
|
%
|
|
81.5
|
%
|
|
8.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
|
|
|
% Change
|
|
Agency renewal
written premiums
|
|
$
|
69
|
|
|
$
|
56
|
|
|
23
|
|
$
|
254
|
|
|
$
|
209
|
|
|
22
|
|
Agency new business
written premiums
|
|
27
|
|
|
28
|
|
|
(4)
|
|
110
|
|
|
110
|
|
|
0
|
|
Other written
premiums
|
|
(4)
|
|
|
(4)
|
|
|
0
|
|
(16)
|
|
|
(16)
|
|
|
0
|
|
Net
written premiums
|
|
$
|
92
|
|
|
$
|
80
|
|
|
15
|
|
$
|
348
|
|
|
$
|
303
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios as a percent
of earned premiums:
|
|
|
|
|
|
Pt. Change
|
|
|
|
|
|
Pt. Change
|
|
Current accident year before
catastrophe losses
|
|
57.6
|
%
|
|
54.3
|
%
|
|
3.3
|
|
57.7
|
%
|
|
54.6
|
%
|
|
3.1
|
|
Current accident year
catastrophe losses
|
|
0.4
|
|
|
0.0
|
|
|
0.4
|
|
1.3
|
|
|
0.4
|
|
|
0.9
|
|
Prior accident years before
catastrophe losses
|
|
(1.5)
|
|
|
(0.4)
|
|
|
(1.1)
|
|
2.1
|
|
|
(4.1)
|
|
|
6.2
|
|
Prior accident years
catastrophe losses
|
|
0.1
|
|
|
0.5
|
|
|
(0.4)
|
|
0.2
|
|
|
0.2
|
|
|
0.0
|
|
Loss and loss expense ratio
|
|
56.6
|
%
|
|
54.4
|
%
|
|
2.2
|
|
61.3
|
%
|
|
51.1
|
%
|
|
10.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current accident year
combined ratio before
|
|
|
|
|
|
|
|
|
|
|
|
|
|
catastrophe
losses
|
|
84.2
|
%
|
|
82.8
|
%
|
|
1.4
|
|
86.4
|
%
|
|
85.0
|
%
|
|
1.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 15% growth in both fourth-quarter and full-year 2020 excess and
surplus lines net written premiums, including fourth-quarter 2020
renewal price increases averaging in the mid-single-digit percent
range.
- 4% decrease in fourth-quarter 2020 new business written
premiums with full-year 2020 matching 2019, reflecting a highly
competitive market with fewer opportunities to write policies with
annual premiums of $10,000 or more at
pricing levels we believe are adequate and offsetting our
additional marketing efforts.
- 0.3 percentage-point increase in fourth-quarter 2020 combined
ratio, primarily due to higher current accident year losses and
loss expenses before catastrophes.
- 8.5 percentage-point increase in the full-year 2020 combined
ratio, primarily due to unfavorable reserve development on prior
accident years before catastrophe losses.
- 1.4 percentage-point fourth-quarter 2020 benefit from favorable
reserve development on prior accident years of $1 million, compared with unfavorable reserve
development of 0.1 points or less than $1
million for fourth-quarter 2019.
- 2.3 percentage-point full-year 2020 unfavorable prior accident
year reserve development of $7
million, compared with 3.9 points or $11 million of favorable development for
full-year 2019.
- 3.1 percentage-point increase, to 57.7%, for the full-year 2020
ratio of current accident year losses and loss expenses before
catastrophes, including no change from 2019 in the ratio for
current accident year losses of $1
million or more per claim.
Life Insurance
Subsidiary Results
|
|
|
|
(Dollars in
millions)
|
Three months ended
December 31,
|
|
Twelve months ended
December 31,
|
|
|
|
2020
|
|
2019
|
|
% Change
|
|
2020
|
|
2019
|
|
% Change
|
|
Term life
insurance
|
|
$
|
50
|
|
|
$
|
47
|
|
|
6
|
|
$
|
197
|
|
|
$
|
186
|
|
|
6
|
|
Universal life
insurance
|
|
10
|
|
|
8
|
|
|
25
|
|
44
|
|
|
39
|
|
|
13
|
|
Other life insurance
and annuity products
|
|
11
|
|
|
12
|
|
|
(8)
|
|
48
|
|
|
45
|
|
|
7
|
|
Earned
premiums
|
|
71
|
|
|
67
|
|
|
6
|
|
289
|
|
|
270
|
|
|
7
|
|
Investment income,
net of expenses
|
|
40
|
|
|
38
|
|
|
5
|
|
158
|
|
|
152
|
|
|
4
|
|
Investment gains and
losses, net
|
|
2
|
|
|
—
|
|
|
nm
|
|
(27)
|
|
|
(4)
|
|
|
nm
|
|
Fee
revenues
|
|
1
|
|
|
1
|
|
|
0
|
|
2
|
|
|
4
|
|
|
(50)
|
|
Total
revenues
|
|
114
|
|
|
106
|
|
|
8
|
|
422
|
|
|
422
|
|
|
0
|
|
Contract holders'
benefits incurred
|
|
73
|
|
|
75
|
|
|
(3)
|
|
297
|
|
|
286
|
|
|
4
|
|
Underwriting expenses
incurred
|
|
22
|
|
|
19
|
|
|
16
|
|
85
|
|
|
86
|
|
|
(1)
|
|
Total benefits and
expenses
|
|
95
|
|
|
94
|
|
|
1
|
|
382
|
|
|
372
|
|
|
3
|
|
Net income before
income tax
|
|
19
|
|
|
12
|
|
|
58
|
|
40
|
|
|
50
|
|
|
(20)
|
|
Income tax
|
|
4
|
|
|
3
|
|
|
33
|
|
8
|
|
|
11
|
|
|
(27)
|
|
Net income of the life
insurance subsidiary
|
|
$
|
15
|
|
|
$
|
9
|
|
|
67
|
|
$
|
32
|
|
|
$
|
39
|
|
|
(18)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- $19 million or 7% increase in
full-year 2020 earned premiums, including a 6% increase for term
life insurance, our largest life insurance product line.
- $7 million or 18% decrease in
full-year 2020 life insurance subsidiary net income, primarily due
to increased investment losses resulting from impairment
write-downs of fixed-maturity securities.
- $179 million or 14% full-year
2020 increase to $1.417 billion in
GAAP shareholders' equity for The Cincinnati Life Insurance
Company, primarily from an increase in unrealized investment
gains.
Investment and
Balance Sheet Highlights
|
|
Investments
Results
|
|
|
|
(Dollars in
millions)
|
|
Three months ended
December 31,
|
|
Twelve months ended
December 31,
|
|
|
|
2020
|
|
2019
|
|
% Change
|
|
2020
|
|
2019
|
|
% Change
|
|
Investment income,
net of expenses
|
|
$
|
172
|
|
|
$
|
168
|
|
|
2
|
|
$
|
670
|
|
|
$
|
646
|
|
|
4
|
|
Investment interest
credited to contract holders'
|
|
(25)
|
|
|
(25)
|
|
|
0
|
|
(102)
|
|
|
(99)
|
|
|
(3)
|
|
Investment gains and
losses, net
|
|
997
|
|
|
537
|
|
|
86
|
|
865
|
|
|
1,650
|
|
|
(48)
|
|
Investment
profit
|
|
$
|
1,144
|
|
|
$
|
680
|
|
|
68
|
|
$
|
1,433
|
|
|
$
|
2,197
|
|
|
(35)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
116
|
|
|
$
|
114
|
|
|
2
|
|
$
|
455
|
|
|
$
|
446
|
|
|
2
|
|
Dividends
|
|
59
|
|
|
55
|
|
|
7
|
|
220
|
|
|
201
|
|
|
9
|
|
Other
|
|
1
|
|
|
2
|
|
|
(50)
|
|
8
|
|
|
12
|
|
|
(33)
|
|
Less
investment expenses
|
|
4
|
|
|
3
|
|
|
33
|
|
13
|
|
|
13
|
|
|
0
|
|
Investment income,
pretax
|
|
172
|
|
|
168
|
|
|
2
|
|
670
|
|
|
646
|
|
|
4
|
|
Less income
taxes
|
|
27
|
|
|
26
|
|
|
4
|
|
104
|
|
|
101
|
|
|
3
|
|
Total investment
income, after-tax
|
|
$
|
145
|
|
|
$
|
142
|
|
|
2
|
|
$
|
566
|
|
|
$
|
545
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
returns:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average invested
assets plus cash and cash
equivalents
|
|
$
|
20,873
|
|
|
$
|
19,591
|
|
|
|
|
$
|
20,670
|
|
|
$
|
18,697
|
|
|
|
|
Average yield
pretax
|
|
3.30
|
%
|
|
3.43
|
%
|
|
|
|
3.24
|
%
|
|
3.46
|
%
|
|
|
|
Average yield
after-tax
|
|
2.78
|
|
|
2.90
|
|
|
|
|
2.74
|
|
|
2.91
|
|
|
|
|
Effective tax
rate
|
|
15.4
|
%
|
|
15.6
|
%
|
|
|
|
15.5
|
%
|
|
15.6
|
%
|
|
|
|
Fixed-maturity
returns:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average amortized
cost
|
|
$
|
11,293
|
|
|
$
|
11,060
|
|
|
|
|
$
|
11,210
|
|
|
$
|
10,876
|
|
|
|
|
Average yield
pretax
|
|
4.11
|
%
|
|
4.12
|
%
|
|
|
|
4.06
|
%
|
|
4.10
|
%
|
|
|
|
Average yield
after-tax
|
|
3.43
|
|
|
3.44
|
|
|
|
|
3.39
|
|
|
3.42
|
|
|
|
|
Effective tax
rate
|
|
16.6
|
%
|
|
16.6
|
%
|
|
|
|
16.6
|
%
|
|
16.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- $4 million or 2% rise in
fourth-quarter 2020 pretax investment income, including 7% growth
in equity portfolio dividends and 2% growth in interest
income.
- $1.139 billion fourth-quarter and
$1.301 billion full-year 2020 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
December 31,
|
|
Twelve months
ended
December 31,
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Investment gains and
losses on equity securities sold, net
|
|
$
|
4
|
|
|
$
|
(1)
|
|
|
$
|
79
|
|
|
$
|
26
|
|
|
Unrealized gains and
losses on equity securities still held, net
|
|
971
|
|
|
542
|
|
|
841
|
|
|
1,626
|
|
|
Investment gains and
losses on fixed-maturity securities, net
|
|
7
|
|
|
1
|
|
|
(65)
|
|
|
1
|
|
|
Other
|
|
15
|
|
|
(5)
|
|
|
10
|
|
|
(3)
|
|
|
Subtotal - investment
gains and losses reported in net income
|
|
997
|
|
|
537
|
|
|
865
|
|
|
1,650
|
|
|
Change in unrealized
investment gains and losses - fixed maturities
|
|
142
|
|
|
2
|
|
|
436
|
|
|
544
|
|
|
Total
|
|
$
|
1,139
|
|
|
$
|
539
|
|
|
$
|
1,301
|
|
|
$
|
2,194
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet
Highlights
|
|
|
|
(Dollars in millions
except share data)
|
|
At December
31,
|
|
At December
31,
|
|
|
|
2020
|
|
2019
|
|
Total
investments
|
|
$
|
21,542
|
|
|
$
|
19,746
|
|
|
Total
assets
|
|
27,542
|
|
|
25,408
|
|
|
Short-term debt
|
|
54
|
|
|
39
|
|
|
Long-term debt
|
|
788
|
|
|
788
|
|
|
Shareholders' equity
|
|
10,789
|
|
|
9,864
|
|
|
Book
value per share
|
|
67.04
|
|
|
60.55
|
|
|
Debt-to-total-capital ratio
|
|
7.2
|
%
|
|
7.7
|
%
|
|
- $22.442 billion in consolidated
cash and invested assets at December 31,
2020, up 9% from $20.513
billion at year-end 2019.
- $12.338 billion bond portfolio at
December 31, 2020, with an average
rating of A3/A. Fair value increased $181
million or 1% during the fourth quarter of 2020.
- $8.856 billion equity portfolio
was 41.1% of total investments, including $4.929 billion in appreciated value before taxes
at December 31, 2020. Fourth-quarter
2020 increase in fair value of $989
million or 13%.
- $6.47 fourth-quarter 2020
increase in book value per share, including an addition of
$1.63 from net income before
investment gains and $5.51 from
investment portfolio net investment gains or changes in unrealized
gains for fixed-maturity securities, partially offset by
$0.07 for other items and
$0.60 from dividends declared to
shareholders.
- Value creation ratio of 14.7% for full-year 2020, including
5.5% from net income before investment gains, which includes
underwriting and investment income, 10.5% from investment portfolio
net investment gains or changes in unrealized gains for
fixed-maturity securities, including 7.5% from our stock portfolio
and 3.0% from our bond portfolio, in addition to negative 1.3% 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 primarily business, home and auto insurance
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 2019 Annual
Report on Form 10-K, Item 1A, Risk Factors, Page 35 and Item
1A, Risk Factors in our subsequent Quarterly Reports on
Form-10Q.
Factors that could cause or contribute to such differences
include, but are not limited to:
- Effects of the COVID-19 pandemic that could affect results for
reasons such as:
-
- Securities market disruption or volatility and related effects
such as decreased economic activity that affect the company's
investment portfolio and book value
- An unusually high level of claims in our insurance or
reinsurance operations that increase litigation-related
expenses
- An unusually high level of insurance losses, including risk of
legislation or court decisions extending business interruption
insurance in commercial property coverage forms to cover claims for
pure economic loss related to the COVID-19 pandemic
- Decreased premium revenue and cash flow from disruption to our
distribution channel of independent agents, consumer
self-isolation, travel limitations, business restrictions and
decreased economic activity
- Inability of our workforce, agencies or vendors to perform
necessary business functions
- Ongoing developments concerning business interruption insurance
claims and litigation related to the COVID-19 pandemic that affect
our estimates of losses and loss adjustment expenses or our ability
to reasonably estimate such losses, such as:
-
- The continuing duration of the pandemic and governmental
actions to limit the spread of the virus that may produce
additional economic losses
- The number of policyholders that will ultimately submit claims
or file lawsuits
- The lack of submitted proofs of loss for allegedly covered
claims
- Judicial rulings in similar litigation involving other
companies in the insurance industry
- Differences in state laws and developing case law in the
relatively few decisions rendered to date
- Litigation trends, including varying legal theories advanced by
policyholders
- Whether and to what degree any class of policyholders may be
certified
- The inherent unpredictability of litigation
- 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 ongoing operations, or disruptions to our
ongoing 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 (unaudited)
|
|
|
|
(Dollars in millions
except per share data)
|
|
December
31,
|
|
December
31,
|
|
|
|
2020
|
|
2019
|
|
Assets
|
|
|
|
|
|
Investments
|
|
|
|
|
|
Fixed maturities, at fair value (amortized cost: 2020—$11,312;
2019—$11,108)
|
|
$
|
12,338
|
|
|
$
|
11,698
|
|
|
Equity securities, at fair value (cost: 2020—$3,927;
2019—$3,581)
|
|
8,856
|
|
|
7,752
|
|
|
Other invested assets
|
|
348
|
|
|
296
|
|
|
Total
investments
|
|
21,542
|
|
|
19,746
|
|
|
Cash and cash
equivalents
|
|
900
|
|
|
767
|
|
|
Investment
income receivable
|
|
136
|
|
|
133
|
|
|
Finance
receivable
|
|
95
|
|
|
77
|
|
|
Premiums
receivable
|
|
1,879
|
|
|
1,777
|
|
|
Reinsurance
recoverable
|
|
517
|
|
|
610
|
|
|
Prepaid
reinsurance premiums
|
|
65
|
|
|
54
|
|
|
Deferred
policy acquisition costs
|
|
805
|
|
|
774
|
|
|
Land, building
and equipment, net, for company use (accumulated depreciation:
2020—$285; 2019—$276)
|
|
213
|
|
|
207
|
|
|
Other
assets
|
|
438
|
|
|
381
|
|
|
Separate
accounts
|
|
952
|
|
|
882
|
|
|
Total assets
|
|
$
|
27,542
|
|
|
$
|
25,408
|
|
|
Liabilities
|
|
|
|
|
|
Insurance
reserves
|
|
|
|
|
|
Loss and loss expense reserves
|
|
$
|
6,746
|
|
|
$
|
6,147
|
|
|
Life policy and investment contract reserves
|
|
2,915
|
|
|
2,835
|
|
|
Unearned
premiums
|
|
2,960
|
|
|
2,788
|
|
|
Other
liabilities
|
|
982
|
|
|
928
|
|
|
Deferred
income tax
|
|
1,299
|
|
|
1,079
|
|
|
Note
payable
|
|
54
|
|
|
39
|
|
|
Long-term debt
and lease obligations
|
|
845
|
|
|
846
|
|
|
Separate
accounts
|
|
952
|
|
|
882
|
|
|
Total liabilities
|
|
16,753
|
|
|
15,544
|
|
|
|
|
|
|
|
|
Shareholders'
Equity
|
|
|
|
|
|
Common stock,
par value—$2 per share; (authorized: 2020 and 2019—500 million
shares;
issued: 2020 and 2019—198.3 million
shares)
|
|
397
|
|
|
397
|
|
|
Paid-in
capital
|
|
1,328
|
|
|
1,306
|
|
|
Retained
earnings
|
|
10,085
|
|
|
9,257
|
|
|
Accumulated other
comprehensive income
|
|
769
|
|
|
448
|
|
|
Treasury stock at cost
(2020— 37.4 million shares and 2019—35.4 million shares)
|
|
(1,790)
|
|
|
(1,544)
|
|
|
Total
shareholders' equity
|
|
$
|
10,789
|
|
|
$
|
9,864
|
|
|
Total
liabilities and shareholders' equity
|
|
$
|
27,542
|
|
|
$
|
25,408
|
|
|
|
|
|
|
|
|
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,
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Revenues
|
|
|
|
|
|
|
|
|
Earned
premiums
|
$
|
1,520
|
|
|
$
|
1,441
|
|
|
$
|
5,980
|
|
|
$
|
5,604
|
|
|
Investment income, net of expenses
|
172
|
|
|
168
|
|
|
670
|
|
|
646
|
|
|
Investment gains and losses, net
|
997
|
|
|
537
|
|
|
865
|
|
|
1,650
|
|
|
Fee
revenues
|
3
|
|
|
4
|
|
|
11
|
|
|
15
|
|
|
Other
revenues
|
2
|
|
|
2
|
|
|
10
|
|
|
9
|
|
|
Total
revenues
|
2,694
|
|
|
2,152
|
|
|
7,536
|
|
|
7,924
|
|
|
|
|
|
|
|
|
|
|
|
Benefits and
Expenses
|
|
|
|
|
|
|
|
|
Insurance losses and contract holders' benefits
|
902
|
|
|
910
|
|
|
4,134
|
|
|
3,638
|
|
|
Underwriting, acquisition and insurance expenses
|
457
|
|
|
442
|
|
|
1,829
|
|
|
1,738
|
|
|
Interest
expense
|
14
|
|
|
13
|
|
|
54
|
|
|
53
|
|
|
Other
operating expenses
|
5
|
|
|
6
|
|
|
20
|
|
|
23
|
|
|
Total benefits and
expenses
|
1,378
|
|
|
1,371
|
|
|
6,037
|
|
|
5,452
|
|
|
|
|
|
|
|
|
|
|
|
Income Before
Income Taxes
|
1,316
|
|
|
781
|
|
|
1,499
|
|
|
2,472
|
|
|
|
|
|
|
|
|
|
|
|
Provision for
Income Taxes
|
|
|
|
|
|
|
|
|
Current
|
66
|
|
|
48
|
|
|
147
|
|
|
132
|
|
|
Deferred
|
201
|
|
|
107
|
|
|
136
|
|
|
343
|
|
|
Total provision for
income taxes
|
267
|
|
|
155
|
|
|
283
|
|
|
475
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income
|
$
|
1,049
|
|
|
$
|
626
|
|
|
$
|
1,216
|
|
|
$
|
1,997
|
|
|
|
|
|
|
|
|
|
|
|
Per Common
Share
|
|
|
|
|
|
|
|
|
Net
income—basic
|
$
|
6.52
|
|
|
$
|
3.84
|
|
|
$
|
7.55
|
|
|
$
|
12.24
|
|
|
Net
income—diluted
|
6.47
|
|
|
3.79
|
|
|
7.49
|
|
|
12.10
|
|
|
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
December 31,
|
|
Twelve months ended
December 31,
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Net income
|
|
$
|
1,049
|
|
|
$
|
626
|
|
|
$
|
1,216
|
|
|
$
|
1,997
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
Investment gains and losses, net
|
|
997
|
|
|
537
|
|
|
865
|
|
|
1,650
|
|
|
Income
tax on investment gains and losses
|
|
(210)
|
|
|
(114)
|
|
|
(182)
|
|
|
(347)
|
|
|
Investment gains and
losses, after-tax
|
|
787
|
|
|
423
|
|
|
683
|
|
|
1,303
|
|
|
Non-GAAP operating
income
|
|
$
|
262
|
|
|
$
|
203
|
|
|
$
|
533
|
|
|
$
|
694
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted per share
data:
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
6.47
|
|
|
$
|
3.79
|
|
|
$
|
7.49
|
|
|
$
|
12.10
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
Investment gains and losses, net
|
|
6.15
|
|
|
3.25
|
|
|
5.33
|
|
|
10.00
|
|
|
Income
tax on investment gains and losses
|
|
(1.29)
|
|
|
(0.69)
|
|
|
(1.12)
|
|
|
(2.10)
|
|
|
Investment gains and
losses, after-tax
|
|
4.86
|
|
|
2.56
|
|
|
4.21
|
|
|
7.90
|
|
|
Non-GAAP operating
income
|
|
$
|
1.61
|
|
|
$
|
1.23
|
|
|
$
|
3.28
|
|
|
$
|
4.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Life Insurance
Reconciliation
|
|
|
|
(Dollars in
millions)
|
|
Three months ended
December 31,
|
|
Twelve months ended
December 31,
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Net income of life
insurance subsidiary
|
|
$
|
15
|
|
|
$
|
9
|
|
|
$
|
32
|
|
|
$
|
39
|
|
|
Investment gains and losses, net
|
|
2
|
|
|
—
|
|
|
(27)
|
|
|
(4)
|
|
|
Income
tax on investment gains and losses
|
|
—
|
|
|
1
|
|
|
(6)
|
|
|
—
|
|
|
Non-GAAP
operating income
|
|
13
|
|
|
10
|
|
|
53
|
|
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment income, net
of expenses
|
|
(40)
|
|
|
(38)
|
|
|
(158)
|
|
|
(152)
|
|
|
Investment income
credited to contract holders'
|
|
25
|
|
|
25
|
|
|
102
|
|
|
99
|
|
|
Income tax excluding
tax on investment gains and losses,
net
|
|
4
|
|
|
2
|
|
|
14
|
|
|
11
|
|
|
Life insurance segment
profit (loss)
|
|
$
|
2
|
|
|
$
|
(1)
|
|
|
$
|
11
|
|
|
$
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
Property Casualty
Insurance Reconciliation
|
|
(Dollars in
millions)
|
Three months ended
December 31, 2020
|
|
|
Consolidated
|
Commercial
|
Personal
|
E&S
|
|
Other*
|
|
Premiums:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Written
premiums
|
|
$
|
1,394
|
|
|
|
$
|
840
|
|
|
|
$
|
354
|
|
|
|
$
|
92
|
|
|
|
$
|
108
|
|
|
Unearned
premiums change
|
|
55
|
|
|
|
38
|
|
|
|
19
|
|
|
|
(5)
|
|
|
|
3
|
|
|
Earned
premiums
|
|
$
|
1,449
|
|
|
|
$
|
878
|
|
|
|
$
|
373
|
|
|
|
$
|
87
|
|
|
|
$
|
111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting
profit
|
|
$
|
187
|
|
|
|
$
|
96
|
|
|
|
$
|
71
|
|
|
|
$
|
15
|
|
|
|
$
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in
millions)
|
Twelve months ended
December 31, 2020
|
|
|
Consolidated
|
Commercial
|
Personal
|
E&S
|
|
Other*
|
|
Premiums:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Written
premiums
|
|
$
|
5,864
|
|
|
|
$
|
3,534
|
|
|
|
$
|
1,503
|
|
|
|
$
|
348
|
|
|
|
$
|
479
|
|
|
Unearned
premiums change
|
|
(173)
|
|
|
|
(58)
|
|
|
|
(40)
|
|
|
|
(23)
|
|
|
|
(52)
|
|
|
Earned
premiums
|
|
$
|
5,691
|
|
|
|
$
|
3,476
|
|
|
|
$
|
1,463
|
|
|
|
$
|
325
|
|
|
|
$
|
427
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting profit
(loss)
|
|
$
|
119
|
|
|
|
$
|
64
|
|
|
|
$
|
47
|
|
|
|
$
|
34
|
|
|
|
$
|
(26)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in
millions)
|
Three months ended
December 31, 2019
|
|
|
Consolidated
|
Commercial
|
Personal
|
E&S
|
Other*
|
|
Premiums:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Written
premiums
|
|
$
|
1,308
|
|
|
|
$
|
819
|
|
|
|
$
|
336
|
|
|
|
$
|
80
|
|
|
|
$
|
73
|
|
|
Unearned
premiums change
|
|
66
|
|
|
|
33
|
|
|
|
22
|
|
|
|
(4)
|
|
|
|
15
|
|
|
Earned
premiums
|
|
$
|
1,374
|
|
|
|
$
|
852
|
|
|
|
$
|
358
|
|
|
|
$
|
76
|
|
|
|
$
|
88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting
profit
|
|
$
|
119
|
|
|
|
$
|
97
|
|
|
|
$
|
4
|
|
|
|
$
|
13
|
|
|
|
$
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in
millions)
|
Twelve months ended
December 31, 2019
|
|
|
Consolidated
|
Commercial
|
Personal
|
E&S
|
Other*
|
|
Premiums:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Written
premiums
|
|
$
|
5,516
|
|
|
|
$
|
3,410
|
|
|
|
$
|
1,435
|
|
|
|
$
|
303
|
|
|
|
$
|
368
|
|
|
Unearned
premiums change
|
|
(182)
|
|
|
|
(91)
|
|
|
|
(31)
|
|
|
|
(25)
|
|
|
|
(35)
|
|
|
Earned
premiums
|
|
$
|
5,334
|
|
|
|
$
|
3,319
|
|
|
|
$
|
1,404
|
|
|
|
$
|
278
|
|
|
|
$
|
333
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting
profit
|
|
$
|
341
|
|
|
|
$
|
241
|
|
|
|
$
|
8
|
|
|
|
$
|
53
|
|
|
|
$
|
39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
December 31,
|
|
Twelve months ended
December 31,
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Value creation
ratio:
|
|
|
|
|
|
|
|
|
End of
period book value*
|
|
$
|
67.04
|
|
|
$
|
60.55
|
|
|
$
|
67.04
|
|
|
$
|
60.55
|
|
Less
beginning of period book value
|
|
60.57
|
|
|
57.37
|
|
|
60.55
|
|
|
48.10
|
|
Change
in book value
|
|
6.47
|
|
|
3.18
|
|
|
6.49
|
|
|
12.45
|
|
Dividend
declared to shareholders
|
|
0.60
|
|
|
0.56
|
|
|
2.40
|
|
|
2.24
|
|
Total
value creation
|
|
$
|
7.07
|
|
|
$
|
3.74
|
|
|
$
|
8.89
|
|
|
$
|
14.69
|
|
|
|
|
|
|
|
|
|
|
Value creation ratio
from change in book value**
|
|
10.7
|
%
|
|
5.5
|
%
|
|
10.7
|
%
|
|
25.9
|
%
|
Value creation ratio
from dividends declared to
shareholders***
|
1.0
|
|
|
1.0
|
|
|
4.0
|
|
|
4.6
|
|
Value creation
ratio
|
|
11.7
|
%
|
|
6.5
|
%
|
|
14.7
|
%
|
|
30.5
|
%
|
|
|
|
|
|
|
|
|
|
* 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