CINCINNATI, Feb. 15, 2022 /PRNewswire/ -- Cincinnati
Financial Corporation (Nasdaq: CINF) today reported:
- Fourth-quarter 2021 net income of $1.470
billion, or $9.04 per share,
compared with net income of $1.049
billion, or $6.47 per share,
in the fourth quarter of 2020, after recognizing a $1.113 billion fourth-quarter 2021 after-tax
increase in the fair value of equity securities still held.
- Full-year 2021 net income of $2.946
billion, or $18.10 per share,
compared with $1.216 billion, or
$7.49 per share, in 2020.
- $58 million or 22% increase in
fourth-quarter 2021 non-GAAP operating income* to $320 million, or $1.97 per share, compared with $262 million, or $1.61 per share, in the fourth quarter of last
year.
- $510 million or 96% increase in
full-year 2021 non-GAAP operating income to $1.043 billion, or $6.41 per share, up from $533 million, or $3.28 per share, with after-tax property casualty
underwriting profit up $483
million.
- $421 million increase in
fourth-quarter 2021 net income reflected the after-tax net effect
of a $363 million increase in net
investment gains and a $55 million
increase in after-tax property casualty underwriting profit.
- $81.72 book value per share at
December 31, 2021, up $14.68 or 21.9% since year-end 2020.
- 25.7% value creation ratio for full-year 2021, compared with
14.7% for 2020.
Financial Highlights
(Dollars in millions
except per share data)
|
Three months ended
December 31,
|
Twelve months ended
December 31,
|
|
|
|
2021
|
|
2020
|
|
% Change
|
|
2021
|
|
2020
|
|
% Change
|
|
Revenue
Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earned
premiums
|
|
$
1,676
|
|
$
1,520
|
|
10
|
|
$
6,482
|
|
$
5,980
|
|
8
|
|
Investment income, net of expenses
|
|
186
|
|
172
|
|
8
|
|
714
|
|
670
|
|
7
|
|
Total
revenues
|
|
3,323
|
|
2,694
|
|
23
|
|
9,630
|
|
7,536
|
|
28
|
|
Income Statement
Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
1,470
|
|
$
1,049
|
|
40
|
|
$
2,946
|
|
$
1,216
|
|
142
|
|
Investment gains and losses, after-tax
|
|
1,150
|
|
787
|
|
46
|
|
1,903
|
|
683
|
|
179
|
|
Non-GAAP
operating income*
|
|
$
320
|
|
$
262
|
|
22
|
|
$
1,043
|
|
$
533
|
|
96
|
|
Per Share Data
(diluted)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
9.04
|
|
$
6.47
|
|
40
|
|
$
18.10
|
|
$
7.49
|
|
142
|
|
Investment gains and losses, after-tax
|
|
7.07
|
|
4.86
|
|
45
|
|
11.69
|
|
4.21
|
|
178
|
|
Non-GAAP
operating income*
|
|
$
1.97
|
|
$
1.61
|
|
22
|
|
$
6.41
|
|
$
3.28
|
|
95
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book
value
|
|
|
|
|
|
|
|
$
81.72
|
|
$
67.04
|
|
22
|
|
Cash
dividend declared
|
|
$
0.63
|
|
$
0.60
|
|
5
|
|
$
2.52
|
|
$
2.40
|
|
5
|
|
Diluted
weighted average shares outstanding
|
|
162.5
|
|
162.1
|
|
0
|
|
162.7
|
|
162.4
|
|
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 Highlights
- 84.2% fourth-quarter 2021 property casualty combined ratio,
improved from 87.3% for the fourth quarter of 2020. Full-year 2021
property casualty combined ratio at 88.3%, with net written
premiums up 10%.
- 10% growth in fourth-quarter 2021 net written premiums, largely
due to price increases and premium growth initiatives.
- $212 million fourth-quarter 2021
property casualty new business written premiums. Agencies appointed
since the beginning of 2020 contributed $19
million or 9% of total fourth-quarter new business written
premiums.
- $9 million of fourth-quarter 2021
life insurance subsidiary net income, down $6 million from the same period in 2020, and 8%
growth in fourth-quarter 2021 term life insurance earned
premiums.
Investment and Balance Sheet Highlights
- 8% or $14 million increase in
fourth-quarter 2021 pretax investment income, including 14% growth
for stock portfolio dividends and 4% growth in interest
income.
- 15% full-year increase in fair value of total investments at
December 31, 2021, including a 28%
increase for the stock portfolio and a 6% increase for the bond
portfolio.
- $5.053 billion parent company
cash and marketable securities at year-end 2021, up 34% from a year
ago.
Finishing 2021 Strong
Steven
J. Johnston, chairman, president and chief executive
officer, commented: "Non-GAAP operating income finished the year
strong, increasing 96% to $1.043
billion, compared with year-end 2020. Net income continued
its pattern of wide swings as the effects of a robust equity market
pushed it to nearly $3 billion at the
end of the year, more than double our 2020 result.
"The communities we serve through our insurance business saw a
high number of weather-related catastrophes near the end of 2021,
including a storm system that left a wide path of destruction
across the Midwest in December. While no one likes to witness the
pain and destruction these events bring, it is when our field
claims representatives shine, delivering support to our
policyholders and agents with empathy and warmth.
"When catastrophes strike, we must have the financial strength
to respond quickly and fairly. That desire to be ready to serve
those who need us led to our multifaceted approach to refine our
pricing precision, including increasing loss control reviews,
improving pricing segmentation and adding third-party data sources
– enhancing financial strength over time. We believe these
long-term initiatives are on the right track as our full-year 2021
combined ratio improved 9.8 points to 88.3% compared with year-end
2020.
"We continued our record of overall favorable reserve
development for a 33rd consecutive year. Net favorable
reserve development on prior accident years benefited our
fourth-quarter and full-year combined ratios by 6 points and 7
points, respectively.
Recognizing our financial strength, our consistently positive
growth and profitability and our strong agency relationships, A.M.
Best Co., a leading credit rating agency specializing in the
insurance industry, recently affirmed our A+ (Superior) rating.
Only the top approximately 12% of insurer groups qualify for
Superior ratings from A.M. Best."
Focused, Profitable Growth
"Diversification and a firm
belief in our underwriting models and expertise are allowing us to
grow with confidence. For the first time, full-year property
casualty net written premiums exceeded $6
billion. New and renewal business written through
independent agencies grew year over year for each of our property
casualty insurance segments. For our life insurance segment, earned
premiums rose 3%.
"Our profitable growth is the result of focused execution of our
strategic initiatives to enter new product lines and marketing
territories and to slowly expand our independent agency force.
During the fourth quarter, 2021 net written premiums from our
excess and surplus lines operation, launched in 2008, surpassed the
$400 million mark. Our initiatives to
attract more of our agents' high net worth clients and to grow
Cincinnati Re® continued as planned, both increasing
property casualty net written premiums."
Book Value at Record High
"At December 31, our book value again reached a
record high, increasing 22% since December
31, 2020, to $81.72.
Consolidated cash and total investments reached nearly $26 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 for
2021, which considers the dividends we pay as well as growth in
book value, was 25.7%, ahead of our 10% to 13% average annual
target for this measure."
Insurance
Operations Highlights
|
|
Consolidated
Property Casualty Insurance Results
|
|
(Dollars in
millions)
|
Three months ended
December 31,
|
|
Twelve months ended
December 31,
|
|
|
|
2021
|
|
2020
|
|
% Change
|
|
2021
|
|
2020
|
|
% Change
|
|
Earned
premiums
|
|
$
1,599
|
|
$
1,449
|
|
10
|
|
$
6,184
|
|
$
5,691
|
|
9
|
|
Fee
revenues
|
|
2
|
|
2
|
|
0
|
|
10
|
|
9
|
|
11
|
|
Total
revenues
|
|
1,601
|
|
1,451
|
|
10
|
|
6,194
|
|
5,700
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss
expenses
|
|
855
|
|
829
|
|
3
|
|
3,596
|
|
3,837
|
|
(6)
|
|
Underwriting
expenses
|
|
490
|
|
435
|
|
13
|
|
1,867
|
|
1,744
|
|
7
|
|
Underwriting profit
|
|
$
256
|
|
$
187
|
|
37
|
|
$
731
|
|
$
119
|
|
514
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios as a percent
of earned premiums:
|
|
|
|
|
|
Pt. Change
|
|
|
|
|
|
Pt. Change
|
|
Loss and loss
expenses
|
|
53.5%
|
|
57.3%
|
|
(3.8)
|
|
58.1%
|
|
67.4%
|
|
(9.3)
|
|
Underwriting
expenses
|
|
30.7
|
|
30.0
|
|
0.7
|
|
30.2
|
|
30.7
|
|
(0.5)
|
|
Combined
ratio
|
|
84.2%
|
|
87.3%
|
|
(3.1)
|
|
88.3%
|
|
98.1%
|
|
(9.8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
|
|
|
% Change
|
|
Agency renewal
written premiums
|
|
$
1,238
|
|
$
1,145
|
|
8
|
|
$
5,091
|
|
$
4,740
|
|
7
|
|
Agency new business
written premiums
|
|
212
|
|
185
|
|
15
|
|
897
|
|
799
|
|
12
|
|
Other written
premiums
|
|
84
|
|
64
|
|
31
|
|
491
|
|
325
|
|
51
|
|
Net
written premiums
|
|
$
1,534
|
|
$
1,394
|
|
10
|
|
$
6,479
|
|
$
5,864
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios as a percent
of earned premiums:
|
|
|
|
|
|
Pt. Change
|
|
|
|
|
|
Pt. Change
|
|
Current accident year before
catastrophe losses
|
|
54.9%
|
|
54.4%
|
|
0.5
|
|
56.0%
|
|
57.0%
|
|
(1.0)
|
|
Current accident year
catastrophe losses
|
|
4.6
|
|
5.7
|
|
(1.1)
|
|
9.1
|
|
12.7
|
|
(3.6)
|
|
Prior accident years before
catastrophe losses
|
|
(5.0)
|
|
(1.8)
|
|
(3.2)
|
|
(5.9)
|
|
(1.7)
|
|
(4.2)
|
|
Prior accident years
catastrophe losses
|
|
(1.0)
|
|
(1.0)
|
|
0.0
|
|
(1.1)
|
|
(0.6)
|
|
(0.5)
|
|
Loss and loss
expense ratio
|
|
53.5%
|
|
57.3%
|
|
(3.8)
|
|
58.1%
|
|
67.4%
|
|
(9.3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current accident year
combined ratio before
|
|
|
|
|
|
|
|
|
|
|
|
|
|
catastrophe
losses
|
|
85.6%
|
|
84.4%
|
|
1.2
|
|
86.2%
|
|
87.7%
|
|
(1.5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 10% growth for both fourth-quarter and full-year 2021 property
casualty net written premiums, reflecting premium growth
initiatives, price increases and a higher level of insured
exposures. Contributions to growth from Cincinnati Re®
were 1% for the fourth quarter and 3% for full-year 2021.
- 15% and 12% increase in fourth-quarter and full-year 2021 new
business premiums written by agencies, compared with a year ago.
The full-year increase included a $50
million increase in standard market property casualty
production from agencies appointed since the beginning of
2020.
- 214 new agency appointments in full-year 2021, including 59
that market only our personal lines products.
- 3.1 percentage-point fourth-quarter 2021 combined ratio
improvement, including a decrease of 1.1 points for losses from
catastrophes.
- 9.8 percentage-point improvement in full-year 2021 combined
ratio, compared with 2020, including a decrease of 4.1 points for
losses from catastrophes.
- 6.0 and 7.0 percentage-point fourth-quarter and full-year 2021
benefit from favorable prior accident year reserve development of
$97 million and $428 million, compared with 2.8 points or
$40 million for fourth-quarter 2020
and 2.3 points or $131 million of
favorable development for full-year 2020.
- 1.0 percentage-point improvement, to 56.0%, for the full-year
2021 ratio of current accident year losses and loss expenses before
catastrophes, including an increase of 1.5 points in the ratio for
current accident year losses of $1
million or more per claim.
- 0.5 percentage-point decrease in the full-year 2021
underwriting expense ratio, primarily due to ongoing expense
management efforts and premium growth outpacing growth in other
expenses.
Commercial Lines
Insurance Results
|
|
(Dollars in
millions)
|
Three months ended
December 31,
|
|
Twelve months ended
December 31,
|
|
|
|
2021
|
|
2020
|
|
% Change
|
|
2021
|
|
2020
|
|
% Change
|
|
Earned
premiums
|
|
$
947
|
|
$
878
|
|
8
|
|
$
3,674
|
|
$
3,476
|
|
6
|
|
Fee
revenues
|
|
1
|
|
—
|
|
nm
|
|
4
|
|
3
|
|
33
|
|
Total
revenues
|
|
948
|
|
878
|
|
8
|
|
3,678
|
|
3,479
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss
expenses
|
|
506
|
|
512
|
|
(1)
|
|
1,940
|
|
2,336
|
|
(17)
|
|
Underwriting
expenses
|
|
301
|
|
270
|
|
11
|
|
1,140
|
|
1,079
|
|
6
|
|
Underwriting profit
|
|
$
141
|
|
$
96
|
|
47
|
|
$
598
|
|
$
64
|
|
834
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios as a percent
of earned premiums:
|
|
|
|
|
|
Pt. Change
|
|
|
|
|
|
Pt. Change
|
|
Loss and loss
expenses
|
|
53.4%
|
|
58.4%
|
|
(5.0)
|
|
52.8%
|
|
67.3%
|
|
(14.5)
|
|
Underwriting
expenses
|
|
31.8
|
|
30.8
|
|
1.0
|
|
31.0
|
|
31.0
|
|
0.0
|
|
Combined
ratio
|
|
85.2%
|
|
89.2%
|
|
(4.0)
|
|
83.8%
|
|
98.3%
|
|
(14.5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
|
|
|
% Change
|
|
Agency renewal
written premiums
|
|
$
809
|
|
$
759
|
|
7
|
|
$
3,334
|
|
$
3,122
|
|
7
|
|
Agency new business
written premiums
|
|
135
|
|
113
|
|
19
|
|
571
|
|
515
|
|
11
|
|
Other written
premiums
|
|
(24)
|
|
(32)
|
|
25
|
|
(94)
|
|
(103)
|
|
9
|
|
Net
written premiums
|
|
$
920
|
|
$
840
|
|
10
|
|
$
3,811
|
|
$
3,534
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios as a percent
of earned premiums:
|
|
|
|
|
|
Pt. Change
|
|
|
|
|
|
Pt. Change
|
|
Current accident year before
catastrophe losses
|
|
57.5%
|
|
58.8%
|
|
(1.3)
|
|
57.8%
|
|
59.2%
|
|
(1.4)
|
|
Current accident year
catastrophe losses
|
|
4.0
|
|
3.8
|
|
0.2
|
|
4.6
|
|
10.8
|
|
(6.2)
|
|
Prior accident years before
catastrophe losses
|
|
(6.8)
|
|
(3.5)
|
|
(3.3)
|
|
(8.4)
|
|
(2.3)
|
|
(6.1)
|
|
Prior accident years
catastrophe losses
|
|
(1.3)
|
|
(0.7)
|
|
(0.6)
|
|
(1.2)
|
|
(0.4)
|
|
(0.8)
|
|
Loss and loss
expense ratio
|
|
53.4%
|
|
58.4%
|
|
(5.0)
|
|
52.8%
|
|
67.3%
|
|
(14.5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current accident year
combined ratio before
|
|
|
|
|
|
|
|
|
|
|
|
|
|
catastrophe
losses
|
|
89.3%
|
|
89.6%
|
|
(0.3)
|
|
88.8%
|
|
90.2%
|
|
(1.4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 10% and 8% growth in fourth-quarter and full-year 2021
commercial lines net written premiums, including price increases,
growth initiatives and a higher level of insured exposures.
Fourth-quarter and full-year 2021 commercial lines average renewal
pricing increased in the mid-single-digit percent range, with the
fourth-quarter increase higher than third-quarter 2021.
- 19% or $22 million increase in
fourth-quarter 2021 new business written premiums, as we continue
to carefully underwrite each policy in a highly competitive
market.
- 11% or $56 million increase in
full-year 2021 new business written by agencies, including
$41 million from agencies appointed
since the beginning of 2020.
- 4.0 percentage-point fourth-quarter 2021 combined ratio
improvement, including a decrease of 0.4 points for losses from
catastrophes.
- 14.5 percentage-point improvement in the full-year 2021
combined ratio, including a decrease of 7.0 points for losses from
catastrophes.
- 8.1 and 9.6 percentage-point fourth-quarter and full-year 2021
benefit from favorable prior accident year reserve development of
$77 million and $353 million, compared with 4.2 points or
$36 million for fourth-quarter 2020
and 2.7 points or $95 million of
favorable development for full-year 2020.
- 1.4 percentage-point improvement, to 57.8%, for the full-year
2021 ratio of current accident year losses and loss expenses before
catastrophes, including an increase of 2.2 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,
|
|
|
|
2021
|
|
2020
|
|
% Change
|
|
2021
|
|
2020
|
|
% Change
|
|
Earned
premiums
|
|
$
396
|
|
$
373
|
|
6
|
|
$
1,542
|
|
$
1,463
|
|
5
|
|
Fee
revenues
|
|
1
|
|
1
|
|
0
|
|
4
|
|
4
|
|
0
|
|
Total
revenues
|
|
397
|
|
374
|
|
6
|
|
1,546
|
|
1,467
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss
expenses
|
|
197
|
|
195
|
|
1
|
|
992
|
|
977
|
|
2
|
|
Underwriting
expenses
|
|
119
|
|
108
|
|
10
|
|
457
|
|
443
|
|
3
|
|
Underwriting profit
|
|
$
81
|
|
$
71
|
|
14
|
|
$
97
|
|
$
47
|
|
106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios as a percent
of earned premiums:
|
|
|
|
|
|
Pt. Change
|
|
|
|
|
|
Pt. Change
|
|
Loss and loss
expenses
|
|
49.9%
|
|
52.3%
|
|
(2.4)
|
|
64.3%
|
|
66.8%
|
|
(2.5)
|
|
Underwriting
expenses
|
|
30.1
|
|
29.0
|
|
1.1
|
|
29.7
|
|
30.3
|
|
(0.6)
|
|
Combined
ratio
|
|
80.0%
|
|
81.3%
|
|
(1.3)
|
|
94.0%
|
|
97.1%
|
|
(3.1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
|
|
|
% Change
|
|
Agency renewal
written premiums
|
|
$
342
|
|
$
317
|
|
8
|
|
$
1,434
|
|
$
1,364
|
|
5
|
|
Agency new business
written premiums
|
|
50
|
|
45
|
|
11
|
|
202
|
|
174
|
|
16
|
|
Other written
premiums
|
|
(10)
|
|
(8)
|
|
(25)
|
|
(42)
|
|
(35)
|
|
(20)
|
|
Net
written premiums
|
|
$
382
|
|
$
354
|
|
8
|
|
$
1,594
|
|
$
1,503
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios as a percent
of earned premiums:
|
|
|
|
|
|
Pt. Change
|
|
|
|
|
|
Pt. Change
|
|
Current accident year before
catastrophe losses
|
|
48.4%
|
|
46.3%
|
|
2.1
|
|
53.4%
|
|
52.1%
|
|
1.3
|
|
Current accident year
catastrophe losses
|
|
5.3
|
|
3.4
|
|
1.9
|
|
14.2
|
|
16.0
|
|
(1.8)
|
|
Prior accident years before
catastrophe losses
|
|
(3.1)
|
|
2.6
|
|
(5.7)
|
|
(2.8)
|
|
(0.7)
|
|
(2.1)
|
|
Prior accident years
catastrophe losses
|
|
(0.7)
|
|
0.0
|
|
(0.7)
|
|
(0.5)
|
|
(0.6)
|
|
0.1
|
|
Loss and loss
expense ratio
|
|
49.9%
|
|
52.3%
|
|
(2.4)
|
|
64.3%
|
|
66.8%
|
|
(2.5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current accident year
combined ratio before
|
|
|
|
|
|
|
|
|
|
|
|
|
|
catastrophe
losses
|
|
78.5%
|
|
75.3%
|
|
3.2
|
|
83.1%
|
|
82.4%
|
|
0.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 8% and 6% growth in fourth-quarter and full-year 2021 personal
lines net written premiums, largely due to higher renewal written
premiums that benefited from rate increases. Full-year 2021 net
written premiums from our agencies' high net worth clients grew
28%, to $663 million.
- 11% and 16% increase in fourth-quarter and full-year 2021 new
business premiums written by agencies, compared with a year ago,
largely reflecting expanded use of pricing precision tools.
- 1.3 percentage-point improvement in the fourth-quarter 2021
combined ratio, despite an increase of 1.2 points from losses from
catastrophes.
- 3.1 percentage-point improvement in the full-year 2021 combined
ratio, including a decrease for losses from catastrophes of 1.7
points.
- 3.8 and 3.3 percentage-point fourth-quarter and full-year 2021
benefit from favorable prior accident year reserve development of
$15 million and $50 million, compared with unfavorable prior
reserve development of 2.6 points or $10
million for fourth-quarter 2020 and favorable development of
1.3 points or $18 million for
full-year 2020.
- 1.3 percentage-point increase, to 53.4%, for the full-year 2021
ratio of current accident year losses and loss expenses before
catastrophes, including an increase of 0.6 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,
|
|
|
|
2021
|
|
2020
|
|
% Change
|
|
2021
|
|
2020
|
|
% Change
|
|
Earned
premiums
|
|
$
109
|
|
$
87
|
|
25
|
|
$
398
|
|
$
325
|
|
22
|
|
Fee
revenues
|
|
—
|
|
1
|
|
(100)
|
|
2
|
|
2
|
|
0
|
|
Total
revenues
|
|
109
|
|
88
|
|
24
|
|
400
|
|
327
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss
expenses
|
|
63
|
|
49
|
|
29
|
|
250
|
|
199
|
|
26
|
|
Underwriting
expenses
|
|
27
|
|
24
|
|
13
|
|
106
|
|
94
|
|
13
|
|
Underwriting profit
|
|
$
19
|
|
$
15
|
|
27
|
|
$
44
|
|
$
34
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios as a percent
of earned premiums:
|
|
|
|
|
|
Pt. Change
|
|
|
|
|
|
Pt. Change
|
|
Loss and loss
expenses
|
|
58.1%
|
|
56.6%
|
|
1.5
|
|
62.8%
|
|
61.3%
|
|
1.5
|
|
Underwriting
expenses
|
|
25.1
|
|
26.6
|
|
(1.5)
|
|
26.7
|
|
28.7
|
|
(2.0)
|
|
Combined
ratio
|
|
83.2%
|
|
83.2%
|
|
0.0
|
|
89.5%
|
|
90.0%
|
|
(0.5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
|
|
|
% Change
|
|
Agency renewal
written premiums
|
|
$
87
|
|
$
69
|
|
26
|
|
$
323
|
|
$
254
|
|
27
|
|
Agency new business
written premiums
|
|
27
|
|
27
|
|
0
|
|
124
|
|
110
|
|
13
|
|
Other written
premiums
|
|
(6)
|
|
(4)
|
|
(50)
|
|
(21)
|
|
(16)
|
|
(31)
|
|
Net
written premiums
|
|
$
108
|
|
$
92
|
|
17
|
|
$
426
|
|
$
348
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios as a percent
of earned premiums:
|
|
|
|
|
|
Pt. Change
|
|
|
|
|
|
Pt. Change
|
|
Current accident year before
catastrophe losses
|
|
56.0%
|
|
57.6%
|
|
(1.6)
|
|
60.3%
|
|
57.7%
|
|
2.6
|
|
Current accident year
catastrophe losses
|
|
0.6
|
|
0.4
|
|
0.2
|
|
0.6
|
|
1.3
|
|
(0.7)
|
|
Prior accident years before
catastrophe losses
|
|
1.2
|
|
(1.5)
|
|
2.7
|
|
1.9
|
|
2.1
|
|
(0.2)
|
|
Prior accident years
catastrophe losses
|
|
0.3
|
|
0.1
|
|
0.2
|
|
0.0
|
|
0.2
|
|
(0.2)
|
|
Loss and loss
expense ratio
|
|
58.1%
|
|
56.6%
|
|
1.5
|
|
62.8%
|
|
61.3%
|
|
1.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current accident year
combined ratio before
|
|
|
|
|
|
|
|
|
|
|
|
|
|
catastrophe
losses
|
|
81.1%
|
|
84.2%
|
|
(3.1)
|
|
87.0%
|
|
86.4%
|
|
0.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 17% and 22% growth in fourth-quarter and full-year 2021 excess
and surplus lines net written premiums, including fourth-quarter
2021 renewal price increases averaging near the low end of the
high-single-digit percent range.
- Less than 1% decrease in fourth-quarter 2021 new business
written premiums with full-year 2021 increasing 13%, 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.
- 83.2% fourth-quarter 2021 combined ratio that matched strong
operating performance for the year-ago period.
- 0.5 percentage-point improvement in the full-year 2021 combined
ratio, as lower ratios for underwriting expenses and catastrophe
losses offset higher current accident year losses and loss expenses
before catastrophes.
- 1.5 percentage-point fourth-quarter 2021 unfavorable reserve
development on prior accident years of $1
million, compared with a benefit from favorable reserve
development of 1.4 points or $1
million for fourth-quarter 2020.
- 1.9 percentage-point full-year 2021 unfavorable prior accident
year reserve development of $7
million, compared with 2.3 points or $7 million of unfavorable development for
full-year 2020.
- 2.6 percentage-point increase, to 60.3%, for the full-year 2021
ratio of current accident year losses and loss expenses before
catastrophes, including an increase of 1.6 points 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,
|
|
|
|
2021
|
|
2020
|
|
% Change
|
|
2021
|
|
2020
|
|
% Change
|
|
Term life
insurance
|
|
$
54
|
|
$
50
|
|
8
|
|
$
210
|
|
$
197
|
|
7
|
|
Universal life
insurance
|
|
11
|
|
10
|
|
10
|
|
39
|
|
44
|
|
(11)
|
|
Other life insurance
and annuity products
|
|
12
|
|
11
|
|
9
|
|
49
|
|
48
|
|
2
|
|
Earned
premiums
|
|
77
|
|
71
|
|
8
|
|
298
|
|
289
|
|
3
|
|
Investment income,
net of expenses
|
|
41
|
|
40
|
|
3
|
|
166
|
|
158
|
|
5
|
|
Investment gains and
losses, net
|
|
3
|
|
2
|
|
50
|
|
11
|
|
(27)
|
|
nm
|
|
Fee
revenues
|
|
2
|
|
1
|
|
100
|
|
5
|
|
2
|
|
150
|
|
Total
revenues
|
|
123
|
|
114
|
|
8
|
|
480
|
|
422
|
|
14
|
|
Contract holders'
benefits incurred
|
|
91
|
|
73
|
|
25
|
|
340
|
|
297
|
|
14
|
|
Underwriting expenses
incurred
|
|
21
|
|
22
|
|
(5)
|
|
84
|
|
85
|
|
(1)
|
|
Total benefits and
expenses
|
|
112
|
|
95
|
|
18
|
|
424
|
|
382
|
|
11
|
|
Net income before
income tax
|
|
11
|
|
19
|
|
(42)
|
|
56
|
|
40
|
|
40
|
|
Income tax
|
|
2
|
|
4
|
|
(50)
|
|
12
|
|
8
|
|
50
|
|
Net income of the life
insurance subsidiary
|
|
$
9
|
|
$
15
|
|
(40)
|
|
$
44
|
|
$
32
|
|
38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- $9 million or 3% increase in
full-year 2021 earned premiums, including a 7% increase for term
life insurance, our largest life insurance product line. Universal
life insurance earned premiums can vary, including from changes in
interest rate or other actuarial assumptions, and decreased 11% in
2021.
- $12 million or 38% increase in
full-year 2021 life insurance subsidiary net income, largely
reflecting investment losses resulting from impairments of
fixed-maturity securities during the first quarter of 2020,
partially offset by less favorable mortality experience in 2021 due
largely to higher pandemic-related death claims.
- $25 million or 2% full-year 2021
decrease to $1.392 billion in GAAP
shareholders' equity for The Cincinnati Life Insurance Company,
primarily from a decrease in unrealized investment gains partially
offset by net income.
Investment and
Balance Sheet Highlights
|
|
Investments
Results
|
|
(Dollars in
millions)
|
|
Three months ended
December 31,
|
|
Twelve months ended
December 31,
|
|
|
|
2021
|
|
2020
|
|
% Change
|
|
2021
|
|
2020
|
|
% Change
|
|
Investment income,
net of expenses
|
|
$
186
|
|
$
172
|
|
8
|
|
$
714
|
|
$
670
|
|
7
|
|
Investment interest
credited to contract holders'
|
|
(26)
|
|
(25)
|
|
(4)
|
|
(105)
|
|
(102)
|
|
(3)
|
|
Investment gains and
losses, net
|
|
1,455
|
|
997
|
|
46
|
|
2,409
|
|
865
|
|
178
|
|
Investment
profit
|
|
$
1,615
|
|
$
1,144
|
|
41
|
|
$
3,018
|
|
$
1,433
|
|
111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
121
|
|
$
116
|
|
4
|
|
$
477
|
|
$
455
|
|
5
|
|
Dividends
|
|
67
|
|
59
|
|
14
|
|
246
|
|
220
|
|
12
|
|
Other
|
|
1
|
|
1
|
|
0
|
|
5
|
|
8
|
|
(38)
|
|
Less
investment expenses
|
|
3
|
|
4
|
|
(25)
|
|
14
|
|
13
|
|
8
|
|
Investment income,
pretax
|
|
186
|
|
172
|
|
8
|
|
714
|
|
670
|
|
7
|
|
Less income
taxes
|
|
29
|
|
27
|
|
7
|
|
111
|
|
104
|
|
7
|
|
Total investment
income, after-tax
|
|
$
157
|
|
$
145
|
|
8
|
|
$
603
|
|
$
566
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
returns:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average invested
assets plus cash and cash equivalents
|
|
$
24,219
|
|
$ 20,873
|
|
|
|
$
23,215
|
|
$ 20,670
|
|
|
|
Average yield
pretax
|
|
3.07%
|
|
3.30%
|
|
|
|
3.08%
|
|
3.24%
|
|
|
|
Average yield
after-tax
|
|
2.59
|
|
2.78
|
|
|
|
2.60
|
|
2.74
|
|
|
|
Effective tax
rate
|
|
15.5%
|
|
15.4%
|
|
|
|
15.5%
|
|
15.5%
|
|
|
|
Fixed-maturity
returns:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average amortized
cost
|
|
$
12,132
|
|
$ 11,293
|
|
|
|
$
11,771
|
|
$ 11,210
|
|
|
|
Average yield
pretax
|
|
3.99%
|
|
4.11%
|
|
|
|
4.05%
|
|
4.06%
|
|
|
|
Average yield
after-tax
|
|
3.32
|
|
3.43
|
|
|
|
3.37
|
|
3.39
|
|
|
|
Effective tax
rate
|
|
16.9%
|
|
16.6%
|
|
|
|
16.8%
|
|
16.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- $14 million or 8% rise in
fourth-quarter 2021 pretax investment income, including 14% growth
in equity portfolio dividends and 4% growth in interest
income.
- $1.373 billion fourth-quarter and
$2.175 billion full-year 2021 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,
|
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Investment gains and
losses on equity securities sold, net
|
|
$
(2)
|
|
$
4
|
|
$
4
|
|
$
79
|
|
Unrealized gains and
losses on equity securities still held, net
|
|
1,409
|
|
971
|
|
2,278
|
|
841
|
|
Investment gains and
losses on fixed-maturity securities, net
|
|
10
|
|
7
|
|
30
|
|
(65)
|
|
Other
|
|
38
|
|
15
|
|
97
|
|
10
|
|
Subtotal - investment
gains and losses reported in net income
|
|
1,455
|
|
997
|
|
2,409
|
|
865
|
|
Change in unrealized
investment gains and losses - fixed maturities
|
|
(82)
|
|
142
|
|
(234)
|
|
436
|
|
Total
|
|
$
1,373
|
|
$
1,139
|
|
$
2,175
|
|
$
1,301
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet
Highlights
|
|
(Dollars in millions
except share data)
|
|
At December
31,
|
|
At December
31,
|
|
|
|
2021
|
|
2020
|
|
Total
investments
|
|
$
24,666
|
|
$
21,542
|
|
Total
assets
|
|
31,387
|
|
27,542
|
|
Short-term debt
|
|
54
|
|
54
|
|
Long-term debt
|
|
789
|
|
788
|
|
Shareholders' equity
|
|
13,105
|
|
10,789
|
|
Book
value per share
|
|
81.72
|
|
67.04
|
|
Debt-to-total-capital ratio
|
|
6.0%
|
|
7.2%
|
|
- $25.805 billion in consolidated
cash and invested assets at December 31,
2021, up 15% from $22.442
billion at year-end 2020.
- $13.022 billion bond portfolio at
December 31, 2021, with an average
rating of A3/A. Fair value increased $114
million or 1% during the fourth quarter of 2021.
- $11.315 billion equity portfolio
was 45.9% of total investments, including $7.194 billion in appreciated value before taxes
at December 31, 2021. Fourth-quarter
2021 increase in fair value of $1.428
billion or 14%.
- $8.23 fourth-quarter 2021
increase in book value per share, including an addition of
$1.99 from net income before
investment gains and $6.58 from
investment portfolio net investment gains or changes in unrealized
gains for fixed-maturity securities, and $0.29 for other items and $0.63 from dividends declared to
shareholders.
- Value creation ratio of 25.7% for full-year 2021, including
9.7% from net income before investment gains, which includes
underwriting and investment income, 15.3% from investment portfolio
net investment gains or changes in unrealized gains for
fixed-maturity securities, including positive 16.8% from our stock
portfolio and negative 1.5% from our bond portfolio, in addition to
positive 0.7% 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 2020 Annual
Report on Form 10-K, Item 1A, Risk Factors, Page 34.
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 and continued supply chain
disruptions that affect our 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
- 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 (whether as a result of
global climate change or otherwise), environmental events,
terrorism incidents, civil unrest or other causes
- Increased frequency and/or severity of claims or development of
claims that are unforeseen at the time of policy issuance, due to
inflationary trends or other causes
- Inadequate estimates or assumptions, or reliance on third-party
data used for critical accounting estimates
- Declines in overall stock market values negatively affecting
our equity portfolio and book value
- Prolonged low interest rate environment or other factors that
limit our 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 or director and officer
policies written for financial institutions or other insured
entities
- Our inability to manage Cincinnati Global or other subsidiaries
to produce related business opportunities and growth prospects for
our ongoing operations
- Recession or other economic conditions resulting in lower
demand for insurance products or increased payment
delinquencies
- Ineffective information technology systems or discontinuing to
develop and implement improvements in technology may impact our
success and profitability
- Difficulties with technology or data security breaches,
including cyberattacks, that could negatively affect our or our
agents' 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
- Difficulties with our operations and technology that may
negatively impact our ability to conduct business, including
cloud-based data information storage, data security, cyberattacks,
remote working capabilities, and/or outsourcing relationships and
third-party operations and data security
- 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
- Intense competition, and the impact of innovation,
technological change and changing customer preferences on the
insurance industry and the markets in which we operate, could harm
our ability to maintain or increase our ability to maintain or
increase our business volumes and profitability
- Changing consumer insurance-buying habits and consolidation of
independent insurance agencies 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 our
relationships with our independent agencies and hamper
opportunities to add new agencies, resulting in limitations on our
opportunities for growth, such as:
-
- Downgrades of our financial strength ratings
- Concerns that doing business with us is too difficult
- Perceptions that our 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,
including effects of social inflation on the size of litigation
awards
- Events or actions, including unauthorized intentional
circumvention of controls, that reduce our 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
- Our inability, or the inability of our independent agents, to
attract and retain personnel in a competitive labor market,
impacting the customer experience and altering our competitive
advantages
- Events, such as an epidemic, natural catastrophe or terrorism,
that could hamper our ability to assemble our workforce at our
headquarters location or work effectively in a remote
environment
Further, our 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. We also are subject to public and
regulatory initiatives that can affect the market value for our
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,
|
|
|
|
2021
|
|
2020
|
|
Assets
|
|
|
|
|
|
Investments
|
|
|
|
|
|
Fixed maturities, at fair value (amortized cost: 2021—$12,230;
2020—$11,312)
|
|
$
13,022
|
|
$
12,338
|
|
Equity securities, at fair value (cost: 2021—$4,121;
2020—$3,927)
|
|
11,315
|
|
8,856
|
|
Other invested assets
|
|
329
|
|
348
|
|
Total
investments
|
|
24,666
|
|
21,542
|
|
Cash and cash
equivalents
|
|
1,139
|
|
900
|
|
Investment
income receivable
|
|
144
|
|
136
|
|
Finance
receivable
|
|
98
|
|
95
|
|
Premiums
receivable
|
|
2,053
|
|
1,879
|
|
Reinsurance
recoverable
|
|
570
|
|
517
|
|
Prepaid
reinsurance premiums
|
|
78
|
|
65
|
|
Deferred
policy acquisition costs
|
|
905
|
|
805
|
|
Land, building
and equipment, net, for company use (accumulated
depreciation:
2021—$303;
2020—$285)
|
|
205
|
|
213
|
|
Other
assets
|
|
570
|
|
438
|
|
Separate
accounts
|
|
959
|
|
952
|
|
Total assets
|
|
$
31,387
|
|
$
27,542
|
|
Liabilities
|
|
|
|
|
|
Insurance
reserves
|
|
|
|
|
|
Loss and loss expense reserves
|
|
$
7,305
|
|
$
6,746
|
|
Life policy and investment contract reserves
|
|
3,014
|
|
2,915
|
|
Unearned
premiums
|
|
3,271
|
|
2,960
|
|
Other
liabilities
|
|
1,092
|
|
982
|
|
Deferred
income tax
|
|
1,744
|
|
1,299
|
|
Note
payable
|
|
54
|
|
54
|
|
Long-term debt
and lease obligations
|
|
843
|
|
845
|
|
Separate
accounts
|
|
959
|
|
952
|
|
Total liabilities
|
|
18,282
|
|
16,753
|
|
|
|
|
|
|
|
Shareholders'
Equity
|
|
|
|
|
|
Common stock,
par value—$2 per share; (authorized: 2021 and 2020—500 million
shares;
issued: 2021 and 2020—198.3 million shares)
|
|
397
|
|
397
|
|
Paid-in
capital
|
|
1,356
|
|
1,328
|
|
Retained
earnings
|
|
12,625
|
|
10,085
|
|
Accumulated other
comprehensive income
|
|
648
|
|
769
|
|
Treasury stock at cost
(2021— 38.0 million shares and 2020—37.4 million shares)
|
|
(1,921)
|
|
(1,790)
|
|
Total
shareholders' equity
|
|
$
13,105
|
|
$
10,789
|
|
Total
liabilities and shareholders' equity
|
|
$
31,387
|
|
$
27,542
|
|
|
|
|
|
|
|
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,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Revenues
|
|
|
|
|
|
|
|
|
Earned
premiums
|
$
1,676
|
|
$
1,520
|
|
$
6,482
|
|
$
5,980
|
|
Investment income, net of expenses
|
186
|
|
172
|
|
714
|
|
670
|
|
Investment gains and losses, net
|
1,455
|
|
997
|
|
2,409
|
|
865
|
|
Fee
revenues
|
4
|
|
3
|
|
15
|
|
11
|
|
Other
revenues
|
2
|
|
2
|
|
10
|
|
10
|
|
Total
revenues
|
3,323
|
|
2,694
|
|
9,630
|
|
7,536
|
|
|
|
|
|
|
|
|
|
|
Benefits and
Expenses
|
|
|
|
|
|
|
|
|
Insurance losses and contract holders' benefits
|
946
|
|
902
|
|
3,936
|
|
4,134
|
|
Underwriting, acquisition and insurance expenses
|
511
|
|
457
|
|
1,951
|
|
1,829
|
|
Interest
expense
|
14
|
|
14
|
|
53
|
|
54
|
|
Other
operating expenses
|
6
|
|
5
|
|
20
|
|
20
|
|
Total benefits and
expenses
|
1,477
|
|
1,378
|
|
5,960
|
|
6,037
|
|
|
|
|
|
|
|
|
|
|
Income Before
Income Taxes
|
1,846
|
|
1,316
|
|
3,670
|
|
1,499
|
|
|
|
|
|
|
|
|
|
|
Provision for
Income Taxes
|
|
|
|
|
|
|
|
|
Current
|
81
|
|
66
|
|
247
|
|
147
|
|
Deferred
|
295
|
|
201
|
|
477
|
|
136
|
|
Total provision for
income taxes
|
376
|
|
267
|
|
724
|
|
283
|
|
|
|
|
|
|
|
|
|
|
Net
Income
|
$
1,470
|
|
$
1,049
|
|
$
2,946
|
|
$
1,216
|
|
|
|
|
|
|
|
|
|
|
Per Common
Share
|
|
|
|
|
|
|
|
|
Net
income—basic
|
$
9.14
|
|
$
6.52
|
|
$
18.29
|
|
$
7.55
|
|
Net
income—diluted
|
9.04
|
|
6.47
|
|
18.10
|
|
7.49
|
|
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,
|
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Net income
|
|
$
1,470
|
|
$
1,049
|
|
$
2,946
|
|
$
1,216
|
|
Less:
|
|
|
|
|
|
|
|
|
|
Investment gains and losses, net
|
|
1,455
|
|
997
|
|
2,409
|
|
865
|
|
Income
tax on investment gains and losses
|
|
(305)
|
|
(210)
|
|
(506)
|
|
(182)
|
|
Investment gains and
losses, after-tax
|
|
1,150
|
|
787
|
|
1,903
|
|
683
|
|
Non-GAAP operating
income
|
|
$
320
|
|
$
262
|
|
$
1,043
|
|
$
533
|
|
|
|
|
|
|
|
|
|
|
|
Diluted per share
data:
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
9.04
|
|
$
6.47
|
|
$
18.10
|
|
$
7.49
|
|
Less:
|
|
|
|
|
|
|
|
|
|
Investment gains and losses, net
|
|
8.95
|
|
6.15
|
|
14.80
|
|
5.33
|
|
Income
tax on investment gains and losses
|
|
(1.88)
|
|
(1.29)
|
|
(3.11)
|
|
(1.12)
|
|
Investment gains and
losses, after-tax
|
|
7.07
|
|
4.86
|
|
11.69
|
|
4.21
|
|
Non-GAAP operating
income
|
|
$
1.97
|
|
$
1.61
|
|
$
6.41
|
|
$
3.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Life Insurance
Reconciliation
|
|
|
|
(Dollars in
millions)
|
|
Three months ended
December 31,
|
|
Twelve months ended
December 31,
|
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Net
income of life insurance subsidiary
|
|
$
9
|
|
$
15
|
|
$
44
|
|
$
32
|
|
Investment gains and losses, net
|
|
3
|
|
2
|
|
11
|
|
(27)
|
|
Income
tax on investment gains and losses
|
|
1
|
|
—
|
|
3
|
|
(6)
|
|
Non-GAAP
operating income
|
|
7
|
|
13
|
|
36
|
|
53
|
|
|
|
|
|
|
|
|
|
|
|
Investment income, net
of expenses
|
|
(41)
|
|
(40)
|
|
(166)
|
|
(158)
|
|
Investment income
credited to contract holders'
|
|
26
|
|
25
|
|
105
|
|
102
|
|
Income tax excluding
tax on investment gains and losses, net
|
|
1
|
|
4
|
|
9
|
|
14
|
|
Life insurance segment
profit (loss)
|
|
$
(7)
|
|
$
2
|
|
$
(16)
|
|
$
11
|
|
|
|
|
|
|
|
|
|
|
|
Property Casualty
Insurance Reconciliation
|
|
(Dollars in
millions)
|
Three months ended
December 31, 2021
|
|
|
Consolidated
|
Commercial
|
Personal
|
E&S
|
|
Other*
|
|
Premiums:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Written
premiums
|
|
$
1,534
|
|
|
$
920
|
|
|
$
382
|
|
|
$
108
|
|
|
$
124
|
|
Unearned
premiums change
|
|
65
|
|
|
27
|
|
|
14
|
|
|
1
|
|
|
23
|
|
Earned
premiums
|
|
$
1,599
|
|
|
$
947
|
|
|
$
396
|
|
|
$
109
|
|
|
$
147
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting
profit
|
|
$
256
|
|
|
$
141
|
|
|
$
81
|
|
|
$
19
|
|
|
$
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in
millions)
|
Twelve months ended
December 31, 2021
|
|
|
Consolidated
|
Commercial
|
Personal
|
E&S
|
|
Other*
|
|
Premiums:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Written
premiums
|
|
$
6,479
|
|
|
$
3,811
|
|
|
$
1,594
|
|
|
$
426
|
|
|
$
648
|
|
Unearned
premiums change
|
|
(295)
|
|
|
(137)
|
|
|
(52)
|
|
|
(28)
|
|
|
(78)
|
|
Earned
premiums
|
|
$
6,184
|
|
|
$
3,674
|
|
|
$
1,542
|
|
|
$
398
|
|
|
$
570
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting profit
(loss)
|
|
$
731
|
|
|
$
598
|
|
|
$
97
|
|
|
$
44
|
|
|
$
(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollar amounts shown
are rounded to millions; certain amounts may not add due to
rounding.
|
|
*Included in Other
are the results of Cincinnati Re and Cincinnati Global.
|
|
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,
|
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Value creation
ratio:
|
|
|
|
|
|
|
|
|
|
End of
period book value*
|
|
$
81.72
|
|
$
67.04
|
|
$
81.72
|
|
$
67.04
|
|
Less
beginning of period book value
|
|
73.49
|
|
60.57
|
|
67.04
|
|
60.55
|
|
Change
in book value
|
|
8.23
|
|
6.47
|
|
14.68
|
|
6.49
|
|
Dividend
declared to shareholders
|
|
0.63
|
|
0.60
|
|
2.52
|
|
2.40
|
|
Total
value creation
|
|
$
8.86
|
|
$
7.07
|
|
$
17.20
|
|
$
8.89
|
|
|
|
|
|
|
|
|
|
|
|
Value creation ratio
from change in book value**
|
|
11.2%
|
|
10.7%
|
|
21.9%
|
|
10.7%
|
|
Value creation ratio
from dividends declared to shareholders***
|
0.9
|
|
1.0
|
|
3.8
|
|
4.0
|
|
Value creation
ratio
|
|
12.1%
|
|
11.7%
|
|
25.7%
|
|
14.7%
|
|
|
|
|
|
|
|
|
|
|
|
* 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