CINCINNATI, April 28, 2022 /PRNewswire/ -- Cincinnati
Financial Corporation (Nasdaq: CINF) today reported:
- First-quarter 2022 net loss of $273
million, or $1.70 per share,
compared with net income of $620
million, or $3.82 per share,
in the first quarter of 2021, after recognizing a $540 million first-quarter 2022 after-tax
reduction in the fair value of equity securities still held.
- $31 million or 14% increase in
non-GAAP operating income* to $253
million, or $1.58 per share,
compared with $222 million, or
$1.37 per share, in the first quarter
of last year.
- $893 million decrease in
first-quarter 2022 net income, compared with first-quarter 2021,
primarily due to the after-tax net effect of a $924 million decrease in net investment gains
partially offset by a $25 million
increase in after-tax property casualty underwriting income.
- $75.43 book value per share at
March 31, 2022, down $6.29 since year-end.
- Negative 6.9% value creation ratio for the first three months
of 2022, compared with positive 4.1% for the same period of
2021.
Financial Highlights
(Dollars in millions,
except per share data)
|
Three months ended
March 31,
|
|
|
|
2022
|
|
2021
|
|
% Change
|
|
Revenue Data
|
|
|
|
|
|
|
|
Earned
premiums
|
|
$
1,690
|
|
$
1,544
|
|
9
|
|
Investment
income, net of expenses
|
|
185
|
|
174
|
|
6
|
|
Total
revenues
|
|
1,215
|
|
2,227
|
|
(45)
|
|
Income Statement Data
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
(273)
|
|
$
620
|
|
nm
|
|
Investment
gains and losses, after-tax
|
|
(526)
|
|
398
|
|
nm
|
|
Non-GAAP
operating income*
|
|
$
253
|
|
$
222
|
|
14
|
|
Per Share Data (diluted)
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
(1.70)
|
|
$
3.82
|
|
nm
|
|
Investment
gains and losses, after-tax
|
|
(3.28)
|
|
2.45
|
|
nm
|
|
Non-GAAP
operating income*
|
|
$
1.58
|
|
$
1.37
|
|
15
|
|
|
|
|
|
|
|
|
|
Book
value
|
|
$
75.43
|
|
$
69.16
|
|
9
|
|
Cash
dividend declared
|
|
$
0.69
|
|
$
0.63
|
|
10
|
|
Diluted
weighted average shares outstanding
|
|
160.4
|
|
162.5
|
|
(1)
|
|
|
|
|
|
|
|
|
|
*
The Definitions of Non-GAAP Information
and Reconciliation to Comparable GAAP Measures section
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
- 89.9% first-quarter 2022 property casualty combined ratio,
improved from 91.2% for the first quarter of 2021.
- 12% growth in first-quarter net written premiums, largely due
to price increases and premium growth initiatives.
- $244 million first-quarter 2022
property casualty new business written premiums, up 11%. Agencies
appointed since the beginning of 2021 contributed $14 million or 6% of total new business written
premiums.
- $10 million first-quarter 2022
life insurance subsidiary net income, matching the first quarter of
2021, and 6% growth in first-quarter 2022 term life insurance
earned premiums.
Investment and Balance Sheet Highlights
- 6% or $11 million increase in
first-quarter 2022 pretax investment income, including a 12%
increase for stock portfolio dividends and a 4% increase for bond
interest income.
- Three-month decrease of 5% in fair value of total investments
at March 31, 2022, including a 5%
decrease for the bond portfolio and a 6% decrease for the stock
portfolio.
- $4.730 billion parent company
cash and marketable securities at March 31,
2022, down 6% from year-end 2021.
Keeping a Steady Approach to Insurance
Steven J. Johnston, chairman, president and CEO,
commented: "Non-GAAP operating income started the year strong,
increasing 14% compared with last year's first-quarter result. The
swing to a GAAP net loss of $273
million, compared with positive net income of $620 million for the same period last year, is
due to accounting rules adopted effective in 2018 by the Financial
Accounting Standards Board.
"As I've mentioned before, this accounting treatment will
continue to create a lot of volatility in net income as equity
security unrealized investment gains and losses flow through the
income statement instead of the balance sheet as they would have
prior to 2018.
"Turning to our insurance business, property casualty
underwriting continued to produce steady results as our
first-quarter combined ratio improved 1.3 percentage points to
89.9% compared to the first quarter of 2021.
"A somewhat milder winter, our continued focus on pricing
precision and our steady approach to insurance reserves helped us
reach $165 million in underwriting
profit – our highest first-quarter underwriting profit in at least
16 years."
Achieving Consistent Growth
"We're pleased with the
progress of our growth initiatives and the premium increases
reported by each of our property casualty segments. Consolidated
property casualty first-quarter net written premiums grew 12%,
including average price increases at percentages similar to the
fourth quarter of 2021. Pricing sophistication allows us to
consider each account on its own merits, charging a price we
believe to be adequate based on its specific risk
characteristics.
"The main driver of our growth continues to come from the
excellent relationships we develop with our agencies. Thanks to
those strong partnerships, the first quarter of 2022 was our
highest-ever single quarter of new business written premiums,
reaching $244 million. To keep the
momentum going, we continue to look for opportunities to appoint
new agents while still preserving the franchise value that our
agents appreciate. So far this year, we've appointed 51 agencies to
offer our property casualty products.
"Our recent efforts to diversify our product portfolio also
support our ability to grow profitably. In February, we launched
our first product offered through our wholly owned brokerage, CSU
Producer Resources Inc. and underwritten by our Lloyd's of
London syndicate, Cincinnati
Global Underwriting Ltd.SM. Our agents have responded
enthusiastically to this new Wind Hail Deductible Buyback policy,
and we've quoted $3.5 million in new
business in just eight weeks."
Focusing on a Long-Term Investment Strategy
"Downward
pressure in both the equity and bond markets contributed to a 7.7%
decline in book value to $75.43 per
share at March 31 compared with
year-end 2021. Despite this movement, we estimate that our
quarter-end total portfolio still held nearly $6.6 billion in appreciated value before
taxes.
"We maintain a long-term perspective with our investment
philosophy and aren't swayed by periodic market volatility. Our
insurance business continues to provide cash that we invest in
high-quality bonds and dividend-paying stocks. We are poised to
further benefit from these purchases when the markets rebound."
Insurance
Operations Highlights
|
|
Consolidated
Property Casualty Insurance Results
|
|
(Dollars in
millions)
|
Three months ended
March 31,
|
|
|
|
2022
|
|
2021
|
|
% Change
|
|
Earned
premiums
|
|
$
1,618
|
|
$
1,475
|
|
10
|
|
Fee revenues
|
|
3
|
|
2
|
|
50
|
|
Total
revenues
|
|
1,621
|
|
1,477
|
|
10
|
|
|
|
|
|
|
|
|
|
Loss and loss
expenses
|
|
956
|
|
923
|
|
4
|
|
Underwriting
expenses
|
|
500
|
|
421
|
|
19
|
|
Underwriting profit
|
|
$
165
|
|
$
133
|
|
24
|
|
|
|
|
|
|
|
|
|
Ratios as a percent of
earned premiums:
|
|
|
|
|
|
Pt. Change
|
|
Loss and loss
expenses
|
|
59.1%
|
|
62.6%
|
|
(3.5)
|
|
Underwriting
expenses
|
|
30.8
|
|
28.6
|
|
2.2
|
|
Combined ratio
|
|
89.9%
|
|
91.2%
|
|
(1.3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
Agency renewal written
premiums
|
|
$
1,397
|
|
$
1,276
|
|
9
|
|
Agency new business
written premiums
|
|
244
|
|
220
|
|
11
|
|
Other written
premiums
|
|
258
|
|
197
|
|
31
|
|
Net
written premiums
|
|
$
1,899
|
|
$
1,693
|
|
12
|
|
|
|
|
|
|
|
|
|
Ratios as a percent of
earned premiums:
|
|
|
|
|
|
Pt. Change
|
|
Current accident year before
catastrophe losses
|
|
58.5%
|
|
57.6%
|
|
0.9
|
|
Current accident year
catastrophe losses
|
|
3.1
|
|
12.4
|
|
(9.3)
|
|
Prior accident years before
catastrophe losses
|
|
(1.2)
|
|
(5.4)
|
|
4.2
|
|
Prior accident years
catastrophe losses
|
|
(1.3)
|
|
(2.0)
|
|
0.7
|
|
Loss and loss expense ratio
|
|
59.1%
|
|
62.6%
|
|
(3.5)
|
|
|
|
|
|
|
|
|
|
Current accident year
combined ratio before catastrophe losses
|
|
89.3%
|
|
86.2%
|
|
3.1
|
|
|
|
|
|
|
|
|
|
- $206 million or 12% growth of
first-quarter 2022 property casualty net written premiums,
reflecting premium growth initiatives, price increases and a higher
level of insured exposures. Cincinnati Re® contributed 3
percentage points to property casualty growth for the first three
months of 2022.
- $24 million or 11% increase in
first-quarter 2022 new business premiums written by agencies. The
growth included a $13 million
increase in standard market property casualty production from
agencies appointed since the beginning of 2021.
- 51 new agency appointments in the first three months of 2022,
including 21 that market only our personal lines products.
- 1.3 percentage-point first-quarter 2022 combined ratio
improvement, including a decrease for losses from catastrophes of
8.6 points.
- 2.5 percentage-point first-quarter 2022 benefit from favorable
prior accident year reserve development of $41 million, compared with 7.4 points or
$110 million for first-quarter
2021.
- 0.9 percentage-point increase, to 58.5%, for the three-month
2022 ratio of current accident year losses and loss expenses before
catastrophes, including an increase of 4.0 points in the ratio for
current accident year losses of $1
million or more per claim.
- 2.2 percentage-point increase in the first-quarter 2022
underwriting expense ratio, compared with the same period of 2021,
primarily due to higher levels of profit-sharing commissions for
agencies and related expenses.
Commercial Lines
Insurance Results
|
|
(Dollars in
millions)
|
Three months ended
March 31,
|
|
|
|
2022
|
|
2021
|
|
% Change
|
|
Earned
premiums
|
|
$
962
|
|
$
886
|
|
9
|
|
Fee revenues
|
|
1
|
|
1
|
|
0
|
|
Total
revenues
|
|
963
|
|
887
|
|
9
|
|
|
|
|
|
|
|
|
|
Loss and loss
expenses
|
|
586
|
|
503
|
|
17
|
|
Underwriting
expenses
|
|
301
|
|
254
|
|
19
|
|
Underwriting profit
|
|
$
76
|
|
$
130
|
|
(42)
|
|
|
|
|
|
|
|
|
|
Ratios as a percent of
earned premiums:
|
|
|
|
|
|
Pt. Change
|
|
Loss and loss
expenses
|
|
61.0%
|
|
56.7%
|
|
4.3
|
|
Underwriting
expenses
|
|
31.3
|
|
28.7
|
|
2.6
|
|
Combined ratio
|
|
92.3%
|
|
85.4%
|
|
6.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
Agency renewal written
premiums
|
|
$
970
|
|
$
898
|
|
8
|
|
Agency new business
written premiums
|
|
156
|
|
145
|
|
8
|
|
Other written
premiums
|
|
(30)
|
|
(24)
|
|
(25)
|
|
Net
written premiums
|
|
$
1,096
|
|
$ 1,019
|
|
8
|
|
|
|
|
|
|
|
|
|
Ratios as a percent of
earned premiums:
|
|
|
|
|
|
Pt. Change
|
|
Current accident year before
catastrophe losses
|
|
61.2%
|
|
60.0%
|
|
1.2
|
|
Current accident year
catastrophe losses
|
|
1.7
|
|
6.1
|
|
(4.4)
|
|
Prior accident years before
catastrophe losses
|
|
(1.6)
|
|
(7.5)
|
|
5.9
|
|
Prior accident years
catastrophe losses
|
|
(0.3)
|
|
(1.9)
|
|
1.6
|
|
Loss and loss expense ratio
|
|
61.0%
|
|
56.7%
|
|
4.3
|
|
|
|
|
|
|
|
|
|
Current accident year
combined ratio before catastrophe losses
|
|
92.5%
|
|
88.7%
|
|
3.8
|
|
|
|
|
|
|
|
|
|
- $77 million or 8% growth in
first-quarter 2022 commercial lines net written premiums, primarily
due to higher agency renewal written premiums.
- $72 million or 8% increase in
first-quarter renewal written premiums, with commercial lines
average renewal pricing increases in the mid-single-digit percent
range.
- $11 million or 8% increase in
first-quarter 2022 new business written by agencies, as we continue
to carefully underwrite each policy in a highly competitive
market.
- 6.9 percentage-point increase in the first-quarter 2022
combined ratio, including a decrease for losses from catastrophes
of 2.8 points.
- 1.9 percentage-point first-quarter 2022 benefit from favorable
prior accident year reserve development of $18 million, compared with 9.4 points or
$83 million for first-quarter
2021.
Personal Lines
Insurance Results
|
|
(Dollars in
millions)
|
Three months ended
March 31,
|
|
|
|
2022
|
|
2021
|
|
% Change
|
|
Earned
premiums
|
|
$
402
|
|
$
376
|
|
7
|
|
Fee revenues
|
|
1
|
|
1
|
|
0
|
|
Total
revenues
|
|
403
|
|
377
|
|
7
|
|
|
|
|
|
|
|
|
|
Loss and loss
expenses
|
|
215
|
|
273
|
|
(21)
|
|
Underwriting
expenses
|
|
123
|
|
107
|
|
15
|
|
Underwriting profit (loss)
|
|
$
65
|
|
$
(3)
|
|
nm
|
|
|
|
|
|
|
|
|
|
Ratios as a percent of
earned premiums:
|
|
|
|
|
|
Pt. Change
|
|
Loss and loss
expenses
|
|
53.5%
|
|
72.6%
|
|
(19.1)
|
|
Underwriting
expenses
|
|
30.4
|
|
28.5
|
|
1.9
|
|
Combined ratio
|
|
83.9%
|
|
101.1%
|
|
(17.2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
Agency renewal written
premiums
|
|
$
333
|
|
$
302
|
|
10
|
|
Agency new business
written premiums
|
|
52
|
|
46
|
|
13
|
|
Other written
premiums
|
|
(11)
|
|
(10)
|
|
(10)
|
|
Net
written premiums
|
|
$
374
|
|
$
338
|
|
11
|
|
|
|
|
|
|
|
|
|
Ratios as a percent of
earned premiums:
|
|
|
|
|
|
Pt. Change
|
|
Current accident year before
catastrophe losses
|
|
55.0%
|
|
57.3%
|
|
(2.3)
|
|
Current accident year
catastrophe losses
|
|
6.9
|
|
20.6
|
|
(13.7)
|
|
Prior accident years before
catastrophe losses
|
|
(3.2)
|
|
(4.5)
|
|
1.3
|
|
Prior accident years
catastrophe losses
|
|
(5.2)
|
|
(0.8)
|
|
(4.4)
|
|
Loss and loss expense ratio
|
|
53.5%
|
|
72.6%
|
|
(19.1)
|
|
|
|
|
|
|
|
|
|
Current accident year
combined ratio before catastrophe losses
|
|
85.4%
|
|
85.8%
|
|
(0.4)
|
|
|
|
|
|
|
|
|
|
- $36 million or 11% growth in
first-quarter 2022 personal lines net written premiums, including
higher renewal written premiums that benefited from rate increases.
First-quarter 2022 net written premiums from our agencies' high net
worth clients grew 32%, to $176
million.
- $6 million or 13% increase in
first-quarter 2022 new business premiums written by agencies,
largely reflecting expanded use of enhanced pricing precision
tools.
- 17.2 percentage-point first-quarter 2022 combined ratio
improvement, including a decrease for losses from catastrophes of
18.1 points.
- 8.4 percentage-point first-quarter 2022 benefit from favorable
prior accident year reserve development of $34 million, compared with 5.3 points or
$20 million for first-quarter
2021.
Excess and Surplus
Lines Insurance Results
|
|
(Dollars in
millions)
|
Three months ended
March 31,
|
|
|
|
2022
|
|
2021
|
|
% Change
|
|
Earned
premiums
|
|
$
112
|
|
$
89
|
|
26
|
|
Fee revenues
|
|
1
|
|
—
|
|
nm
|
|
Total
revenues
|
|
113
|
|
89
|
|
27
|
|
|
|
|
|
|
|
|
|
Loss and loss
expenses
|
|
66
|
|
59
|
|
12
|
|
Underwriting
expenses
|
|
31
|
|
22
|
|
41
|
|
Underwriting profit
|
|
$
16
|
|
$
8
|
|
100
|
|
|
|
|
|
|
|
|
|
Ratios as a percent of
earned premiums:
|
|
|
|
|
|
Pt. Change
|
|
Loss and loss
expenses
|
|
58.3%
|
|
66.7%
|
|
(8.4)
|
|
Underwriting
expenses
|
|
27.6
|
|
25.3
|
|
2.3
|
|
Combined ratio
|
|
85.9%
|
|
92.0%
|
|
(6.1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
Agency renewal written
premiums
|
|
$
94
|
|
$
76
|
|
24
|
|
Agency new business
written premiums
|
|
36
|
|
29
|
|
24
|
|
Other written
premiums
|
|
(6)
|
|
(6)
|
|
0
|
|
Net
written premiums
|
|
$
124
|
|
$
99
|
|
25
|
|
|
|
|
|
|
|
|
|
Ratios as a percent of
earned premiums:
|
|
|
|
|
|
Pt. Change
|
|
Current accident year before
catastrophe losses
|
|
61.8%
|
|
61.0%
|
|
0.8
|
|
Current accident year
catastrophe losses
|
|
1.5
|
|
1.3
|
|
0.2
|
|
Prior accident years before
catastrophe losses
|
|
(4.6)
|
|
4.7
|
|
(9.3)
|
|
Prior accident years
catastrophe losses
|
|
(0.4)
|
|
(0.3)
|
|
(0.1)
|
|
Loss and loss expense ratio
|
|
58.3%
|
|
66.7%
|
|
(8.4)
|
|
|
|
|
|
|
|
|
|
Current accident year
combined ratio before catastrophe losses
|
|
89.4%
|
|
86.3%
|
|
3.1
|
|
|
|
|
|
|
|
|
|
- $25 million or 25% growth in
first-quarter 2022 excess and surplus lines net written premiums,
including higher renewal written premiums that benefited from price
increases averaging in the high-single-digit percent range.
- $7 million or 24% increase in
first-quarter new business written by agencies, as we continue to
carefully underwrite each policy in a highly competitive
market.
- 6.1 percentage-point first-quarter 2022 combined ratio
improvement, primarily due to favorable reserve development on
prior accident years.
- $5 million of first-quarter 2022
favorable prior accident year reserve development, compared with
$4 million of unfavorable development
for first-quarter 2021.
Life Insurance
Subsidiary Results
|
|
(Dollars in
millions)
|
Three months ended
March 31,
|
|
|
2022
|
|
2021
|
|
% Change
|
|
Term life
insurance
|
$
54
|
|
$
51
|
|
6
|
|
Whole life
insurance
|
11
|
|
11
|
|
0
|
|
Universal life and
other
|
7
|
|
7
|
|
0
|
|
Earned premiums
|
72
|
|
69
|
|
4
|
|
Investment income, net
of expenses
|
42
|
|
41
|
|
2
|
|
Investment gains and
losses, net
|
—
|
|
—
|
|
0
|
|
Fee revenues
|
1
|
|
1
|
|
0
|
|
Total revenues
|
115
|
|
111
|
|
4
|
|
Contract holders'
benefits incurred
|
83
|
|
80
|
|
4
|
|
Underwriting expenses
incurred
|
19
|
|
18
|
|
6
|
|
Total benefits and expenses
|
102
|
|
98
|
|
4
|
|
Net income before
income tax
|
13
|
|
13
|
|
0
|
|
Income tax
provision
|
3
|
|
3
|
|
0
|
|
Net income of the life
insurance subsidiary
|
$
10
|
|
$
10
|
|
0
|
|
|
|
|
|
|
|
|
- $3 million or 4% increase in
first-quarter 2022 earned premiums, including a 6% increase for
term life insurance, our largest life insurance product line.
- Less than $1 million increase in
three-month 2022 life insurance subsidiary net income, primarily
from more favorable impacts from the unlocking of interest rate
actuarial assumptions, mostly offset by less favorable mortality
experience in the first quarter of 2022 due in part to
pandemic-related death claims.
- $187 million or 13% three-month
2022 decrease, to $1.205 billion, in
GAAP shareholders' equity for the life insurance subsidiary,
primarily from a decrease in unrealized investment gains on
fixed-maturity securities.
Investment and
Balance Sheet Highlights
|
|
Investments
Results
|
|
(Dollars in
millions)
|
|
Three months ended
March 31,
|
|
|
|
2022
|
|
2021
|
|
% Change
|
|
Investment income, net
of expenses
|
|
$
185
|
|
$
174
|
|
6
|
|
Investment interest
credited to contract holders
|
|
(27)
|
|
(26)
|
|
(4)
|
|
Investment gains and
losses, net
|
|
(666)
|
|
504
|
|
nm
|
|
Investments
profit
|
|
$
(508)
|
|
$
652
|
|
nm
|
|
|
|
|
|
|
|
|
|
Investment
income:
|
|
|
|
|
|
|
|
Interest
|
|
$
123
|
|
$
118
|
|
4
|
|
Dividends
|
|
65
|
|
58
|
|
12
|
|
Other
|
|
1
|
|
2
|
|
(50)
|
|
Less
investment expenses
|
|
4
|
|
4
|
|
0
|
|
Investment income,
pretax
|
|
185
|
|
174
|
|
6
|
|
Less income
taxes
|
|
29
|
|
27
|
|
7
|
|
Total investment income, after-tax
|
|
$
156
|
|
$
147
|
|
6
|
|
|
|
|
|
|
|
|
|
Investment
returns:
|
|
|
|
|
|
|
|
Average invested
assets plus cash and cash equivalents
|
|
$
24,677
|
|
$ 21,776
|
|
|
|
Average yield
pretax
|
|
3.00%
|
|
3.20%
|
|
|
|
Average yield
after-tax
|
|
2.53
|
|
2.70
|
|
|
|
Effective tax
rate
|
|
15.6
|
|
15.5
|
|
|
|
Fixed-maturity
returns:
|
|
|
|
|
|
|
|
Average amortized
cost
|
|
$
12,280
|
|
$ 11,395
|
|
|
|
Average yield
pretax
|
|
4.01%
|
|
4.14%
|
|
|
|
Average yield
after-tax
|
|
3.33
|
|
3.45
|
|
|
|
Effective tax
rate
|
|
17.0
|
|
16.7
|
|
|
|
|
|
|
|
|
|
|
|
- $11 million or 6% rise in
first-quarter 2022 pretax investment income, including a 12%
increase in equity portfolio dividends and a 4% increase in
interest income from fixed-maturity securities.
- $1.412 billion first-quarter 2022
decrease in pretax total investment gains, summarized in 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
March 31,
|
|
|
|
2022
|
|
2021
|
|
Investment gains and
losses on equity securities sold, net
|
|
$
8
|
|
$
4
|
|
Unrealized gains and
losses on equity securities still held, net
|
|
(683)
|
|
487
|
|
Investment gains and
losses on fixed-maturity securities, net
|
|
3
|
|
3
|
|
Other
|
|
6
|
|
10
|
|
Subtotal -
investment gains and losses reported in net income
|
|
(666)
|
|
504
|
|
Change in unrealized
investment gains and losses - fixed maturities
|
|
(746)
|
|
(196)
|
|
Total
|
|
$
(1,412)
|
|
$
308
|
|
|
|
|
|
|
|
Balance Sheet
Highlights
|
|
(Dollars in millions,
except share data)
|
At March 31,
|
At December
31,
|
|
|
|
2022
|
|
2021
|
|
Total
investments
|
|
$
23,399
|
|
$
24,666
|
|
Total
assets
|
|
30,250
|
|
31,387
|
|
Short-term
debt
|
|
49
|
|
54
|
|
Long-term
debt
|
|
789
|
|
789
|
|
Shareholders' equity
|
|
12,092
|
|
13,105
|
|
Book value
per share
|
|
75.43
|
|
81.72
|
|
Debt-to-total-capital ratio
|
|
6.5%
|
|
6.0%
|
|
|
|
|
|
|
|
- $24.386 billion in consolidated
cash and total investments at March 31,
2022, a decrease of 5% from $25.805
billion at year-end 2021.
- $12.376 billion bond portfolio at
March 31, 2022, with an average
rating of A3/A. Fair value decreased $646
million during the first quarter of 2022, including
$109 million in net purchases of
fixed-maturity securities.
- $10.675 billion equity portfolio
was 45.6% of total investments, including $6.508 billion in appreciated value before taxes
at March 31, 2022. First-quarter 2022
decrease in fair value of $640
million.
- $6.29 first-quarter 2022 decrease
in book value per share, including an addition of $1.58 from net income before investment gains
that was offset by $7.00 from
investment portfolio net investment losses or changes in unrealized
gains for fixed-maturity securities, $0.18 for other items and $0.69 from dividends declared to
shareholders.
- Value creation ratio of negative 6.9% for the first three
months of 2022, including 1.9% from net income before investment
gains, which includes underwriting and investment income, and
negative 8.6% from investment portfolio net investment losses and
changes in unrealized gains for fixed-maturity securities.
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 2021 Annual
Report on Form 10-K, Item 1A, Risk Factors, Page 32.
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, cyberattacks, 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, such as Russia's invasion of Ukraine, 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, prolonged elevated inflation 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 and Statements of Income
(unaudited)
|
|
(Dollars in
millions)
|
|
March 31,
|
|
December 31,
|
|
|
|
2022
|
|
2021
|
|
Assets
|
|
|
|
|
|
Investments
|
|
$
23,399
|
|
$
24,666
|
|
Cash and
cash equivalents
|
|
987
|
|
1,139
|
|
Premiums
receivable
|
|
2,248
|
|
2,053
|
|
Reinsurance recoverable
|
|
556
|
|
570
|
|
Deferred
policy acquisition costs
|
|
979
|
|
905
|
|
Other
assets
|
|
2,081
|
|
2,054
|
|
Total assets
|
|
$
30,250
|
|
$
31,387
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
Insurance
reserves
|
|
$
10,393
|
|
$
10,319
|
|
Unearned
premiums
|
|
3,560
|
|
3,271
|
|
Deferred
income tax
|
|
1,460
|
|
1,744
|
|
Long-term
debt and lease obligations
|
|
841
|
|
843
|
|
Other
liabilities
|
|
1,904
|
|
2,105
|
|
Total
liabilities
|
|
18,158
|
|
18,282
|
|
|
|
|
|
|
|
Shareholders' Equity
|
|
|
|
|
|
Common
stock and paid-in capital
|
|
1,751
|
|
1,753
|
|
Retained
earnings
|
|
12,241
|
|
12,625
|
|
Accumulated other comprehensive income
|
|
59
|
|
648
|
|
Treasury
stock
|
|
(1,959)
|
|
(1,921)
|
|
Total shareholders'
equity
|
|
12,092
|
|
13,105
|
|
Total liabilities and
shareholders' equity
|
|
$
30,250
|
|
$
31,387
|
|
|
|
|
|
|
|
(Dollars in millions,
except per share data)
|
|
Three months ended
March 31,
|
|
|
|
2022
|
|
2021
|
|
Revenues
|
|
|
|
|
|
Earned
premiums
|
|
$
1,690
|
|
$
1,544
|
|
Investment
income, net of expenses
|
|
185
|
|
174
|
|
Investment
gains and losses, net
|
|
(666)
|
|
504
|
|
Other
revenues
|
|
6
|
|
5
|
|
Total
revenues
|
|
1,215
|
|
2,227
|
|
|
|
|
|
|
|
Benefits and Expenses
|
|
|
|
|
|
Insurance
losses and contract holders' benefits
|
|
1,039
|
|
1,003
|
|
Underwriting, acquisition and insurance expenses
|
|
519
|
|
439
|
|
Interest
expense
|
|
13
|
|
13
|
|
Other
operating expenses
|
|
4
|
|
4
|
|
Total benefits and
expenses
|
|
1,575
|
|
1,459
|
|
|
|
|
|
|
|
Income (Loss) Before Income
Taxes
|
|
(360)
|
|
768
|
|
|
|
|
|
|
|
Provision (Benefit) for Income
Taxes
|
|
(87)
|
|
148
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
(273)
|
|
$
620
|
|
|
|
|
|
|
|
Per Common Share:
|
|
|
|
|
|
Net income
(loss)—basic
|
|
$
(1.70)
|
|
$
3.85
|
|
Net income
(loss)—diluted
|
|
(1.70)
|
|
3.82
|
|
|
|
|
|
|
|
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
March 31,
|
|
|
|
2022
|
|
2021
|
|
Net income
(loss)
|
|
$
(273)
|
|
$
620
|
|
Less:
|
|
|
|
|
|
Investment
gains and losses, net
|
|
(666)
|
|
504
|
|
Income tax
on investment gains and losses
|
|
140
|
|
(106)
|
|
Investment gains and
losses, after-tax
|
|
(526)
|
|
398
|
|
Non-GAAP
operating income
|
|
$
253
|
|
$
222
|
|
|
|
|
|
|
|
Diluted per share
data:
|
|
|
|
|
|
Net income
(loss)
|
|
$
(1.70)
|
|
$
3.82
|
|
Less:
|
|
|
|
|
|
Investment
gains and losses, net
|
|
(4.15)
|
|
3.10
|
|
Income tax
on investment gains and losses
|
|
0.87
|
|
(0.65)
|
|
Investment gains and
losses, after-tax
|
|
(3.28)
|
|
2.45
|
|
Non-GAAP
operating income
|
|
$
1.58
|
|
$
1.37
|
|
|
|
|
|
|
|
|
|
Life Insurance Reconciliation
|
|
|
|
|
|
|
|
(Dollars in
millions)
|
|
Three months ended
March 31,
|
|
|
|
2022
|
|
2021
|
|
Net income of the life
insurance subsidiary
|
|
$
10
|
|
$
10
|
|
Investment gains and
losses, net
|
|
—
|
|
—
|
|
Income tax on
investment gains and losses
|
|
—
|
|
—
|
|
Non-GAAP operating
income
|
|
10
|
|
10
|
|
|
|
|
|
|
|
Investment income, net
of expenses
|
|
(42)
|
|
(41)
|
|
Investment income
credited to contract holders
|
|
27
|
|
26
|
|
Income tax excluding
tax on investment gains and losses, net
|
|
3
|
|
3
|
|
Life insurance segment
loss
|
|
$
(2)
|
|
$
(2)
|
|
|
|
|
|
|
|
Property Casualty Insurance
Reconciliation
|
|
(Dollars in
millions)
|
Three months ended
March 31, 2022
|
|
|
Consolidated
|
Commercial
|
Personal
|
E&S
|
|
Other*
|
|
Premiums:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Written
premiums
|
|
$
1,899
|
|
|
$
1,096
|
|
|
$
374
|
|
|
$
124
|
|
|
$
305
|
|
Unearned
premiums change
|
|
(281)
|
|
|
(134)
|
|
|
28
|
|
|
(12)
|
|
|
(163)
|
|
Earned
premiums
|
|
$
1,618
|
|
|
$
962
|
|
|
$
402
|
|
|
$
112
|
|
|
$
142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting
profit
|
|
$
165
|
|
|
$
76
|
|
|
$
65
|
|
|
$
16
|
|
|
$
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in
millions)
|
Three months ended
March 31, 2021
|
|
|
Consolidated
|
Commercial
|
Personal
|
E&S
|
Other*
|
|
Premiums:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Written
premiums
|
|
$
1,693
|
|
|
$
1,019
|
|
|
$
338
|
|
|
$
99
|
|
|
$
237
|
|
Unearned
premiums change
|
|
(218)
|
|
|
(133)
|
|
|
38
|
|
|
(10)
|
|
|
(113)
|
|
Earned
premiums
|
|
$
1,475
|
|
|
$
886
|
|
|
$
376
|
|
|
$
89
|
|
|
$
124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting profit
(loss)
|
|
$
133
|
|
|
$
130
|
|
|
$
(3)
|
|
|
$
8
|
|
|
$
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
March 31,
|
|
|
2022
|
|
2021
|
|
Value creation
ratio:
|
|
|
|
|
End of
period book value*
|
$
75.43
|
|
$
69.16
|
|
Less
beginning of period book value
|
81.72
|
|
67.04
|
|
Change in
book value
|
(6.29)
|
|
2.12
|
|
Dividend
declared to shareholders
|
0.69
|
|
0.63
|
|
Total
value creation
|
$
(5.60)
|
|
$
2.75
|
|
|
|
|
|
|
Value
creation ratio from change in book value**
|
(7.7)%
|
|
3.2%
|
|
Value
creation ratio from dividends declared to
shareholders***
|
0.8
|
|
0.9
|
|
Value
creation ratio
|
(6.9)%
|
|
4.1%
|
|
|
|
|
|
|
*
Book value per share is calculated by dividing end of period total
shareholders' equity by end of period shares outstanding
|
|
** Change in
book value divided by the beginning of period book value
|
|
|
|
*** Dividend declared
to shareholders divided by beginning of period book
value
|
|
|
|
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SOURCE Cincinnati Financial Corporation