CINCINNATI, Oct. 27, 2021 /PRNewswire/ -- Cincinnati
Financial Corporation (Nasdaq: CINF) today reported:
- Third-quarter 2021 net income of $153
million, or 94 cents per
share, compared with $484 million, or
$2.99 per share, in the third quarter
of 2020, after recognizing an $82
million third-quarter 2021 after-tax reduction in the fair
value of equity securities still held.
- $146 million or 232% increase in
non-GAAP operating income* to $209
million, or $1.28 per share,
compared with $63 million, or
39 cents per share, in the third
quarter of last year.
- $331 million decrease in
third-quarter 2021 net income, primarily due to the after-tax net
effect of a $477 million decrease in
net investment gains partially offset by a $136 million increase in after-tax property
casualty underwriting income.
- $73.49 book value per share at
September 30, 2021, up $6.45 since year-end.
- 12.4% value creation ratio for the first nine months of 2021,
compared with 3.0% for the same period of 2020.
Financial Highlights
(Dollars in millions,
except per share data)
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
|
2021
|
|
2020
|
|
% Change
|
|
2021
|
|
2020
|
|
% Change
|
Revenue
Data
|
|
|
|
|
|
|
|
|
|
|
|
|
Earned
premiums
|
|
$
|
1,669
|
|
|
$
|
1,522
|
|
|
10
|
|
$
|
4,806
|
|
|
$
|
4,460
|
|
|
8
|
Investment income, net of expenses
|
|
179
|
|
|
167
|
|
|
7
|
|
528
|
|
|
498
|
|
|
6
|
Total
revenues
|
|
1,785
|
|
|
2,227
|
|
|
(20)
|
|
6,307
|
|
|
4,842
|
|
|
30
|
Income Statement
Data
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
153
|
|
|
$
|
484
|
|
|
(68)
|
|
$
|
1,476
|
|
|
$
|
167
|
|
|
nm
|
Investment gains and losses, after-tax
|
|
(56)
|
|
|
421
|
|
|
nm
|
|
753
|
|
|
(104)
|
|
|
nm
|
Non-GAAP
operating income*
|
|
$
|
209
|
|
|
$
|
63
|
|
|
232
|
|
$
|
723
|
|
|
$
|
271
|
|
|
167
|
Per Share Data
(diluted)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
0.94
|
|
|
$
|
2.99
|
|
|
(69)
|
|
$
|
9.07
|
|
|
$
|
1.03
|
|
|
nm
|
Investment gains and losses, after-tax
|
|
(0.34)
|
|
|
2.60
|
|
|
nm
|
|
4.63
|
|
|
(0.64)
|
|
|
nm
|
Non-GAAP
operating income*
|
|
$
|
1.28
|
|
|
$
|
0.39
|
|
|
228
|
|
$
|
4.44
|
|
|
$
|
1.67
|
|
|
166
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book
value
|
|
|
|
|
|
|
|
$
|
73.49
|
|
|
$
|
60.57
|
|
|
21
|
Cash
dividend declared
|
|
$
|
0.63
|
|
|
$
|
0.60
|
|
|
5
|
|
$
|
1.89
|
|
|
$
|
1.80
|
|
|
5
|
Diluted
weighted average shares outstanding
|
|
162.9
|
|
|
162.0
|
|
|
1
|
|
162.8
|
|
|
162.5
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
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
- 92.6% third-quarter 2021 property casualty combined ratio,
improved from 103.6% for the third quarter of 2020.
- 10% growth in third-quarter net written premiums, reflecting
price increases and premium growth initiatives.
- $230 million third-quarter 2021
property casualty new business written premiums, up 22%. Agencies
appointed since the beginning of 2020 contributed $21 million or 9% of total new business written
premiums.
- $11 million third-quarter 2021
life insurance subsidiary net income, down $7 million from the third quarter of 2020, and 8%
growth in third-quarter 2021 term life insurance earned
premiums.
Investment and Balance Sheet Highlights
- 7% or $12 million increase in
third-quarter 2021 pretax investment income, including an 11%
increase for stock portfolio dividends and a 7% increase for bond
interest income.
- Three-month increase of 1% in fair value of total investments
at September 30, 2021, including a 1%
increase for the bond portfolio and a decrease of less than 1% for
the stock portfolio.
- $4.297 billion parent company
cash and marketable securities at September
30, 2021, up 14% from year-end 2020.
Rebuilding Communities After Catastrophes
Steven J. Johnston, chairman, president and CEO,
commented: "After a fairly quiet start to the year from a
weather-related catastrophe standpoint, August and September
brought hail, wind and flooding to many parts of the country. We
were ready to respond, quickly sending teams of our own field
claims associates to the most impacted areas. Through their
consistent and coordinated approach, we were able to quickly review
claims to determine the appropriate payment based on the policy
contract.
"This quarter is a nice example of the impact our growth,
profitability and diversification initiatives are having on our
insurance business. While catastrophe losses for the quarter
outpaced our 5-year average of 9.8% for the third quarter by 4.4
points, our combined ratio came in at a satisfactory 92.6%.
"That improvement reflects our continued efforts in pricing
segmentation across our organization and the strong collaboration
we enjoy between our associates in sales, underwriting and
analytics.
"On a nine-month basis we achieved strong non-GAAP operating
income results, increasing that measure to $723 million. Our insurance operations continued
to lead the way. With three-quarters of the year behind us, our
combined ratio is 89.8%.
"We again built on our record of 32 years of overall favorable
reserve development. While maintaining our consistent approach to
setting reserves, we were able to recognize a 7.2 percentage-point
benefit to our nine-month combined ratio, compared with 2.1 points
for the 2020 period."
Growing as Planned
"New business premiums written by
agencies rose 12% to a record $685
million in the first nine months of 2021. Our field
marketing associates, who underwrite our new business, are armed
with analytics that complement their experience, earned through an
average of 21 years in the industry, giving them confidence when
competing for our agencies' best accounts.
"A strengthening economy contributed to net written premium
growth for the third quarter and first nine months of 2021,
compared with the same periods a year ago. Total property casualty
net written premium growth maintained its return to pre-pandemic
levels, increasing 11% for the first nine months."
Value for Shareholders
"At September 30, our book value per share was
$73.49 up 10% from the year-end. We
held a total of $5.791 billion of
unrealized gains in our equity portfolio, even after recognizing a
small decline in the portfolio's fair value during the
third quarter.
"A strong balance sheet gives us the flexibility to pursue
business growth and pay shareholder dividends as a consistent,
long-term strategy. Our value creation ratio at 12.4% for the first
nine months of 2021 reflects the success of that strategy."
Insurance
Operations Highlights
|
Consolidated
Property Casualty Insurance Results
|
(Dollars in
millions)
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
|
|
2021
|
|
2020
|
|
% Change
|
|
2021
|
|
2020
|
|
% Change
|
Earned
premiums
|
|
$
|
1,596
|
|
|
$
|
1,450
|
|
|
10
|
|
|
$
|
4,585
|
|
|
$
|
4,242
|
|
|
8
|
|
Fee
revenues
|
|
3
|
|
|
2
|
|
|
50
|
|
|
8
|
|
|
7
|
|
|
14
|
|
Total
revenues
|
|
1,599
|
|
|
1,452
|
|
|
10
|
|
|
4,593
|
|
|
4,249
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss
expenses
|
|
988
|
|
|
1,071
|
|
|
(8)
|
|
|
2,741
|
|
|
3,008
|
|
|
(9)
|
|
Underwriting
expenses
|
|
490
|
|
|
432
|
|
|
13
|
|
|
1,377
|
|
|
1,309
|
|
|
5
|
|
Underwriting profit (loss)
|
|
$
|
121
|
|
|
$
|
(51)
|
|
|
nm
|
|
|
$
|
475
|
|
|
$
|
(68)
|
|
|
nm
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios as a percent
of earned premiums:
|
|
|
|
|
|
Pt. Change
|
|
|
|
|
|
Pt. Change
|
Loss and loss
expenses
|
|
61.9
|
%
|
|
73.8
|
%
|
|
(11.9)
|
|
|
59.8
|
%
|
|
70.9
|
%
|
|
(11.1)
|
|
Underwriting
expenses
|
|
30.7
|
|
|
29.8
|
|
|
0.9
|
|
|
30.0
|
|
|
30.9
|
|
|
(0.9)
|
|
Combined ratio
|
|
92.6
|
%
|
|
103.6
|
%
|
|
(11.0)
|
|
|
89.8
|
%
|
|
101.8
|
%
|
|
(12.0)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
|
|
|
% Change
|
Agency renewal
written premiums
|
|
$
|
1,244
|
|
|
$
|
1,153
|
|
|
8
|
|
|
$
|
3,853
|
|
|
$
|
3,595
|
|
|
7
|
|
Agency new business
written premiums
|
|
230
|
|
|
189
|
|
|
22
|
|
|
685
|
|
|
614
|
|
|
12
|
|
Other written
premiums
|
|
64
|
|
|
51
|
|
|
25
|
|
|
407
|
|
|
261
|
|
|
56
|
|
Net
written premiums
|
|
$
|
1,538
|
|
|
$
|
1,393
|
|
|
10
|
|
|
$
|
4,945
|
|
|
$
|
4,470
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios as a percent
of earned premiums:
|
|
|
|
|
|
Pt. Change
|
|
|
|
|
|
Pt. Change
|
Current accident year before
catastrophe losses
|
|
54.7
|
%
|
|
55.7
|
%
|
|
(1.0)
|
|
|
56.3
|
%
|
|
57.9
|
%
|
|
(1.6)
|
|
Current accident year
catastrophe losses
|
|
13.6
|
|
|
18.9
|
|
|
(5.3)
|
|
|
10.7
|
|
|
15.1
|
|
|
(4.4)
|
|
Prior accident years before
catastrophe losses
|
|
(7.0)
|
|
|
(0.2)
|
|
|
(6.8)
|
|
|
(6.1)
|
|
|
(1.7)
|
|
|
(4.4)
|
|
Prior accident years
catastrophe losses
|
|
0.6
|
|
|
(0.6)
|
|
|
1.2
|
|
|
(1.1)
|
|
|
(0.4)
|
|
|
(0.7)
|
|
Loss and loss expense ratio
|
|
61.9
|
%
|
|
73.8
|
%
|
|
(11.9)
|
|
|
59.8
|
%
|
|
70.9
|
%
|
|
(11.1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current accident year
combined ratio before
catastrophe
losses
|
|
85.4
|
%
|
|
85.5
|
%
|
|
(0.1)
|
|
|
86.3
|
%
|
|
88.8
|
%
|
|
(2.5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- $145 million or 10% growth of
third-quarter 2021 property casualty net written premiums, and
nine-month growth of 11%, largely reflecting premium growth
initiatives and price increases. Cincinnati Re®
contributed 3 percentage points to property casualty growth for the
first nine months of 2021.
- $41 million or 22% increase in
third-quarter 2021 new business premiums written by agencies and
nine-month increase of 12%. The third-quarter growth included a
$15 million increase in standard
market property casualty production from agencies appointed since
the beginning of 2020.
- 171 new agency appointments in the first nine months of 2021,
including 49 that market only our personal lines products.
- 11.0 percentage-point third-quarter 2021 combined ratio
improvement and a 12.0 percentage-point improvement for the
nine-month period. The lower combined ratios included decreases for
losses from catastrophes of 4.1 points for the third quarter and
5.1 points for the first nine months of 2021.
- 6.4 percentage-point third-quarter 2021 benefit from favorable
prior accident year reserve development of $102 million, compared with 0.8 points or
$11 million for third-quarter
2020.
- 7.2 percentage-point nine-month 2021 benefit from favorable
prior accident year reserve development, compared with 2.1 points
for the first nine months of 2020.
- 1.6 percentage-point improvement, to 56.3%, for the nine-month
2021 ratio of current accident year losses and loss expenses before
catastrophes, including an increase of 0.2 points in the ratio for
current accident year losses of $1
million or more per claim.
- 0.9 percentage-point increase in the third-quarter 2021
underwriting expense ratio, compared with the same period of 2020,
primarily due to higher levels of profit-sharing commissions for
agencies.
Commercial Lines
Insurance Results
|
(Dollars in
millions)
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
|
|
2021
|
|
2020
|
|
% Change
|
|
2021
|
|
2020
|
|
% Change
|
Earned
premiums
|
|
$
|
930
|
|
|
$
|
865
|
|
|
8
|
|
|
$
|
2,727
|
|
|
$
|
2,598
|
|
|
5
|
|
Fee
revenues
|
|
1
|
|
|
1
|
|
|
0
|
|
|
3
|
|
|
3
|
|
|
0
|
|
Total
revenues
|
|
931
|
|
|
866
|
|
|
8
|
|
|
2,730
|
|
|
2,601
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss
expenses
|
|
451
|
|
|
620
|
|
|
(27)
|
|
|
1,434
|
|
|
1,824
|
|
|
(21)
|
|
Underwriting
expenses
|
|
298
|
|
|
266
|
|
|
12
|
|
|
839
|
|
|
809
|
|
|
4
|
|
Underwriting profit (loss)
|
|
$
|
182
|
|
|
$
|
(20)
|
|
|
nm
|
|
|
$
|
457
|
|
|
$
|
(32)
|
|
|
nm
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios as a percent
of earned premiums:
|
|
|
|
|
|
Pt. Change
|
|
|
|
|
|
Pt. Change
|
Loss and loss
expenses
|
|
48.5
|
%
|
|
71.6
|
%
|
|
(23.1)
|
|
|
52.6
|
%
|
|
70.2
|
%
|
|
(17.6)
|
|
Underwriting
expenses
|
|
32.1
|
|
|
30.8
|
|
|
1.3
|
|
|
30.8
|
|
|
31.1
|
|
|
(0.3)
|
|
Combined ratio
|
|
80.6
|
%
|
|
102.4
|
%
|
|
(21.8)
|
|
|
83.4
|
%
|
|
101.3
|
%
|
|
(17.9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
|
|
|
% Change
|
Agency renewal
written premiums
|
|
$
|
775
|
|
|
$
|
727
|
|
|
7
|
|
|
$
|
2,525
|
|
|
$
|
2,363
|
|
|
7
|
|
Agency new business
written premiums
|
|
145
|
|
|
114
|
|
|
27
|
|
|
436
|
|
|
402
|
|
|
8
|
|
Other written
premiums
|
|
(25)
|
|
|
(27)
|
|
|
7
|
|
|
(70)
|
|
|
(71)
|
|
|
1
|
|
Net
written premiums
|
|
$
|
895
|
|
|
$
|
814
|
|
|
10
|
|
|
$
|
2,891
|
|
|
$
|
2,694
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios as a percent
of earned premiums:
|
|
|
|
|
|
Pt. Change
|
|
|
|
|
|
Pt. Change
|
Current accident year before
catastrophe losses
|
|
56.1
|
%
|
|
57.8
|
%
|
|
(1.7)
|
|
|
57.9
|
%
|
|
59.2
|
%
|
|
(1.3)
|
|
Current accident year
catastrophe losses
|
|
3.9
|
|
|
14.7
|
|
|
(10.8)
|
|
|
4.8
|
|
|
13.2
|
|
|
(8.4)
|
|
Prior accident years before
catastrophe losses
|
|
(10.9)
|
|
|
(1.0)
|
|
|
(9.9)
|
|
|
(8.9)
|
|
|
(1.9)
|
|
|
(7.0)
|
|
Prior accident years
catastrophe losses
|
|
(0.6)
|
|
|
0.1
|
|
|
(0.7)
|
|
|
(1.2)
|
|
|
(0.3)
|
|
|
(0.9)
|
|
Loss and loss expense ratio
|
|
48.5
|
%
|
|
71.6
|
%
|
|
(23.1)
|
|
|
52.6
|
%
|
|
70.2
|
%
|
|
(17.6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current accident year
combined ratio before
catastrophe
losses
|
|
88.2
|
%
|
|
88.6
|
%
|
|
(0.4)
|
|
|
88.7
|
%
|
|
90.3
|
%
|
|
(1.6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- $81 million or 10% growth in
third-quarter 2021 commercial lines net written premiums, largely
due to higher agency renewal written premiums. Seven percent growth
in nine-month net written premiums.
- $48 million or 7% increase in
third-quarter renewal written premiums, with commercial lines
average renewal pricing increases near the low end of the
mid-single-digit percent range.
- $31 million or 27% increase in
third-quarter 2021 new business written by agencies, and a
nine-month increase of 8%, as we continue to carefully underwrite
each policy in a highly competitive market.
- 21.8 percentage-point third-quarter 2021 combined ratio
improvement and a 17.9 percentage-point improvement for the
nine-month period. The lower combined ratios included decreases for
losses from catastrophes of 11.5 points for the third quarter and
9.3 points for the first nine months of 2021.
- 11.5 percentage-point third-quarter 2021 benefit from favorable
prior accident year reserve development of $107 million, compared with 0.9 points or
$8 million for third-quarter
2020.
- 10.1 percentage-point nine-month 2021 benefit from favorable
prior accident year reserve development, compared with 2.2 points
for the first nine months of 2020.
Personal Lines
Insurance Results
|
(Dollars in
millions)
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
|
|
2021
|
|
2020
|
|
% Change
|
|
2021
|
|
2020
|
|
% Change
|
Earned
premiums
|
|
$
|
388
|
|
|
$
|
367
|
|
|
6
|
|
|
$
|
1,146
|
|
|
$
|
1,090
|
|
|
5
|
|
Fee
revenues
|
|
1
|
|
|
1
|
|
|
0
|
|
|
3
|
|
|
3
|
|
|
0
|
|
Total
revenues
|
|
389
|
|
|
368
|
|
|
6
|
|
|
1,149
|
|
|
1,093
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss
expenses
|
|
281
|
|
|
265
|
|
|
6
|
|
|
795
|
|
|
782
|
|
|
2
|
|
Underwriting
expenses
|
|
118
|
|
|
105
|
|
|
12
|
|
|
338
|
|
|
335
|
|
|
1
|
|
Underwriting profit (loss)
|
|
$
|
(10)
|
|
|
$
|
(2)
|
|
|
(400)
|
|
|
$
|
16
|
|
|
$
|
(24)
|
|
|
nm
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios as a percent
of earned premiums:
|
|
|
|
|
|
Pt. Change
|
|
|
|
|
|
Pt. Change
|
Loss and loss
expenses
|
|
72.4
|
%
|
|
71.9
|
%
|
|
0.5
|
|
|
69.3
|
%
|
|
71.7
|
%
|
|
(2.4)
|
|
Underwriting
expenses
|
|
30.3
|
|
|
28.8
|
|
|
1.5
|
|
|
29.5
|
|
|
30.8
|
|
|
(1.3)
|
|
Combined ratio
|
|
102.7
|
%
|
|
100.7
|
%
|
|
2.0
|
|
|
98.8
|
%
|
|
102.5
|
%
|
|
(3.7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
|
|
|
% Change
|
Agency renewal
written premiums
|
|
$
|
393
|
|
|
$
|
366
|
|
|
7
|
|
|
$
|
1,092
|
|
|
$
|
1,047
|
|
|
4
|
|
Agency new business
written premiums
|
|
53
|
|
|
51
|
|
|
4
|
|
|
152
|
|
|
129
|
|
|
18
|
|
Other written
premiums
|
|
(11)
|
|
|
(10)
|
|
|
(10)
|
|
|
(32)
|
|
|
(27)
|
|
|
(19)
|
|
Net
written premiums
|
|
$
|
435
|
|
|
$
|
407
|
|
|
7
|
|
|
$
|
1,212
|
|
|
$
|
1,149
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios as a percent
of earned premiums:
|
|
|
|
|
|
Pt. Change
|
|
|
|
|
|
Pt. Change
|
Current accident year before
catastrophe losses
|
|
53.1
|
%
|
|
48.5
|
%
|
|
4.6
|
|
|
55.2
|
%
|
|
54.0
|
%
|
|
1.2
|
|
Current accident year
catastrophe losses
|
|
20.1
|
|
|
23.3
|
|
|
(3.2)
|
|
|
17.2
|
|
|
20.2
|
|
|
(3.0)
|
|
Prior accident years before
catastrophe losses
|
|
(0.7)
|
|
|
0.9
|
|
|
(1.6)
|
|
|
(2.7)
|
|
|
(1.8)
|
|
|
(0.9)
|
|
Prior accident years
catastrophe losses
|
|
(0.1)
|
|
|
(0.8)
|
|
|
0.7
|
|
|
(0.4)
|
|
|
(0.7)
|
|
|
0.3
|
|
Loss and loss expense ratio
|
|
72.4
|
%
|
|
71.9
|
%
|
|
0.5
|
|
|
69.3
|
%
|
|
71.7
|
%
|
|
(2.4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current accident year
combined ratio before
catastrophe losses
|
|
83.4
|
%
|
|
77.3
|
%
|
|
6.1
|
|
|
84.7
|
%
|
|
84.8
|
%
|
|
(0.1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- $28 million or 7% growth in
third-quarter 2021 personal lines net written premiums, including
higher renewal written premiums that benefited from rate increases.
Third-quarter 2021 net written premiums from our agencies' high net
worth clients grew 28%, to $180
million. Five percent growth in nine-month personal lines
net written premiums.
- $2 million or 4% increase in
third-quarter 2021 new business premiums written by agencies and
nine-month increase of 18%, largely reflecting expanded use of
enhanced pricing precision tools.
- 2.0 percentage-point third-quarter 2021 combined ratio increase
and a 3.7 percentage-point improvement for the nine-month period.
The combined ratios included decreases for losses from catastrophes
of 2.5 points for the third quarter and 2.7 points for the first
nine months of 2021.
- 0.8 percentage-point third-quarter 2021 benefit from favorable
prior accident year reserve development of $3 million, compared with 0.1 points or less than
$1 million of unfavorable development
for third-quarter 2020.
- 3.1 percentage-point nine-month 2021 benefit from favorable
prior accident year reserve development, compared with 2.5 points
for the first nine months of 2020.
Excess and Surplus
Lines Insurance Results
|
(Dollars in
millions)
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
|
|
2021
|
|
2020
|
|
% Change
|
|
2021
|
|
2020
|
|
% Change
|
Earned
premiums
|
|
$
|
105
|
|
|
$
|
82
|
|
|
28
|
|
|
$
|
289
|
|
|
$
|
238
|
|
|
21
|
|
Fee
revenues
|
|
1
|
|
|
—
|
|
|
nm
|
|
|
2
|
|
|
1
|
|
|
100
|
|
Total
revenues
|
|
106
|
|
|
82
|
|
|
29
|
|
|
291
|
|
|
239
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss
expenses
|
|
70
|
|
|
48
|
|
|
46
|
|
|
187
|
|
|
150
|
|
|
25
|
|
Underwriting
expenses
|
|
29
|
|
|
23
|
|
|
26
|
|
|
79
|
|
|
70
|
|
|
13
|
|
Underwriting profit
|
|
$
|
7
|
|
|
$
|
11
|
|
|
(36)
|
|
|
$
|
25
|
|
|
$
|
19
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios as a percent
of earned premiums:
|
|
|
|
|
|
Pt. Change
|
|
|
|
|
|
Pt. Change
|
Loss and loss
expenses
|
|
66.2
|
%
|
|
58.2
|
%
|
|
8.0
|
|
|
64.6
|
%
|
|
63.0
|
%
|
|
1.6
|
|
Underwriting
expenses
|
|
27.9
|
|
|
28.5
|
|
|
(0.6)
|
|
|
27.3
|
|
|
29.5
|
|
|
(2.2)
|
|
Combined ratio
|
|
94.1
|
%
|
|
86.7
|
%
|
|
7.4
|
|
|
91.9
|
%
|
|
92.5
|
%
|
|
(0.6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
|
|
|
% Change
|
Agency renewal
written premiums
|
|
$
|
76
|
|
|
$
|
60
|
|
|
27
|
|
|
$
|
236
|
|
|
$
|
185
|
|
|
28
|
|
Agency new business
written premiums
|
|
32
|
|
|
24
|
|
|
33
|
|
|
97
|
|
|
83
|
|
|
17
|
|
Other written
premiums
|
|
(4)
|
|
|
(4)
|
|
|
0
|
|
|
(15)
|
|
|
(12)
|
|
|
(25)
|
|
Net
written premiums
|
|
$
|
104
|
|
|
$
|
80
|
|
|
30
|
|
|
$
|
318
|
|
|
$
|
256
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios as a percent
of earned premiums:
|
|
|
|
|
|
Pt. Change
|
|
|
|
|
|
Pt. Change
|
Current accident year before
catastrophe losses
|
|
62.6
|
%
|
|
58.5
|
%
|
|
4.1
|
|
|
61.9
|
%
|
|
57.8
|
%
|
|
4.1
|
|
Current accident year
catastrophe losses
|
|
0.4
|
|
|
1.0
|
|
|
(0.6)
|
|
|
0.7
|
|
|
1.7
|
|
|
(1.0)
|
|
Prior accident years before
catastrophe losses
|
|
3.3
|
|
|
(1.5)
|
|
|
4.8
|
|
|
2.1
|
|
|
3.4
|
|
|
(1.3)
|
|
Prior accident years
catastrophe losses
|
|
(0.1)
|
|
|
0.2
|
|
|
(0.3)
|
|
|
(0.1)
|
|
|
0.1
|
|
|
(0.2)
|
|
Loss and loss expense ratio
|
|
66.2
|
%
|
|
58.2
|
%
|
|
8.0
|
|
|
64.6
|
%
|
|
63.0
|
%
|
|
1.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current accident year
combined ratio before
catastrophe losses
|
|
90.5
|
%
|
|
87.0
|
%
|
|
3.5
|
|
|
89.2
|
%
|
|
87.3
|
%
|
|
1.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- $24 million or 30% growth in
third-quarter 2021 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.
Twenty-four percent growth in nine-month net written premiums.
- $8 million or 33% increase in
third-quarter new business written by agencies and nine-month
increase of 17%, as we continue to carefully underwrite each policy
in a highly competitive market.
- 7.4 percentage-point third-quarter 2021 combined ratio increase
and a 0.6 percentage-point improvement for the nine-month period,
including more prudent reserving as claims on average are remaining
open longer than previously expected.
- $3 million of third-quarter 2021
unfavorable prior accident year reserve development, compared with
$1 million of favorable development
for third-quarter 2020, as claims on average are remaining open
longer than previously expected.
- $6 million of unfavorable prior
accident year reserve development for the first nine months of
2021, compared with $8 million for
the first nine months of 2020.
Life Insurance
Subsidiary Results
|
(Dollars in
millions)
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
|
|
2021
|
|
2020
|
|
% Change
|
|
2021
|
|
2020
|
|
% Change
|
Term life
insurance
|
|
$
|
53
|
|
|
$
|
49
|
|
|
8
|
|
|
$
|
156
|
|
|
$
|
147
|
|
|
6
|
|
Universal life
insurance
|
|
7
|
|
|
10
|
|
|
(30)
|
|
|
28
|
|
|
34
|
|
|
(18)
|
|
Other life insurance,
annuity, and disability income
products
|
|
13
|
|
|
13
|
|
|
0
|
|
|
37
|
|
|
37
|
|
|
0
|
|
Earned premiums
|
|
73
|
|
|
72
|
|
|
1
|
|
|
221
|
|
|
218
|
|
|
1
|
|
Investment income,
net of expenses
|
|
42
|
|
|
40
|
|
|
5
|
|
|
125
|
|
|
118
|
|
|
6
|
|
Investment gains and
losses, net
|
|
4
|
|
|
2
|
|
|
100
|
|
|
8
|
|
|
(29)
|
|
|
nm
|
|
Fee
revenues
|
|
1
|
|
|
—
|
|
|
nm
|
|
|
3
|
|
|
1
|
|
|
200
|
|
Total
revenues
|
|
120
|
|
|
114
|
|
|
5
|
|
|
357
|
|
|
308
|
|
|
16
|
|
Contract holders'
benefits incurred
|
|
84
|
|
|
72
|
|
|
17
|
|
|
249
|
|
|
224
|
|
|
11
|
|
Underwriting expenses
incurred
|
|
21
|
|
|
20
|
|
|
5
|
|
|
63
|
|
|
63
|
|
|
0
|
|
Total benefits and expenses
|
|
105
|
|
|
92
|
|
|
14
|
|
|
312
|
|
|
287
|
|
|
9
|
|
Net income before
income tax
|
|
15
|
|
|
22
|
|
|
(32)
|
|
|
45
|
|
|
21
|
|
|
114
|
|
Income tax
provision
|
|
4
|
|
|
4
|
|
|
0
|
|
|
10
|
|
|
4
|
|
|
150
|
|
Net income of the life
insurance subsidiary
|
|
$
|
11
|
|
|
$
|
18
|
|
|
(39)
|
|
|
$
|
35
|
|
|
$
|
17
|
|
|
106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- $1 million increase in
third-quarter 2021 earned premiums, including an 8% increase for
term life insurance, our largest life insurance product line.
- $18 million increase in
nine-month 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 the
first nine months of 2021 due in part to higher pandemic-related
death claims.
- $2 million or less than 1%
nine-month 2021 decrease, to $1.415
billion, in GAAP shareholders' equity for the life insurance
subsidiary, primarily from a decrease in unrealized investment
gains that was largely offset by net income.
Investment and
Balance Sheet Highlights
|
Investments
Results
|
(Dollars in
millions)
|
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
|
2021
|
|
2020
|
|
% Change
|
|
2021
|
|
2020
|
|
% Change
|
Investment income,
net of expenses
|
|
$
|
179
|
|
|
$
|
167
|
|
|
7
|
|
|
$
|
528
|
|
|
$
|
498
|
|
|
6
|
|
Investment interest
credited to contract holders
|
|
(26)
|
|
|
(26)
|
|
|
0
|
|
|
(79)
|
|
|
(77)
|
|
|
(3)
|
|
Investment gains and
losses, net
|
|
(70)
|
|
|
533
|
|
|
nm
|
|
|
954
|
|
|
(132)
|
|
|
nm
|
|
Investments
profit
|
|
$
|
83
|
|
|
$
|
674
|
|
|
(88)
|
|
|
$
|
1,403
|
|
|
$
|
289
|
|
|
385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
121
|
|
|
$
|
113
|
|
|
7
|
|
|
$
|
356
|
|
|
$
|
339
|
|
|
5
|
|
Dividends
|
|
61
|
|
|
55
|
|
|
11
|
|
|
179
|
|
|
161
|
|
|
11
|
|
Other
|
|
1
|
|
|
2
|
|
|
(50)
|
|
|
4
|
|
|
7
|
|
|
(43)
|
|
Less
investment expenses
|
|
4
|
|
|
3
|
|
|
33
|
|
|
11
|
|
|
9
|
|
|
22
|
|
Investment income,
pretax
|
|
179
|
|
|
167
|
|
|
7
|
|
|
528
|
|
|
498
|
|
|
6
|
|
Less income
taxes
|
|
28
|
|
|
26
|
|
|
8
|
|
|
82
|
|
|
77
|
|
|
6
|
|
Total investment
income, after-tax
|
|
$
|
151
|
|
|
$
|
141
|
|
|
7
|
|
|
$
|
446
|
|
|
$
|
421
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
returns:
|
|
|
|
|
|
|
|
|
|
|
|
|
Average invested
assets plus cash and cash
equivalents
|
|
$
|
23,263
|
|
|
$
|
19,875
|
|
|
|
|
$
|
22,420
|
|
|
$
|
20,126
|
|
|
|
Average yield
pretax
|
|
3.08
|
%
|
|
3.36
|
%
|
|
|
|
3.14
|
%
|
|
3.30
|
%
|
|
|
Average yield
after-tax
|
|
2.60
|
|
|
2.84
|
|
|
|
|
2.65
|
|
|
2.79
|
|
|
|
Effective tax
rate
|
|
15.6
|
|
|
15.5
|
|
|
|
|
15.5
|
|
|
15.5
|
|
|
|
Fixed-maturity
returns:
|
|
|
|
|
|
|
|
|
|
|
|
|
Average amortized
cost
|
|
$
|
11,931
|
|
|
$
|
11,206
|
|
|
|
|
$
|
11,673
|
|
|
$
|
11,191
|
|
|
|
Average yield
pretax
|
|
4.06
|
%
|
|
4.03
|
%
|
|
|
|
4.07
|
%
|
|
4.04
|
%
|
|
|
Average yield
after-tax
|
|
3.37
|
|
|
3.36
|
|
|
|
|
3.38
|
|
|
3.37
|
|
|
|
Effective tax
rate
|
|
16.9
|
|
|
16.6
|
|
|
|
|
16.8
|
|
|
16.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- $12 million or 7% rise in
third-quarter 2021 pretax investment income, including an 11%
increase in equity portfolio dividends and a 7% increase in
interest income from fixed-maturity securities.
- $158 million third-quarter 2021
pretax total investment losses, 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
September 30,
|
|
Nine months ended
September 30,
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Investment gains and
losses on equity securities sold, net
|
$
|
(1)
|
|
|
$
|
55
|
|
|
$
|
6
|
|
|
$
|
75
|
|
Unrealized gains and
losses on equity securities still held, net
|
(104)
|
|
|
475
|
|
|
869
|
|
|
(130)
|
|
Investment gains and
losses on fixed-maturity securities, net
|
8
|
|
|
3
|
|
|
20
|
|
|
(72)
|
|
Other
|
27
|
|
|
—
|
|
|
59
|
|
|
(5)
|
|
Subtotal - investment
gains and losses reported in net income
|
(70)
|
|
|
533
|
|
|
954
|
|
|
(132)
|
|
Change in unrealized
investment gains and losses - fixed maturities
|
(88)
|
|
|
112
|
|
|
(152)
|
|
|
294
|
|
Total
|
$
|
(158)
|
|
|
$
|
645
|
|
|
$
|
802
|
|
|
$
|
162
|
|
|
|
|
|
|
|
|
|
Balance Sheet
Highlights
|
(Dollars in millions,
except share data)
|
At September
30,
|
At December
31,
|
|
2021
|
|
2020
|
Total
investments
|
|
$
|
23,213
|
|
|
$
|
21,542
|
|
Total
assets
|
|
29,907
|
|
|
27,542
|
|
Short-term debt
|
|
59
|
|
|
54
|
|
Long-term debt
|
|
789
|
|
|
788
|
|
Shareholders' equity
|
|
11,841
|
|
|
10,789
|
|
Book
value per share
|
|
73.49
|
|
|
67.04
|
|
Debt-to-total-capital ratio
|
|
6.7
|
%
|
|
7.2
|
%
|
|
|
|
|
|
- $24.298 billion in consolidated
cash and total investments at September 30,
2021, an increase of 8% from $22.442
billion at year-end 2020.
- $12.908 billion bond portfolio at
September 30, 2021, with an average
rating of A3/A. Fair value increased $119
million during the third quarter of 2021, including
$229 million in net purchases of
fixed-maturity securities.
- $9.887 billion equity portfolio
was 42.6% of total investments, including $5.791 billion in appreciated value before taxes
at September 30, 2021. Third-quarter
2021 decrease in fair value of $10
million.
- $0.08 third-quarter 2021 decrease
in book value per share, including additions of $1.30 from net income before investment gains and
$0.15 for other items that were
offset by $0.90 from investment
portfolio net investment losses or changes in unrealized gains for
fixed-maturity securities and $0.63
from dividends declared to shareholders.
- Value creation ratio of 12.4% for the first nine months of
2021, including 6.7% from net income before investment gains, which
includes underwriting and investment income, and 5.4% from
investment portfolio net investment gains 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 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 that affect the company's
investment portfolio and book value
- An unusually high level of claims in our insurance or
reinsurance operations that increase litigation-related
expenses
- An unusually high level of insurance losses, including risk of
legislation or court decisions extending business interruption
insurance in commercial property coverage forms to cover claims for
pure economic loss related to the COVID-19 pandemic
- Decreased premium revenue and cash flow from disruption to our
distribution channel of independent agents, consumer
self-isolation, travel limitations, business restrictions and
decreased economic activity
- Inability of our workforce, agencies or vendors to perform
necessary business functions
- Ongoing developments concerning business interruption insurance
claims and litigation related to the COVID-19 pandemic that affect
our estimates of losses and loss adjustment expenses or our ability
to reasonably estimate such losses, such as:
-
- The continuing duration of the pandemic and governmental
actions to limit the spread of the virus that may produce
additional economic losses
- The number of policyholders that will ultimately submit claims
or file lawsuits
- The lack of submitted proofs of loss for allegedly covered
claims
- Judicial rulings in similar litigation involving other
companies in the insurance industry
- Differences in state laws and developing case law
- Litigation trends, including varying legal theories advanced by
policyholders
- Whether and to what degree any class of policyholders may be
certified
- The inherent unpredictability of litigation
- Unusually high levels of catastrophe losses due to risk
concentrations, changes in weather patterns, environmental events,
terrorism incidents or other causes
- Increased frequency and/or severity of claims or development of
claims that are unforeseen at the time of policy issuance, due to
inflationary trends or other causes
- Inadequate estimates, assumptions or reliance on third-party
data used for critical accounting estimates
- Declines in overall stock market values negatively affecting
the company's equity portfolio and book value
- Prolonged low interest rate environment or other factors that
limit the company's ability to generate growth in investment income
or interest rate fluctuations that result in declining values of
fixed-maturity investments, including declines in accounts in which
we hold bank-owned life insurance contract assets
- Domestic and global events resulting in capital market or
credit market uncertainty, followed by prolonged periods of
economic instability or recession, that lead to:
-
- Significant or prolonged decline in the fair value of a
particular security or group of securities and impairment of the
asset(s)
- Significant decline in investment income due to reduced or
eliminated dividend payouts from a particular security or group of
securities
- Significant rise in losses from surety and director and officer
policies written for financial institutions or other insured
entities
- Our inability to integrate Cincinnati Global and its
subsidiaries into our ongoing operations, or disruptions to our
ongoing operations due to such integration
- Recession or other economic conditions resulting in lower
demand for insurance products or increased payment
delinquencies
- Difficulties with technology or data security breaches,
including cyberattacks, that could negatively affect our 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
- Disruption of the insurance market caused by technology
innovations such as driverless cars that could decrease consumer
demand for insurance products
- Delays, inadequate data developed internally or from third
parties, or performance inadequacies from ongoing development and
implementation of underwriting and pricing methods, including
telematics and other usage-based insurance methods, or technology
projects and enhancements expected to increase our pricing
accuracy, underwriting profit and competitiveness
- Increased competition that could result in a significant
reduction in the company's premium volume
- Changing consumer insurance-buying habits and consolidation of
independent insurance agencies that could alter our competitive
advantages
- Inability to obtain adequate ceded reinsurance on acceptable
terms, amount of reinsurance coverage purchased, financial strength
of reinsurers and the potential for nonpayment or delay in payment
by reinsurers
- Inability to defer policy acquisition costs for any business
segment if pricing and loss trends would lead management to
conclude that segment could not achieve sustainable
profitability
- Inability of our subsidiaries to pay dividends consistent with
current or past levels
- Events or conditions that could weaken or harm the company's
relationships with its independent agencies and hamper
opportunities to add new agencies, resulting in limitations on the
company's opportunities for growth, such as:
-
- Downgrades of the company's financial strength ratings
- Concerns that doing business with the company is too
difficult
- Perceptions that the company's level of service, particularly
claims service, is no longer a distinguishing characteristic in the
marketplace
- Inability or unwillingness to nimbly develop and introduce
coverage product updates and innovations that our competitors offer
and consumers expect to find in the marketplace
- Actions of insurance departments, state attorneys general or
other regulatory agencies, including a change to a federal system
of regulation from a state-based system, that:
-
- Impose new obligations on us that increase our expenses or
change the assumptions underlying our critical accounting
estimates
- Place the insurance industry under greater regulatory scrutiny
or result in new statutes, rules and regulations
- Restrict our ability to exit or reduce writings of unprofitable
coverages or lines of business
- Add assessments for guaranty funds, other insurance–related
assessments or mandatory reinsurance arrangements; or that impair
our ability to recover such assessments through future surcharges
or other rate changes
- Increase our provision for federal income taxes due to changes
in tax law
- Increase our other expenses
- Limit our ability to set fair, adequate and reasonable
rates
- Place us at a disadvantage in the marketplace
- Restrict our ability to execute our business model, including
the way we compensate agents
- Adverse outcomes from litigation or administrative
proceedings
- Events or actions, including unauthorized intentional
circumvention of controls, that reduce the company's future ability
to maintain effective internal control over financial reporting
under the Sarbanes-Oxley Act of 2002
- Unforeseen departure of certain executive officers or other key
employees due to retirement, health or other causes that could
interrupt progress toward important strategic goals or diminish the
effectiveness of certain longstanding relationships with insurance
agents and others
- Events, such as an epidemic, natural catastrophe or terrorism,
that could hamper our ability to assemble our workforce at our
headquarters location or work effectively in a remote
environment
Further, the company's insurance businesses are subject to the
effects of changing social, global, economic and regulatory
environments. Public and regulatory initiatives have included
efforts to adversely influence and restrict premium rates, restrict
the ability to cancel policies, impose underwriting standards and
expand overall regulation. The company also is subject to public
and regulatory initiatives that can affect the market value for its
common stock, such as measures affecting corporate financial
reporting and governance. The ultimate changes and eventual
effects, if any, of these initiatives are uncertain.
Cincinnati
Financial Corporation
|
Condensed
Consolidated Balance Sheets and Statements of Income
(unaudited)
|
|
(Dollars in
millions)
|
|
|
|
|
September
30,
|
|
December 31,
|
|
|
|
|
|
2021
|
|
2020
|
Assets
|
|
|
|
|
|
|
|
Investments
|
|
|
|
|
$
|
23,213
|
|
|
$
|
21,542
|
|
Cash and
cash equivalents
|
|
|
|
|
1,085
|
|
|
900
|
|
Premiums
receivable
|
|
|
|
|
2,106
|
|
|
1,879
|
|
Reinsurance recoverable
|
|
|
|
|
548
|
|
|
517
|
|
Deferred policy
acquisition costs
|
|
|
|
|
915
|
|
|
805
|
|
Other
assets
|
|
|
|
|
2,040
|
|
|
1,899
|
|
Total
assets
|
|
|
|
|
$
|
29,907
|
|
|
$
|
27,542
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Insurance reserves
|
|
|
|
|
$
|
10,291
|
|
|
$
|
9,661
|
|
Unearned
premiums
|
|
|
|
|
3,342
|
|
|
2,960
|
|
Deferred
income tax
|
|
|
|
|
1,453
|
|
|
1,299
|
|
Long-term debt and lease obligations
|
|
|
|
|
845
|
|
|
845
|
|
Other
liabilities
|
|
|
|
|
2,135
|
|
|
1,988
|
|
Total
liabilities
|
|
|
|
|
18,066
|
|
|
16,753
|
|
|
|
|
|
|
|
|
|
Shareholders'
Equity
|
|
|
|
|
|
|
|
Common
stock and paid-in capital
|
|
|
|
|
1,741
|
|
|
1,725
|
|
Retained
earnings
|
|
|
|
|
11,257
|
|
|
10,085
|
|
Accumulated other comprehensive income
|
|
|
|
|
663
|
|
|
769
|
|
Treasury
stock
|
|
|
|
|
(1,820)
|
|
|
(1,790)
|
|
Total shareholders'
equity
|
|
|
|
|
11,841
|
|
|
10,789
|
|
Total liabilities and
shareholders' equity
|
|
|
|
|
$
|
29,907
|
|
|
$
|
27,542
|
|
|
|
|
|
|
|
|
|
(Dollars in millions,
except per share data)
|
Three months ended
September 30,
|
|
Nine months ended
September 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Revenues
|
|
|
|
|
|
|
|
Earned
premiums
|
$
|
1,669
|
|
|
$
|
1,522
|
|
|
$
|
4,806
|
|
|
$
|
4,460
|
|
Investment income, net of expenses
|
179
|
|
|
167
|
|
|
528
|
|
|
498
|
|
Investment gains and losses, net
|
(70)
|
|
|
533
|
|
|
954
|
|
|
(132)
|
|
Other
revenues
|
7
|
|
|
5
|
|
|
19
|
|
|
16
|
|
Total
revenues
|
1,785
|
|
|
2,227
|
|
|
6,307
|
|
|
4,842
|
|
|
|
|
|
|
|
|
|
Benefits and
Expenses
|
|
|
|
|
|
|
|
Insurance losses and contract holders' benefits
|
1,072
|
|
|
1,143
|
|
|
2,990
|
|
|
3,232
|
|
Underwriting, acquisition and insurance expenses
|
511
|
|
|
452
|
|
|
1,440
|
|
|
1,372
|
|
Interest
expense
|
13
|
|
|
13
|
|
|
39
|
|
|
40
|
|
Other
operating expenses
|
5
|
|
|
5
|
|
|
14
|
|
|
15
|
|
Total benefits and
expenses
|
1,601
|
|
|
1,613
|
|
|
4,483
|
|
|
4,659
|
|
|
|
|
|
|
|
|
|
Income Before
Income Taxes
|
184
|
|
|
614
|
|
|
1,824
|
|
|
183
|
|
|
|
|
|
|
|
|
|
Provision for
Income Taxes
|
31
|
|
|
130
|
|
|
348
|
|
|
16
|
|
|
|
|
|
|
|
|
|
Net
Income
|
$
|
153
|
|
|
$
|
484
|
|
|
$
|
1,476
|
|
|
$
|
167
|
|
|
|
|
|
|
|
|
|
Per Common
Share:
|
|
|
|
|
|
|
|
Net
income—basic
|
$
|
0.95
|
|
|
$
|
3.01
|
|
|
$
|
9.16
|
|
|
$
|
1.03
|
|
Net
income—diluted
|
0.94
|
|
|
2.99
|
|
|
9.07
|
|
|
1.03
|
|
|
|
|
|
|
|
|
|
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
September 30,
|
Nine months ended
September 30,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Net income
|
|
$
|
153
|
|
|
$
|
484
|
|
|
$
|
1,476
|
|
|
$
|
167
|
|
Less:
|
|
|
|
|
|
|
|
|
Investment gains and losses, net
|
|
(70)
|
|
|
533
|
|
|
954
|
|
|
(132)
|
|
Income
tax on investment gains and losses
|
|
14
|
|
|
(112)
|
|
|
(201)
|
|
|
28
|
|
Investment gains and losses, after-tax
|
|
(56)
|
|
|
421
|
|
|
753
|
|
|
(104)
|
|
Non-GAAP operating
income
|
|
$
|
209
|
|
|
$
|
63
|
|
|
$
|
723
|
|
|
$
|
271
|
|
|
|
|
|
|
|
|
|
|
Diluted per share
data:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
0.94
|
|
|
$
|
2.99
|
|
|
$
|
9.07
|
|
|
$
|
1.03
|
|
Less:
|
|
|
|
|
|
|
|
|
Investment gains and losses, net
|
|
(0.43)
|
|
|
3.29
|
|
|
5.86
|
|
|
(0.81)
|
|
Income
tax on investment gains and losses
|
|
0.09
|
|
|
(0.69)
|
|
|
(1.23)
|
|
|
0.17
|
|
Investment gains and losses, after-tax
|
|
(0.34)
|
|
|
2.60
|
|
|
4.63
|
|
|
(0.64)
|
|
Non-GAAP
operating income
|
|
$
|
1.28
|
|
|
$
|
0.39
|
|
|
$
|
4.44
|
|
|
$
|
1.67
|
|
|
|
|
|
|
|
|
|
|
Life Insurance
Reconciliation
|
|
(Dollars in
millions)
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Net income of the life
insurance subsidiary
|
|
$
|
11
|
|
|
$
|
18
|
|
|
$
|
35
|
|
|
$
|
17
|
|
Investment gains and
losses, net
|
|
4
|
|
|
2
|
|
|
8
|
|
|
(29)
|
|
Income tax on
investment gains and losses
|
|
1
|
|
|
1
|
|
|
2
|
|
|
(6)
|
|
Non-GAAP operating
income
|
|
8
|
|
|
17
|
|
|
29
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
Investment income, net
of expenses
|
|
(42)
|
|
|
(40)
|
|
|
(125)
|
|
|
(118)
|
|
Investment income
credited to contract holders
|
|
26
|
|
|
26
|
|
|
79
|
|
|
77
|
|
Income tax excluding
tax on investment gains and
losses,
net
|
|
3
|
|
|
3
|
|
|
8
|
|
|
10
|
|
Life insurance segment
profit (loss)
|
|
$
|
(5)
|
|
|
$
|
6
|
|
|
$
|
(9)
|
|
|
$
|
9
|
|
|
|
|
|
|
|
|
|
|
Property Casualty
Insurance Reconciliation
|
(Dollars in
millions)
|
Three months ended
September 30, 2021
|
|
Consolidated
|
Commercial
|
Personal
|
E&S
|
|
Other*
|
Premiums:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Written
premiums
|
|
$
|
1,538
|
|
|
|
$
|
895
|
|
|
|
$
|
435
|
|
|
|
$
|
104
|
|
|
|
$
|
104
|
|
Unearned
premiums change
|
|
58
|
|
|
|
35
|
|
|
|
(47)
|
|
|
|
1
|
|
|
|
69
|
|
Earned
premiums
|
|
$
|
1,596
|
|
|
|
$
|
930
|
|
|
|
$
|
388
|
|
|
|
$
|
105
|
|
|
|
$
|
173
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting profit
(loss)
|
|
$
|
121
|
|
|
|
$
|
182
|
|
|
|
$
|
(10)
|
|
|
|
$
|
7
|
|
|
|
$
|
(58)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in
millions)
|
Nine months ended
September 30, 2021
|
|
Consolidated
|
Commercial
|
Personal
|
E&S
|
|
Other*
|
Premiums:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Written
premiums
|
|
$
|
4,945
|
|
|
|
$
|
2,891
|
|
|
|
$
|
1,212
|
|
|
|
$
|
318
|
|
|
|
$
|
524
|
|
Unearned
premiums change
|
|
(360)
|
|
|
|
(164)
|
|
|
|
(66)
|
|
|
|
(29)
|
|
|
|
(101)
|
|
Earned
premiums
|
|
$
|
4,585
|
|
|
|
$
|
2,727
|
|
|
|
$
|
1,146
|
|
|
|
$
|
289
|
|
|
|
$
|
423
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting profit
(loss)
|
|
$
|
475
|
|
|
|
$
|
457
|
|
|
|
$
|
16
|
|
|
|
$
|
25
|
|
|
|
$
|
(23)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in
millions)
|
Three months ended
September 30, 2020
|
|
Consolidated
|
Commercial
|
Personal
|
E&S
|
Other*
|
Premiums:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Written
premiums
|
|
$
|
1,393
|
|
|
|
$
|
814
|
|
|
|
$
|
407
|
|
|
|
$
|
80
|
|
|
|
$
|
92
|
|
Unearned
premiums change
|
|
57
|
|
|
|
51
|
|
|
|
(40)
|
|
|
|
2
|
|
|
|
44
|
|
Earned
premiums
|
|
$
|
1,450
|
|
|
|
$
|
865
|
|
|
|
$
|
367
|
|
|
|
$
|
82
|
|
|
|
$
|
136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting profit
(loss)
|
|
$
|
(51)
|
|
|
|
$
|
(20)
|
|
|
|
$
|
(2)
|
|
|
|
$
|
11
|
|
|
|
$
|
(40)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in
millions)
|
Nine months ended
September 30, 2020
|
|
Consolidated
|
Commercial
|
Personal
|
E&S
|
Other*
|
Premiums:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Written
premiums
|
|
$
|
4,470
|
|
|
|
$
|
2,694
|
|
|
|
$
|
1,149
|
|
|
|
$
|
256
|
|
|
|
$
|
371
|
|
Unearned
premiums change
|
|
(228)
|
|
|
|
(96)
|
|
|
|
(59)
|
|
|
|
(18)
|
|
|
|
(55)
|
|
Earned
premiums
|
|
$
|
4,242
|
|
|
|
$
|
2,598
|
|
|
|
$
|
1,090
|
|
|
|
$
|
238
|
|
|
|
$
|
316
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting profit
(loss)
|
|
$
|
(68)
|
|
|
|
$
|
(32)
|
|
|
|
$
|
(24)
|
|
|
|
$
|
19
|
|
|
|
$
|
(31)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
September 30,
|
Nine months ended
September 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Value creation
ratio:
|
|
|
|
|
|
|
|
|
End of
period book value*
|
|
$
|
73.49
|
|
|
$
|
60.57
|
|
|
$
|
73.49
|
|
|
$
|
60.57
|
|
Less
beginning of period book value
|
|
73.57
|
|
|
57.56
|
|
|
67.04
|
|
|
60.55
|
|
Change
in book value
|
|
(0.08)
|
|
|
3.01
|
|
|
6.45
|
|
|
0.02
|
|
Dividend
declared to shareholders
|
|
0.63
|
|
|
0.60
|
|
|
1.89
|
|
|
1.80
|
|
Total
value creation
|
|
$
|
0.55
|
|
|
$
|
3.61
|
|
|
$
|
8.34
|
|
|
$
|
1.82
|
|
|
|
|
|
|
|
|
|
|
Value creation ratio
from change in book value**
|
|
(0.1)
|
%
|
|
5.2
|
%
|
|
9.6
|
%
|
|
0.0
|
%
|
Value creation ratio
from dividends declared to
shareholders***
|
|
0.8
|
|
|
1.1
|
|
|
2.8
|
|
|
3.0
|
|
Value creation
ratio
|
|
0.7
|
%
|
|
6.3
|
%
|
|
12.4
|
%
|
|
3.0
|
%
|
|
|
|
|
|
|
|
|
|
*
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