CINCINNATI, Oct. 26, 2020 /PRNewswire/ -- Cincinnati Financial Corporation (Nasdaq: CINF) today reported:
Financial Highlights
(Dollars in millions, except per share data) | Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||
2020 | 2019 | % Change | 2020 | 2019 | % Change | ||||||||||||||||
Revenue Data | |||||||||||||||||||||
Earned premiums | $ | 1,522 | $ | 1,446 | 5 | $ | 4,460 | $ | 4,163 | 7 | |||||||||||
Investment income, net of expenses | 167 | 161 | 4 | 498 | 478 | 4 | |||||||||||||||
Total revenues | 2,227 | 1,700 | 31 | 4,842 | 5,772 | (16) | |||||||||||||||
Income Statement Data | |||||||||||||||||||||
Net income | $ | 484 | $ | 248 | 95 | $ | 167 | $ | 1,371 | (88) | |||||||||||
Investment gains and losses, after-tax | 421 | 69 | 510 | (104) | 880 | nm | |||||||||||||||
Non-GAAP operating income* | $ | 63 | $ | 179 | (65) | $ | 271 | $ | 491 | (45) | |||||||||||
Per Share Data (diluted) | |||||||||||||||||||||
Net income | $ | 2.99 | $ | 1.49 | 101 | $ | 1.03 | $ | 8.30 | (88) | |||||||||||
Investment gains and losses, after-tax | 2.60 | 0.41 | 534 | (0.64) | 5.32 | nm | |||||||||||||||
Non-GAAP operating income* | $ | 0.39 | $ | 1.08 | (64) | $ | 1.67 | $ | 2.98 | (44) | |||||||||||
Book value | $ | 60.57 | $ | 57.37 | 6 | ||||||||||||||||
Cash dividend declared | $ | 0.60 | $ | 0.56 | 7 | $ | 1.80 | $ | 1.68 | 7 | |||||||||||
Diluted weighted average shares outstanding | 162.0 | 165.6 | (2) | 162.5 | 165.1 | (2) | |||||||||||||||
* | The Definitions of Non-GAAP Information and Reconciliation to Comparable GAAP Measures defines and reconciles measures presented in this release that are not based on U.S. Generally Accepted Accounting Principles. |
Forward-looking statements and related assumptions are subject to the risks outlined in the company's safe harbor statement. |
Insurance Operations Highlights
Investment and Balance Sheet Highlights
Investments Lead ProfitSteven J. Johnston, chairman, president and CEO, commented: "As previously announced, a Midwestern derecho in August, along with multiple hurricanes and wildfires, brought considerable losses to our policyholders. Confident in our balance sheet and risk management decisions, we were able to focus on what was important: outstanding claims service. I applaud the efforts of our associates who worked quickly – under extraordinary circumstances – to comfort those who had experienced loss and get them moving toward recovery.
"Investment income continued to contribute to a positive operating profit, supported by a 10% growth in dividends from our stock portfolio and an increase of 3% in the interest from our bond portfolio. Steady cash flow from 8 years in a row of underwriting profit helps fuel our investment approach, allowing us to continually grow our entire portfolio.
"Catastrophe events in the third quarter nearly tripled our 10-year average of 6.2 points, contributing 18.3 points to our 103.6% combined ratio. Elevated catastrophe losses alone explain the decrease in non-GAAP operating income, as performance improved in several other areas. During the third quarter, there was no change to our estimate of $71 million for pandemic-related losses or expenses incurred for the first six months of 2020, other than increasing estimated losses for Cincinnati Global Underwriting Ltd.TM by less than $1 million. With three-quarters of the year behind us, we believe our 101.8% combined ratio is within reach of our long-term target of 95% to 100%.
"The focus we've applied to pricing segmentation and risk modeling is having the desired effect. Through those initiatives, we've continued to enhance our core underwriting book as measured by our nine-month combined ratio before catastrophe losses and before development of reserves for prior accident years. At a satisfactory 88.8%, that ratio improved 3.2 points over the same period a year ago."
Confident in Growth Plans Property casualty net written premiums grew 3% in the third-quarter and 6% in the first nine months of 2020 compared with the same periods of 2019, reflecting strong renewal pricing.
"While our agents continue to send us ample opportunities to quote on new business, our growth rate has slowed as we've exercised underwriting discipline. Our underwriting models combine with the judgement of our seasoned underwriters to align pricing decisions with risk quality and assure rate adequacy, regardless of any changes in the competitive insurance marketplace. At the same time, we are able to confidently decline new business opportunities we consider to be underpriced.
"I think it's also important to note that our life insurance subsidiary saw a 7% increase in earned premiums in the first nine-months of 2020 compared to 2019, including a 6% increase for term life insurance, our largest life insurance product line."
Book Value Rebounds "Our book value rose $0.02 to $60.57 at September 30 compared with year-end, although equity markets remain volatile and catastrophe losses remained far above normal. We believe we are in a position to further add to that value over the coming quarters, as we drive further progress on operational initiatives that have us headed in the right direction."
Insurance Operations Highlights | |||||||||||||||||||||||
Consolidated Property Casualty Insurance Results | |||||||||||||||||||||||
(Dollars in millions) | Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||
2020 | 2019 | % Change | 2020 | 2019 | % Change | ||||||||||||||||||
Earned premiums | $ | 1,450 | $ | 1,376 | 5 | $ | 4,242 | $ | 3,960 | 7 | |||||||||||||
Fee revenues | 2 | 3 | (33) | 7 | 8 | (13) | |||||||||||||||||
Total revenues | 1,452 | 1,379 | 5 | 4,249 | 3,968 | 7 | |||||||||||||||||
Loss and loss expenses | 1,071 | 864 | 24 | 3,008 | 2,517 | 20 | |||||||||||||||||
Underwriting expenses | 432 | 432 | 0 | 1,309 | 1,229 | 7 | |||||||||||||||||
Underwriting profit (loss) | $ | (51) | $ | 83 | nm | $ | (68) | $ | 222 | nm | |||||||||||||
Ratios as a percent of earned premiums: | Pt. Change | Pt. Change | |||||||||||||||||||||
Loss and loss expenses | 73.8 | % | 62.8 | % | 11.0 | 70.9 | % | 63.6 | % | 7.3 | |||||||||||||
Underwriting expenses | 29.8 | 31.4 | (1.6) | 30.9 | 31.0 | (0.1) | |||||||||||||||||
Combined ratio | 103.6 | % | 94.2 | % | 9.4 | 101.8 | % | 94.6 | % | 7.2 | |||||||||||||
% Change | % Change | ||||||||||||||||||||||
Agency renewal written premiums | $ | 1,153 | $ | 1,119 | 3 | $ | 3,595 | $ | 3,435 | 5 | |||||||||||||
Agency new business written premiums | 189 | 192 | (2) | 614 | 585 | 5 | |||||||||||||||||
Other written premiums | 51 | 40 | 28 | 261 | 188 | 39 | |||||||||||||||||
Net written premiums | $ | 1,393 | $ | 1,351 | 3 | $ | 4,470 | $ | 4,208 | 6 | |||||||||||||
Ratios as a percent of earned premiums: | Pt. Change | Pt. Change | |||||||||||||||||||||
Current accident year before catastrophe losses | 55.7 | % | 60.3 | % | (4.6) | 57.9 | % | 61.0 | % | (3.1) | |||||||||||||
Current accident year catastrophe losses | 18.9 | 6.2 | 12.7 | 15.1 | 7.7 | 7.4 | |||||||||||||||||
Prior accident years before catastrophe losses | (0.2) | (2.8) | 2.6 | (1.7) | (4.5) | 2.8 | |||||||||||||||||
Prior accident years catastrophe losses | (0.6) | (0.9) | 0.3 | (0.4) | (0.6) | 0.2 | |||||||||||||||||
Loss and loss expense ratio | 73.8 | % | 62.8 | % | 11.0 | 70.9 | % | 63.6 | % | 7.3 | |||||||||||||
Current accident year combined ratio before catastrophe losses | 85.5 | % | 91.7 | % | (6.2) | 88.8 | % | 92.0 | % | (3.2) | |||||||||||||
Commercial Lines Insurance Results | |||||||||||||||||||||||
(Dollars in millions) | Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||
2020 | 2019 | % Change | 2020 | 2019 | % Change | ||||||||||||||||||
Earned premiums | $ | 865 | $ | 834 | 4 | $ | 2,598 | $ | 2,467 | 5 | |||||||||||||
Fee revenues | 1 | 1 | 0 | 3 | 3 | 0 | |||||||||||||||||
Total revenues | 866 | 835 | 4 | 2,601 | 2,470 | 5 | |||||||||||||||||
Loss and loss expenses | 620 | 510 | 22 | 1,824 | 1,541 | 18 | |||||||||||||||||
Underwriting expenses | 266 | 269 | (1) | 809 | 785 | 3 | |||||||||||||||||
Underwriting profit (loss) | $ | (20) | $ | 56 | nm | $ | (32) | $ | 144 | nm | |||||||||||||
Ratios as a percent of earned premiums: | Pt. Change | Pt. Change | |||||||||||||||||||||
Loss and loss expenses | 71.6 | % | 61.2 | % | 10.4 | 70.2 | % | 62.5 | % | 7.7 | |||||||||||||
Underwriting expenses | 30.8 | 32.2 | (1.4) | 31.1 | 31.8 | (0.7) | |||||||||||||||||
Combined ratio | 102.4 | % | 93.4 | % | 9.0 | 101.3 | % | 94.3 | % | 7.0 | |||||||||||||
% Change | % Change | ||||||||||||||||||||||
Agency renewal written premiums | $ | 727 | $ | 713 | 2 | $ | 2,363 | $ | 2,279 | 4 | |||||||||||||
Agency new business written premiums | 114 | 124 | (8) | 402 | 381 | 6 | |||||||||||||||||
Other written premiums | (27) | (21) | (29) | (71) | (69) | (3) | |||||||||||||||||
Net written premiums | $ | 814 | $ | 816 | 0 | $ | 2,694 | $ | 2,591 | 4 | |||||||||||||
Ratios as a percent of earned premiums: | Pt. Change | Pt. Change | |||||||||||||||||||||
Current accident year before catastrophe losses | 57.8 | % | 60.5 | % | (2.7) | 59.2 | % | 61.5 | % | (2.3) | |||||||||||||
Current accident year catastrophe losses | 14.7 | 4.6 | 10.1 | 13.2 | 7.1 | 6.1 | |||||||||||||||||
Prior accident years before catastrophe losses | (1.0) | (3.4) | 2.4 | (1.9) | (5.4) | 3.5 | |||||||||||||||||
Prior accident years catastrophe losses | 0.1 | (0.5) | 0.6 | (0.3) | (0.7) | 0.4 | |||||||||||||||||
Loss and loss expense ratio | 71.6 | % | 61.2 | % | 10.4 | 70.2 | % | 62.5 | % | 7.7 | |||||||||||||
Current accident year combined ratio before catastrophe losses | 88.6 | % | 92.7 | % | (4.1) | 90.3 | % | 93.3 | % | (3.0) | |||||||||||||
Personal Lines Insurance Results | |||||||||||||||||||||||
(Dollars in millions) | Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||
2020 | 2019 | % Change | 2020 | 2019 | % Change | ||||||||||||||||||
Earned premiums | $ | 367 | $ | 354 | 4 | $ | 1,090 | $ | 1,046 | 4 | |||||||||||||
Fee revenues | 1 | 1 | 0 | 3 | 3 | 0 | |||||||||||||||||
Total revenues | 368 | 355 | 4 | 1,093 | 1,049 | 4 | |||||||||||||||||
Loss and loss expenses | 265 | 244 | 9 | 782 | 734 | 7 | |||||||||||||||||
Underwriting expenses | 105 | 108 | (3) | 335 | 311 | 8 | |||||||||||||||||
Underwriting profit (loss) | $ | (2) | $ | 3 | nm | $ | (24) | $ | 4 | nm | |||||||||||||
Ratios as a percent of earned premiums: | Pt. Change | Pt. Change | |||||||||||||||||||||
Loss and loss expenses | 71.9 | % | 69.2 | % | 2.7 | 71.7 | % | 70.2 | % | 1.5 | |||||||||||||
Underwriting expenses | 28.8 | 30.4 | (1.6) | 30.8 | 29.7 | 1.1 | |||||||||||||||||
Combined ratio | 100.7 | % | 99.6 | % | 1.1 | 102.5 | % | 99.9 | % | 2.6 | |||||||||||||
% Change | % Change | ||||||||||||||||||||||
Agency renewal written premiums | $ | 366 | $ | 356 | 3 | $ | 1,047 | $ | 1,003 | 4 | |||||||||||||
Agency new business written premiums | 51 | 40 | 28 | 129 | 122 | 6 | |||||||||||||||||
Other written premiums | (10) | (8) | (25) | (27) | (26) | (4) | |||||||||||||||||
Net written premiums | $ | 407 | $ | 388 | 5 | $ | 1,149 | $ | 1,099 | 5 | |||||||||||||
Ratios as a percent of earned premiums: | Pt. Change | Pt. Change | |||||||||||||||||||||
Current accident year before catastrophe losses | 48.5 | % | 63.8 | % | (15.3) | 54.0 | % | 62.2 | % | (8.2) | |||||||||||||
Current accident year catastrophe losses | 23.3 | 7.2 | 16.1 | 20.2 | 9.7 | 10.5 | |||||||||||||||||
Prior accident years before catastrophe losses | 0.9 | (1.3) | 2.2 | (1.8) | (2.0) | 0.2 | |||||||||||||||||
Prior accident years catastrophe losses | (0.8) | (0.5) | (0.3) | (0.7) | 0.3 | (1.0) | |||||||||||||||||
Loss and loss expense ratio | 71.9 | % | 69.2 | % | 2.7 | 71.7 | % | 70.2 | % | 1.5 | |||||||||||||
Current accident year combined ratio before catastrophe losses | 77.3 | % | 94.2 | % | (16.9) | 84.8 | % | 91.9 | % | (7.1) | |||||||||||||
Excess and Surplus Lines Insurance Results | |||||||||||||||||||||||
(Dollars in millions) | Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||
2020 | 2019 | % Change | 2020 | 2019 | % Change | ||||||||||||||||||
Earned premiums | $ | 82 | $ | 72 | 14 | $ | 238 | $ | 202 | 18 | |||||||||||||
Fee revenues | — | 1 | (100) | 1 | 2 | (50) | |||||||||||||||||
Total revenues | 82 | 73 | 12 | 239 | 204 | 17 | |||||||||||||||||
Loss and loss expenses | 48 | 39 | 23 | 150 | 101 | 49 | |||||||||||||||||
Underwriting expenses | 23 | 22 | 5 | 70 | 63 | 11 | |||||||||||||||||
Underwriting profit | $ | 11 | $ | 12 | (8) | $ | 19 | $ | 40 | (53) | |||||||||||||
Ratios as a percent of earned premiums: | Pt. Change | Pt. Change | |||||||||||||||||||||
Loss and loss expenses | 58.2 | % | 52.7 | % | 5.5 | 63.0 | % | 49.8 | % | 13.2 | |||||||||||||
Underwriting expenses | 28.5 | 30.5 | (2.0) | 29.5 | 31.1 | (1.6) | |||||||||||||||||
Combined ratio | 86.7 | % | 83.2 | % | 3.5 | 92.5 | % | 80.9 | % | 11.6 | |||||||||||||
% Change | % Change | ||||||||||||||||||||||
Agency renewal written premiums | $ | 60 | $ | 50 | 20 | $ | 185 | $ | 153 | 21 | |||||||||||||
Agency new business written premiums | 24 | 28 | (14) | 83 | 82 | 1 | |||||||||||||||||
Other written premiums | (4) | (4) | 0 | (12) | (12) | 0 | |||||||||||||||||
Net written premiums | $ | 80 | $ | 74 | 8 | $ | 256 | $ | 223 | 15 | |||||||||||||
Ratios as a percent of earned premiums: | Pt. Change | Pt. Change | |||||||||||||||||||||
Current accident year before catastrophe losses | 58.5 | % | 57.6 | % | 0.9 | 57.8 | % | 54.7 | % | 3.1 | |||||||||||||
Current accident year catastrophe losses | 1.0 | 0.6 | 0.4 | 1.7 | 0.5 | 1.2 | |||||||||||||||||
Prior accident years before catastrophe losses | (1.5) | (6.0) | 4.5 | 3.4 | (5.5) | 8.9 | |||||||||||||||||
Prior accident years catastrophe losses | 0.2 | 0.5 | (0.3) | 0.1 | 0.1 | 0.0 | |||||||||||||||||
Loss and loss expense ratio | 58.2 | % | 52.7 | % | 5.5 | 63.0 | % | 49.8 | % | 13.2 | |||||||||||||
Current accident year combined ratio before catastrophe losses | 87.0 | % | 88.1 | % | (1.1) | 87.3 | % | 85.8 | % | 1.5 | |||||||||||||
Life Insurance Subsidiary Results | |||||||||||||||||||||||
(Dollars in millions) | Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||
2020 | 2019 | % Change | 2020 | 2019 | % Change | ||||||||||||||||||
Term life insurance | $ | 49 | $ | 47 | 4 | $ | 147 | $ | 139 | 6 | |||||||||||||
Universal life insurance | 10 | 11 | (9) | 34 | 31 | 10 | |||||||||||||||||
Other life insurance, annuity, and disability income products | 13 | 12 | 8 | 37 | 33 | 12 | |||||||||||||||||
Earned premiums | 72 | 70 | 3 | 218 | 203 | 7 | |||||||||||||||||
Investment income, net of expenses | 40 | 38 | 5 | 118 | 114 | 4 | |||||||||||||||||
Investment gains and losses, net | 2 | (2) | nm | (29) | (4) | nm | |||||||||||||||||
Fee revenues | — | 1 | (100) | 1 | 3 | (67) | |||||||||||||||||
Total revenues | 114 | 107 | 7 | 308 | 316 | (3) | |||||||||||||||||
Contract holders' benefits incurred | 72 | 68 | 6 | 224 | 211 | 6 | |||||||||||||||||
Underwriting expenses incurred | 20 | 23 | (13) | 63 | 67 | (6) | |||||||||||||||||
Total benefits and expenses | 92 | 91 | 1 | 287 | 278 | 3 | |||||||||||||||||
Net income before income tax | 22 | 16 | 38 | 21 | 38 | (45) | |||||||||||||||||
Income tax provision | 4 | 4 | 0 | 4 | 8 | (50) | |||||||||||||||||
Net income of the life insurance subsidiary | $ | 18 | $ | 12 | 50 | $ | 17 | $ | 30 | (43) | |||||||||||||
Investment and Balance Sheet Highlights | |||||||||||||||||||||||
Investments Results | |||||||||||||||||||||||
(Dollars in millions) | Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||
2020 | 2019 | % Change | 2020 | 2019 | % Change | ||||||||||||||||||
Investment income, net of expenses | $ | 167 | $ | 161 | 4 | $ | 498 | $ | 478 | 4 | |||||||||||||
Investment interest credited to contract holders | (26) | (25) | (4) | (77) | (74) | (4) | |||||||||||||||||
Investment gains and losses, net | 533 | 86 | 520 | (132) | 1,113 | nm | |||||||||||||||||
Investments profit | $ | 674 | $ | 222 | 204 | $ | 289 | $ | 1,517 | (81) | |||||||||||||
Investment income: | |||||||||||||||||||||||
Interest | $ | 113 | $ | 110 | 3 | $ | 339 | $ | 332 | 2 | |||||||||||||
Dividends | 55 | 50 | 10 | 161 | 146 | 10 | |||||||||||||||||
Other | 2 | 5 | (60) | 7 | 10 | (30) | |||||||||||||||||
Less investment expenses | 3 | 4 | (25) | 9 | 10 | (10) | |||||||||||||||||
Investment income, pretax | 167 | 161 | 4 | 498 | 478 | 4 | |||||||||||||||||
Less income taxes | 26 | 26 | 0 | 77 | 75 | 3 | |||||||||||||||||
Total investment income, after-tax | $ | 141 | $ | 135 | 4 | $ | 421 | $ | 403 | 4 | |||||||||||||
Investment returns: | |||||||||||||||||||||||
Average invested assets plus cash and cash equivalents | $ | 19,875 | $ | 19,088 | $ | 20,126 | $ | 18,364 | |||||||||||||||
Average yield pretax | 3.36 | % | 3.37 | % | 3.30 | % | 3.47 | % | |||||||||||||||
Average yield after-tax | 2.84 | 2.83 | 2.79 | 2.93 | |||||||||||||||||||
Effective tax rate | 15.5 | 15.7 | 15.5 | 15.6 | |||||||||||||||||||
Fixed-maturity returns: | |||||||||||||||||||||||
Average amortized cost | $ | 11,206 | $ | 10,922 | $ | 11,191 | $ | 10,828 | |||||||||||||||
Average yield pretax | 4.03 | % | 4.03 | % | 4.04 | % | 4.09 | % | |||||||||||||||
Average yield after-tax | 3.36 | 3.36 | 3.37 | 3.41 | |||||||||||||||||||
Effective tax rate | 16.6 | 16.5 | 16.6 | 16.6 | |||||||||||||||||||
(Dollars in millions) | Three months ended | Nine months ended | |||||||||||||||
September 30, | September 30, | ||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||
Investment gains and losses on equity securities sold, net | $ | 55 | $ | — | $ | 75 | $ | 27 | |||||||||
Unrealized gains and losses on equity securities still held, net | 475 | 89 | (130) | 1,084 | |||||||||||||
Investment gains and losses on fixed-maturity securities, net | 3 | (1) | (72) | — | |||||||||||||
Other | — | (2) | (5) | 2 | |||||||||||||
Subtotal - investment gains and losses reported in net income | 533 | 86 | (132) | 1,113 | |||||||||||||
Change in unrealized investment gains and losses - fixed maturities | 112 | 100 | 294 | 542 | |||||||||||||
Total | $ | 645 | $ | 186 | $ | 162 | $ | 1,655 | |||||||||
Balance Sheet Highlights | |||||||||
(Dollars in millions, except share data) | At September 30, | At December 31, | |||||||
2020 | 2019 | ||||||||
Total investments | $ | 20,299 | $ | 19,746 | |||||
Total assets | 26,370 | 25,408 | |||||||
Short-term debt | 123 | 39 | |||||||
Long-term debt | 788 | 788 | |||||||
Shareholders' equity | 9,745 | 9,864 | |||||||
Book value per share | 60.57 | 60.55 | |||||||
Debt-to-total-capital ratio | 8.5 | % | 7.7 | % | |||||
For additional information or to register for our conference call webcast, please visit cinfin.com/investors.
About Cincinnati FinancialCincinnati Financial Corporation offers primarily business, home and auto insurance, our main business, through The Cincinnati Insurance Company and its two standard market property casualty companies. The same local independent insurance agencies that market those policies may offer products of our other subsidiaries, including life insurance, fixed annuities and surplus lines property and casualty insurance. For additional information about the company, please visit cinfin.com.
Mailing Address: | Street Address: |
P.O. Box 145496 | 6200 South Gilmore Road |
Cincinnati, Ohio 45250-5496 | Fairfield, Ohio 45014-5141 |
Safe Harbor Statement
This is our "Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995. Our business is subject to certain risks and uncertainties that may cause actual results to differ materially from those suggested by the forward-looking statements in this report. Some of those risks and uncertainties are discussed in our 2019 Annual Report on Form 10-K, Item 1A, Risk Factors, Page 35 and Item 1A, Risk Factors in our subsequent Quarterly Reports on Form 10-Q.
Factors that could cause or contribute to such differences include, but are not limited to:
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, | ||||||||||||||
2020 | 2019 | |||||||||||||||
Assets | ||||||||||||||||
Investments | $ | 20,299 | $ | 19,746 | ||||||||||||
Cash and cash equivalents | 914 | 767 | ||||||||||||||
Premiums receivable | 1,925 | 1,777 | ||||||||||||||
Reinsurance recoverable | 533 | 610 | ||||||||||||||
Deferred policy acquisition costs | 817 | 774 | ||||||||||||||
Other assets | 1,882 | 1,734 | ||||||||||||||
Total assets | $ | 26,370 | $ | 25,408 | ||||||||||||
Liabilities | ||||||||||||||||
Insurance reserves | $ | 9,647 | $ | 8,982 | ||||||||||||
Unearned premiums | 3,024 | 2,788 | ||||||||||||||
Deferred income tax | 1,077 | 1,079 | ||||||||||||||
Long-term debt and lease obligations | 844 | 846 | ||||||||||||||
Other liabilities | 2,033 | 1,849 | ||||||||||||||
Total liabilities | 16,625 | 15,544 | ||||||||||||||
Shareholders' Equity | ||||||||||||||||
Common stock and paid-in capital | 1,715 | 1,703 | ||||||||||||||
Retained earnings | 9,132 | 9,257 | ||||||||||||||
Accumulated other comprehensive income | 686 | 448 | ||||||||||||||
Treasury stock | (1,788) | (1,544) | ||||||||||||||
Total shareholders' equity | 9,745 | 9,864 | ||||||||||||||
Total liabilities and shareholders' equity | $ | 26,370 | $ | 25,408 | ||||||||||||
(Dollars in millions, except per share data) | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Revenues | ||||||||||||||||
Earned premiums | $ | 1,522 | $ | 1,446 | $ | 4,460 | $ | 4,163 | ||||||||
Investment income, net of expenses | 167 | 161 | 498 | 478 | ||||||||||||
Investment gains and losses, net | 533 | 86 | (132) | 1,113 | ||||||||||||
Other revenues | 5 | 7 | 16 | 18 | ||||||||||||
Total revenues | 2,227 | 1,700 | 4,842 | 5,772 | ||||||||||||
Benefits and Expenses | ||||||||||||||||
Insurance losses and contract holders' benefits | 1,143 | 932 | 3,232 | 2,728 | ||||||||||||
Underwriting, acquisition and insurance expenses | 452 | 455 | 1,372 | 1,296 | ||||||||||||
Interest expense | 13 | 14 | 40 | 40 | ||||||||||||
Other operating expenses | 5 | 5 | 15 | 17 | ||||||||||||
Total benefits and expenses | 1,613 | 1,406 | 4,659 | 4,081 | ||||||||||||
Income Before Income Taxes | 614 | 294 | 183 | 1,691 | ||||||||||||
Provision for Income Taxes | 130 | 46 | 16 | 320 | ||||||||||||
Net Income | $ | 484 | $ | 248 | $ | 167 | $ | 1,371 | ||||||||
Per Common Share: | ||||||||||||||||
Net income—basic | $ | 3.01 | $ | 1.51 | $ | 1.03 | $ | 8.40 | ||||||||
Net income—diluted | 2.99 | 1.49 | 1.03 | 8.30 | ||||||||||||
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.
Cincinnati Financial Corporation | |||||||||||||||||
Net Income Reconciliation | |||||||||||||||||
(Dollars in millions, except per share data) | Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||
Net income | $ | 484 | $ | 248 | $ | 167 | $ | 1,371 | |||||||||
Less: | |||||||||||||||||
Investment gains and losses, net | 533 | 86 | (132) | 1,113 | |||||||||||||
Income tax on investment gains and losses | (112) | (17) | 28 | (233) | |||||||||||||
Investment gains and losses, after-tax | 421 | 69 | (104) | 880 | |||||||||||||
Non-GAAP operating income | $ | 63 | $ | 179 | $ | 271 | $ | 491 | |||||||||
Diluted per share data: | |||||||||||||||||
Net income | $ | 2.99 | $ | 1.49 | $ | 1.03 | $ | 8.30 | |||||||||
Less: | |||||||||||||||||
Investment gains and losses, net | 3.29 | 0.52 | (0.81) | 6.74 | |||||||||||||
Income tax on investment gains and losses | (0.69) | (0.11) | 0.17 | (1.42) | |||||||||||||
Investment gains and losses, after-tax | 2.60 | 0.41 | (0.64) | 5.32 | |||||||||||||
Non-GAAP operating income | $ | 0.39 | $ | 1.08 | $ | 1.67 | $ | 2.98 | |||||||||
Life Insurance Reconciliation | |||||||||||||||||
(Dollars in millions) | Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||
Net income of the life insurance subsidiary | $ | 18 | $ | 12 | $ | 17 | $ | 30 | |||||||||
Investment gains and losses, net | 2 | (2) | (29) | (4) | |||||||||||||
Income tax on investment gains and losses | 1 | (1) | (6) | (1) | |||||||||||||
Non-GAAP operating income | 17 | 13 | 40 | 33 | |||||||||||||
Investment income, net of expenses | (40) | (38) | (118) | (114) | |||||||||||||
Investment income credited to contract holders | 26 | 25 | 77 | 74 | |||||||||||||
Income tax excluding tax on investment gains and losses, net | 3 | 5 | 10 | 9 | |||||||||||||
Life insurance segment profit | $ | 6 | $ | 5 | $ | 9 | $ | 2 | |||||||||
Property Casualty Insurance Reconciliation | |||||||||||||||||||||||||
(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) | |||||||||||||||
(Dollars in millions) | Three months ended September 30, 2019 | ||||||||||||||||||||||||
Consolidated | Commercial | Personal | E&S | Other* | |||||||||||||||||||||
Premiums: | |||||||||||||||||||||||||
Written premiums | $ | 1,351 | $ | 816 | $ | 388 | $ | 74 | $ | 73 | |||||||||||||||
Unearned premiums change | 25 | 18 | (34) | (2) | 43 | ||||||||||||||||||||
Earned premiums | $ | 1,376 | 834 | $ | 354 | 72 | $ | 116 | |||||||||||||||||
Underwriting profit | $ | 83 | $ | 56 | $ | 3 | $ | 12 | $ | 12 | |||||||||||||||
(Dollars in millions) | Nine months ended September 30, 2019 | ||||||||||||||||||||||||
Consolidated | Commercial | Personal | E&S | Other* | |||||||||||||||||||||
Premiums: | |||||||||||||||||||||||||
Written premiums | $ | 4,208 | $ | 2,591 | $ | 1,099 | $ | 223 | $ | 295 | |||||||||||||||
Unearned premiums change | (248) | (124) | (53) | (21) | (50) | ||||||||||||||||||||
Earned premiums | $ | 3,960 | $ | 2,467 | $ | 1,046 | $ | 202 | $ | 245 | |||||||||||||||
Underwriting profit | $ | 222 | $ | 144 | $ | 4 | $ | 40 | $ | 34 | |||||||||||||||
Dollar amounts shown are rounded to millions; certain amounts may not add due to rounding. Ratios are calculated based on dollar amounts in thousands. *Included in Other are the results of Cincinnati Re and Cincinnati Global, acquired on February 28, 2019. |
Cincinnati Financial Corporation | |
Other Measures | |
• | Value creation ratio: This is a measure of shareholder value creation that management believes captures the contribution of the company's insurance operations, the success of its investment strategy and the importance placed on paying cash dividends to shareholders. The value creation ratio measure is made up of two primary components: (1) rate of growth in book value per share plus (2) the ratio of dividends declared per share to beginning book value per share. Management believes this measure is useful, providing a meaningful measure of long-term progress in creating shareholder value. It is intended to be all-inclusive regarding changes in book value per share, and uses originally reported book value per share in cases where book value per share has been adjusted, such as adoption of Accounting Standards Updates with a cumulative effect of a change in accounting. |
• | Written premium: Under statutory accounting rules in the U.S., property casualty written premium is the amount recorded for policies issued and recognized on an annualized basis at the effective date of the policy. Management analyzes trends in written premium to assess business efforts. The difference between written and earned premium is unearned premium. |
Value Creation Ratio Calculations | |||||||||||||||||
(Dollars are per share) | Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||
Value creation ratio: | |||||||||||||||||
End of period book value* | $ | 60.57 | $ | 57.37 | $ | 60.57 | $ | 57.37 | |||||||||
Less beginning of period book value | 57.56 | 55.92 | 60.55 | 48.10 | |||||||||||||
Change in book value | 3.01 | 1.45 | 0.02 | 9.27 | |||||||||||||
Dividend declared to shareholders | 0.60 | 0.56 | 1.80 | 1.68 | |||||||||||||
Total value creation | $ | 3.61 | $ | 2.01 | $ | 1.82 | $ | 10.95 | |||||||||
Value creation ratio from change in book value** | 5.2 | % | 2.6 | % | 0.0 | % | 19.3 | % | |||||||||
Value creation ratio from dividends declared to shareholders*** | 1.1 | 1.0 | 3.0 | 3.5 | |||||||||||||
Value creation ratio | 6.3 | % | 3.6 | % | 3.0 | % | 22.8 | % | |||||||||
* 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