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PRNewswire 25-Oct-2018 4:05 PM
PR Newswire
CINCINNATI, Oct. 25, 2018
CINCINNATI, Oct. 25, 2018 /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, |
||||||||||||||
2018 |
2017 |
% Change |
2018 |
2017 |
% Change |
|||||||||||
Revenue Data |
||||||||||||||||
Earned premiums |
$ |
1,298 |
$ |
1,247 |
4 |
$ |
3,852 |
$ |
3,696 |
4 |
||||||
Investment income, net of expenses |
154 |
153 |
1 |
458 |
453 |
1 |
||||||||||
Total revenues |
1,915 |
1,412 |
36 |
4,697 |
4,321 |
9 |
||||||||||
Income Statement Data |
||||||||||||||||
Net income |
$ |
553 |
$ |
102 |
442 |
$ |
739 |
$ |
403 |
83 |
||||||
Investment gains and losses, after-tax |
360 |
5 |
nm |
293 |
101 |
190 |
||||||||||
Other non-recurring items |
56 |
— |
nm |
56 |
— |
nm |
||||||||||
Non-GAAP operating income* |
$ |
137 |
$ |
97 |
41 |
$ |
390 |
$ |
302 |
29 |
||||||
Per Share Data (diluted) |
||||||||||||||||
Net income |
$ |
3.38 |
$ |
0.61 |
454 |
$ |
4.49 |
$ |
2.42 |
86 |
||||||
Investment gains and losses, after-tax |
2.20 |
0.03 |
nm |
1.78 |
0.61 |
192 |
||||||||||
Other non-recurring items |
$ |
0.34 |
$ |
— |
nm |
$ |
0.34 |
$ |
— |
nm |
||||||
Non-GAAP operating income* |
$ |
0.84 |
$ |
0.58 |
45 |
$ |
2.37 |
$ |
1.81 |
31 |
||||||
Book value |
$ |
51.22 |
$ |
45.86 |
12 |
|||||||||||
Cash dividend declared |
$ |
0.53 |
$ |
0.50 |
6 |
$ |
1.59 |
$ |
1.50 |
6 |
||||||
Diluted weighted average shares outstanding |
164.0 |
165.9 |
(1) |
164.7 |
166.1 |
(1) |
||||||||||
* |
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. |
Selected Third-Quarter Highlights
Investment and Balance Sheet Highlights
Property Casualty Operations Maintaining Profitability
Steven J. Johnston, president and chief executive officer, commented: "Over the past few months our field claims teams and headquarters claims associates have been busy. I'm proud of their efforts as they brought compassion and expertise to our agents and policyholders, quickly resolving claims and helping affected communities to begin to move forward.
"This quarter is a nice example of the impact our many growth, profitability and diversification initiatives are having on our insurance business. While catastrophe losses grew by six-tenths of a percentage point in the third quarter of 2018 compared with last year's third quarter, our overall combined ratio declined 2.5 points to 96.8 percent.
"That improvement reflects our continued efforts in pricing segmentation across our organization and our purposeful growth in lines of business less prone to catastrophe losses such as: management liability, surety, the casualty portion of excess and surplus lines and life insurance.
"On a nine-month basis we achieved strong non-GAAP operating income results, increasing that measure 29 percent to $390 million. Our insurance operations continued to lead the way. With three-quarters of the year behind us, our 97.3 percent combined ratio is comfortably within our long-term target of 95 to 100 percent.
"We again built on our record of 29 consecutive years of overall favorable reserve development. While maintaining our consistent approach to setting reserves, we were able to recognize a 3.5 percentage-point third-quarter benefit to our combined ratio, compared with 1.6 points for the 2017 period. Commercial casualty – a line we've been watching closely – also experienced another quarter of favorable prior accident year reserve development."
Growth Reflecting Underwriting Discipline
"In this competitive market, we are balancing new business opportunities with underwriting discipline. Total property casualty net written premiums grew 4 percent through the first nine months of 2018, reflecting average renewal price increases for each of our property casualty insurance segments and most of our major lines of business.
"Our overall growth strategy plays to the strengths of each area where we do business. We consider factors such as market conditions, weather patterns and historic loss ratios for particular lines of business to create an appropriate plan for targeted growth. That work creates a generally stable underwriting appetite to support our agents and enhance our mutual success."
Book Value Reaching Record High
"Our third-quarter pretax investment income grew 1 percent as 5 percent growth in dividends from our equity holdings helped to offset a 1 percent decline in interest income from our bond portfolio. Benefits from the increasing value of our investment portfolio, our strong underwriting performance and other non-recurring items helped to boost book value to another record high, increasing 1.8 percent since the end of 2017 to $51.22.
"The increase in our book value brings our value creation ratio back into positive territory, ending the first nine months at 5.0 percent."
Insurance Operations Highlights |
||||||||||||||||||||||
Consolidated Property Casualty Insurance Results |
||||||||||||||||||||||
(Dollars in millions) |
Three months ended September 30, |
Nine months ended September 30, |
||||||||||||||||||||
2018 |
2017 |
% Change |
2018 |
2017 |
% Change |
|||||||||||||||||
Earned premiums |
$ |
1,237 |
$ |
1,191 |
4 |
$ |
3,667 |
$ |
3,523 |
4 |
||||||||||||
Fee revenues |
2 |
2 |
0 |
8 |
8 |
0 |
||||||||||||||||
Total revenues |
1,239 |
1,193 |
4 |
3,675 |
3,531 |
4 |
||||||||||||||||
Loss and loss expenses |
813 |
815 |
0 |
2,425 |
2,397 |
1 |
||||||||||||||||
Underwriting expenses |
384 |
367 |
5 |
1,143 |
1,094 |
4 |
||||||||||||||||
Underwriting profit |
$ |
42 |
$ |
11 |
282 |
$ |
107 |
$ |
40 |
168 |
||||||||||||
Ratios as a percent of earned premiums: |
Pt. Change |
Pt. Change |
||||||||||||||||||||
Loss and loss expenses |
65.7 |
% |
68.4 |
% |
(2.7) |
66.1 |
% |
68.0 |
% |
(1.9) |
||||||||||||
Underwriting expenses |
31.1 |
30.9 |
0.2 |
31.2 |
31.1 |
0.1 |
||||||||||||||||
Combined ratio |
96.8 |
% |
99.3 |
% |
(2.5) |
97.3 |
% |
99.1 |
% |
(1.8) |
||||||||||||
% Change |
% Change |
|||||||||||||||||||||
Agency renewal written premiums |
$ |
1,088 |
$ |
1,064 |
2 |
$ |
3,321 |
$ |
3,211 |
3 |
||||||||||||
Agency new business written premiums |
154 |
157 |
(2) |
494 |
475 |
4 |
||||||||||||||||
Cincinnati Re net written premiums |
36 |
24 |
50 |
130 |
104 |
25 |
||||||||||||||||
Other written premiums |
(32) |
(37) |
14 |
(92) |
(80) |
(15) |
||||||||||||||||
Net written premiums |
$ |
1,246 |
$ |
1,208 |
3 |
$ |
3,853 |
$ |
3,710 |
4 |
||||||||||||
Ratios as a percent of earned premiums: |
Pt. Change |
Pt. Change |
||||||||||||||||||||
Current accident year before catastrophe losses |
59.1 |
% |
60.4 |
% |
(1.3) |
62.0 |
% |
60.8 |
% |
1.2 |
||||||||||||
Current accident year catastrophe losses |
10.1 |
9.6 |
0.5 |
7.4 |
9.9 |
(2.5) |
||||||||||||||||
Prior accident years before catastrophe losses |
(3.1) |
(1.1) |
(2.0) |
(3.0) |
(2.1) |
(0.9) |
||||||||||||||||
Prior accident years catastrophe losses |
(0.4) |
(0.5) |
0.1 |
(0.3) |
(0.6) |
0.3 |
||||||||||||||||
Loss and loss expense ratio |
65.7 |
% |
68.4 |
% |
(2.7) |
66.1 |
% |
68.0 |
% |
(1.9) |
||||||||||||
Current accident year combined ratio before catastrophe losses |
90.2 |
% |
91.3 |
% |
(1.1) |
93.2 |
% |
91.9 |
% |
1.3 |
||||||||||||
Commercial Lines Insurance Results |
||||||||||||||||||||||
(Dollars in millions) |
Three months ended September 30, |
Nine months ended September 30, |
||||||||||||||||||||
2018 |
2017 |
% Change |
2018 |
2017 |
% Change |
|||||||||||||||||
Earned premiums |
$ |
805 |
$ |
792 |
2 |
$ |
2,407 |
$ |
2,369 |
2 |
||||||||||||
Fee revenues |
1 |
1 |
0 |
3 |
3 |
0 |
||||||||||||||||
Total revenues |
806 |
793 |
2 |
2,410 |
2,372 |
2 |
||||||||||||||||
Loss and loss expenses |
515 |
501 |
3 |
1,544 |
1,555 |
(1) |
||||||||||||||||
Underwriting expenses |
257 |
253 |
2 |
770 |
756 |
2 |
||||||||||||||||
Underwriting profit |
$ |
34 |
$ |
39 |
(13) |
$ |
96 |
$ |
61 |
57 |
||||||||||||
Ratios as a percent of earned premiums: |
Pt. Change |
Pt. Change |
||||||||||||||||||||
Loss and loss expenses |
63.9 |
% |
63.3 |
% |
0.6 |
64.1 |
% |
65.7 |
% |
(1.6) |
||||||||||||
Underwriting expenses |
32.0 |
31.9 |
0.1 |
32.0 |
31.9 |
0.1 |
||||||||||||||||
Combined ratio |
95.9 |
% |
95.2 |
% |
0.7 |
96.1 |
% |
97.6 |
% |
(1.5) |
||||||||||||
% Change |
% Change |
|||||||||||||||||||||
Agency renewal written premiums |
$ |
702 |
$ |
707 |
(1) |
$ |
2,231 |
$ |
2,208 |
1 |
||||||||||||
Agency new business written premiums |
94 |
99 |
(5) |
316 |
301 |
5 |
||||||||||||||||
Other written premiums |
(22) |
(28) |
21 |
(63) |
(53) |
(19) |
||||||||||||||||
Net written premiums |
$ |
774 |
$ |
778 |
(1) |
$ |
2,484 |
$ |
2,456 |
1 |
||||||||||||
Ratios as a percent of earned premiums: |
Pt. Change |
Pt. Change |
||||||||||||||||||||
Current accident year before catastrophe losses |
58.2 |
% |
61.3 |
% |
(3.1) |
61.9 |
% |
60.7 |
% |
1.2 |
||||||||||||
Current accident year catastrophe losses |
10.3 |
4.3 |
6.0 |
7.0 |
7.2 |
(0.2) |
||||||||||||||||
Prior accident years before catastrophe losses |
(3.8) |
(1.8) |
(2.0) |
(4.1) |
(1.6) |
(2.5) |
||||||||||||||||
Prior accident years catastrophe losses |
(0.8) |
(0.5) |
(0.3) |
(0.7) |
(0.6) |
(0.1) |
||||||||||||||||
Loss and loss expense ratio |
63.9 |
% |
63.3 |
% |
0.6 |
64.1 |
% |
65.7 |
% |
(1.6) |
||||||||||||
Current accident year combined ratio before catastrophe losses |
90.2 |
% |
93.2 |
% |
(3.0) |
93.9 |
% |
92.6 |
% |
1.3 |
||||||||||||
Personal Lines Insurance Results |
||||||||||||||||||||||
(Dollars in millions) |
Three months ended September 30, |
Nine months ended September 30, |
||||||||||||||||||||
2018 |
2017 |
% Change |
2018 |
2017 |
% Change |
|||||||||||||||||
Earned premiums |
$ |
338 |
$ |
314 |
8 |
$ |
994 |
$ |
921 |
8 0 |
||||||||||||
Fee revenues |
1 |
1 |
0 |
4 |
4 |
|||||||||||||||||
Total revenues |
339 |
315 |
8 |
998 |
925 |
8 |
||||||||||||||||
Loss and loss expenses |
249 |
233 |
7 |
756 |
706 |
7 |
||||||||||||||||
Underwriting expenses |
99 |
91 |
9 |
292 |
267 |
9 |
||||||||||||||||
Underwriting loss |
$ |
(9) |
$ |
(9) |
0 |
$ |
(50) |
$ |
(48) |
(4) |
||||||||||||
Ratios as a percent of earned premiums: |
Pt. Change |
Pt. Change |
||||||||||||||||||||
Loss and loss expenses |
73.7 |
% |
74.0 |
% |
(0.3) |
76.0 |
% |
76.6 |
% |
(0.6) |
||||||||||||
Underwriting expenses |
29.3 |
29.1 |
0.2 |
29.4 |
29.0 |
0.4 |
||||||||||||||||
Combined ratio |
103.0 |
% |
103.1 |
% |
(0.1) |
105.4 |
% |
105.6 |
% |
(0.2) |
||||||||||||
% Change |
% Change |
|||||||||||||||||||||
Agency renewal written premiums |
$ |
342 |
$ |
318 |
8 |
$ |
948 |
$ |
881 |
8 |
||||||||||||
Agency new business written premiums |
42 |
43 |
(2) |
127 |
122 |
4 |
||||||||||||||||
Other written premiums |
(7) |
(6) |
(17) |
(20) |
(18) |
(11) |
||||||||||||||||
Net written premiums |
$ |
377 |
$ |
355 |
6 |
$ |
1,055 |
$ |
985 |
7 |
||||||||||||
Ratios as a percent of earned premiums: |
Pt. Change |
Pt. Change |
||||||||||||||||||||
Current accident year before catastrophe losses |
64.0 |
% |
62.2 |
% |
1.8 |
65.0 |
% |
63.6 |
% |
1.4 |
||||||||||||
Current accident year catastrophe losses |
9.7 |
11.7 |
(2.0) |
9.5 |
14.5 |
(5.0) |
||||||||||||||||
Prior accident years before catastrophe losses |
(0.5) |
0.7 |
(1.2) |
1.2 |
(1.0) |
2.2 |
||||||||||||||||
Prior accident years catastrophe losses |
0.5 |
(0.6) |
1.1 |
0.3 |
(0.5) |
0.8 |
||||||||||||||||
Loss and loss expense ratio |
73.7 |
% |
74.0 |
% |
(0.3) |
76.0 |
% |
76.6 |
% |
(0.6) |
||||||||||||
Current accident year combined ratio before catastrophe losses |
93.3 |
% |
91.3 |
% |
2.0 |
94.4 |
% |
92.6 |
% |
1.8 |
||||||||||||
Excess and Surplus Lines Insurance Results |
||||||||||||||||||||||
(Dollars in millions) |
Three months ended September 30, |
Nine months ended September 30, |
||||||||||||||||||||
2018 |
2017 |
% Change |
2018 |
2017 |
% Change |
|||||||||||||||||
Earned premiums |
$ |
60 |
$ |
53 |
13 |
$ |
173 |
$ |
153 |
13 |
||||||||||||
Fee revenues |
— |
— |
0 |
1 |
1 |
0 |
||||||||||||||||
Total revenues |
60 |
53 |
13 |
174 |
154 |
13 |
||||||||||||||||
Loss and loss expenses |
25 |
24 |
4 |
75 |
58 |
29 |
||||||||||||||||
Underwriting expenses |
18 |
16 |
13 |
51 |
46 |
11 |
||||||||||||||||
Underwriting profit |
$ |
17 |
$ |
13 |
31 |
$ |
48 |
$ |
50 |
(4) |
||||||||||||
Ratios as a percent of earned premiums: |
Pt. Change |
Pt. Change |
||||||||||||||||||||
Loss and loss expenses |
42.6 |
% |
45.8 |
% |
(3.2) |
43.5 |
% |
38.1 |
% |
5.4 |
||||||||||||
Underwriting expenses |
29.4 |
29.0 |
0.4 |
29.3 |
29.9 |
(0.6) |
||||||||||||||||
Combined ratio |
72.0 |
% |
74.8 |
% |
(2.8) |
72.8 |
% |
68.0 |
% |
4.8 |
||||||||||||
% Change |
% Change |
|||||||||||||||||||||
Agency renewal written premiums |
$ |
44 |
$ |
39 |
13 |
$ |
142 |
$ |
122 |
16 |
||||||||||||
Agency new business written premiums |
18 |
15 |
20 |
51 |
52 |
(2) |
||||||||||||||||
Other written premiums |
(3) |
(3) |
0 |
(9) |
(9) |
0 |
||||||||||||||||
Net written premiums |
$ |
59 |
$ |
51 |
16 |
$ |
184 |
$ |
165 |
12 |
||||||||||||
Ratios as a percent of earned premiums: |
Pt. Change |
Pt. Change |
||||||||||||||||||||
Current accident year before catastrophe losses |
53.3 |
% |
49.1 |
% |
4.2 |
54.9 |
% |
52.8 |
% |
2.1 |
||||||||||||
Current accident year catastrophe losses |
0.9 |
1.7 |
(0.8) |
1.2 |
1.3 |
(0.1) |
||||||||||||||||
Prior accident years before catastrophe losses |
(11.3) |
(4.7) |
(6.6) |
(12.6) |
(15.9) |
3.3 |
||||||||||||||||
Prior accident years catastrophe losses |
(0.3) |
(0.3) |
0.0 |
0.0 |
(0.1) |
0.1 |
||||||||||||||||
Loss and loss expense ratio |
42.6 |
% |
45.8 |
% |
(3.2) |
43.5 |
% |
38.1 |
% |
5.4 |
||||||||||||
Current accident year combined ratio before catastrophe losses |
82.7 |
% |
78.1 |
% |
4.6 |
84.2 |
% |
82.7 |
% |
1.5 |
||||||||||||
Life Insurance Subsidiary Results |
||||||||||||||||||||||
(Dollars in millions) |
Three months ended September 30, |
Nine months ended September 30, |
||||||||||||||||||||
2018 |
2017 |
% Change |
2018 |
2017 |
% Change |
|||||||||||||||||
Term life insurance |
$ |
42 |
$ |
39 |
8 |
$ |
127 |
$ |
118 |
8 |
||||||||||||
Universal life insurance |
9 |
7 |
29 |
27 |
28 |
(4) |
||||||||||||||||
Other life insurance, annuity, and disability income products |
10 |
10 |
0 |
31 |
27 |
15 |
||||||||||||||||
Earned premiums |
61 |
56 |
9 |
185 |
173 |
7 |
||||||||||||||||
Investment income, net of expenses |
39 |
39 |
0 |
115 |
117 |
(2) |
||||||||||||||||
Investment gains and losses, net |
— |
1 |
(100) |
— |
4 |
(100) |
||||||||||||||||
Fee revenues |
1 |
1 |
0 |
3 |
4 |
(25) |
||||||||||||||||
Total revenues |
101 |
97 |
4 |
303 |
298 |
2 |
||||||||||||||||
Contract holders' benefits incurred |
66 |
59 |
12 |
191 |
184 |
4 |
||||||||||||||||
Underwriting expenses incurred |
17 |
26 |
(35) |
56 |
63 |
(11) |
||||||||||||||||
Total benefits and expenses |
83 |
85 |
(2) |
247 |
247 |
0 |
||||||||||||||||
Net income before income tax |
18 |
12 |
50 |
56 |
51 |
10 |
||||||||||||||||
Income tax |
3 |
4 |
(25) |
11 |
18 |
(39) |
||||||||||||||||
Net income of the life insurance subsidiary |
$ |
15 |
$ |
8 |
88 |
$ |
45 |
$ |
33 |
36 |
||||||||||||
Investment and Balance Sheet Highlights |
||||||||||||||||||||||
Investments Results |
||||||||||||||||||||||
(Dollars in millions) |
Three months ended September 30, |
Nine months ended September 30, |
||||||||||||||||||||
2018 |
2017 |
% Change |
2018 |
2017 |
% Change |
|||||||||||||||||
Investment income, net of expenses |
$ |
154 |
$ |
153 |
1 |
$ |
458 |
$ |
453 |
1 |
||||||||||||
Investment interest credited to contract holders' |
(24) |
(24) |
0 |
(72) |
(70) |
(3) |
||||||||||||||||
Investment gains and losses, net |
458 |
7 |
nm |
372 |
156 |
138 |
||||||||||||||||
Investments profit |
$ |
588 |
$ |
136 |
332 |
$ |
758 |
$ |
539 |
41 |
||||||||||||
Investment income: |
||||||||||||||||||||||
Interest |
$ |
111 |
$ |
112 |
(1) |
$ |
333 |
$ |
334 |
0 |
||||||||||||
Dividends |
45 |
43 |
5 |
131 |
124 |
6 |
||||||||||||||||
Other |
1 |
1 |
0 |
3 |
3 |
0 |
||||||||||||||||
Less investment expenses |
3 |
3 |
0 |
9 |
8 |
13 |
||||||||||||||||
Investment income, pretax |
154 |
153 |
1 |
458 |
453 |
1 |
||||||||||||||||
Less income taxes |
24 |
35 |
(31) |
70 |
106 |
(34) |
||||||||||||||||
Total investment income, after-tax |
$ |
130 |
$ |
118 |
10 |
$ |
388 |
$ |
347 |
12 |
||||||||||||
Investment returns: |
||||||||||||||||||||||
Average invested assets plus cash and cash equivalents |
$ |
17,712 |
$ |
16,769 |
$ |
17,683 |
$ |
16,462 |
||||||||||||||
Average yield pretax |
3.48 |
% |
3.65 |
% |
3.45 |
% |
3.67 |
% |
||||||||||||||
Average yield after-tax |
2.94 |
2.81 |
2.93 |
2.81 |
||||||||||||||||||
Effective tax rate |
15.4 |
23.4 |
15.3 |
23.5 |
||||||||||||||||||
Fixed-maturity returns: |
||||||||||||||||||||||
Average amortized cost |
$ |
10,603 |
$ |
10,121 |
$ |
10,484 |
$ |
9,967 |
||||||||||||||
Average yield pretax |
4.19 |
% |
4.43 |
% |
4.24 |
% |
4.47 |
% |
||||||||||||||
Average yield after-tax |
3.50 |
3.25 |
3.54 |
3.27 |
||||||||||||||||||
Effective tax rate |
16.5 |
26.6 |
16.4 |
26.8 |
||||||||||||||||||
(Dollars in millions) |
Three months ended September 30, |
Nine months ended September 30, |
||||||||||||||
2018 |
2017 |
2018 |
2017 |
|||||||||||||
Investment gains and losses on equity securities sold, net |
$ |
8 |
$ |
1 |
$ |
17 |
$ |
146 |
||||||||
Unrealized gains and losses on equity securities still held, net |
450 |
— |
351 |
— |
||||||||||||
Investment gains and losses on fixed-maturity securities sold, net |
1 |
3 |
7 |
16 |
||||||||||||
Other |
(1) |
3 |
(3) |
(6) |
||||||||||||
Subtotal - investment gains and losses reported in net income |
458 |
7 |
372 |
156 |
||||||||||||
Change in unrealized investment gains and losses - equity securities |
— |
9 |
— |
119 |
||||||||||||
Change in unrealized investment gains and losses - fixed maturities |
(77) |
180 |
(378) |
422 |
||||||||||||
Total |
$ |
381 |
$ |
196 |
$ |
(6) |
$ |
697 |
||||||||
Balance Sheet Highlights |
||||||||
(Dollars in millions, except share data) |
At September 30, |
At December 31, |
||||||
2018 |
2017 |
|||||||
Total investments |
$ |
17,433 |
$ |
17,051 |
||||
Total assets |
22,480 |
21,843 |
||||||
Short-term debt |
30 |
24 |
||||||
Long-term debt |
787 |
787 |
||||||
Shareholders' equity |
8,334 |
8,243 |
||||||
Book value per share |
51.22 |
50.29 |
||||||
Debt-to-total-capital ratio |
8.9 |
% |
9.0 |
% |
||||
For additional information or to register for our conference call webcast, please visit cinfin.com/investors.
About Cincinnati Financial
Cincinnati Financial Corporation offers 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 and disability income 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 2017 Annual Report on Form 10-K, Item 1A, Risk Factors, Page 30.
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, |
|||||||||||||
2018 |
2017 |
||||||||||||||
Assets |
|||||||||||||||
Investments |
$ |
17,433 |
$ |
17,051 |
|||||||||||
Cash and cash equivalents |
616 |
657 |
|||||||||||||
Premiums receivable |
1,709 |
1,589 |
|||||||||||||
Reinsurance recoverable |
424 |
432 |
|||||||||||||
Deferred policy acquisition costs |
743 |
670 |
|||||||||||||
Other assets |
1,555 |
1,444 |
|||||||||||||
Total assets |
$ |
22,480 |
$ |
21,843 |
|||||||||||
Liabilities |
|||||||||||||||
Insurance reserves |
$ |
8,348 |
$ |
8,002 |
|||||||||||
Unearned premiums |
2,591 |
2,404 |
|||||||||||||
Deferred income tax |
797 |
745 |
|||||||||||||
Long-term debt and capital lease obligations |
830 |
827 |
|||||||||||||
Other liabilities |
1,580 |
1,622 |
|||||||||||||
Total liabilities |
14,146 |
13,600 |
|||||||||||||
Shareholders' Equity |
|||||||||||||||
Common stock and paid-in capital |
1,670 |
1,662 |
|||||||||||||
Retained earnings |
8,164 |
5,180 |
|||||||||||||
Accumulated other comprehensive income (loss) |
(4) |
2,788 |
|||||||||||||
Treasury stock |
(1,496) |
(1,387) |
|||||||||||||
Total shareholders' equity |
8,334 |
8,243 |
|||||||||||||
Total liabilities and shareholders' equity |
$ |
22,480 |
$ |
21,843 |
|||||||||||
(Dollars in millions, except per share data) |
Three months ended September 30, |
Nine months ended September 30, |
|||||||||||||
2018 |
2017 |
2018 |
2017 |
||||||||||||
Revenues |
|||||||||||||||
Earned premiums |
$ |
1,298 |
$ |
1,247 |
$ |
3,852 |
$ |
3,696 |
|||||||
Investment income, net of expenses |
154 |
153 |
458 |
453 |
|||||||||||
Investment gains and losses, net |
458 |
7 |
372 |
156 |
|||||||||||
Other revenues |
5 |
5 |
15 |
16 |
|||||||||||
Total revenues |
1,915 |
1,412 |
4,697 |
4,321 |
|||||||||||
Benefits and Expenses |
|||||||||||||||
Insurance losses and contract holders' benefits |
879 |
874 |
2,616 |
2,581 |
|||||||||||
Underwriting, acquisition and insurance expenses |
401 |
393 |
1,199 |
1,157 |
|||||||||||
Interest expense |
14 |
13 |
40 |
39 |
|||||||||||
Other operating expenses |
3 |
3 |
10 |
11 |
|||||||||||
Total benefits and expenses |
1,297 |
1,283 |
3,865 |
3,788 |
|||||||||||
Income Before Income Taxes |
618 |
129 |
832 |
533 |
|||||||||||
Provision for Income Taxes |
65 |
27 |
93 |
130 |
|||||||||||
Net Income |
$ |
553 |
$ |
102 |
$ |
739 |
$ |
403 |
|||||||
Per Common Share: |
|||||||||||||||
Net income—basic |
$ |
3.40 |
$ |
0.62 |
$ |
4.53 |
$ |
2.45 |
|||||||
Net income—diluted |
3.38 |
0.61 |
4.49 |
2.42 |
|||||||||||
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 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, |
||||||||||||||
2018 |
2017 |
2018 |
2017 |
|||||||||||||
Net income |
$ |
553 |
$ |
102 |
$ |
739 |
$ |
403 |
||||||||
Less: |
||||||||||||||||
Investment gains and losses, net |
458 |
7 |
372 |
156 |
||||||||||||
Income tax on investment gains and losses |
(98) |
(2) |
(79) |
(55) |
||||||||||||
Investment gains and losses, after-tax |
360 |
5 |
293 |
101 |
||||||||||||
Other non-recurring items |
$ |
56 |
$ |
— |
$ |
56 |
$ |
— |
||||||||
Non-GAAP operating income |
$ |
137 |
$ |
97 |
$ |
390 |
$ |
302 |
||||||||
Diluted per share data: |
||||||||||||||||
Net income |
$ |
3.38 |
$ |
0.61 |
$ |
4.49 |
$ |
2.42 |
||||||||
Less: |
||||||||||||||||
Investment gains and losses, net |
2.79 |
0.04 |
2.26 |
0.94 |
||||||||||||
Income tax on investment gains and losses |
(0.59) |
(0.01) |
(0.48) |
(0.33) |
||||||||||||
Investment gains and losses, after-tax |
2.20 |
0.03 |
1.78 |
0.61 |
||||||||||||
Other non-recurring items |
$ |
0.34 |
$ |
— |
$ |
0.34 |
$ |
— |
||||||||
Non-GAAP operating income |
$ |
0.84 |
$ |
0.58 |
$ |
2.37 |
$ |
1.81 |
||||||||
Life Insurance Reconciliation |
||||||||||||||||
(Dollars in millions) |
Three months ended September 30, |
Nine months ended September 30, |
||||||||||||||
2018 |
2017 |
2018 |
2017 |
|||||||||||||
Net income of the life insurance subsidiary |
$ |
15 |
$ |
8 |
$ |
45 |
$ |
33 |
||||||||
Investment gains and losses, net |
— |
1 |
— |
4 |
||||||||||||
Income tax on investment gains and losses |
— |
1 |
— |
2 |
||||||||||||
Non-GAAP operating income |
15 |
8 |
45 |
31 |
||||||||||||
Investment income, net of expenses |
(39) |
(39) |
(115) |
(117) |
||||||||||||
Investment income credited to contract holders' |
24 |
24 |
72 |
70 |
||||||||||||
Income tax excluding tax on investment gains and |
3 |
3 |
11 |
16 |
||||||||||||
Life insurance segment profit |
$ |
3 |
$ |
(4) |
$ |
13 |
$ |
— |
||||||||
Cincinnati Financial Corporation
Other Measures
Value Creation Ratio Calculations
|
||||||||||||||||
(Dollars are per share) |
Three months ended September 30, |
Nine months ended September 30, |
||||||||||||||
2018 |
2017 |
2018 |
2017 |
|||||||||||||
Value creation ratio: |
||||||||||||||||
End of period book value* |
$ |
51.22 |
$ |
45.86 |
$ |
51.22 |
$ |
45.86 |
||||||||
Less beginning of period book value |
48.68 |
44.97 |
50.29 |
42.95 |
||||||||||||
Change in book value |
2.54 |
0.89 |
0.93 |
2.91 |
||||||||||||
Dividend declared to shareholders |
0.53 |
0.50 |
1.59 |
1.50 |
||||||||||||
Total value creation |
$ |
3.07 |
$ |
1.39 |
$ |
2.52 |
$ |
4.41 |
||||||||
Value creation ratio from change in book value** |
5.2 |
% |
2.0 |
% |
1.8 |
% |
6.8 |
% |
||||||||
Value creation ratio from dividends declared to |
1.1 |
1.1 |
3.2 |
3.5 |
||||||||||||
Value creation ratio |
6.3 |
% |
3.1 |
% |
5.0 |
% |
10.3 |
% |
||||||||
* 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 |
Cincinnati Financial Corporation |
||||||||||||||||||||||||
Property Casualty Insurance Reconciliation |
||||||||||||||||||||||||
(Dollars in millions) |
Three months ended September 30, 2018 |
|||||||||||||||||||||||
Consolidated |
Commercial |
Personal |
E&S |
Cincinnati Re |
||||||||||||||||||||
Premiums: |
||||||||||||||||||||||||
Written premiums |
$ |
1,246 |
$ |
774 |
$ |
377 |
$ |
59 |
$ |
36 |
||||||||||||||
Unearned premiums change |
(9) |
31 |
(39) |
1 |
(2) |
|||||||||||||||||||
Earned premiums |
$ |
1,237 |
$ |
805 |
$ |
338 |
$ |
60 |
$ |
34 |
||||||||||||||
Statutory ratios: |
||||||||||||||||||||||||
Combined ratio |
96.7 |
% |
96.7 |
% |
100.6 |
% |
73.1 |
% |
106.8 |
% |
||||||||||||||
Contribution from catastrophe losses |
9.7 |
9.5 |
10.2 |
0.6 |
24.5 |
|||||||||||||||||||
Combined ratio excluding catastrophe losses |
87.0 |
% |
87.2 |
% |
90.4 |
% |
72.5 |
% |
82.3 |
% |
||||||||||||||
Commission expense ratio |
19.3 |
% |
19.3 |
% |
17.0 |
% |
27.2 |
% |
30.7 |
% |
||||||||||||||
Other underwriting expense ratio |
11.7 |
13.5 |
9.9 |
3.3 |
6.8 |
|||||||||||||||||||
Total expense ratio |
31.0 |
% |
32.8 |
% |
26.9 |
% |
30.5 |
% |
37.5 |
% |
||||||||||||||
GAAP ratios: |
||||||||||||||||||||||||
Combined ratio |
96.8 |
% |
95.9 |
% |
103.0 |
% |
72.0 |
% |
101.0 |
% |
||||||||||||||
Contribution from catastrophe losses |
9.7 |
9.5 |
10.2 |
0.6 |
24.5 |
|||||||||||||||||||
Prior accident years before catastrophe losses |
(3.1) |
(3.8) |
(0.5) |
(11.3) |
2.3 |
|||||||||||||||||||
Current accident year combined ratio before catastrophe losses |
90.2 |
% |
90.2 |
% |
93.3 |
% |
82.7 |
% |
74.2 |
% |
||||||||||||||
(Dollars in millions) |
Nine months ended September 30, 2018 |
|||||||||||||||||||||||
Consolidated |
Commercial |
Personal |
E&S |
Cincinnati Re |
||||||||||||||||||||
Premiums: |
||||||||||||||||||||||||
Written premiums |
$ |
3,853 |
$ |
2,484 |
$ |
1,055 |
$ |
184 |
$ |
130 |
||||||||||||||
Unearned premiums change |
(186) |
(77) |
(61) |
(11) |
(37) |
|||||||||||||||||||
Earned premiums |
$ |
3,667 |
$ |
2,407 |
$ |
994 |
$ |
173 |
$ |
93 |
||||||||||||||
Statutory ratios: |
||||||||||||||||||||||||
Combined ratio |
96.3 |
% |
95.2 |
% |
104.0 |
% |
72.5 |
% |
85.9 |
% |
||||||||||||||
Contribution from catastrophe losses |
7.1 |
6.3 |
9.8 |
1.2 |
9.0 |
|||||||||||||||||||
Combined ratio excluding catastrophe losses |
89.2 |
% |
88.9 |
% |
94.2 |
% |
71.3 |
% |
76.9 |
% |
||||||||||||||
Commission expense ratio |
18.5 |
% |
17.9 |
% |
17.5 |
% |
25.7 |
% |
26.4 |
% |
||||||||||||||
Other underwriting expense ratio |
11.7 |
13.2 |
10.5 |
3.3 |
6.1 |
|||||||||||||||||||
Total expense ratio |
30.2 |
% |
31.1 |
% |
28.0 |
% |
29.0 |
% |
32.5 |
% |
||||||||||||||
GAAP ratios: |
||||||||||||||||||||||||
Combined ratio |
97.3 |
% |
96.1 |
% |
105.4 |
% |
72.8 |
% |
86.2 |
% |
||||||||||||||
Contribution from catastrophe losses |
7.1 |
6.3 |
9.8 |
1.2 |
9.0 |
|||||||||||||||||||
Prior accident years before catastrophe losses |
(3.0) |
(4.1) |
1.2 |
(12.6) |
(3.9) |
|||||||||||||||||||
Current accident year combined ratio before catastrophe losses |
93.2 |
% |
93.9 |
% |
94.4 |
% |
84.2 |
% |
81.1 |
% |
||||||||||||||
Dollar amounts shown are rounded to millions; certain amounts may not add due to rounding. Ratios are calculated based on dollar amounts in thousands. |
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SOURCE Cincinnati Financial Corporation