* 1999 net operating income per share up 30.3 percent to a new high of $1.55
* Assets rose to a record $11.380 billion
* Strong fourth quarter: property and casualty net written premiums
grew 10 percent with a gross underwriting profit of $19.0 million
CINCINNATI, Feb. 3 /PRNewswire/ -- Cincinnati Financial Corporation (Nasdaq: CINF)-- Cincinnati Financial reported today that net operating income for 1999 rose $56.0 million to $255.1 million, or $1.55 per share, versus $199.1 million, or $1.19 per share, in 1998. Total net earnings for 1999 rose 5.5 percent to $254.7 million, or $1.55 per share, versus $241.6 million, or $1.45 per share, in 1998. 1999 earnings included a net realized capital loss of $0.4 million while 1998 earnings included a net realized capital gain of $42.5 million, or $0.26 per share.
(Photo: http://www.newscom.com/cgi-bin/prnh/19990403/HSSA008-a )
Total 1999 revenues advanced $73.9 million to $2.128 billion, up 3.6 percent over the previous year's total. Revenues from pre-tax investment income, the Corporation's primary source of profits, rose 5.1 percent to a new high of $386.8 million.
Financial Highlights (In millions, except per
share data and percentages) Fourth Quarter Full Year
Ended Ended
December 31, December 31,
1999 1998 1999 1998
Revenues $511.9 $508.4 $2,128.2 $2,054.3
Net Operating Income $73.1 $49.7 $255.1 $199.1
Net Capital Gain (Loss) (26.2) (4.1) (0.4) 42.5
Net Income $46.9 $45.6 $254.7 $241.6
Net Operating Income Per
Share $.45 $.30 $1.55 $1.19
Net Capital Gain (Loss)
Per Share (.16) (.03) .00 .26
Net Income Per Share $.29 $.27 $1.55 $1.45
Net Income Per Share
(diluted) $.28 $.27 $1.52 $1.41
Dividends Declared Per
Share $.17 $.15-1/3 $.68 $.61-1/3
Book Value Per Share -- -- $33.46 $33.72
Average Shares
Outstanding 163.1 166.7 164.6 166.8
Annualized Return on
Equity 3.6% 3.5% 4.6% 4.7%
Annualized Return on
Equity Including
Net Unrealized Gain
and Loss* 37.3% 58.3% 1.9% 19.6%
* This calculation reflects Cincinnati Financial Corporation's
comprehensive net income. It recognizes the Company's equity focus and
the resulting appreciation/depreciation not reflected in traditional
return calculations that consider income statement-based earnings only.
Chairman and Chief Executive Officer John J. Schiff, Jr., CPCU, commented, "We're pleased to report increases in net operating income of 47.1 percent for the fourth quarter and 28.1 percent for the full year. While this year's performance is outstanding, it's exaggerated by the comparison to 1998, a year when unusually high catastrophe losses kept our fundamentally solid performance from showing on the bottom line.
"Looking at current results in a longer-term context, net operating earnings were our best ever for any year in our history, modestly surpassing even 1997-an outstanding year with lower catastrophe losses. Net operating income for the quarter exceeded results for all previous quarters except this year's second. Steady, incremental growth of profits, sustainable over the long term, is our goal."
Operating earnings included catastrophe losses of $0.15 per share after tax, for 1999; $0.36 per share after tax, for 1998; and $0.10 per share after tax, for 1997.
Fourth-Quarter Results
1999 fourth-quarter net operating income reached $73.1 million, or $0.45 per share, versus $49.7 million, or $0.30 per share for the last quarter of 1998. Fourth-quarter net income totaled $46.9 million, or $0.29 per share, including net realized capital losses of $26.2 million, or $0.16 per share. For 1998, total net income was $45.6 million, or $0.27 per share, including net realized capital losses of $4.1 million, or $0.03 per share. Total revenues advanced less than one percent to $511.9 million in 1999 as higher realized capital losses offset increased revenues from insurance and investment operations. Pre-tax investment income grew 3.4 percent to $98.4 million.
The Corporation's property and casualty insurance companies reported no new events classified as catastrophes during the fourth quarter. Losses from earlier storms were lower than previously estimated, increasing fourth-quarter earnings by $0.01 per share, after tax. Fourth-quarter 1998 catastrophe losses were $0.05 per share after tax.
Property and Casualty Insurance Operations
(Dollars in millions) Fourth Quarter Full Year
Ended Ended
December 31, December 31,
1999 1998 1999 1998
Gross Written Premiums $465.2 $427.1 $1,774.6 $1,656.5
Net Written Premiums $439.9 $400.1 $1,680.8 $1,557.6
Net Earned Premiums $433.5 $398.1 $1,658.4 $1,543.6
Loss and LAE Ratio 67.5% 74.3% 71.6% 74.7%
Expense Ratio 27.7 29.5 28.4 28.9
Statutory Combined Ratio 95.2% 103.8% 100.0% 103.6%
For the fourth quarter, total net written premiums by the Corporation's property casualty insurance affiliates-The Cincinnati Insurance Company, The Cincinnati Casualty Company and The Cincinnati Indemnity Company-grew 10.0 percent to $439.9 million. The quarterly combined loss and expense ratio was 95.2 percent, resulting in a gross underwriting gain of $19.0 million, the second quarterly underwriting profit in 1999. For the comparable period of 1998, net written premium growth was 6.9 percent and the combined ratio was 103.8 percent, including 3 points due to catastrophe losses.
For the full year, net written premiums rose 7.9 percent over 1998 and the combined ratio was 100.0 percent. Schiff commented, "Over the course of 1999, we've seen positive trends developing. Growth improved from 5.8 percent for 1998 and profitability improved from the 103.6 percent combined ratio for 1998. Estimates reported by the A. M. Best Company place average growth of property and casualty net written premiums at just 2.3 percent for 1999, with the average combined ratio coming in at 106.4 percent. We believe our business model-centered on superior claims service, disciplined underwriting and local decision making-gives us strong advantages in continuing to outperform the industry through all kinds of market and economic environments."
Full-year net written premiums for commercial insurance rose 7.9 percent to $1.100 billion, with a 61.4 percent pure loss ratio versus 61.1 percent in 1998. Net written premiums for personal insurance rose 8.0 percent to $581.0 million, with a 62.0 percent pure loss ratio versus 73.8 percent in 1998.
Schiff noted, "Stepped-up growth of new business in the last few months of the year brought our 1999 total to $210.3 million versus $218.4 million in 1998. We're encouraged by the 11.0 percent growth of new business during the fourth quarter, and particularly by 4.6 percent overall growth, for the full year, of total net premiums for new and renewal workers' compensation."
Schiff continued, "On the personal lines side, it appears that our 1998-99 agency reunderwriting program is helping to restore profitability to our personal auto insurance business. While this year's 58.2 percent pure loss ratio was our best for the auto line in recent years, improved profitability was balanced against slower premium growth. The pace of personal lines growth will continue to reflect heightened underwriting discipline and the need for our upcoming technology upgrades. As pricing of some commercial lines of business in some regions appears to firm, we will be challenged to continue achieving strong personal lines growth."
"Early estimates of our catastrophe losses from two severe storms in January of this year are $9.2 million. In 1999, four January storms added $23.6 million to the gross catastrophe loss reported for the first quarter," Schiff added.
Life Insurance Operations
(Dollars in millions) Fourth Quarter Full Year
Ended Ended
December 31, December 31,
1999 1998 1999 1998
Revenues $34.1 $33.5 $143.8 $132.2
Net Operating Income $5.8 $6.5 $28.1 $23.6
Net Capital Loss (2.5) (1.7) (2.5) (2.1)
Net Income $3.3 $4.8 $25.6 $21.5
The Cincinnati Life Insurance Company's total gross written premiums for the year were $420.7 million. This includes a $302.9 million dollar, single-premium bank-owned life insurance policy written on December 30. Looking at business other than that single-premium transaction, gross written premiums totaled $117.8 million in 1999 versus $114.7 million for 1998. Gross written life insurance premiums, the primary marketing thrust, increased 8.9 percent to $89.7 million.
Worksite marketing applications increased 17 percent, while individual LifeHorizons insurance applications increased 64 percent. "Term insurance sales skyrocketed because we offered competitive rates and commissions, as well as longer periods of guaranteed level premiums that policyholders wanted to lock into before "Triple X" regulations took effect January 1, 2000, said Cincinnati Life President David H. Popplewell, FALU, LLIF. "As much as 90 percent of those term policies were cross-sold to the agents' property and casualty policyholders. An important part of Cincinnati Life's strategic mission is to help round out accounts and improve persistency of business for Cincinnati's property and casualty agents. Term products are ideally suited to this goal and we are further expanding our product portfolio in 2000."
Investment Operations
Revenues from investment income rose 5.1 percent to $386.8 million for 1999. Seven common stocks in the investment portfolio raised their dividends during the fourth quarter, bringing the total to 35 increases since January 1 for an addition of $16.1 million to gross investment earnings on an annualized basis.
Chief Investment Officer James G. Miller noted, "While 1999 investment income of $386.8 million represents an all-time high, the slower growth rate reflects reduced cash available for investment, due to costs associated with our new office tower, ongoing technology initiatives and repurchase of CFC stock. During 1999, we bought back 6.1 million shares at an average price of $35.66 per share for a total cost of $217.1 million. We continued in January 2000 to acquire 589,000 additional CFC shares, leaving a balance of 10.3 million shares authorized for repurchase under the 17-million-share program announced in February 1999."
Miller noted, "Asset value of the equity portfolio increased only $56.1 million for the year ended December 31, 1999, partially due to the rising interest rate environment. Because we invest in equities of companies with strong management and business fundamentals, and we closely monitor them while holding them for the long term, we are not unduly concerned when these stocks are temporarily out of favor due to interest rate cycles. Rising interest rates negatively impacted the asset value of the bond portfolio, which declined $194.8 million."
Balance Sheet Strength
At December 31, 1999, total assets were $11.380 billion versus $11.087 billion at year-end 1998. Shareholders' equity was $5.421 billion, or a book value of $33.46 per share, versus $5.621 billion, or a book value of $33.72, at December 31, 1998. Shareholders' equity included $3.530 billion of unrealized gain versus $3.678 billion at year-end 1998.
Chairman and CEO John J. Schiff, CPCU, commented, "Cincinnati's very strong balance sheet can absorb market value fluctuations. Because of this strength, our insurance companies qualify for the highest ratings, giving agents a sales advantage that consumers demand. Surplus protects our policyholders from catastrophe losses. And because of this strength, we have been able to build a new office tower, ready this month for its first occupants, creating space to house the growing staff that supports headquarters operations. We've been able to invest for both income and appreciation, and we've been able to launch CinFin Capital Management, our complementary new asset management services start-up. We can go forward with expansion plans into Utah later this year and make plans to split five marketing territories, adding five marketing representatives to call on agents and earn their business.
"Because of our strong financial position and consistent performance, we can follow our business plan as it continues to produce steady, incremental growth of profits over the long term," Schiff concluded.
Cincinnati Financial Corporation offers property and casualty insurance, our main business, through The Cincinnati Insurance Company, The Cincinnati Indemnity Company and The Cincinnati Casualty Company. The Cincinnati Life Insurance Company markets life, health and accident insurance. CFC Investment Company supports the insurance subsidiaries and their independent agent representatives through leasing and financing activities. CinFin Capital Management provides investment management services to institutions, corporations and individuals. For additional information, please visit our Web site at www.cinfin.com .
SOURCE Cincinnati Financial Corporation
CONTACT: Kenneth W. Stecher, Senior Vice President, Secretary & Treasurer of Cincinnati Financial Corporation, 513-870-2639/