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Cincinnati Financial Reports Fourth-Quarter and Full-Year 2020 Results

CINCINNATI, Feb. 10, 2021 /PRNewswire/ -- Cincinnati Financial Corporation (Nasdaq: CINF) today reported:

  • Fourth-quarter 2020 net income of $1.049 billion, or $6.47 per share, compared with net income of $626 million, or $3.79 per share, in the fourth quarter of 2019, after recognizing a $767 million fourth-quarter 2020 after-tax increase in the fair value of equity securities still held.
  • Full-year 2020 net income of $1.216 billion, or $7.49 per share, compared with $1.997 billion, or $12.10 per share, in 2019.
  • $59 million or 29% increase in fourth-quarter 2020 non-GAAP operating income* to $262 million, or $1.61 per share, compared with $203 million, or $1.23 per share, in the fourth quarter of last year.
  • $161 million or 23% decrease in full-year 2020 non-GAAP operating income to $533 million, or $3.28 per share, down from $694 million, or $4.20 per share, with after-tax property casualty underwriting profit down $175 million.
  • $423 million increase in fourth-quarter 2020 net income reflected the after-tax net effect of a $364 million increase in net investment gains and a $54 million increase in after-tax property casualty underwriting profit.
  • $67.04 book value per share at December 31, 2020, up $6.49 or 10.7% since year-end 2019.
  • 14.7% value creation ratio for full-year 2020, compared with 30.5% for 2019.

Financial Highlights

(Dollars in millions except per share data)

Three months ended December 31,

Twelve months ended December 31,




2020


2019


% Change


2020


2019


% Change


Revenue Data














   Earned premiums


$

1,520



$

1,441



5


$

5,980



$

5,604



7


   Investment income, net of expenses


172



168



2


670



646



4


   Total revenues


2,694



2,152



25


7,536



7,924



(5)


Income Statement Data














   Net income


$

1,049



$

626



68


$

1,216



$

1,997



(39)


   Investment gains and losses, after-tax


787



423



86


683



1,303



(48)


   Non-GAAP operating income*


$

262



$

203



29


$

533



$

694



(23)


Per Share Data (diluted)














   Net income


$

6.47



$

3.79



71


$

7.49



$

12.10



(38)


   Investment gains and losses, after-tax


4.86



2.56



90


4.21



7.90



(47)


   Non-GAAP operating income*


$

1.61



$

1.23



31


$

3.28



$

4.20



(22)
















   Book value








$

67.04



$

60.55



11


   Cash dividend declared


$

0.60



$

0.56



7


$

2.40



$

2.24



7


   Diluted weighted average shares outstanding


162.1



165.3



(2)


162.4



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

  • 87.3% fourth-quarter 2020 property casualty combined ratio, improved from 91.6% for the fourth quarter of 2019. Full-year 2020 property casualty combined ratio at 98.1%, with net written premiums up 6%.
  • 7% growth in fourth-quarter 2020 net written premiums, reflecting price increases and premium growth initiatives.
  • $185 million fourth-quarter 2020 property casualty new business written premiums. Agencies appointed since the beginning of 2019 contributed $18 million or 10% of total fourth-quarter new business written premiums.
  • $15 million of fourth-quarter 2020 life insurance subsidiary net income, up $6 million from the same period in 2019, and 6% growth in fourth-quarter 2020 term life insurance earned premiums.

Investment and Balance Sheet Highlights

  • 2% or $4 million increase in fourth-quarter 2020 pretax investment income, including 7% growth for stock portfolio dividends and 2% growth in interest income.
  • 9% full-year increase in fair value of total investments at December 31, 2020, including a 14% increase for the stock portfolio and a 5% increase for the bond portfolio.
  • $3.771 billion parent company cash and marketable securities at year-end 2020, up 14% from a year ago.

Fourth Quarter Improves Full-Year Results    
Steven J. Johnston, chairman, president and chief executive officer, commented: "Spring storms in the Midwest, hurricanes in the Southeast and wildfires in the West: across our country, weather-related catastrophes were relentless in 2020. In the midst of a global pandemic, our experienced claims professionals rose to the occasion, responding quickly and compassionately.

"We finished the year with a fourth-quarter catastrophe loss impact that was 2.1 percentage points higher than our fourth-quarter 10-year average. Despite that increase, we were able to improve our quarterly combined ratio by 4.3 points compared with the fourth quarter of 2019. A fourth-quarter combined ratio of 87.3% improved our combined ratio from 101.8% at nine months to 98.1% for the full-year. Underwriting profit increased 57% for the quarter and helped us earn a 2020 full-year amount of $119 million.

"This year, it was more important than ever to keep our attention centered on our proven strategies to enhance the profitability of our core book of business. To look through the noise caused by catastrophes or inherent variability in updating estimates for loss reserves, we track our underwriting results before catastrophe losses and before development of reserves for prior accident years. That measure improved from a year ago, by a satisfying 4.2%, to 87.7% for the year."

Focused on Growth
"A steady rise in renewal premiums led the way to what we believe will again be net written premium growth ahead of the industry average. We successfully managed commercial lines pricing, improving it as the year progressed to see average increases in the mid-single-digit percent range in the fourth quarter. We also have an advantage in our three-year commercial package policy, which reduces administrative burdens for agents and policyholders and supports commercial lines retention as the market firms.

"Our personal lines operations saw 5% growth in net written premiums for both the quarter and the full year. As we introduced greater pricing precision in more states through the rollout of The Cincinnati Casualty Company, our agents responded with enthusiasm, increasing new business premiums written by 25% for the quarter and 10% for the year.

"The pandemic put a spotlight on the importance of life insurance, and we were able to support agencies in providing a total account solution for their clients through The Cincinnati Life Insurance Company. Strong renewal premiums drove a 7% increase in full-year 2020 earned premiums, including a 6% increase for term life insurance.

"Remaining focused on geographic and product diversification, more recent additions to our insurance portfolio also contributed: the excess and surplus lines segment increased its net written premiums 15% for the year while Cincinnati Global Underwriting Ltd.SM and Cincinnati Re® each contributed 1% to overall growth in 2020."

Confidence in the Future
"Positive contributions from both our insurance operations and investment performance increased our book value nearly 11% to a record $67.04 per share at December 31, 2020. We finished the year with a value creation ratio of 14.7%, ahead of our long-term objective of a 10% to 13% annual average.

"Achieving these positive results in a year that brought a global pandemic, a record number of catastrophe events and historically low interest rates, demonstrates the strength of our relationships with the independent agents who represent us, the mastery demonstrated by our associates in underwriting on an account by account basis and the benefits realized by our dedication to data and analytics. We believe more opportunities lie ahead to deliver meaningful shareholder value into the future as we continue to serve agents and their communities."

Insurance Operations Highlights


Consolidated Property Casualty Insurance Results




(Dollars in millions)

Three months ended December 31,


Twelve months ended December 31,




2020


2019


% Change


2020


2019


% Change


Earned premiums


$

1,449



$

1,374



5


$

5,691



$

5,334



7


Fee revenues


2



3



(33)


9



11



(18)


   Total revenues


1,451



1,377



5


5,700



5,345



7
















Loss and loss expenses


829



835



(1)


3,837



3,352



14


Underwriting expenses


435



423



3


1,744



1,652



6


   Underwriting profit


$

187



$

119



57


$

119



$

341



(65)
















Ratios as a percent of earned premiums:






Pt. Change






Pt. Change


     Loss and loss expenses


57.3

%


60.8

%


(3.5)


67.4

%


62.8

%


4.6


     Underwriting expenses


30.0



30.8



(0.8)


30.7



31.0



(0.3)


           Combined ratio


87.3

%


91.6

%


(4.3)


98.1

%


93.8

%


4.3






















% Change






% Change


Agency renewal written premiums


$

1,145



$

1,084



6


$

4,740



$

4,519



5


Agency new business written premiums


185



193



(4)


799



778



3


Other written premiums


64



31



106


325



219



48


   Net written premiums


$

1,394



$

1,308



7


$

5,864



$

5,516



6
















Ratios as a percent of earned premiums:






Pt. Change






Pt. Change


     Current accident year before catastrophe losses


54.4

%


60.5

%


(6.1)


57.0

%


60.9

%


(3.9)


     Current accident year catastrophe losses


5.7



3.5



2.2


12.7



6.6



6.1


     Prior accident years before catastrophe losses


(1.8)



(3.0)



1.2


(1.7)



(4.1)



2.4


     Prior accident years catastrophe losses


(1.0)



(0.2)



(0.8)


(0.6)



(0.6)



0.0


           Loss and loss expense ratio


57.3

%


60.8

%


(3.5)


67.4

%


62.8

%


4.6
















Current accident year combined ratio before














  catastrophe losses


84.4

%


91.3

%


(6.9)


87.7

%


91.9

%


(4.2)
















 

  • 7% and 6% growth in fourth-quarter and full-year 2020 property casualty net written premiums, reflecting premium growth initiatives and price increases. Contributions to growth for both 2020 periods included 1% from Cincinnati Global, while Cincinnati Re's contribution was 2% in the fourth-quarter and 1% for full-year 2020.
  • 4% decrease in fourth-quarter and a 3% increase in full-year 2020 new business premiums written by agencies, compared with a year ago. The full-year increase included a $52 million increase in standard market property casualty production from agencies appointed since the beginning of 2019.
  • 191 new agency appointments in full-year 2020, including 58 that market only our personal lines products.
  • 4.3 percentage-point fourth-quarter 2020 combined ratio improvement, despite an increase of 1.4 points for losses from catastrophes and 0.9 points of pandemic-related losses and expenses.
  • 4.3 percentage-point increase in full-year 2020 combined ratio, compared with 2019, including an increase of 6.1 points for losses from catastrophes and 1.5 points of pandemic-related losses and expenses.
  • 2.8 and 2.3 percentage-point fourth-quarter and full-year 2020 benefit from favorable prior accident year reserve development of $40 million and $131 million, compared with 3.2 points or $45 million for fourth-quarter 2019 and 4.7 points or $248 million of favorable development for full-year 2019.
  • 3.9 percentage-point improvement, to 57.0%, for the full-year 2020 ratio of current accident year losses and loss expenses before catastrophes, including a decrease of 0.6 points in the ratio for current accident year losses of $1 million or more per claim.
  • 0.3 percentage-point decrease in the full-year 2020 underwriting expense ratio, primarily due to elevated catastrophe losses resulting in a lower level of profit-sharing commissions for agencies.

 

Commercial Lines Insurance Results




(Dollars in millions)

Three months ended December 31,


Twelve months ended December 31,




2020


2019


% Change


2020


2019


% Change


Earned premiums


$

878



$

852



3


$

3,476



$

3,319



5


Fee revenues




2



(100)


3



5



(40)


   Total revenues


878



854



3


3,479



3,324



5
















Loss and loss expenses


512



489



5


2,336



2,030



15


Underwriting expenses


270



268



1


1,079



1,053



2


   Underwriting profit


$

96



$

97



(1)


$

64



$

241



(73)
















Ratios as a percent of earned premiums:






Pt. Change






Pt. Change


     Loss and loss expenses


58.4

%


57.4

%


1.0


67.3

%


61.2

%


6.1


     Underwriting expenses


30.8



31.4



(0.6)


31.0



31.7



(0.7)


           Combined ratio


89.2

%


88.8

%


0.4


98.3

%


92.9

%


5.4






















% Change






% Change


Agency renewal written premiums


$

759



$

719



6


$

3,122



$

2,998



4


Agency new business written premiums


113



129



(12)


515



510



1


Other written premiums


(32)



(29)



(10)


(103)



(98)



(5)


   Net written premiums


$

840



$

819



3


$

3,534



$

3,410



4
















Ratios as a percent of earned premiums:






Pt. Change






Pt. Change


     Current accident year before catastrophe losses


58.8

%


62.0

%


(3.2)


59.2

%


61.7

%


(2.5)


     Current accident year catastrophe losses


3.8



0.1



3.7


10.8



5.3



5.5


     Prior accident years before catastrophe losses


(3.5)



(3.9)



0.4


(2.3)



(5.0)



2.7


     Prior accident years catastrophe losses


(0.7)



(0.8)



0.1


(0.4)



(0.8)



0.4


           Loss and loss expense ratio


58.4

%


57.4

%


1.0


67.3

%


61.2

%


6.1
















Current accident year combined ratio before














  catastrophe losses


89.6

%


93.4

%


(3.8)


90.2

%


93.4

%


(3.2)
















 

  • 3% and 4% growth in fourth-quarter and full-year 2020 commercial lines net written premiums, including price increases and growth initiatives. Fourth-quarter and full-year 2020 commercial lines average renewal pricing increases in the mid-single-digit percent range, with the fourth-quarter increase higher than third-quarter 2020.
  • 12% or $16 million decrease in fourth-quarter 2020 new business written premiums, reflecting increased competition that resulted in fewer opportunities to write policies at pricing levels we believe are adequate.
  • 1% or $5 million increase in full-year 2020 new business written by agencies, including $39 million from agencies appointed since the beginning of 2019.
  • 0.4 percentage-point fourth-quarter 2020 combined ratio increase, including an increase of 3.8 points for losses from catastrophes.
  • 5.4 percentage-point increase in the full-year 2020 combined ratio, including an increase of 5.9 points for losses from catastrophes.
  • 4.2 and 2.7 percentage-point fourth-quarter and full-year 2020 benefit from favorable prior accident year reserve development of $36 million and $95 million, compared with 4.7 points or $39 million for fourth-quarter 2019 and 5.8 points or $192 million of favorable development for full-year 2019.
  • 2.5 percentage-point improvement, to 59.2%, for the full-year 2020 ratio of current accident year losses and loss expenses before catastrophes, including a decrease of 1.0 points in the ratio for current accident year losses of $1 million or more per claim.

 

Personal Lines Insurance Results




(Dollars in millions)

Three months ended December 31,


Twelve months ended December 31,




2020


2019


% Change


2020


2019


% Change


Earned premiums


$

373



$

358



4


$

1,463



$

1,404



4


Fee revenues


1



1



0


4



4



0


   Total revenues


374



359



4


1,467



1,408



4
















Loss and loss expenses


195



251



(22)


977



985



(1)


Underwriting expenses


108



104



4


443



415



7


   Underwriting profit


$

71



$

4



nm


$

47



$

8



488
















Ratios as a percent of earned premiums:






Pt. Change






Pt. Change


     Loss and loss expenses


52.3

%


70.2

%


(17.9)


66.8

%


70.2

%


(3.4)


     Underwriting expenses


29.0



29.1



(0.1)


30.3



29.6



0.7


           Combined ratio


81.3

%


99.3

%


(18.0)


97.1

%


99.8

%


(2.7)






















% Change






% Change


Agency renewal written premiums


$

317



$

309



3


$

1,364



$

1,312



4


Agency new business written premiums


45



36



25


174



158



10


Other written premiums


(8)



(9)



11


(35)



(35)



0


   Net written premiums


$

354



$

336



5


$

1,503



$

1,435



5
















Ratios as a percent of earned premiums:






Pt. Change






Pt. Change


     Current accident year before catastrophe losses


46.3

%


63.0

%


(16.7)


52.1

%


62.4

%


(10.3)


     Current accident year catastrophe losses


3.4



10.0



(6.6)


16.0



9.7



6.3


     Prior accident years before catastrophe losses


2.6



(2.5)



5.1


(0.7)



(2.1)



1.4


     Prior accident years catastrophe losses


0.0



(0.3)



0.3


(0.6)



0.2



(0.8)


           Loss and loss expense ratio


52.3

%


70.2

%


(17.9)


66.8

%


70.2

%


(3.4)
















Current accident year combined ratio before














  catastrophe losses


75.3

%


92.1

%


(16.8)


82.4

%


92.0

%


(9.6)
















 

  • 5% growth for both fourth-quarter and full-year 2020 personal lines net written premiums, largely due to higher renewal written premiums that benefited from rate increases. Full-year 2020 net written premiums from our agencies' high net worth clients grew 27%, to $519 million.
  • 25% and 10% increase in fourth-quarter and full-year 2020 new business premiums written by agencies, compared with a year ago, reflecting expanded use of pricing precision tools.
  • 18.0 percentage-point improvement in fourth-quarter 2020 combined ratio, including decreases of 16.7 points in the ratio for current accident year losses and loss expenses before catastrophes and 6.3 points from losses from catastrophes.
  • 2.7 percentage-point improvement in the full-year 2020 combined ratio, despite an increase for losses from catastrophes of 5.5 points.
  • 2.6 percentage-point fourth-quarter 2020 unfavorable prior accident year reserve development of $10 million and 1.3 point full-year 2020 benefit from favorable development of $18 million, compared with favorable prior reserve development of 2.8 points or $9 million for fourth-quarter 2019 and 1.9 points or $27 million for full-year 2019.
  • 10.3 percentage-point improvement, to 52.1%, for the full-year 2020 ratio of current accident year losses and loss expenses before catastrophes, despite an increase of 0.4 points in the ratio for current accident year losses of $1 million or more per claim.

 

Excess and Surplus Lines Insurance Results




(Dollars in millions)

Three months ended December 31,


Twelve months ended December 31,




2020


2019


% Change


2020


2019


% Change


Earned premiums


$

87



$

76



14


$

325



$

278



17


Fee revenues


1





nm


2



2



0


   Total revenues


88



76



16


327



280



17
















Loss and loss expenses


49



41



20


199



142



40


Underwriting expenses


24



22



9


94



85



11


   Underwriting profit


$

15



$

13



15


$

34



$

53



(36)
















Ratios as a percent of earned premiums:






Pt. Change






Pt. Change


     Loss and loss expenses


56.6

%


54.4

%


2.2


61.3

%


51.1

%


10.2


     Underwriting expenses


26.6



28.5



(1.9)


28.7



30.4



(1.7)


           Combined ratio


83.2

%


82.9

%


0.3


90.0

%


81.5

%


8.5






















% Change






% Change


Agency renewal written premiums


$

69



$

56



23


$

254



$

209



22


Agency new business written premiums


27



28



(4)


110



110



0


Other written premiums


(4)



(4)



0


(16)



(16)



0


   Net written premiums


$

92



$

80



15


$

348



$

303



15
















Ratios as a percent of earned premiums:






Pt. Change






Pt. Change


     Current accident year before catastrophe losses


57.6

%


54.3

%


3.3


57.7

%


54.6

%


3.1


     Current accident year catastrophe losses


0.4



0.0



0.4


1.3



0.4



0.9


     Prior accident years before catastrophe losses


(1.5)



(0.4)



(1.1)


2.1



(4.1)



6.2


     Prior accident years catastrophe losses


0.1



0.5



(0.4)


0.2



0.2



0.0


           Loss and loss expense ratio


56.6

%


54.4

%


2.2


61.3

%


51.1

%


10.2
















Current accident year combined ratio before














  catastrophe losses


84.2

%


82.8

%


1.4


86.4

%


85.0

%


1.4
















 

  • 15% growth in both fourth-quarter and full-year 2020 excess and surplus lines net written premiums, including fourth-quarter 2020 renewal price increases averaging in the mid-single-digit percent range.
  • 4% decrease in fourth-quarter 2020 new business written premiums with full-year 2020 matching 2019, reflecting a highly competitive market with fewer opportunities to write policies with annual premiums of $10,000 or more at pricing levels we believe are adequate and offsetting our additional marketing efforts.
  • 0.3 percentage-point increase in fourth-quarter 2020 combined ratio, primarily due to higher current accident year losses and loss expenses before catastrophes.
  • 8.5 percentage-point increase in the full-year 2020 combined ratio, primarily due to unfavorable reserve development on prior accident years before catastrophe losses.
  • 1.4 percentage-point fourth-quarter 2020 benefit from favorable reserve development on prior accident years of $1 million, compared with unfavorable reserve development of 0.1 points or less than $1 million for fourth-quarter 2019.
  • 2.3 percentage-point full-year 2020 unfavorable prior accident year reserve development of $7 million, compared with 3.9 points or $11 million of favorable development for full-year 2019.
  • 3.1 percentage-point increase, to 57.7%, for the full-year 2020 ratio of current accident year losses and loss expenses before catastrophes, including no change from 2019 in the ratio for current accident year losses of $1 million or more per claim.

 

Life Insurance Subsidiary Results




(Dollars in millions)

Three months ended December 31,


Twelve months ended December 31,




2020


2019


% Change


2020


2019


% Change


Term life insurance


$

50



$

47



6


$

197



$

186



6


Universal life insurance


10



8



25


44



39



13


Other life insurance and annuity products


11



12



(8)


48



45



7


Earned premiums


71



67



6


289



270



7


Investment income, net of expenses


40



38



5


158



152



4


Investment gains and losses, net


2





nm


(27)



(4)



nm


Fee revenues


1



1



0


2



4



(50)


Total revenues


114



106



8


422



422



0


Contract holders' benefits incurred


73



75



(3)


297



286



4


Underwriting expenses incurred


22



19



16


85



86



(1)


Total benefits and expenses


95



94



1


382



372



3


Net income before income tax


19



12



58


40



50



(20)


Income tax


4



3



33


8



11



(27)


Net income of the life insurance subsidiary


$

15



$

9



67


$

32



$

39



(18)
















 

  • $19 million or 7% increase in full-year 2020 earned premiums, including a 6% increase for term life insurance, our largest life insurance product line.
  • $7 million or 18% decrease in full-year 2020 life insurance subsidiary net income, primarily due to increased investment losses resulting from impairment write-downs of fixed-maturity securities.
  • $179 million or 14% full-year 2020 increase to $1.417 billion in GAAP shareholders' equity for The Cincinnati Life Insurance Company, primarily from an increase in unrealized investment gains.

 

Investment and Balance Sheet Highlights


Investments Results




(Dollars in millions)


Three months ended December 31,


Twelve months ended December 31,




2020


2019


% Change


2020


2019


% Change


Investment income, net of expenses


$

172



$

168



2


$

670



$

646



4


Investment interest credited to contract holders'


(25)



(25)



0


(102)



(99)



(3)


Investment gains and losses, net


997



537



86


865



1,650



(48)


Investment profit


$

1,144



$

680



68


$

1,433



$

2,197



(35)
















Investment income:














   Interest


$

116



$

114



2


$

455



$

446



2


   Dividends


59



55



7


220



201



9


   Other


1



2



(50)


8



12



(33)


   Less investment expenses


4



3



33


13



13



0


      Investment income, pretax


172



168



2


670



646



4


      Less income taxes


27



26



4


104



101



3


Total investment income, after-tax


$

145



$

142



2


$

566



$

545



4
















Investment returns:














Average invested assets plus cash and cash
   equivalents


$

20,873



$

19,591





$

20,670



$

18,697





Average yield pretax


3.30

%


3.43

%




3.24

%


3.46

%




Average yield after-tax


2.78



2.90





2.74



2.91





Effective tax rate


15.4

%


15.6

%




15.5

%


15.6

%




Fixed-maturity returns:














Average amortized cost


$

11,293



$

11,060





$

11,210



$

10,876





Average yield pretax


4.11

%


4.12

%




4.06

%


4.10

%




Average yield after-tax


3.43



3.44





3.39



3.42





Effective tax rate


16.6

%


16.6

%




16.6

%


16.6

%


















 

  • $4 million or 2% rise in fourth-quarter 2020 pretax investment income, including 7% growth in equity portfolio dividends and 2% growth in interest income.
  • $1.139 billion fourth-quarter and $1.301 billion full-year 2020 pretax total investment gains, summarized on 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
December 31,


Twelve months ended
December 31,




2020


2019


2020


2019


Investment gains and losses on equity securities sold, net


$

4



$

(1)



$

79



$

26



Unrealized gains and losses on equity securities still held, net


971



542



841



1,626



Investment gains and losses on fixed-maturity securities, net


7



1



(65)



1



Other


15



(5)



10



(3)



Subtotal - investment gains and losses reported in net income


997



537



865



1,650



Change in unrealized investment gains and losses - fixed maturities


142



2



436



544



Total


$

1,139



$

539



$

1,301



$

2,194













 

Balance Sheet Highlights




(Dollars in millions except share data)


At December 31,


At December 31,




2020


2019


   Total investments


$

21,542



$

19,746



   Total assets


27,542



25,408



   Short-term debt


54



39



   Long-term debt


788



788



   Shareholders' equity


10,789



9,864



   Book value per share


67.04



60.55



   Debt-to-total-capital ratio


7.2

%


7.7

%


 

  • $22.442 billion in consolidated cash and invested assets at December 31, 2020, up 9% from $20.513 billion at year-end 2019.
  • $12.338 billion bond portfolio at December 31, 2020, with an average rating of A3/A. Fair value increased $181 million or 1% during the fourth quarter of 2020.
  • $8.856 billion equity portfolio was 41.1% of total investments, including $4.929 billion in appreciated value before taxes at December 31, 2020. Fourth-quarter 2020 increase in fair value of $989 million or 13%.
  • $6.47 fourth-quarter 2020 increase in book value per share, including an addition of $1.63 from net income before investment gains and $5.51 from investment portfolio net investment gains or changes in unrealized gains for fixed-maturity securities, partially offset by $0.07 for other items and $0.60 from dividends declared to shareholders.
  • Value creation ratio of 14.7% for full-year 2020, including 5.5% from net income before investment gains, which includes underwriting and investment income, 10.5% from investment portfolio net investment gains or changes in unrealized gains for fixed-maturity securities, including 7.5% from our stock portfolio and 3.0% from our bond portfolio, in addition to negative 1.3% from other items.

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 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-10Q.

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 in the relatively few decisions rendered to date
    • 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
  • 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 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

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 (unaudited)




(Dollars in millions except per share data)


December 31,


December 31,




2020


2019


Assets






  Investments






    Fixed maturities, at fair value (amortized cost: 2020—$11,312; 2019—$11,108)


$

12,338



$

11,698



    Equity securities, at fair value (cost: 2020—$3,927; 2019—$3,581)


8,856



7,752



    Other invested assets


348



296



      Total investments


21,542



19,746



  Cash and cash equivalents


900



767



  Investment income receivable


136



133



  Finance receivable


95



77



  Premiums receivable


1,879



1,777



  Reinsurance recoverable


517



610



  Prepaid reinsurance premiums


65



54



  Deferred policy acquisition costs


805



774



  Land, building and equipment, net, for company use (accumulated depreciation:
     2020—$285; 2019—$276)


213



207



  Other assets


438



381



  Separate accounts


952



882



    Total assets


$

27,542



$

25,408



Liabilities






  Insurance reserves






    Loss and loss expense reserves


$

6,746



$

6,147



    Life policy and investment contract reserves


2,915



2,835



  Unearned premiums


2,960



2,788



  Other liabilities


982



928



  Deferred income tax


1,299



1,079



  Note payable


54



39



  Long-term debt and lease obligations


845



846



  Separate accounts


952



882



    Total liabilities


16,753