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Cincinnati Financial Reports Fourth-Quarter and Full-Year 2022 Results

CINCINNATI, Feb. 6, 2023 /PRNewswire/ -- Cincinnati Financial Corporation (Nasdaq: CINF) today reported:

  • Fourth-quarter 2022 net income of $1.013 billion, or $6.40 per share, compared with net income of $1.470 billion, or $9.04 per share, in the fourth quarter of 2021, after recognizing an $806 million fourth-quarter 2022 after-tax increase in the fair value of equity securities still held.
  • Full-year 2022 net loss of $486 million, or $3.06 per share, compared with net income of $2.946 billion, or $18.10 per share, in 2021.
  • $118 million or 37% decrease in fourth-quarter 2022 non-GAAP operating income* to $202 million, or $1.27 per share, compared with $320 million, or $1.97 per share, in the fourth quarter of last year.
  • $370 million or 35% decrease in full-year 2022 non-GAAP operating income to $673 million, or $4.24 per share, down from $1.043 billion, or $6.41 per share, with after-tax property casualty underwriting profit down $467 million.
  • $457 million decrease in fourth-quarter 2022 net income reflected the after-tax net effect of a $339 million decrease in net investment gains and a $129 million decrease in after-tax property casualty underwriting profit.
  • $67.01 book value per share at December 31, 2022, down $14.71 or 18.0% since year-end 2021.
  • Negative 14.6% value creation ratio for full-year 2022, compared with positive 25.7% for 2021.

Financial Highlights

(Dollars in millions except per share data)

Three months ended December 31,

Twelve months ended December 31,



2022


2021


% Change


2022


2021


% Change

Revenue Data













   Earned premiums


$      1,874


$      1,676


12


$      7,219


$      6,482


11

   Investment income, net of expenses


208


186


12


781


714


9

   Total revenues


3,114


3,323


(6)


6,557


9,630


(32)

Income Statement Data













   Net income (loss)


$      1,013


$      1,470


(31)


$       (486)


$      2,946


nm

   Investment gains and losses, after-tax


811


1,150


(29)


(1,159)


1,903


nm

   Non-GAAP operating income*


$         202


$         320


(37)


$         673


$      1,043


(35)

Per Share Data (diluted)













   Net income (loss)


$        6.40


$        9.04


(29)


$      (3.06)


$      18.10


nm

   Investment gains and losses, after-tax


5.13


7.07


(27)


(7.30)


11.69


nm

   Non-GAAP operating income*


$        1.27


$        1.97


(36)


$        4.24


$        6.41


(34)














   Book value








$      67.01


$      81.72


(18)

   Cash dividend declared


$        0.69


$        0.63


10


$        2.76


$        2.52


10

   Diluted weighted average shares outstanding


158.2


162.5


(3)


158.8


162.7


(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

  • 94.9% fourth-quarter 2022 property casualty combined ratio, up from 84.2% for the fourth quarter of 2021. Full-year 2022 property casualty combined ratio at 98.1%, with net written premiums up 13%.
  • 10% growth in fourth-quarter 2022 net written premiums, including price increases, premium growth initiatives and a higher level of insured exposures.
  • $238 million fourth-quarter 2022 property casualty new business written premiums. Agencies appointed since the beginning of 2021 contributed $20 million or 8% of total fourth-quarter new business written premiums.
  • $14 million of fourth-quarter 2022 life insurance subsidiary net income, up $5 million from the same period in 2021, and 2% growth in fourth-quarter 2022 term life insurance earned premiums.

Investment and Balance Sheet Highlights

  • 12% or $22 million increase in fourth-quarter 2022 pretax investment income, including 7% growth for stock portfolio dividends and 11% growth for bond interest income.
  • 9% full-year decrease in fair value of total investments at December 31, 2022, including a 13% decrease for the stock portfolio and a 7% decrease for the bond portfolio.
  • $4.177 billion parent company cash and marketable securities at year-end 2022, down 17% from a year ago.

More Than a Decade of Underwriting Profit
Steven J. Johnston, chairman and chief executive officer, commented: "Winter Storm Elliott impacted policyholders in 44 states and Washington, D.C. The timing of the storm was particularly influential as many businesses were closed and families were traveling for the holiday, delaying discovery and reporting of losses.

"It's rare for us to experience a catastrophe of Elliott's magnitude in the fourth quarter. Our standard property casualty and excess and surplus businesses recorded $158 million in losses from this storm, while Cincinnati Re® and Cincinnati Global Underwriting Ltd.SM recorded $3 million in total. Catastrophe losses contributed 7.8 points to the quarter, twice as high as our fourth-quarter five-year average, pushing our fourth-quarter combined ratio to 94.9%.

"On a full-year basis, our combined ratio was 98.1%, within our long-term target of 95-100%, and marking 11 years in a row of underwriting profit." 

Diversified Growth in a Challenging Market
"For the first-time ever, new business written by our independent agents surpassed $1 billion. Strong pricing and exposure growth across our insurance business combined to support a second consecutive year of double-digit net written premium growth. While we continued to focus on pricing sophistication and segmentation to exercise underwriting discipline, full-year 2022 growth of 13% is our highest result since 2001.

"We are employing a number of strategies to maintain diversified, profitable growth, including: growing our management liability and surety book – which topped $300 million in written premiums for 2022; adding CinergySM, our small-business platform, to new states; writing excess and surplus lines homeowner policies in California and Florida; and participating in a firming property insurance market through Cincinnati Re and Cincinnati Global."

Positive Momentum Heading into 2023
"We enter 2023 from a position of strength: our personal insurance business has recorded four consecutive years of underwriting profit; our commercial insurance business has enjoyed 11 years of underwriting profit; our excess and surplus lines company has achieved a combined ratio in the low-90s or better every year since 2012; and our life insurance company contributed record-high earnings of $66 million in 2022. While our commercial umbrella business was challenged during 2022, its five-year average combined ratio through 2022 was below 85%.

"Cash flow produced by our insurance business continues to fuel investment income as we grew pretax investment income 9% to a record-high $781 million.

"The board of directors expressed their confidence in our future by declaring a dividend increase in January. Our value creation ratio captures the dividends we pay along with changes in our book value. On a five-year average basis through 2022, we've achieved an 11.2% VCR – in line with our long-term target of 10-13%."

Insurance Operations Highlights

Consolidated Property Casualty Insurance Results

(Dollars in millions)

Three months ended December 31,


Twelve months ended December 31,



2022


2021


% Change


2022


2021


% Change

Earned premiums


$ 1,800


$  1,599


13


$ 6,924


$  6,184


12

Fee revenues


2


2


0


10


10


0

   Total revenues


1,802


1,601


13


6,934


6,194


12














Loss and loss expenses


1,172


855


37


4,716


3,596


31

Underwriting expenses


537


490


10


2,078


1,867


11

   Underwriting profit


$       93


$     256


(64)


$     140


$     731


(81)














Ratios as a percent of earned premiums:






Pt. Change






Pt. Change

     Loss and loss expenses


65.1 %


53.5 %


11.6


68.1 %


58.1 %


10.0

     Underwriting expenses


29.8


30.7


(0.9)


30.0


30.2


(0.2)

           Combined ratio


94.9 %


84.2 %


10.7


98.1 %


88.3 %


9.8




















% Change






% Change

Agency renewal written premiums


$ 1,396


$  1,238


13


$ 5,665


$  5,091


11

Agency new business written premiums


238


212


12


1,032


897


15

Other written premiums


60


84


(29)


610


491


24

   Net written premiums


$ 1,694


$  1,534


10


$ 7,307


$  6,479


13














Ratios as a percent of earned premiums:






Pt. Change






Pt. Change

     Current accident year before catastrophe losses


58.0 %


54.9 %


3.1


60.2 %


56.0 %


4.2

     Current accident year catastrophe losses


8.0


4.6


3.4


10.2


9.1


1.1

     Prior accident years before catastrophe losses


(0.7)


(5.0)


4.3


(1.3)


(5.9)


4.6

     Prior accident years catastrophe losses


(0.2)


(1.0)


0.8


(1.0)


(1.1)


0.1

           Loss and loss expense ratio


65.1 %


53.5 %


11.6


68.1 %


58.1 %


10.0














Current accident year combined ratio before













  catastrophe losses


87.8 %


85.6 %


2.2


90.2 %


86.2 %


4.0














  • 10% and 13% growth in fourth-quarter and full-year 2022 property casualty net written premiums, reflecting premium growth initiatives, price increases and a higher level of insured exposures. The contribution to full-year 2022 growth from Cincinnati Re and Cincinnati Global in total was 3 percentage points.
  • 12% and 15% increase in fourth-quarter and full-year 2022 new business premiums written by agencies, compared with a year ago. The full-year increase included a $45 million increase in standard market property casualty production from agencies appointed since the beginning of 2021.
  • 209 new agency appointments in full-year 2022, including 64 that market only our personal lines products.
  • 90.2% full-year 2022 current accident year combined ratio before catastrophe losses was 1.7 percentage points better than accident year 2019 and 1.5 points better than the five-year average through 2019, with each accident year measured as of the respective year-end.
  • 10.7 percentage-point fourth-quarter 2022 combined ratio increase, compared with 2021, reflecting elevated inflation effects, including an increase of 2.7 points from higher commercial umbrella incurred loss and loss expenses, and an increase of 4.2 points for losses from catastrophes.
  • 9.8 percentage-point full-year 2022 combined ratio increase that reflects elevated inflation effects, including an increase of 3.3 points from higher commercial umbrella incurred loss and loss expenses.
  • 0.9 and 2.3 percentage-point fourth-quarter and full-year 2022 benefit from favorable prior accident year reserve development of $16 million and $159 million, compared with 6.0 points or $97 million for fourth-quarter 2021 and 7.0 points or $428 million of favorable development for full-year 2021.
  • 4.2 percentage-point increase, to 60.2%, for the full-year 2022 ratio of current accident year losses and loss expenses before catastrophes, including an increase of 2.1 points in the ratio for commercial umbrella current accident year loss and loss expenses.
  • 0.2 percentage-point decrease in the full-year 2022 underwriting expense ratio, primarily due to lower levels of profit-sharing commissions for agencies.

Commercial Lines Insurance Results

(Dollars in millions)

Three months ended December 31,


Twelve months ended December 31,



2022


2021


% Change


2022


2021


% Change

Earned premiums


$ 1,040


$     947


10


$ 4,024


$  3,674


10

Fee revenues


1


1


0


4


4


0

   Total revenues


1,041


948


10


4,028


3,678


10














Loss and loss expenses


715


506


41


2,761


1,940


42

Underwriting expenses


313


301


4


1,229


1,140


8

   Underwriting profit


$       13


$     141


(91)


$       38


$     598


(94)














Ratios as a percent of earned premiums:






Pt. Change






Pt. Change

     Loss and loss expenses


68.8 %


53.4 %


15.4


68.6 %


52.8 %


15.8

     Underwriting expenses


30.1


31.8


(1.7)


30.6


31.0


(0.4)

           Combined ratio


98.9 %


85.2 %


13.7


99.2 %


83.8 %


15.4




















% Change






% Change

Agency renewal written premiums


$     908


$     809


12


$ 3,672


$  3,334


10

Agency new business written premiums


130


135


(4)


600


571


5

Other written premiums


(31)


(24)


(29)


(113)


(94)


(20)

   Net written premiums


$ 1,007


$     920


9


$ 4,159


$  3,811


9














Ratios as a percent of earned premiums:






Pt. Change






Pt. Change

     Current accident year before catastrophe losses


61.0 %


57.5 %


3.5


62.9 %


57.8 %


5.1

     Current accident year catastrophe losses


10.2


4.0


6.2


7.6


4.6


3.0

     Prior accident years before catastrophe losses


(1.8)


(6.8)


5.0


(1.3)


(8.4)


7.1

     Prior accident years catastrophe losses


(0.6)


(1.3)


0.7


(0.6)


(1.2)


0.6

           Loss and loss expense ratio


68.8 %


53.4 %


15.4


68.6 %


52.8 %


15.8














Current accident year combined ratio before













  catastrophe losses


91.1 %


89.3 %


1.8


93.5 %


88.8 %


4.7














  • 9% growth in both fourth-quarter and full-year 2022 commercial lines net written premiums, reflecting price increases, growth initiatives and a higher level of insured exposures. Fourth-quarter and full-year 2022 commercial lines average renewal pricing increased in the mid-single-digit percent range, with the fourth-quarter increase higher than third-quarter 2022.
  • 4% or $5 million decrease in fourth-quarter 2022 new business written premiums, as we continue to carefully underwrite each policy in a highly competitive market.
  • 5% or $29 million increase in full-year 2022 new business written by agencies, including $30 million from agencies appointed since the beginning of 2021.
  • 13.7 percentage-point fourth-quarter 2022 combined ratio increase due to elevated inflation effects, including an increase of 4.7 points from higher commercial umbrella incurred loss and loss expenses, and an increase of 6.9 points for losses from catastrophes.
  • 15.4 percentage-point full-year 2022 combined ratio increase that reflects elevated inflation effects, including an increase of 5.8 points from higher commercial umbrella incurred loss and loss expenses, and an increase of 3.6 points for losses from catastrophes.
  • 2.4 and 1.9 percentage-point fourth-quarter and full-year 2022 benefit from favorable prior accident year reserve development of $25 million and $76 million, compared with 8.1 points or $77 million for fourth-quarter 2021 and 9.6 points or $353 million of favorable development for full-year 2021.
  • 5.1 percentage-point increase, to 62.9%, for the full-year 2022 ratio of current accident year losses and loss expenses before catastrophes, including an increase of 0.6 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,



2022


2021


% Change


2022


2021


% Change

Earned premiums


$     443


$     396


12


$ 1,689


$  1,542


10

Fee revenues


1


1


0


4


4


0

   Total revenues


444


397


12


1,693


1,546


10














Loss and loss expenses


288


197


46


1,166


992


18

Underwriting expenses


136


119


14


509


457


11

   Underwriting profit


$       20


$        81


(75)


$       18


$        97


(81)














Ratios as a percent of earned premiums:






Pt. Change






Pt. Change

     Loss and loss expenses


65.0 %


49.9 %


15.1


69.1 %


64.3 %


4.8

     Underwriting expenses


30.7


30.1


0.6


30.1


29.7


0.4

           Combined ratio


95.7 %


80.0 %


15.7


99.2 %


94.0 %


5.2




















% Change






% Change

Agency renewal written premiums


$     393


$     342


15


$ 1,601


$  1,434


12

Agency new business written premiums


75


50


50


296


202


47

Other written premiums


(23)


(10)


(130)


(66)


(42)


(57)

   Net written premiums


$     445


$     382


16


$ 1,831


$  1,594


15














Ratios as a percent of earned premiums:






Pt. Change






Pt. Change

     Current accident year before catastrophe losses


56.6 %


48.4 %


8.2


58.7 %


53.4 %


5.3

     Current accident year catastrophe losses


9.4


5.3


4.1


14.0


14.2


(0.2)

     Prior accident years before catastrophe losses


(0.3)


(3.1)


2.8


(1.0)


(2.8)


1.8

     Prior accident years catastrophe losses


(0.7)


(0.7)


0.0


(2.6)


(0.5)


(2.1)

           Loss and loss expense ratio


65.0 %


49.9 %


15.1


69.1 %


64.3 %


4.8














Current accident year combined ratio before













  catastrophe losses


87.3 %


78.5 %


8.8


88.8 %


83.1 %


5.7














  • 16% and 15% growth in fourth-quarter and full-year 2022 personal lines net written premiums, largely due to higher renewal written premiums that benefited from rate increases and a higher level of insured exposures. Full-year 2022 net written premiums from our agencies' high net worth clients grew 39%, to $919 million.
  • 50% and 47% increase in fourth-quarter and full-year 2022 new business premiums written by agencies, including expanded use of enhanced pricing precision tools and increases of $2 million and $21 million, respectively, from excess and surplus lines homeowner policies. The total for high net worth increases in new business written premiums was $17 million for the fourth quarter and $77 million for full-year 2022.
  • 15.7 percentage-point increase in the fourth-quarter 2022 combined ratio, reflecting an inflationary environment and an increase of 4.1 points from losses from catastrophes.
  • 5.2 percentage-point full-year 2022 combined ratio increase, including an increase of 5.3 points from higher current accident year loss and loss expenses that includes estimates for rising economic inflation for our personal auto and homeowner lines of business and a decrease of 2.3 points for losses from catastrophes.
  • 1.0 and 3.6 percentage-point fourth-quarter and full-year 2022 benefit from favorable prior accident year reserve development of $5 million and $61 million, compared with 3.8 points or $15 million for fourth-quarter 2021 and 3.3 points or $50 million of favorable development for full-year 2021.
  • 5.3 percentage-point increase, to 58.7%, for the full-year 2022 ratio of current accident year losses and loss expenses before catastrophes, including an increase of 2.0 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,



2022


2021


% Change


2022


2021


% Change

Earned premiums


$     124


$     109


14


$     485


$     398


22

Fee revenues




0


2


2


0

   Total revenues


124


109


14


487


400


22














Loss and loss expenses


89


63


41


315


250


26

Underwriting expenses


31


27


15


124


106


17

   Underwriting profit


$         4


$        19


(79)


$       48


$        44


9














Ratios as a percent of earned premiums:






Pt. Change






Pt. Change

     Loss and loss expenses


71.6 %


58.1 %


13.5


64.8 %


62.8 %


2.0

     Underwriting expenses


24.7


25.1


(0.4)


25.6


26.7


(1.1)

           Combined ratio


96.3 %


83.2 %


13.1


90.4 %


89.5 %


0.9




















% Change






% Change

Agency renewal written premiums


$       95


$        87


9


$     392


$     323


21

Agency new business written premiums


33


27


22


136


124


10

Other written premiums


(6)


(6)


0


(26)


(21)


(24)

   Net written premiums


$     122


$     108


13


$     502


$     426


18














Ratios as a percent of earned premiums:






Pt. Change






Pt. Change

     Current accident year before catastrophe losses


66.4 %


56.0 %


10.4


65.7 %


60.3 %


5.4

     Current accident year catastrophe losses


1.6


0.6


1.0


1.0


0.6


0.4

     Prior accident years before catastrophe losses


3.8


1.2


2.6


(1.7)


1.9


(3.6)

     Prior accident years catastrophe losses


(0.2)


0.3


(0.5)


(0.2)


0.0


(0.2)

           Loss and loss expense ratio


71.6 %


58.1 %


13.5


64.8 %


62.8 %


2.0














Current accident year combined ratio before













  catastrophe losses


91.1 %


81.1 %


10.0


91.3 %


87.0 %


4.3














  • 13% and 18% growth in fourth-quarter and full-year 2022 excess and surplus lines net written premiums, including fourth-quarter 2022 renewal price increases averaging in the high-single-digit percent range.
  • 22% and 10% increase in fourth-quarter and full-year 2022 new business premiums written by agencies, as we continue to carefully underwrite each policy in a highly competitive market.
  • 13.1 percentage-point increase in the fourth-quarter 2022 combined ratio, including increases of 10.4 points from higher current accident year loss and loss expenses before catastrophes that reflect elevated inflation effects and 0.5 points from catastrophe losses.
  • 0.9 percentage-point full-year 2022 combined ratio increase, including increases of 5.4 points from higher current accident year loss and loss expenses before catastrophes that reflect elevated inflation effects and 0.2 points from catastrophe losses.
  • 3.6 percentage-point fourth-quarter 2022 unfavorable prior accident year reserve development of $4 million, compared with 1.5 points or $1 million of unfavorable development for fourth-quarter 2021.
  • 1.9 percentage-point full-year 2022 favorable prior accident year reserve development of $9 million, compared with 1.9 points or $7 million of unfavorable development for full-year 2021.
  • 5.4 percentage-point increase, to 65.7%, for the full-year 2022 ratio of current accident year losses and loss expenses before catastrophes, including an increase of 0.9 points 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,



2022


2021


% Change


2022


2021


% Change

Term life insurance


$           55


$           54


2


$         220


$         210


5

Whole life insurance


12


11


9


46


46


0

Universal life and other


7


12


(42)


29


42


(31)

Earned premiums


74


77


(4)


295


298


(1)

Investment income, net of expenses


44


41


7


171


166


3

Investment gains and losses, net


(1)


3


nm


(2)


11


nm

Fee revenues



2


(100)


4


5


(20)

Total revenues


117


123


(5)


468


480


(3)

Contract holders' benefits incurred


74


91


(19)


296


340


(13)

Underwriting expenses incurred


21


21


0


84


84


0

Total benefits and expenses


95


112


(15)


380


424


(10)

Net income before income tax


22


11


100


88


56


57

Income tax


8


2


300


22


12


83

Net income of the life insurance subsidiary


$           14


$             9


56


$           66


$           44


50














  • $3 million or 1% decrease in full-year 2022 earned premiums, including a 5% increase for term life insurance, our largest life insurance product line.
  • $22 million or 50% increase in full-year 2022 life insurance subsidiary net income, primarily from more favorable impacts from the unlocking of interest rate and other actuarial assumptions and more favorable mortality experience.
  • $403 million or 29% full-year 2022 decrease to $989 million in GAAP shareholders' equity for The Cincinnati Life Insurance Company, primarily from a decrease in unrealized investment gains on fixed-maturity securities.

Investment and Balance Sheet Highlights

Investments Results

(Dollars in millions)


Three months ended December 31,


Twelve months ended December 31,



2022


2021


% Change


2022


2021


% Change

Investment income, net of expenses


$     208


$     186


12


$     781


$     714


9

Investment interest credited to contract holders'


(27)


(26)


(4)


(109)


(105)


(4)

Investment gains and losses, net


1,027


1,455


(29)


(1,467)


2,409


nm

Investment profit


$  1,208


$  1,615


(25)


$   (795)


$  3,018


nm














Investment income:













   Interest


$     134


$     121


11


$     510


$     477


7

   Dividends


72


67


7


275


246


12

   Other


5


1


400


11


5


120

   Less investment expenses


3


3


0


15


14


7

      Investment income, pretax


208


186


12


781


714


9

      Less income taxes


33


29


14


123


111


11

Total investment income, after-tax


$     175


$     157


11


$     658


$     603


9














Investment returns:













Average invested assets plus cash and cash

   equivalents


$  23,843


$  24,219




$  24,775


$  23,215



Average yield pretax


3.49 %


3.07 %




3.15 %


3.08 %



Average yield after-tax


2.94


2.59




2.66


2.60



Effective tax rate


15.8 %


15.5 %




15.8 %


15.5 %



Fixed-maturity returns:













Average amortized cost


$  12,896


$  12,132




$  12,605


$  11,771



Average yield pretax


4.16 %


3.99 %




4.05 %


4.05 %



Average yield after-tax


3.44


3.32




3.35


3.37



Effective tax rate


17.2 %


16.9 %




17.1 %


16.8 %
















  • $22 million or 12% rise in fourth-quarter 2022 pretax investment income, including 7% growth in equity portfolio dividends and 11% growth in interest income.
  • $1.258 billion increase in fourth-quarter and $3.106 billion decrease in full-year 2022 pretax total investment gains, summarized in the table below. Changes in unrealized gains or losses reported in other comprehensive income, in addition to investment gains and losses reported in net income, are useful for evaluating total investment performance over time and are major components of changes in book value and the value creation ratio.

(Dollars in millions)


Three months ended
December 31,


Twelve months ended
December 31,



2022


2021


2022


2021

Investment gains and losses on equity securities sold, net


$                  4


$                (2)


$                16


$                  4

Unrealized gains and losses on equity securities still held, net


1,020


1,409


(1,526)


2,278

Investment gains and losses on fixed-maturity securities, net


(6)


10


(3)


30

Other


9


38


46


97

Subtotal - investment gains and losses reported in net income


1,027


1,455


(1,467)


2,409

Change in unrealized investment gains and losses - fixed maturities


231


(82)


(1,639)


(234)

Total


$          1,258


$          1,373


$        (3,106)


$          2,175










 

Balance Sheet Highlights

(Dollars in millions except share data)


At December 31,


At December 31,



2022


2021

   Total investments


$               22,425


$                24,666

   Total assets


29,736


31,387

   Short-term debt


50


54

   Long-term debt


789


789

   Shareholders' equity


10,531


13,105

   Book value per share


67.01


81.72

   Debt-to-total-capital ratio


7.4 %


6.0 %

  • $23.689 billion in consolidated cash and invested assets at December 31, 2022, a decrease of 8% from $25.805 billion at year-end 2021.
  • $12.132 billion bond portfolio at December 31, 2022, with an average rating of A2/A. Fair value increased $398 million during the fourth quarter of 2022, including $254 million in net purchases of fixed-maturity securities.
  • $9.841 billion equity portfolio was 43.9% of total investments, including $5.547 billion in appreciated value before taxes at December 31, 2022. Fair value increased $1.001 billion during the fourth quarter of 2022, including $11 million in net sales of equity securities.
  • $7.00 fourth-quarter 2022 increase in book value per share, including an addition of $1.28 from net income before investment gains and $6.29 from investment portfolio net investment gains or changes in unrealized gains for fixed-maturity securities and $0.12 for other items, partially offset by $0.69 from dividends declared to shareholders.
  • Value creation ratio of negative 14.6% for full-year 2022, including positive 5.2% from net income before investment gains, which includes underwriting and investment income, and negative 19.4% from investment portfolio net investment losses or changes in unrealized gains for fixed-maturity securities, including 9.3% from our stock portfolio and 10.1% from our bond portfolio, in addition to negative 0.4% 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 2021 Annual Report on Form 10-K, Item 1A, Risk Factors, Page 32.

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 and continued supply chain disruptions that affect our investment portfolio and book value
    • An unusually high level of claims in our insurance or reinsurance operations that increase litigation-related expenses
    • An unusually high level of insurance losses, including risk of legislation or court decisions extending business interruption insurance in commercial property coverage forms to cover claims for pure economic loss related to the COVID-19 pandemic
    • Decreased premium revenue and cash flow from disruption to our distribution channel of independent agents, consumer self-isolation, travel limitations, business restrictions and decreased economic activity
    • Inability of our workforce, agencies or vendors to perform necessary business functions
  • Ongoing developments concerning business interruption insurance claims and litigation related to the COVID-19 pandemic that affect our estimates of losses and loss adjustment expenses or our ability to reasonably estimate such losses, such as:
    • The continuing duration of the pandemic and governmental actions to limit the spread of the virus that may produce additional economic losses
    • The number of policyholders that will ultimately submit claims or file lawsuits
    • The lack of submitted proofs of loss for allegedly covered claims
    • Judicial rulings in similar litigation involving other companies in the insurance industry
    • Differences in state laws and developing case law
    • Litigation trends, including varying legal theories advanced by policyholders
    • Whether and to what degree any class of policyholders may be certified
    • The inherent unpredictability of litigation
  • Unusually high levels of catastrophe losses due to risk concentrations, changes in weather patterns (whether as a result of global climate change or otherwise), environmental events, war or political unrest, terrorism incidents, cyberattacks, civil unrest or other causes
  • Increased frequency and/or severity of claims or development of claims that are unforeseen at the time of policy issuance, due to inflationary trends or other causes
  • Inadequate estimates or assumptions, or reliance on third-party data used for critical accounting estimates
  • Declines in overall stock market values negatively affecting our equity portfolio and book value
  • Prolonged low interest rate environment or other factors that limit our 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, such as Russia's invasion of Ukraine, 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 or director and officer policies written for financial institutions or other insured entities
  • Our inability to manage Cincinnati Global or other subsidiaries to produce related business opportunities and growth prospects for our ongoing operations
  • Recession, prolonged elevated inflation or other economic conditions resulting in lower demand for insurance products or increased payment delinquencies
  • Ineffective information technology systems or discontinuing to develop and implement improvements in technology may impact our success and profitability
  • Difficulties with technology or data security breaches, including cyberattacks, that could negatively affect our or our agents' ability to conduct business; disrupt our relationships with agents, policyholders and others; cause reputational damage, mitigation expenses and data loss and expose us to liability under federal and state laws
  • Difficulties with our operations and technology that may negatively impact our ability to conduct business, including cloud-based data information storage, data security, cyberattacks, remote working capabilities, and/or outsourcing relationships and third-party operations and data security
  • 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
  • Intense competition, and the impact of innovation, technological change and changing customer preferences on the insurance industry and the markets in which we operate, could harm our ability to maintain or increase our ability to maintain or increase our business volumes and profitability
  • Changing consumer insurance-buying habits and consolidation of independent insurance agencies 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 our relationships with our independent agencies and hamper opportunities to add new agencies, resulting in limitations on our opportunities for growth, such as:
    • Downgrades of our financial strength ratings
    • Concerns that doing business with us is too difficult
    • Perceptions that our 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, including effects of social inflation on the size of litigation awards
  • Events or actions, including unauthorized intentional circumvention of controls, that reduce our 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
  • Our inability, or the inability of our independent agents, to attract and retain personnel in a competitive labor market, impacting the customer experience and altering our competitive advantages
  • Events, such as an epidemic, natural catastrophe or terrorism, that could hamper our ability to assemble our workforce at our headquarters location or work effectively in a remote environment

Further, our 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. We also are subject to public and regulatory initiatives that can affect the market value for our 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,



2022


2021

Assets





  Investments





    Fixed maturities, at fair value (amortized cost: 2022—$12,979; 2021—$12,230)


$           12,132


$          13,022

    Equity securities, at fair value (cost: 2022—$4,294; 2021—$4,121)


9,841


11,315

    Other invested assets


452


329

      Total investments


22,425


24,666

  Cash and cash equivalents


1,264


1,139

  Investment income receivable


160


144

  Finance receivable


92


98

  Premiums receivable


2,322


2,053

  Reinsurance recoverable


640


570

  Prepaid reinsurance premiums


79


78

  Deferred policy acquisition costs


1,014


905

  Land, building and equipment, net, for company use (accumulated depreciation:

     2022—$322; 2021—$303)


202


205

  Other assets


646


570

  Separate accounts


892


959

    Total assets


$           29,736


$          31,387

Liabilities





  Insurance reserves





    Loss and loss expense reserves


$              8,400


$             7,305

    Life policy and investment contract reserves


3,059


3,014

  Unearned premiums


3,689


3,271

  Other liabilities


1,229


1,092

  Deferred income tax


1,045


1,744

  Note payable


50


54

  Long-term debt and lease obligations


841


843

  Separate accounts


892


959

    Total liabilities


19,205


18,282






Shareholders' Equity





  Common stock, par value—$2 per share; (authorized: 2022 and 2021—500 million shares;

    issued: 2022 and 2021—198.3 million shares)


397


397

Paid-in capital


1,392


1,356

Retained earnings


11,702


12,625

Accumulated other comprehensive income


(636)


648

Treasury stock at cost (2022—41.2 million shares and 2021—38.0  million shares)


(2,324)