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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 21, 2004
CINCINNATI FINANCIAL CORPORATION
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(Exact name of registrant as specified in its charter)
Ohio 0-4604 31-0746871
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
6200 S. Gilmore Road, Fairfield, Ohio 45014-5141
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (513) 870-2000
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(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
|_| Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13a-4(c))
Item 2.02 Results of Operations and Financial Condition. On October 21, 2004,
Cincinnati Financial Corporation issued the attached news release titled
"Cincinnati Financial Corporation Reports Strong Third-Quarter 2004 Results."
The news release is furnished as Exhibit 99.1 hereto and is incorporated herein
by reference. This report should not be deemed an admission as to the
materiality of any information contained in the news release.
In accordance with general instruction B.2 of Form 8-K, the information
furnished in this report, including exhibits, is furnished pursuant to Item 2.02
and shall not be deemed "filed" for purposes of Section 18 of the Securities
Exchange Act of 1934, as amended, or otherwise subject to the liabilities of
that Section, nor shall such information be deemed incorporated by reference in
any filing under the Securities Act of 1933, as amended.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits
Exhibit 99.1 - News release dated October 21, 2004, "Cincinnati Financial
Corporation Reports Strong Third-Quarter 2004 Results."
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CINCINNATI FINANCIAL CORPORATION
Date October 21, 2004
/s/ Kenneth W. Stecher
-------------------------------------
Kenneth W. Stecher
Chief Financial Officer, Senior Vice
President, Secretary and Treasurer
(Principal Accounting Officer)
Exhibit 99.1
Cincinnati Financial Corporation Reports Strong Third-Quarter 2004 Results
- Net income at 53 cents per share compared with 61 cents
- Operating income* improves to 56 cents per share
from 46 cents before one-time software recovery
- Property casualty GAAP combined ratio at 97.8%,
including 11.8 percentage points from catastrophe losses
- Full-year estimate of property casualty profitability increases,
with lower premium growth target
- Book value at $36.21 per share
CINCINNATI, Oct. 21 /PRNewswire-FirstCall/ -- Cincinnati Financial
Corporation (Nasdaq: CINF) today reported third-quarter 2004 net income of
$90 million, or 53 cents per diluted share, compared with $104 million, or
61 cents per share, in the third quarter of 2003. Net income per share
included net realized investment losses of 3 cents per share in 2004 versus a
gain of 6 cents in the third quarter of 2003. Net income for the third quarter
of 2003 included a $15 million, or 9 cent per share, after-tax software cost
recovery. Per-share amounts for all periods have been adjusted for the
5 percent stock dividend paid June 15, 2004.
Revenues from pretax investment income rose 6.1 percent to $124 million
for the third quarter. Total revenues advanced $43 million, or 5.1 percent, to
$879 million, reflecting 8.1 percent total earned premium growth and realized
losses versus realized gains in the comparable 2003 quarter.
Financial Highlights*
(Dollars in millions,
except share data) Third Quarter Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
Income Statement Data
Net income $90 $104 $392 $245
Negotiated
settlement-software
cost recovery -- 15 -- 15
Net income before
recovery* $90 $89 $392 $230
Net realized investment
gains and losses (5) 10 36 (29)
Operating income
before recovery* $95 $79 $356 $259
Per Share Data
(diluted)
Net income $0.53 $0.61 $2.30 $1.44
Negotiated
settlement-software
cost recovery -- 0.09 -- 0.09
Net income before
recovery* $0.53 $0.52 $2.30 $1.35
Net realized investment
gains and losses (0.03) 0.06 0.21 (0.17)
Operating income
before recovery* $0.56 $0.46 $2.09 $1.52
Cash dividend
declared 0.2750 0.2380 0.8250 0.7140
Book value -- -- 36.21 34.23
Average shares
outstanding 169,907,395 169,983,298 170,043,940 169,812,514
* The Definitions of Non-GAAP Information and Reconciliation to Comparable
GAAP Measures on Page 11 of this news release defines and reconciles
measures presented in this release that are not based on Generally
Accepted Accounting Principles (non-GAAP).
Chairman and Chief Executive Officer John J. Schiff, Jr., CPCU, commented,
"Storms had a significant impact on third-quarter results for the insurance
industry, with The Cincinnati Insurance Companies incurring a record level of
catastrophe losses. The bigger impact, however, has been on the lives of
policyholders throughout the Southeast. In these difficult times, we are
working to honor the trust they have placed in us by paying their claims
promptly, fairly and personally. More than 100 of Cincinnati's experienced
claims representatives have traveled to stricken areas to work with associates
based in each market, helping policyholders get back on their feet.
"Service also is the key to the strong performance we've recorded again
this quarter, despite the catastrophe losses, and to the positive outlook we
have for the remainder of 2004 and beyond," Schiff continued. "As we noted
last quarter, we are entering this period of predictably increasing
competition in the commercial insurance marketplace from a position of
strength, with an underwriting mindset. Our personal lines operation made a
small step toward a return to profitability. Our financial strength continues
to let us invest for both short-term income and the potential for long-term
appreciation, supporting the financial flexibility that is so valuable to our
policyholders, independent agent representatives and shareholders."
"Our nine-month GAAP combined ratio was very satisfactory at 92.3 percent,
led by excellent commercial lines results. That performance puts our combined
ratio on track to finish 2004 slightly better than our target ratio of
92 percent (91.5 percent on a statutory basis). We are basing this more
favorable outlook on expectations that catastrophe losses will contribute
approximately 5 percentage points for the full year. There also will be an
approximately 1 percentage point benefit from the first-quarter 2004 release
of uninsured motorist/underinsured motorist (UM/UIM) reserves. We believe we
can surpass this level of underwriting success next year, assuming catastrophe
losses are in the more normal range of 3 to 3.5 percentage points on the
combined ratio," Schiff added.
Catastrophe Loss Summary
Total catastrophe losses of $86 million for third quarter, net of
reinsurance, reflected $94 million from storms during the period, partially
offset by reduced estimates of prior-period catastrophe losses.
(Dollars in millions,
net of reinsurance) Third Quarter Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
Catastrophe losses
(pretax) $86 $41 $133 $90
Catastrophe losses
per fully diluted
share (after tax) $0.33 $0.16 $0.51 $0.34
Combined ratio
impact of
catastrophe losses
(percentage points) 11.8 6.1 6.1 4.6
The company's reinsurance coverage limits its losses from catastrophic
events such as wind, hail, hurricanes or earthquakes. Under the 2004
reinsurance program, the company retains the first $25 million in losses
arising from a single event and 43 percent of losses from $25 million to
$45 million. The company retains only 5 percent of losses between $45 million
and $500 million. To restore affected layers of the property catastrophe
reinsurance program following Hurricane Ivan, the company incurred an $11
million reinsurance reinstatement premium in the third quarter. The company
has received no information on potential assessments for wind pools in Florida
and other affected states.
Nine-Month Results
Net income for the first nine months was $392 million, or $2.30 per
diluted share, up 60.1 percent from $245 million, or $1.44 per share, in the
first nine months of 2003. Net income per share included net realized
investment gains of 21 cents in 2004 versus losses of 17 cents per share in
2003. Nine-month 2004 results included the first-quarter 2004 release of
$32 million pretax ($21 million, or 12 cents per share, after tax) from
reserves for UM/UIM losses. Remaining UM/UIM reserve changes have been
immaterial since the first quarter of 2004. Nine-month 2003 results included a
$15 million, or 9 cents per share, after-tax software cost recovery.
Revenues from pretax investment income rose 5.2 percent to $365 million
for the first nine months of 2004. Total revenues advanced $331 million, or
14.1 percent, to $2.672 billion, reflecting 10.4 percent total earned premium
growth and realized gains versus realized losses in the first nine months of
2003.
Property Casualty Insurance Operations
(Dollars in
millions - GAAP) Third Quarter Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
Income Statement Data
Earned premiums $733 $678 $2,166 $1,963
Loss and loss expenses
excluding catastrophe
losses 416 443 1,222 1,293
Catastrophe losses 86 41 133 90
Commissions 149 136 445 379
Underwriting expenses 66 35 199 136
Underwriting profit $16 $23 $167 $65
Underwriting
profit before
recovery* $16 $- $167 $42
Ratio Data
Loss and loss expenses
excluding catastrophe
losses 56.7% 65.3% 56.5% 65.8%
Catastrophe losses 11.8 6.1 6.1 4.6
Commissions 20.3 20.0 20.5 19.3
Underwriting
expenses 9.0 5.2 9.2 7.0
Combined ratio 97.8% 96.6% 92.3% 96.7%
Combined ratio
before recovery* 97.8% 100.0% 92.3% 97.9%
* The Definitions of Non-GAAP Information and Reconciliation to Comparable
GAAP Measures on Page 11 of this news release defines and reconciles
measures presented in this release that are not based on Generally
Accepted Accounting Principles (non-GAAP).
For the third quarter, statutory net written premiums of the property
casualty insurance affiliates rose 3.7 percent to $750 million compared with
$723 million in last year's third quarter. Both net written and net earned
premium for 2004 were reduced by the $11 million reinsurance reinstatement
premium, which lowered the third-quarter net written premium growth rate by
1.5 percentage points. For the first nine months of 2004, statutory net
written premiums of the property casualty insurance affiliates rose 6.5
percent to $2.274 billion compared with $2.136 billion last year. The
reinsurance reinstatement premium lowered the nine-month growth rate by 0.5
percentage points.
Third-quarter new business written directly by agencies was unchanged at
$87 million, including $73 million in commercial lines new business and
$14 million in personal lines new business. Nine-month new business written
directly by agencies was $253 million, up 4.9 percent over the first nine
months of last year.
The third-quarter 2004 GAAP combined ratio of 97.8 percent improved
2.2 percentage points over the comparable prior period excluding the software
recovery. The loss and loss expense ratio excluding catastrophes declined
8.6 percentage points. The third-quarter 2004 commission expense ratio rose by
0.3 percentage points. The underwriting expense ratio rose by 0.4 percentage
points, excluding the 3.4 percentage point benefit of the recovery from 2003
underwriting expenses. The nine-month 2004 GAAP combined ratio of 92.3 percent
included a 1.5 percentage-point benefit from the release of the UM/UIM
reserves. The comparable 2003 ratio was 97.9 percent before the recovery.
Schiff commented, "Our commercial markets are showing continuing signs of
increasing competition. We believe our approach will allow us to continue
winning our agencies' quality business while maintaining profitability.
Everything we are doing to achieve growth revolves around strengthening our
relationships with the local independent insurance agents who serve our
policyholders. Restructuring selected field territories to make them smaller
lets us provide a higher level of sales support and service to these agents."
Schiff added, "We have 92 property casualty field marketing territories
today, and we anticipate reaching 100 field marketing territories in 2005.
Territory subdivisions are planned for Birmingham, Alabama; Chicago, Illinois;
Central Indiana; Detroit, Michigan; Chattanooga and Nashville, Tennessee; and
Utah. We also will carve out a new Delaware/Maryland territory when we appoint
our first agencies in Delaware, which we anticipate in 2005. In addition to
the representatives who staff marketing territories, the company's 975
independent agencies also are supported by more than 1,000 additional field
associates who provide claims, life insurance marketing, loss control, premium
audit, bond, leasing and machinery and equipment services.
"Our first and foremost objective is to earn more business from the
independent agencies that currently represent us. However, smaller territories
also allow us to appoint additional, high-caliber agencies in markets where we
see opportunities to attract new policyholders who value Cincinnati's
financial strength, service and products. As previously announced, we
anticipate appointing approximately 150 new agencies during the 2004 through
2006 period. Thirty new agencies already have been appointed in 2004, with
another 20 appointments already scheduled for the last three months of the
year."
Commercial Lines
(Dollars in
millions - GAAP) Third Quarter Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
Income Statement Data
Earned premiums $537 $488 $1,576 $1,410
Loss and loss
expenses excluding
catastrophe losses 285 310 826 895
Catastrophe losses 48 10 65 28
Commissions 108 98 324 271
Underwriting expenses 50 31 143 106
Underwriting
profit $46 $39 $218 $110
Underwriting profit
before recovery* $46 $24 $218 $95
Ratio Data
Loss and loss expenses
excluding catastrophe
losses 53.1% 63.4% 52.4% 63.4%
Catastrophe losses 9.0 2.0 4.1 2.0
Commissions 20.1 20.1 20.6 19.2
Underwriting expenses 9.2 6.6 9.1 7.6
Combined ratio 91.4% 92.1% 86.2% 92.2%
Combined ratio
before recovery* 91.4% 95.0% 86.2% 93.2%
* The Definitions of Non-GAAP Information and Reconciliation to Comparable
GAAP Measures on Page 11 of this news release defines and reconciles
measures presented in this release that are not based on Generally
Accepted Accounting Principles (non-GAAP).
Statutory net written premiums for commercial lines of insurance rose
5.0 percent to $532 million for the third quarter, compared with $507 million
in last year's third quarter. The $6 million commercial lines reinsurance
reinstatement premium reduced the third-quarter growth rate by 1.3 percentage
points. New commercial lines business written directly by agencies increased
2.0 percent for the third quarter and 9.9 percent for the nine months. The
third-quarter 2004 commercial lines GAAP combined ratio was 91.4 percent, a
3.6 percentage-point improvement over the third-quarter of 2003 ratio
excluding the recovery.
Schiff commented, "Our plans to increase our field presence in our
agencies will be most significant for commercial lines, helping to bolster new
business growth as competition increases in more regional marketplaces. Agents
report that the market continues to differentiate between quality and average
accounts. We are pleased to hear that in most areas they are negotiating
low-single-digit rate increases on most quality renewal risks that have no
change in exposure.
"To maintain our underwriting success, we intend to carefully manage our
underwriting appetite and use of discounting. With increasing price pressure,
our programs to accurately match exposures with appropriate premium are all
the more important. Our field teams continue to support our agents by
emphasizing renewal reviews and personally inspecting risks," Schiff noted.
For the first nine months of 2004, statutory net written premiums for
commercial lines of insurance rose 7.4 percent to $1.654 billion, compared
with $1.540 billion last year. The reinsurance reinstatement premium reduced
the nine-month growth rate by 0.4 percentage points. The commercial lines GAAP
combined ratio for the first nine months of 2004 was 86.2 percent, including a
2.0 percentage-point benefit from the release of UM/UIM reserves. The
comparable 2003 combined ratio was 93.2 percent before the recovery.
Personal Lines
(Dollars in
millions - GAAP) Third Quarter Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
Income Statement Data
Earned premiums $196 $190 $590 $553
Loss and loss
expenses excluding
catastrophe losses 131 133 396 398
Catastrophe losses 38 31 68 62
Commissions 41 38 121 108
Underwriting expenses 16 4 56 30
Underwriting loss $(30) $(16) $(51) $(45)
Underwriting loss
before recovery* $(30) $(24) $(51) $(53)
Ratio Data
Loss and loss
expenses excluding
catastrophe losses 66.9% 70.0% 67.1% 71.9%
Catastrophe losses 19.3 16.6 11.6 11.2
Commissions 20.9 20.0 20.5 19.6
Underwriting expenses 8.3 1.8 9.4 5.5
Combined ratio 115.4% 108.4% 108.6% 108.2%
Combined ratio
before recovery* 115.4% 112.6% 108.6% 109.6%
* The Definitions of Non-GAAP Information and Reconciliation to Comparable
GAAP Measures on Page 11 of this news release defines and reconciles
measures presented in this release that are not based on Generally
Accepted Accounting Principles (non-GAAP).
Statutory net written premiums for personal lines of insurance rose
0.5 percent to $218 million for the third quarter, compared with $216 million
in last year's third quarter. The $5 million personal lines reinsurance
reinstatement premium reduced the third-quarter growth rate by 2.1 percentage
points. Third-quarter new personal lines business written directly by agencies
was $14 million, compared with $15 million in last year's third quarter. The
third-quarter 2004 personal lines GAAP combined ratio was 115.4 percent,
including 19.3 percentage points from catastrophe losses. For the comparable
2003 period, the ratio before the recovery was 112.6 percent, including
16.6 percentage points from catastrophe losses.
Schiff commented, "Our personal lines business is focused on achieving two
key objectives: returning to profitability and deploying Diamond, our new
personal lines policy processing system, as quickly as possible. While each
objective brings its own challenges, including a measurable effect on new
business growth, agents and associates have shown their commitment to these
initiatives and an appreciation of their importance.
"In terms of profitability, for the nine months, our personal auto line
continued to perform well and our homeowner line made progress, as seen in a
5.5 percentage-point improvement in its loss and loss expense ratio excluding
catastrophe losses compared with the first nine months of 2003. In addition to
rate increases, deductible changes and modifications in policy terms and
conditions including one-year homeowner policy periods, we anticipate
fine-tuning our rate structure in 2005 to offer marketable prices to attract
our agencies' quality accounts. For current personal lines policies up for
renewal, retention remains above 90 percent," Schiff said.
"The rollout of the Diamond system now has been completed for agencies in
Indiana, Michigan and Ohio. These are three of our largest personal lines
states, accounting for 53.1 percent of personal lines premium volume. The
transition of these agencies to the Diamond system is a significant
accomplishment. They also have helped us understand that the learning curve
may be steeper than anticipated, temporarily reducing agency attention to new
business efforts. As these agents progress through the transition, they are
writing or renewing approximately $1 million in personal lines premium in
Diamond each day."
For the first nine months of 2004, statutory net written premiums for
personal lines of insurance rose 4.0 percent to $620 million, compared with
$596 million last year. The reinsurance reinstatement premium reduced the
nine-month growth rate by 0.7 percentage points. Personal lines new business
written directly by agencies for the first nine months of 2004 was
$39 million, compared with $46 million in the first nine months of 2003. The
personal lines GAAP combined ratio for the first nine months of 2004 was
108.6 percent, including a 0.1 percentage-point benefit from the release of
UM/UIM reserves. The comparable 2003 combined ratio was 109.6 percent.
Life Insurance Operations
(In millions - GAAP) Third Quarter Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
Earned premiums $25 $23 $77 $68
Investment income, net
of expenses 23 22 68 67
Other income 1 1 2 2
Total revenues excluding
realized investment
gains and losses $49 $46 $147 $137
Policyholder benefits 23 22 71 66
Expenses 14 13 40 36
Total benefits and
expenses $37 $35 $111 $102
Income before income
tax and realized
investment gains
and losses $12 $11 $36 $35
Income tax 4 3 12 12
Income before realized
investment gains
and losses* $8 $8 $24 $23
* The Definitions of Non-GAAP Information and Reconciliation to Comparable
GAAP Measures on Page 11 of this news release defines and reconciles
measures presented in this release that are not based on Generally
Accepted Accounting Principles (non-GAAP).
The Cincinnati Life Insurance Company's third-quarter 2004 earned premiums
increased 7.2 percent to $25 million. Income before realized investment gains
and losses increased 3.2 percent over the third quarter of 2003. Net income
including net realized investment gains and losses -- a performance indicator
for Cincinnati Life -- declined 35.2 percent to $5 million for the third
quarter from $8 million for the comparable 2003 period. Third-quarter realized
losses in the life insurance company's investment portfolio were due to the
sale of airline bonds and a decline in the fair value of derivatives embedded
in convertible securities.
Cincinnati Life President David H. Popplewell, FALU, LLIF, commented,
"Since the beginning of the year, face amounts of in-force policies have grown
13.0 percent and applications submitted have grown 5.4 percent. During the
third quarter, we further strengthened our worksite marketing line with the
addition of a disability income product. Worksite insurance products provide
our property casualty agency force with an excellent cross serving opportunity
for their small commercial accounts. Agents find that offering our
competitively priced worksite products through employers provides a voluntary
benefit program to employees at no cost to the employer."
For the first nine months of 2004, Cincinnati Life's earned premiums
increased 13.5 percent to $77 million. Income before realized investment gains
and losses increased 3.0 percent over the first nine months of 2003. For the
nine months, net income including net realized investment gains and losses
rose to $24 million from $14 million for the comparable 2003 period.
Investment Operations
(In millions, pre-tax) Third Quarter Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
Investment income:
Interest $64 $60 $188 $177
Dividends 58 57 176 169
Other 3 1 5 4
Investment expenses (1) (1) (4) (3)
Investment income,
net of expenses $124 $117 $365 $347
Net realized investment
gains and losses:
Other-than-temporary
impairment charges $(5) $(8) $(8) $(77)
Realized investment
gains and losses 8 14 70 24
Change in valuation
of embedded derivatives (10) 9 (7) 9
Net realized investment
gains and losses $(7) $15 $55 $(44)
Consolidated pretax investment income rose 6.1 percent for the third
quarter and 5.2 percent for the first nine months of 2004, benefiting from
higher interest income due to cash flow invested in the fixed-income portfolio
and from dividend increases by companies in the equity portfolio. Dividend
increases announced during the 12 months ended September 30, 2004, by Fifth
Third Bancorp and another 38 of the 50 equity holdings in the portfolio are
expected to add $18 million to annualized investment income.
Schiff commented, "We are seeing an upward trend in investment income
growth. With continued strong cash flow, our investment program should produce
a full-year growth rate above the high end of the 3.5 percent to 4.5 percent
range we had initially anticipated, with this level of growth continuing into
2005."
Net realized investment losses were $7 million in this year's third
quarter, including $5 million in other-than-temporary impairment charges. In
last year's third quarter, net realized investment gains were $15 million,
including $8 million in other-than-temporary impairment charges.
During the third quarter, the company made $208 million in net new
investments from cash flow and existing cash balances. Purchases were almost
entirely fixed income securities, including U.S. agency paper and municipal
bonds. The market value of consolidated fixed-maturity investments rose
15.1 percent to $4.516 billion at September 30, 2004, from $3.925 billion at
year-end 2003. The market value of consolidated equity securities was
$7.688 billion at September 30, 2004, down from $8.524 billion at year-end
2003. The decline was due to the $350 million in net equity sales in the
second quarter of 2004, as well as market value fluctuations of the company's
holdings including a decline in the market value of Fifth Third, the company's
largest common stock holding. Proceeds from the equity sales were reinvested
in fixed income and convertible securities during the second and third
quarters.
The company repurchased 296,800 shares of Cincinnati Financial common
stock at a total cost of $12 million, or $39.83 per share, during the third
quarter. Approximately 5 million shares remain authorized by the board of
directors for repurchase.
Balance Sheet
(Dollars in millions) Third Quarter Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
Balance Sheet Data
Total assets -- -- $15,806 $14,958
Invested assets -- -- 12,242 11,742
Shareholders' equity -- -- 6,084 5,766
Ratio Data
Return on equity,
annualized 5.9% 7.1% 8.5% 5.7%
Return on equity,
annualized, based
on comprehensive
income 2.4 (4.2) 0.7 7.8
At September 30, 2004, consolidated assets reached $15.806 billion
compared with $15.509 billion at year-end 2003. Shareholders' equity was
$6.084 billion, or $36.21 per share, compared with $6.204 billion, or
$36.85 per share, at year-end 2003, due to lower unrealized gains in the
investment portfolio. Total debt declined to $478 million, including
$58 million in borrowings on one short-term line of credit, compared with
$603 million, including $183 million in borrowings on two short-term lines, at
year-end 2003. The company paid off one short-term line of credit during the
2004 third quarter.
As announced in August 2004, management transferred investment securities
with a market value of $1.600 billion to The Cincinnati Insurance Company from
the parent company. As a result of the transfer, the ratio of investment
securities held at the holding company level to total holding-company-only
assets moved under 40 percent at September 30, 2004, as management intended.
Schiff noted, "The asset transfer resolved the holding company's current
status under the Investment Company Act of 1940. While it also raised The
Cincinnati Insurance Company's surplus, our action was not a means to
accelerate growth or strengthen loss reserves. Rather, it allowed us to retain
the financial flexibility that continues to support our high financial
strength ratings. During the third quarter, we also followed up on other
actions we had announced to support our strong policyholder surplus, including
our short-term program to allocate virtually all funds available for
investment purchases to fixed income securities. This builds on the
enhancement to our reinsurance program we accomplished in the second quarter
and the modifications to our earthquake deductibles in the Midwest that began
to take effect in selected states this summer."
Statutory surplus for the property casualty insurance group was
$4.037 billion at September 30, 2004, up $1.257 billion from year-end 2003,
primarily because of the asset transfer. The property casualty insurance
group's ratio of common stock holdings to statutory surplus was 102.4 percent
at September 30, 2004. The ratio was 93.7 percent at June 30, 2004, and
114.7 percent at year-end 2003.
Schiff added, "Over the longer term, we anticipate continuing to allocate
approximately 25 percent to 35 percent of new money to equities on a
consolidated basis. Our equity approach remains the center of our investing
strategy."
During the third quarter, the company also announced that it anticipates
investing approximately $98 million in a headquarters expansion beginning in
early 2005. The company believes that the financial resources of its insurance
operations are adequate to fund the project; however, management is exploring
the full range of financing options available.
Outlook Positive for Remainder of 2004 and 2005
Schiff commented, "For the full-year 2004, we now expect that our property
casualty combined ratio may be slightly better than our target ratio of
92 percent (91.5 percent on a statutory basis). We believe we will exceed this
level of underwriting success next year, if catastrophe losses are in the more
normal range of 3 to 3.5 percentage points on the combined ratio.
"With our emphasis on underwriting, the softening of commercial lines
prices and our modest shorter-term expectations for new personal lines
business, we now believe total 2004 written premiums growth may be in the
range of 7 percent," Schiff added. "The strong profitability we anticipate
more than offsets the slightly lower growth rate we now are targeting. Our
agents continue to choose Cincinnati for their quality business.
"As a result, we look forward to 2005 with optimism. Our agencies are
growing and we expect to grow with them, while making purposeful decisions to
maintain our position as an industry profitability leader over the longer
term," Schiff concluded.
For additional information or to register for this afternoon's conference
call, please visit http://www.cinfin.com .
Cincinnati Financial Corporation offers property and casualty insurance,
its main business, through The Cincinnati Insurance Company, The Cincinnati
Indemnity Company and The Cincinnati Casualty Company. The Cincinnati Life
Insurance Company markets life and disability income insurance and annuities.
CFC Investment Company supports the insurance subsidiaries and their
independent agent representatives through commercial leasing and financing
activities. CinFin Capital Management Company provides asset management
services to institutions, corporations and individuals. For additional
information, please visit the company's Web site at http://www.cinfin.com .
This is a "Safe Harbor" statement under the Private Securities Litigation
Reform Act of 1995. Certain forward-looking statements contained herein
involve potential risks and uncertainties. The company's future results could
differ materially from those discussed. Factors that could cause or contribute
to such differences include, but are not limited to:
-- unusually high levels of catastrophe losses due to changes in weather
patterns, environmental events, terrorism incidents or other causes
-- ability to obtain adequate reinsurance on acceptable terms, amount of
reinsurance purchased and financial strength of reinsurers
-- increased frequency and/or severity of claims
-- 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:
-- downgrade of the company's financial strength ratings
-- concerns that doing business with the company is too difficult or
-- perceptions that the company's level of service, particularly
claims service, is no longer a distinguishing characteristic in the
marketplace
-- insurance regulatory actions, legislation or court decisions or legal
actions that increase expenses or place the company at a disadvantage
in the marketplace
-- delays in the development, implementation, performance and benefits of
technology projects and enhancements
-- inaccurate estimates or assumptions used for critical accounting
estimates, including loss reserves
-- results and timely completion of assessment and remediation of
internal controls for financial reporting under the Sarbanes-Oxley Act
of 2002
-- recession or other economic conditions or regulatory, accounting or tax
changes resulting in lower demand for insurance products
-- sustained decline in overall stock market values negatively affecting
the company's equity portfolio, in particular a sustained decline in
the market value of Fifth Third Bancorp (Fifth Third) shares, a
significant equity holding
-- events that lead to a significant decline in the market value of a
particular security and impairment of the asset
-- prolonged low interest rate environment or other factors that limit the
company's ability to generate growth in investment income
-- adverse outcomes from litigation or administrative proceedings
-- limited flexibility in conducting investment activities if the
restrictions imposed by the Investment Company Act of 1940 become
applicable to the parent company.
Further, the company's insurance businesses are subject to the effects of
changing social, 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 recent measures affecting corporate financial reporting and
governance. The ultimate changes and eventual effects, if any, of these
initiatives are uncertain.
Readers are cautioned that the company undertakes no obligation to review
or update the forward-looking statements included in this material.
Cincinnati Financial Corporation
Consolidated Balance Sheets
(Dollars in millions except share data) September 30, December 31,
2004 2003
(unaudited)
Assets
Investments
Fixed maturities, at fair
value (amortized cost:
2004-$4,268; 2003-$3,669) $4,516 $3,925
Equity securities, at fair
value (cost: 2004-$2,203;
2003-$2,487) 7,688 8,524
Other invested assets 38 36
Cash 311 91
Investment income receivable 98 99
Finance receivable 96 81
Premiums receivable 1,154 1,060
Reinsurance receivable 739 617
Prepaid reinsurance premiums 14 13
Deferred policy acquisition costs 396 372
Property and equipment, net, for
company use (accumulated depreciation:
2004-$202; 2003-$181) 157 153
Other assets 118 75
Separate accounts 481 463
Total assets $15,806 $15,509
Liabilities
Insurance reserves
Losses and loss expense $3,681 $3,415
Life policy reserves 1,139 1,025
Unearned premiums 1,566 1,446
Other liabilities 603 404
Deferred income tax 1,774 1,949
Notes payable 58 183
6.9% senior debenture due 2028 420 420
Separate accounts 481 463
Total liabilities 9,722 9,305
Shareholders' equity
Common stock, par value-$2 per
share; authorized 200 million
shares; issued: 2004-185
million shares, 2003-176
million shares 370 352
Paid-in capital 652 306
Retained earnings 1,879 1,986
Accumulated other comprehensive
income-unrealized gains on
investments and derivatives 3,726 4,084
Treasury stock at cost (2004-17
million shares, 2003-16 million
shares) (543) (524)
Total shareholders' equity 6,084 6,204
Total liabilities and
shareholders' equity $15,806 $15,509
Cincinnati Financial Corporation
Consolidated Statements of Income
(In millions except per share data) Nine Months Ending September 30,
2004 2003
(unaudited)
Revenues
Earned premiums
Property casualty $2,166 $1,963
Life 77 68
Investment income, net of expenses 365 352
Realized investment gains and losses 55 (44)
Other income 9 3
Total revenues 2,672 2,342
Benefits and expenses
Insurance losses and policyholder
benefits 1,424 1,447
Commissions 468 402
Other operating expenses 192 142
Taxes, licenses and fees 55 48
Increase in deferred policy
acquisition costs (29) (42)
Interest expense 27 25
Other expenses 6 10
Total benefits and expenses 2,143 2,032
Income before income taxes 529 310
Provision (benefit) for income taxes
Current 120 75
Deferred 17 (10)
Total provision (benefit) for
income taxes 137 65
Net income $392 $245
Per common share
Net income -- basic $2.33 $1.45
Net income -- diluted $2.30 $1.44
Since 1996, Cincinnati Financial has disclosed the estimated impact of
stock options on net income and earnings per share in a Note to the Financial
Statements. In the nine months ending September 30, 2004 and 2003, diluted net
income would have been reduced by less than 4 cents per share, if option
expense, calculated using the binomial option-pricing model, were included as
an expense.
Definitions of Non-GAAP Information
and Reconciliation to Comparable GAAP Measures
Cincinnati Financial Corporation prepares its public financial statements
in conformity with accounting principles generally accepted in the United
States of America (GAAP). Statutory data is prepared in accordance with
statutory accounting rules as defined by the National Association of Insurance
Commissioners' (NAIC) Accounting Practices and Procedures Manual and therefore
is not reconciled to GAAP data.
Management uses certain non-GAAP and non-statutory financial measures to
evaluate its primary business areas - property casualty insurance, life
insurance and investments - where analyzing both GAAP and certain non-GAAP
measures may improve understanding of trends in the underlying business,
helping avoid incorrect or misleading assumptions and conclusions about the
success or failure of company strategies. Management adjustments to GAAP
measures generally: apply to non-recurring events unrelated to business
performance that distort short-term results; involve values that fluctuate
based on events outside of management's control; or relate to accounting
refinements that affect comparability between periods, creating a need to
analyze data on the same basis.
Operating income: Operating income (also described as net income before
realized investment gains and losses) is calculated by excluding net realized
investment gains and losses from net income. Management evaluates operating
income to measure the success of pricing, rate and underwriting strategies.
While realized investment gains (or losses) are integral to the company's
insurance operations over the long term, the determination to realize
investment gains or losses in any period may be subject to management's
discretion and is independent of the insurance underwriting process. Moreover,
under applicable GAAP accounting requirements, losses can be recognized from
certain changes in market values of securities without actual realization.
Management believes that the level of realized investment gains or losses for
any particular period, while it may be material, may not be indicative of the
performance of ongoing underlying business operations in that period.
For these reasons, many investors and shareholders consider operating
income to be one of the more meaningful measures for evaluating insurance
company performance. Equity analysts who report on the insurance industry and
the company generally focus on operating income in their analyses. The company
presents operating income so all investors have what management believes to be
a useful supplement to GAAP information.
Statutory accounting rules: For public reporting, insurance companies
prepare financial statements in accordance with GAAP. However, certain data
also must be calculated according to statutory accounting rules as defined in
the NAIC's Accounting Practices and Procedures Manual, which may be, and has
been, modified by various state insurance departments. Statutory data is
publicly available and used by various organizations to calculate aggregate
industry data, study industry trends and make comparisons between various
insurance companies.
Written premium: Under statutory accounting rules, written premium is the
amount recorded for policies issued and recognized on an annualized basis at
the effective date of the policy. Management analyzes trends in written
premium to assess business efforts. Earned premium, used in both statutory and
GAAP accounting, is calculated ratably over the policy term. The difference
between written and earned premium is unearned premium.
Written premium adjustment -- statutory basis only: In 2002, the company
refined its estimation process for matching written premiums to policy
effective dates, which added $117 million to 2002 written premiums. To better
assess ongoing business trends, management may exclude this adjustment when
evaluating trends in written premiums and statutory ratios that make use of
written premiums.
One-time charges or adjustments: Management analyzes results excluding the
impact of one-time items.
-- In 2003, as the result of a settlement negotiated with a vendor, pretax
results included the recovery of $23 million of the $39 million one-
time, pretax charge incurred in 2000.
-- In 2000, the company recorded a one-time charge of $39 million, pre-
tax, to write down previously capitalized costs related to the
development of software to process property casualty policies.
-- In 2000, the company earned $5 million in interest in the first quarter
from a $303 million single-premium bank-owned life insurance (BOLI)
policy booked at the end of 1999 that was segregated as a Separate
Account effective April 1, 2000. Investment income and realized
investment gains and losses from separate accounts generally accrue
directly to the contract holder and, therefore, are not included in the
company's consolidated financials.
Codification: Adoption of Codification of Statutory Accounting Principles
was required for Ohio-based insurance companies effective January 1, 2001. The
adoption of Codification changed the manner in which the company recognized
property casualty written premiums. As a result, 2001 statutory written
premiums included $402 million to account for unbooked premiums related to
policies with effective dates prior to January 1, 2001. To better assess
ongoing business trends, management excludes this $402 million when evaluating
written premiums and statutory ratios that make use of written premiums.
Life insurance gross written premiums: In analyzing life insurance company
gross written premiums, management excludes three larger, single-pay life
insurance policies (BOLIs) to focus on the trend in premiums written through
the agency distribution channel.
Cincinnati Financial Corporation and Subsidiaries
Quarterly Net Income Reconciliation
(In millions except
per share data)
Three months ended
12/31/ 9/30/ 6/30/ 3/31/ 12/31/ 9/30/ 6/30/ 3/31/
2004 2004 2004 2004 2003 2003 2003 2003
Net income $90 $155 $146 $130 $104 $84 $57
One-time item 0 0 0 0 15 0 0
Net income
before
one-time item $90 $155 $146 $130 $89 $84 $57
Net realized
investment
gains and
losses (5) 36 4 2 10 1 (40)
Operating
income before
one-time item $95 $119 $142 $128 $79 $83 $97
Less catastrophe
losses 56 30 0 4 27 30 2
"Operating income
before
catastrophe
losses and
one-time item" $151 $149 $142 $132 $106 $113 $99
Diluted per
share data
Net income $0.53 $0.91 $0.86 $0.76 $0.61 $0.50 $0.33
One-time item 0.00 0.00 0.00 0.00 0.09 0.00 0.00
Net income before
one-time item $0.53 $0.91 $0.86 $0.76 $0.52 $0.50 $0.33
Net realized
investment gains
and losses (0.03) 0.21 0.03 0.01 0.06 0.01 (0.24)
Operating income
before one-time
item $0.56 $0.70 $0.83 $0.75 $0.46 $0.49 $0.57
Less catastrophe
losses (0.33) (0.16) 0.00 (0.03) (0.16) (0.18) (0.01)
"Operating income
before catastrophe
losses and
one-time item" $0.89 $0.86 $0.83 $0.78 $0.62 $0.67 $0.58
Six months Nine months Twelve months
ended ended ended
6/30/ 6/30/ 9/30/ 9/30/ 12/31/ 12/31/
2004 2003 2004 2003 2004 2003
Net income $301 $141 $392 $245 $374
One-time item 0 0 0 15 15
Net income
before one-time
item $301 $141 $392 $230 $359
Net realized
investment gains
and losses 40 (39) 36 (29) (27)
Operating income
before one-time
item $261 $180 $356 $259 $386
Less catastrophe
losses 30 32 86 59 63
"Operating income
before catastrophe
losses and
one-time item" $291 $212 $442 $318 $449
Diluted per share data
Net income $1.77 $0.83 $2.30 $1.44 $2.21
One-time item 0.00 0.00 0.00 0.09 0.09
Net income before
one-time item $1.77 $0.83 $2.30 $1.35 $2.12
Net realized
investment gains
and losses 0.24 (0.23) 0.21 (0.17) (0.16)
Operating income
before one-time
item $1.53 $1.06 $2.09 $1.52 $2.28
Less catastrophe
losses (0.18) (0.19) (0.51) (0.34) (0.37)
"Operating income
before catastrophe
losses and
one-time item" $1.71 $1.25 $2.60 $1.86 $2.65
Dollar amounts shown are rounded to millions; certain amounts may not add
due to rounding. Ratios are calculated based on whole dollar amounts. The sum
of quarterly amounts may not equal the full year as each is computed
independently.
Cincinnati Insurance Group
Quarterly Property Casualty Data - Consolidated
(Dollars in millions) Three months ended
12/31/ 9/30/ 6/30/ 3/31/ 12/31/ 9/30/ 6/30/ 3/31/
2004 2004 2004 2004 2003 2003 2003 2003
Premiums
Adjusted
written
premiums
(statutory) $750 $761 $767 $698 $714 $707 $667
"Written
premium
adjustment
-- statutory
only" 0 (27) 23 (19) 9 19 20
Reported
written
premiums
(statutory)* $750 $734 $790 $679 $723 $726 $687
Unearned
premiums change (17) (17) (74) 11 (45) (70) (58)
Earned premiums $733 $717 $716 $690 $678 $656 $629
Statutory
combined ratio
Reported statutory
combined ratio* 97.9% 91.2% 85.1% 89.8% 96.3% 98.4% 92.8%
"Written premium
adjustment --
statutory only" NM NM NM NM NM NM NM
One-time item 0.0 0.0 0.0 0.0 3.1 0.0 0.0
Adjusted statutory
combined ratio 97.9% 91.2% 85.1% 89.8% 99.4% 98.4% 92.8%
Less catastrophe
losses 11.7 6.5 0.1 1.0 6.1 7.1 0.4
"Adjusted
statutory
combined ratio
excluding
catastrophe
losses" 86.2% 84.7% 85.0% 88.8% 93.3% 91.3% 92.4%
Reported
commission
expense ratio* 19.9% 18.9% 18.3% 18.8% 18.5% 17.0% 16.4%
"Written premium
adjustment --
statutory only" NM NM NM NM NM NM NM
One-time item 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Adjusted
commission
expense ratio 19.9% 18.9% 18.3% 18.8% 18.5% 17.0% 16.4%
Reported other
expense ratio* 9.5% 10.8% 9.3% 10.9% 6.5% 8.2% 10.0%
"Written premium
adjustment --
statutory only" NM NM NM NM NM NM NM
One-time item 0.0 0.0 0.0 0.0 3.1 0.0 0.0
Adjusted other
expense ratio 9.5% 10.8% 9.3% 10.9% 9.6% 8.2% 10.0%
Reported
statutory
expense
ratio* 29.4% 29.7% 27.6% 29.7% 25.0% 25.2% 26.4%
"Written
premium
adjustment --
statutory only" NM NM NM NM NM NM NM
One-time item 0.0 0.0 0.0 0.0 3.1 0.0 0.0
Adjusted statutory
expense ratio 29.4% 29.7% 27.6% 29.7% 28.1% 25.2% 26.4%
GAAP combined ratio
GAAP combined
ratio 97.8% 91.9% 87.1% 89.1% 96.6% 98.4% 95.1%
One-time item 0.0 0.0 0.0 0.0 3.4 0.0 0.0
GAAP combined
ratio before
one-time item 97.8% 91.9% 87.1% 89.1% 100.0% 98.4% 95.1%
(Dollars in millions) Six months Nine months Twelve months
ended ended ended
6/30/ 6/30/ 9/30/ 9/30/ 12/31/ 12/31/
2004 2003 2004 2003 2004 2003
Premiums
Adjusted written
premiums (statutory) $1,528 $1,374 $2,278 $2,090 $2,789
"Written premium
adjustment --
statutory only" (4) 39 (4) 46 26
Reported written
premiums
(statutory)* $1,524 $1,413 $2,274 $2,136 $2,815
Unearned premiums
change (92) (128) (108) (173) (162)
Earned premiums $1,432 $1,285 $2,166 $1,963 $2,653
Statutory combined ratio
Reported statutory
combined ratio* 88.1% 95.7% 91.4% 96.0% 94.2%
"Written premium
adjustment --
statutory only" NM NM NM NM NM
One-time item 0.0 0.0 0.0 1.0 0.8
Adjusted statutory
combined ratio 88.1% 95.7% 91.4% 97.0% 95.0%
Less catastrophe losses 3.3 3.8 6.1 4.6 3.6
"Adjusted statutory
combined ratio
excluding catastrophe
losses" 84.8% 91.9% 85.3% 92.4% 91.4%
Reported commission
expense ratio* 18.6% 16.7% 19.0% 17.3% 17.6%
"Written premium
adjustment --
statutory only" NM NM NM NM NM
One-time item 0.0 0.0 0.0 0.0 0.0
Adjusted commission
expense ratio 18.6% 16.7% 19.0% 17.3% 17.6%
Reported other
expense ratio* 10.0% 9.0% 9.8% 8.1% 8.9%
"Written premium
adjustment --
statutory only" NM NM NM NM NM
One-time item 0.0 0.0 0.0 1.0 0.8
Adjusted other
expense ratio 10.0% 9.0% 9.8% 9.1% 9.7%
Reported statutory
expense ratio* 28.6% 25.7% 28.9% 25.5% 26.5%
"Written premium
adjustment --
statutory only" NM NM NM NM NM
One-time item 0.0 0.0 0.0 1.0 0.8
Adjusted statutory
expense ratio 28.6% 25.7% 28.9% 26.5% 27.3%
GAAP combined ratio
GAAP combined ratio 89.5% 96.8% 92.3% 96.7% 94.7%
One-time item 0.0 0.0 0.0 1.2 0.8
GAAP combined ratio
before one-time item 89.5% 96.8% 92.3% 97.9% 95.5%
Dollar amounts shown are rounded to millions; certain amounts may not add
due to rounding. Ratios are calculated based on whole dollar amounts. The sum
of quarterly amounts may not equal the full year as each is computed
independently.
NM - Not meaningful
* Statutory data prepared in accordance with statutory accounting rules
as defined by the National Association of Insurance Commissioners and
filed with the appropriate regulatory bodies.
Cincinnati Insurance Group
Quarterly Property Casualty Data - Commercial Lines
(Dollars in millions) Three months ended
12/31/ 9/30/ 6/30/ 3/31/ 12/31/ 9/30/ 6/30/ 3/31/
2004 2004 2004 2004 2003 2003 2003 2003
Premiums
Adjusted written
premiums
(statutory) $532 $537 $587 $507 $499 $495 $506
"Written premium
adjustment --
statutory only" 0 (25) 23 (16) 8 12 20
Reported written
premiums
(statutory)* $532 $512 $610 $491 $507 $507 $526
Unearned premiums
change 5 8 (91) 7 (19) (35) (76)
Earned premiums $537 $520 $519 $498 $488 $472 $450
Statutory combined
ratio
Reported statutory
combined ratio* 92.0% 84.1% 80.3% 89.7% 91.9% 91.9% 90.3%
"Written premium
adjustment --
statutory only" NM NM NM NM NM NM NM
One-time item 0.0 0.0 0.0 0.0 2.9 0.0 0.0
Adjusted statutory
combined ratio 92.0% 84.1% 80.3% 89.7% 94.7% 91.9% 90.3%
Less catastrophe
losses 9.0 3.0 0.2 2.9 2.0 2.9 1.0
"Adjusted statutory
combined ratio
excluding
catastrophe
losses" 83.0% 81.1% 80.1% 86.8% 92.7% 89.0% 89.3%
GAAP combined ratio
GAAP combined ratio 91.4% 84.4% 82.6% 88.5% 92.1% 91.4% 93.2%
One-time item 0.0 0.0 0.0 0.0 2.9 0.0 0.0
GAAP combined ratio
before one-time
item 91.4% 84.4% 82.6% 88.5% 95.0% 91.4% 93.2%
(Dollars in millions) Six months Nine months Twelve months
ended ended ended
6/30/ 6/30/ 9/30/ 9/30/ 12/31/ 12/31/
2004 2003 2004 2003 2004 2003
Premiums
Adjusted written
premiums (statutory) $1,124 $1,001 $1,656 $1,502 $2,009
"Written premium
adjustment --
statutory only" (2) 32 (2) 38 22
Reported written
premiums
(statutory)* $1,122 $1,033 $1,654 $1,540 $2,031
Unearned premiums
change (84) (111) (79) (130) (123)
Earned premiums $1,038 $922 $1,575 $1,410 $1,908
Statutory combined ratio
Reported statutory
combined ratio* 82.0% 91.1% 85.4% 91.4% 90.9%
"Written premium
adjustment --
statutory only" NM NM NM NM NM
One-time item 0.0 0.0 0.0 0.9 0.7
Adjusted statutory
combined ratio 82.0% 91.1% 85.4% 92.3% 91.6%
Less catastrophe
losses 1.6 2.0 4.1 2.0 2.2
"Adjusted statutory
combined ratio
excluding
catastrophe losses" 80.4% 89.1% 81.3% 90.3% 89.4%
GAAP combined ratio
GAAP combined ratio 83.5% 92.3% 86.2% 92.2% 91.2%
One-time item 0.0 0.0 0.0 1.0 0.8
GAAP combined
ratio before
one-time item 83.5% 92.3% 86.2% 93.2% 92.0%
Dollar amounts shown are rounded to millions; certain amounts may not add
due to rounding. Ratios are calculated based on whole dollar amounts. The sum
of quarterly amounts may not equal the full year as each is computed
independently.
NM - Not meaningful
* Statutory data prepared in accordance with statutory accounting rules as
defined by the National Association of Insurance Commissioners and filed with
the appropriate regulatory bodies.
Cincinnati Insurance Group
Quarterly Property Casualty Data - Personal Lines
(Dollars in millions) Three months ended
12/31/ 9/30/ 6/30/ 3/31/ 12/31/ 9/30/ 6/30/ 3/31/
2004 2004 2004 2004 2003 2003 2003 2003
Premiums
Adjusted
written
premiums
(statutory) $217 $224 $180 $191 $215 $212 $161
"Written premium
adjustment --
statutory only" 0 (2) 0 (3) 1 7 0
Reported
written
premiums
(statutory)* $217 $222 $180 $188 $216 $219 $161
Unearned
premiums
change (21) (25) 17 4 (26) (35) 18
Earned premiums $196 $197 $197 $192 $190 $184 $179
Statutory combined
ratio
Reported statutory
combined ratio* 114.4% 110.1% 98.7% 90.0% 108.1% 115.2% 99.5%
"Written premium
adjustment --
statutory only" NM NM NM NM NM NM NM
One-time item 0.0 0.0 0.0 0.0 3.8 0.0 0.0
Adjusted
statutory
combined ratio 114.4% 110.1% 98.7% 90.0% 111.9% 115.2% 99.5%
Less catastrophe
losses 19.3 15.7 (0.2) (3.9) 16.6 17.8 (1.3)
"Adjusted
statutory
combined ratio
excluding
catastrophe
losses" 95.1% 94.4% 98.9% 93.9% 95.3% 97.4% 100.8%
GAAP combined ratio
GAAP combined ratio 115.4% 111.6% 98.8% 90.7% 108.4% 116.1% 99.9%
One-time item 0.0 0.0 0.0 0.0 4.3 0.0 0.0
GAAP combined
ratio before
one-time item 115.4% 111.6% 98.8% 90.7% 112.7% 116.1% 99.9%
(Dollars in millions) Six months Nine months Twelve months
ended ended ended
6/30/ 6/30/ 9/30/ 9/30/ 12/31/ 12/31/
2004 2003 2004 2003 2004 2003
Premiums
Adjusted written
premiums (statutory) $404 $373 $622 $588 $780
"Written premium
adjustment --
statutory only" (2) 7 (2) 8 4
Reported written
premiums (statutory)* $402 $380 $620 $596 $784
Unearned premiums
change (8) (16) (30) (43) (39)
Earned premiums $394 $364 $590 $553 $745
Statutory combined ratio
Reported statutory
combined ratio* 104.3% 107.2% 107.6% 107.5% 102.9%
"Written premium
adjustment --
statutory only" NM NM NM NM NM
One-time item 0.0 0.0 0.0 1.3 1.0
Adjusted statutory
combined ratio 104.3% 107.2% 107.6% 108.8% 103.9%
Less catastrophe
losses 7.8 8.4 11.6 11.2 7.3
"Adjusted statutory
combined ratio
excluding
catastrophe losses" 96.5% 98.8% 96.0% 97.6% 96.6%
GAAP combined ratio
GAAP combined ratio 105.2% 108.1% 108.6% 108.2% 103.6%
One-time item 0.0 0.0 0.0 1.5 1.1
GAAP combined ratio
before one-time item 105.2% 108.1% 108.6% 109.7% 104.7%
Dollar amounts shown are rounded to millions; certain amounts may not add
due to rounding. Ratios are calculated based on whole dollar amounts. The sum
of quarterly amounts may not equal the full year as each is computed
independently.
NM - Not meaningful
* Statutory data prepared in accordance with statutory accounting rules
as defined by the National Association of Insurance Commissioners and filed
with the appropriate regulatory bodies.
SOURCE Cincinnati Financial Corporation
-0- 10/21/2004
/CONTACT: Investors: Heather J. Wietzel, +1-513-603-5236, or Media: Joan
O. Shevchik, +1-513-603-5323, both for Cincinnati Financial Corporation/
/Web site: http://www.cinfin.com /
(CINF)
CO: Cincinnati Financial Corporation
ST: Ohio
IN: FIN INS
SU: ERN ERP
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