Cincinnati Financial Corporation 8-K
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: June 4, 2008
(Date of earliest event reported)
CINCINNATI FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
| |
|
|
|
|
| Ohio
|
|
0-4604
|
|
31-0746871 |
(State or other jurisdiction
of incorporation)
|
|
(Commission
File Number)
|
|
(I.R.S. Employer
Identification No.) |
| |
|
|
|
|
| 6200 S. Gilmore Road, Fairfield, Ohio
|
|
|
|
45014-5141 |
| (Address of principal executive offices)
|
|
|
|
(Zip Code) |
Registrant’s telephone number, including area code: (513) 870-2000
N/A
(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:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13a-4(c))
TABLE OF CONTENTS
Item 7.01 Regulation FD Disclosure.
Cincinnati Financial Corporation began distributing the attached “2008 First-quarter Letter to
Shareholders,” furnished as an exhibit hereto and incorporated by reference herein, on June 4,
2008. This report should not be deemed an admission as to the materiality of any information
contained in the news release.
The information furnished in Item 7.01 of this report 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 — 2008 First-quarter Letter to Shareholders
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: June 4, 2008 |
/S/ Ken W. Stecher
|
|
| |
Kenneth W. Stecher |
|
| |
Chief Financial Officer, Executive Vice President, Secretary and Treasurer
(Principal Accounting Officer) |
|
| |
EX-99.1
| Cincinnati Financial Corporation
2008 First-quarter Letter to Shareholders
May 27, 2008
To Our Shareholders, Friends and Associates:
The early months of 2008 brought rocky weather of all kinds to Cincinnati Financial and The
Cincinnati Insurance Companies. Our policyholders were caught in severe storms, resulting in $43
million of catastrophe losses in the first quarter followed by additional events in April and May.
This increased storm activity contrasted sharply with the atypically storm-free 2007.
It’s no surprise that the timing and severity of storms is unpredictable. But we expect and plan
for them. We make sure we have staff trained to respond to policyholders and financial resources to
pay claims. Year after year, we maintain solid reinsurance agreements and policy reserves to add to
our flexibility.
We’re weathering other storms too.
The property casualty insurance underwriting cycle is at the stage called a soft market, with
carriers aggressively competing by cutting prices. We expect and plan for soft markets by building
up our underwriting strength, as well as agency and policyholder relationships. Our agents work
with our underwriters to help us identify and retain the highest quality accounts with clear
potential to be profitable over the long term. We continue to identify new ways to serve our
agencies, appoint new agencies and take advantage of our automation to write business in new areas.
Nor can we claim to be totally surprised at the stormy financial markets, which currently are
reducing our investment income growth rate and book value. The current storm is widespread and
powerful, yet our premiums-to-surplus ratio remains a healthy 0.75 to 1, and we remain one of the
few insurer groups with A.M. Best Co’s highest rating, the A++ (Superior). We believe our total
return investment philosophy, which encompasses selecting and holding securities that offer both
current income and appreciation potential, will yet prove to be the most enduring shelter from this
storm’s worst damage.
You’ll see the impact of all of these storms in our first-quarter results — and you’ll also see
that they did not cause us to change our outlook for full-year 2008. At our annual meeting of
shareholders we discussed our belief that we can still achieve modest full-year property casualty
profitability, total premiums as much as 5 percent lower than the 2007 level and growth in
investment income.
Yes, it’s been rocky weather to start 2008 with the confluence of higher storm claims, market
competition and a difficult investment environment, and the rain continues to fall. We’re going to
focus on our proven strategies, deliberately conceived to produce a stronger company over the long
term and to take us through all kinds of weather and economic cycles. Our goal remains to increase
your return on your investment.
We believe better weather will return.
Sincerely,
/S/ John J. Schiff, Jr. /S/ James E. Benoski
—— —
John J. Schiff, Jr., CPCU James E. Benoski
Chairman and Chief Executive Officer Vice Chairman, President, Chief Operating Officer,
and Chief Insurance Officer |
| www.cinfin.com,
About the Company
Cincinnati Financial meets the
needs of agencies and policyholders
through our insurance group and
three complementary subsidiaries:
The Cincinnati Insurance Company
leads our A++ A.M. Best-rated
standard market property casualty
insurance group, which includes
The Cincinnati Casualty Company
and The Cincinnati Indemnity
Company. This group markets a
broad range of business, homeowner
and auto policies through our
select group of local independent
insurance agencies in 34 states.
These companies support each
agency’s ability to provide
exceptional value and service to
the people and businesses in its
community. Our local field
representatives work out of their
homes, customizing products to
meet policyholder needs,
responding personally and promptly
to claims and strengthening
relationships.
Two other subsidiaries of
The Cincinnati Insurance Company
also market insurance products.
The Cincinnati Life Insurance
Company, rated A+ by A.M. Best,
markets life insurance policies,
disability income policies and
annuities. The Cincinnati
Specialty Underwriters Insurance
Company, rated A by A.M. Best,
began offering excess and surplus
lines insurance products in 2008.
Three subsidiaries of Cincinnati
Financial support our insurance
operations. CSU Producer Resources
Inc. offers insurance brokerage
services to our independent
agencies to support their access
to Cincinnati Specialty
Underwriters. CFC Investment
Company offers commercial leasing
and financing services to our
agents and their clients. CinFin
Capital Management Company
provides asset management services
to institutions, corporations and
nonprofit organizations.
2007 Fourth-quarter and Full-year Letter to Shareholders - mid-February 2008
This message from our chairman and our president includes recent news
releases about financial results announced February 6 and actions taken
by the board of directors at its February 1 meeting. The Cincinnati
Experience, a profile of our operating philosophy, accompanies this
letter.
The Cincinnati Experience - mid-February 2008
The Cincinnati Insurance Company, Cincinnati Financial Corporation’s
lead subsidiary, ranks among the top 25 U.S. property casualty insurer
groups based on net written premiums. In The Cincinnati Experience,
you’ll read about how our relationship-based approach creates value and
loyalty, supporting premium growth.
2007 Annual Report on Form 10-K - late-February 2008
The Annual Report on Form 10-K is a detailed document published by
every publicly traded company as required by the U.S. Securities and
Exchange Commission. In our report, we describe your company’s
operations, its results and trends, along with supporting data,
discussions, audited financial statements and accompanying notes.
2008 Shareholder Meeting Notice and Proxy Statement -mid-March
2008
This statement informs you of items requiring shareholder action at the
2008 Annual Meeting of Shareholders on May 3, 2008. It identifies board
members, detailing director and executive officer compensation and board
activities. Notice cards, mailed in March, tell how to easily obtain the
Proxy Statement and vote.
Chairman and President’s Letter - late-March 2008
Accompanying the Proxy Statement are the 2007 condensed balance sheets
and income statements, six years of summary financial data and an
annual message from our chairman and our president. Their letter
presents management’s perspectives on your company’s 2007 performance
and trends that may affect performance in 2008 and beyond.
First-quarter 2008 Letter to Shareholders - mid-May 2008
This message from our chairman and our president includes recent news
releases about financial results announced April 30, results of
shareholder votes at the 2008 Annu
al Meeting of Shareholders and
actions of the board at its May meeting. For additional details, see
our Quarterly Report on Form 10-Q, filed with the SEC by May 12, 2008.
Second-quarter 2008 Letter to Shareholders - mid-August 2008
This message from our chairman and our president includes our August
6 news release with financial results. For additional details, see
our Quarterly Report on Form 10-Q, filed with the SEC by August 11,
2008.
Third-quarter 2008 Letter to Shareholders - mid-November 2008
This message from our chairman and our president includes our October
29 news release with financial results. For additional details, see our
Quarterly Report on Form 10-Q, filed with the SEC by November 10, 2008. |
| Recent News Releases
Cincinnati Financial Reports First-quarter 2008 Results
Cincinnati, April 30, 2008 — Cincinnati Financial Corporation (Nasdaq: CINF) today reported:
· First-quarter net loss of $42 million, or 26 cents per
share, compared with net income of $194 million, or
$1.11 per share, in the first quarter of 2007. The
realized investment loss in the first quarter of 2008
included other-than-temporary impairment charges of
$214 million largely due to recognition on the income
statement of significant declines in market values of
four equity investments. These non-cash charges lower
the carrying value of these investments.
· Operating income* of $109 million, or 66 cents per
share, compared with $153 million, or 88 cents per
share. Catastrophe losses reduced first-quarter
operating income by 17 cents compared with 1 cent in
last year’s first quarter.
· Total property casualty underwriting profit of $10
million compared with strong $81 million for the first
quarter of 2007.
Financial Highlights
(Dollars in millions except share data) Three months ended March 31,
2008 2007 Change %
—— —— —
Revenue Highlights
Earned premiums $780 $815 (4.2) |
| Investment income 152 148 2.6 |
| Total revenues 704 1,031 (31.7) |
| Income Statement Data
Net income (loss) $(42) $194 nm
Net realized investment gains and losses (151) 41 nm
—— —
Operating income* ___$ 109 ___$ 153 (29.0) |
| —— —
Per Share Data (diluted)
Net income (loss) $(0.26) $1.11 nm
Net realized investment gains and losses (0.92) 0.23 nm
—— —
Operating income* $___0.66 ___$ 0.88 (25.0) |
| —— —
Book value $33.40 $39.08 (14.5) |
| Cash dividend declared $0.39 $0.355 9.9 |
| Weighted average shares outstanding 165,105,311 174,274,157 (5.3) |
| Insurance Operations Highlights |
| · 98.6 percent first-quarter 2008 property casualty
combined ratio, compared with 89.6 percent for the
2007 first-quarter.
· Catastrophe losses added 5.7 percentage points to the
property casualty combined ratio for the 2008 first
quarter, compared with an unusually low 0.4 percentage
points for the same quarter one year ago.
· Commercial and personal lines marketplace competition
continues to intensify. First-quarter 2008 property
casualty net written premiums decreased 8.3 percent,
reflecting softer pricing, disciplined underwriting
ad timing differences.
· 5 cents per share contribution from life insurance
operations to first-quarter operating income, down
from 7 cents.
Investment and Balance Sheet Highlights
· 2.6 percent growth in pretax investment income.
· Book value of $33.40 per share compared with $35.70
at year-end 2007. Invested assets and book value
declined primarily on lower market values of financial
sector equity holdings.
· 2.93 million shares of common stock repurchased at a
cost of $109 million.
Full-year 2008 Outlook Unchanged**
· Property casualty net written premiums could decline
as much as 5 percent for the full year due to
competitive pricing.
· Combined ratio could be in the 96 percent to 98
percent range for the full year.
· Investment income growth is expected to be below
last year’s 6.6 percent increase as financial sector
holdings evaluate dividend levels. Portfolio
strategies continue to focus on balancing near-term
income generation with long-term book value growth.
* The Definitions of Non-GAAP Information and Reconciliation to Comparable GAAP Measures on
defines and reconciles measures presented in this release that are not based on Generally
Accepted Accounting Principles or Statutory Accounting Principles.
** Forward-looking statements and related assumptions are subject to the risks outlined in the
company’s safe harbor statement (see Page 13). nm Not meaningful |
| Challenging Markets — Insurance and Investments
Chairman and Chief Executive Officer John J. Schiff,
Jr., CPCU, commented, “This was a tough quarter for
Cincinnati Financial as both the insurance and investment
markets presented unusual challenges. Soft pricing in the
property casualty insurance market pressured our growth and
profitability while pressure on financial stocks in our
portfolio reduced our net income and book value.
“We firmly believe — and our 55 plus year history
supports our confidence — that Cincinnati’s strategies will
work as designed, helping us rise above these challenges.
After carefully reviewing our position, we are confirming
our previously announced outlook, including all of our
estimates for full-year performance. We will continue to
support agents by providing local service and local
decision making authority. We will continue to invest,
looking for opportunities that will let us ride out this
market cycle with the high level of financial strength and
stability that our agents and policyholders rely on.”
Long-term Investment in Property Casualty Business
James E. Benoski, vice chairman, president and chief
insurance officer, said, “Our new excess and surplus lines
operation is off to a good start. It increases our
underwriting capabilities, adding a new layer of
flexibility to write the whole account, even when part of
it isn’t a good fit for a standard market business policy.
We began quoting and issuing excess and surplus business
during the first quarter, adding almost $1 million to net
written premiums and putting much more in the pipeline.”
“We initiated our excess and surplus business with the
ability to underwrite general liability in five states. We
plan to expand both coverage offerings and operating
territory. By year-end, we plan to offer commercial
property insurance, along with miscellaneous professional
liability and excess casualty. Cincinnati agents benefit
not only from prompt and efficient policy processing, but
also from the ease of accessing services such as loss
control and personal attention from knowledgeable
underwriters. Our reputation for superb claims handling and
other value-added services also is encouraging agencies to
select Cincinnati’s excess and surplus lines carrier as
their preferred market to serve this segment of their
clients. We’re very satisfied with progress to date.”
Benoski added, “This year began with severe weather
in the South and Midwest. We incurred $43 million of
catastrophe losses during the quarter, quite a contrast to
$3 million for last year’s first quarter. Of almost 2,500
catastrophe claims our commercial and personal
policyholders reported in the five events during the
quarter, approximately 85 percent are already closed. Our
claims representatives’ prompt responses and personal
service are creating tremendous policyholder loyalty that
will help agents market Cincinnati policies in the current
competitiv marketplace.”
2008 Property Casualty Outlook Update
Kenneth W. Stecher, chief financial officer and
executive vice president, commented, “We continue to expect
our full-year 2008 results will reflect current commercial
lines pricing trends, leading to as much as a 5 percent
decline in net written premiums and a combined ratio in the
range of 96 percent to 98 percent. Softer pricing is likely
to continue to challenge us as we hold steady to our core
business values of strong agency relationships,
policyholder retention and accurate risk classification.
“We also continue to make deliberate decisions not to
write or renew certain business. In this environment, we
have been careful to maintain our underwriting discipline.
Across our industry, the expectation is for full-year 2008
net written premiums to decline 0.5 percent with the
combined ratio at 98.6 percent.&
#148;
Stecher noted that the combined ratio target relies on three assumptions:
· Current accident year loss and loss expense ratio
excluding catastrophe losses — Will reflect the same
market trends that contributed to an increase in this
ratio in 2007 and are further pressuring the 2008
ratio.
· Catastrophe loss ratio — May contribute approximately
4.5 percentage points to the full-year 2008 combined
ratio. Catastrophes are unpredictable for any given
year. These losses have contributed on average 3.7
percentage points to the company’s combined ratio in
the past 10 years, ranging from 2007’s low of 0.8
points to 1998’s high of 6.1 points.
· Savings from favorable development on prior period
reserves — May benefit the full-year 2008 combined
ratio by approximately 4 percentage points based on
current trends. Even as market conditions soften,
management continues to rely on sound actuarial
analysis in determining loss and loss expense
reserves.
Stecher added, “We believe this level of full-year
performance will allow us to sustain our industry leading
position in the commercial lines insurance marketplace. We
are taking steps in our personal lines insurance operations
to enhance our opportunities in the changing marketplace.
We also expect our life insurance business to continue its
contribution to our earnings.
“As the preferred market for our agents’ best
business, we are well positioned to carry out our
commitments, supporting market stability and contributing
to their success. While we believe we may see a positive
contribution from our new excess and surplus lines
operations, our 2008 targets do not take into account any
contribution. It will take some time before that operation
is of sufficient size to materially influence our overall
corporate results.” |
| Investment Performance Affected by Recent Market Activity
Schiff commented, “Our equity investing strategy has
been key to the long-term growth of our assets and
shareholders’ equity. We identify companies with the
potential for sales, earnings and dividend growth, a strong
management team and favorable outlook. Over the years, these
equities have generally offered a steady flow of dividend
income along with the potential for capital appreciation.
“Broad concerns about credit quality, liquidity and
the general health of the economy have disrupted the
financial markets, causing unusual volatility in our equity
portfolio. Valuations of a number of our holdings have been
significantly influenced and, in some cases, dividend
payouts have been reduced. As a result, our book value
declined further in the first quarter. We are making some
changes in our portfolio and we took a non-cash charge to
earnings to reduce our carrying cost for some holdings,
including four equity investments. We adjusted our carrying
value to quarter-end market value because we concluded that
the decline in the value of these holdings to below our
cost was ‘other than temporary.’ Other-than-temporary
impairment losses represent a non-cash charge to income.
“Our bond portfolio, however, continued to hold
steady, with a total value of $5.965 billion at
quarter-end, up 2.0 percent from the year-end level. The
flight to quality and the resulting lower interest rates
for risk-free securities continued to support bond
valuations, helping offset the effects of increasing risk
premiums
and credit spreads in the first quarter of 2008. Our focus
remains on portfolio strategies to balance near-term income
generation and long-term book value growth. While decisions
to sell investments that no longer meet our investment
criteria could have a negative impact on income in the
short-term, reinvestment in securities with lower, but more
secure, yields should help us weather the present storm.
“We are committed to sustaining the strong
capitalization that supports our high insurer financial
strength ratings, giving our agents a distinct marketing
advantage for their value-oriented clients. On March 26,
A.M. Best Co. affirmed our issuer credit and financial
strength ratings. Best said its stable outlook on our
ratings reflects our group’s ‘superior risk-adjusted
capitalization and its historical ability to generate
solid operating results through underwriting cycles, which
will enable the group to absorb any near-term increases in
volatility as a result of its investment philosophy or
weather-related events.’
“Our ratio of property casualty written premiums to
statutory surplus, an important measure of that financial
strength, rose slightly at March 31, 2008, to 0.75 from
0.72 at year-end 2007, but remains more than 10 percent
stronger than the industry average,” Schiff noted.
“Cincinnati Financial has the resources and tenacity to
get through times such as these in good shape.
“We returned $168 million to shareholders in the first
three months of 2008 through cash dividends and repurchase
activity,” Schiff concluded.
Combined Property Casualty Insurance Operations
(Dollars in millions) Three months ended March 31,
2008 2007 Change %
—— —— — |
| Written premiums ___$ 776 ___$ 846 (8.3) |
| —— —
Earned premiums $751 $785 (4.3) |
| Loss and loss expenses excluding catastrophes 458 455 0.8 |
| Catastrophe loss and loss expenses 43 3 1,230.8 |
| Commission expenses 144 161 (10.9) |
| Underwriting expenses 93 82 14.5 |
| Policyholder dividends 3 3 (1.7) |
| —— —
Underwriting profit $___10 ___$ 81 (87.1) |
| —— —
Ratios as a percent of earned premiums: |
| Loss and loss expenses excluding catastrophes 61.0 % 57.9 %
Catastrophe loss and loss expenses 5.7 0.4 |
| —— —
Loss and loss expenses 66.7 58.3 |
| Commission expenses 19.1 20.5 |
| Underwriting expenses 12.4 10.4 |
| Policyholder dividends 0.4 0.4 |
| —— —
Combined ratio ___98.6 % ___89.6 %
—— — |
|
· 8.3 percent decline in first-quarter
property-casualty net written premiums
reflecting softer pricing, disciplined
underwriting and timing differences.
· $74 million in first-quarter 2008 new business written
directly by agencies compared with $80 million in last
year’s first quarter, down 7.5 percent.
· Excess and surplus lines contributed almost $1
million in net written premiums in its first quarter
of operations.
· Lower level of commission expense, largely due
to softer pricing, offset higher other
underwriting expenses.
· 1,098 agency relationships with 1,337 reporting
locations marketed our insurance products at March
31, 2008, up from 1,092 agency relationships with
1,327 reporting locations at year-end 2007.
· $13 million of net savings from favorable development on
prior period reserves improved the first-quarter 2008
combined ratio by 1.8 percentage points, compared with $30
million and 4.0 points for the same period in 2007.
· $43 million in first-quarter 2008 catastrophe losses,
due primarily to wind and hail damage from storms in the
South and Midwest.
Catastrophe Loss and Loss Expenses Incurred
(In millions, net of reinsurance) Three months ended March 31,
Commercial Personal
Dates Cause of loss Region lines lines Total
—— —— —— —— —— —
2008
Jan. 4-9 Wind, hail, flood, freezing South, Midwest $3 $3 $ 6
Jan. 29-30 Wind, hail Midwest 5 5 10
Feb. 5-6 Wind, hail, flood Midwest 8 9 17
Mar. 14 Tornadoes, wind, hail, flood South 5 1 6
Mar. 15-16 Wind, hail South 4 4 8
Development on 2007 and prior catastrophes (3) (1) (4)
—— —— —
Calendar year incurred total $___22 ___$ 21 ___$ 43
—— —— —
2007
Jan. 12-15 Wind, hail, ice, snow Midwest $2 $1 $ 3
Feb. 14-15 Wind, hail, ice, snow Mid-Atlantic 1 1 2
Feb. 23-25 Wind, hail, ice, snow Midwest 3 0 3
Mar. 1-2 Wind, hail, flood South 6 2 8
Development on 2006 and prior catastrophes (2) (11) (13)
—— —— —
Calendar year incurred total ___$ 10 $___(7) ___$ 3
—— —— —
Insurance Segment Highlights
Commercial Lines Insurance Operations
(Dollars in millions) Three months ended March 31,
2008 2007 Change %
—— —— —
Written premiums $___625 ___$ 693 (9.8)
—— —
Earned premiums $574 $604 (4.9)
Loss and loss expenses excluding catastrophes 343 344 (0.2)
Catastrophe loss and loss expenses 22 10 110.4
Commission expenses 109 123 (12.0)
Underwriting expenses 68 57 21.9
Policyholder dividends 3 3 (1.7)
—— —
Underwriting profit $___29 ___$ 67 (56.8)
—— —
Ratios as a percent of earned premiums:
Loss and loss expenses excluding catastrophes 59.7 % 56.9 %
Catastrophe loss and loss expenses 3.9 1.8
—— —
Loss and loss expenses 63.6 58.7
Commission expenses 18.9 20.4
Underwriting expenses 11.9 9.3
Policyholder dividends 0.6 0.5
—— —
Combined ratio ___95.0 % ___88.9 %
—— —
|
| · 9.8 percent lower first-quarter 2008 commercial
lines net written premiums, primarily a result of
intensifying market competition.
· $66 million in first-quarter 2008 commercial lines
new business written directly by agencies compared
with $72 million in last year’s first quarter, down
8.3 percent.
· 95.0 percent first-quarter 2008 commercial lines
combined ratio, an increase of 6.1 percentage points
over first-quarter 2007 due mostly to higher
catastrophe losses, lower pricing, normal loss cost
inflation and higher underwriting expenses. Lower
commission expenses partially offset these
increases.
· 3.9 percentage points of first-quarter 2008
catastrophe losses, more than double last year’s
unusually low level.
· 2.5 percentage point improvement in combined ratio
due to savings from favorable development on prior
period reserves for the first three months of both
2008 and 2007.
· Commercial lines insurance industry combined ratio
for full-year 2008 estimated at 97.5 percent with
decline in net written premiums estimated at 2.3
percent.
Personal Lines Insurance Operations
(Dollars in millions) Three months ended March 31,
2008 2007 Change %
—— —— — |
| Written premiums ___$ 150 ___$ 153 ___(2.0)
—— —— —
Earned premiums $177 $181 (2.2) |
| Loss and loss expenses excluding catastrophes 115 111 3.7 |
| Catastrophe loss and loss expenses 21 (7) 376.2 |
| Commission expenses 35 38 (7.7) |
| Underwriting expenses 24 25 (3.6) |
| —— —— —
Underwriting profit (loss) $___(18) ___$ 14 ___(223.6)
—— —— —
Ratios as a percent of earned premiums: |
| Loss and loss expenses excluding catastrophes 65.1 % 61.4 %
Catastrophe loss and loss expenses 11.6 (4.1) |
| —— —
Loss and loss expenses 76.7 57.3 |
| Commission expenses 19.8 20.9 |
| Underwriting expenses 13.6 13.8 |
| —— —
Combined ratio ___110.1 % ___92.0 %
—— — |
| · 2.0 percent lower first-quarter 2008 personal lines
net written premiums on lower policy counts, steady
new business levels and pricing changes that reduced
premiums per policy.
· $8 million in first-quarter 2008 personal lines new
business written directly by agencies, down 0.5 percent.
· 110.1 percent first-quarter 2008 personal lines
combined ratio. The ratio reflects significantly
higher catastrophe losses and a modest increase in the
loss and loss expense ratio excluding catastrophe
losses due to lower pricing and normal loss cost
inflation.
· 11.6 percentage-point contribution from first
quarter 2008 catastrophe losses, compared with a
benefit of 4.1 points in the first quarter of 2007
due to savings primarily from fourth-quarter 2006
events.
· $1 million of reserve strengthening added 0.7 percentage
points to the combined ratio in the first three months of
2008, compared with 9.0 percentage points of savings from
favorable development on prior period reserves for the same
period last year. 2007 savings included 6.1 points in
savings on prior period catastrophe loss reserves.
· Personal lines insurance industry combined ratio for
full-year 2008 estimated at 99.5 percent with net
written premiums rising approximately 1.4 percent. |
| Life Insurance Operations |
| (In millions) Three months ended March 31,
2008 2007 Change %
—— —— — |
| Written premiums ___$ 44 ___$ 42 3.8 |
| —— —
Earned premiums $ 29 $30 (3.2) |
| Investment income, net of expenses 29 28 2.7 |
| —— —
Total revenues, excluding realized investment gains and losses 59 59 (1.4) |
| —— —
Contract holders benefits 35 27 30.4 |
| —— —
Total benefits and expenses 47 40 15.7 |
| —— —
Net income before income tax and realized investment gains and losses 12 19 (37.2) |
| —— —
Net income before realized investment gains and losses $ ___8 $___13 (36.0) |
| · $44 million in first-quarter 2008 life insurance
segment net written premiums. Written premiums include
life insurance, annuity and accident and health
premiums.
· 3.2 percent increase to $35 million in written
premiums for life insurance products in total.
· 9.0 percent rise to $18 million in term life
insurance written premiums, reflecting marketing
advantages of competitive, up to date products,
providing close personal attention and offering
policies backed by financial strength and stability.
· 1.5 percent rise in face amount of life policies
in force to $62.803 billion at March 31, 2008,
from $61.875 billion at year-end 2007.
· $5 million decrease in first-quarter 2008 operating
profit, primarily due to less favorable mortality
experience.
· 2008 plans include redesign of all life term
insurance products. In addition to the worksite term
product, updates are planned for the full worksite
life portfolio. These improvements support
opportunities to cross-sell life insurance products to
clients of the independent agencies that sell
Cincinnati’s property casualty insurance policies.
Investment and Balance Sheet Highlights
Investment Operations |
| (In millions) Three months ended March 31,
2008 2007 Change %
—— —— — |
| Investment expenses (2) (3) 40.0 |
| —— —
Total investment income, net of expenses 152 148 2.6 |
| —— —
Investment interest credited to contract holders (16) (14) 6.0 |
| —— —
Realized investment gains and losses summary: |
| Realized investment gains and losses (16) 61 nm
Change in fair value of securities with embedded derivatives (2) 1 nm
Other-than-temporary impairment charges (214) 0 nm
—— —
Total realized investment gains and losses (232) 62 nm
—— —
Investment operations income (loss) ___$ (96) ___$ 196 nm
—— — |
| · 2.6 percent growth in first-quarter 2008 net
investment income due to cash flow for new investments
that produced higher interest and dividend income.
· $232 realized investment loss in first-quarter 2008
compared with realized investment gain of $62 million in
first quarter 2007.
· First-quarter pretax realized investment loss included $214 million non-cash charge for
other-than-temporary impairments that recognize significant market value declines, largely for
four equity holdings. |
| (Dollars in millions except share data) At March 31, At December 31,
2008 2007
—— — |
| Balance sheet data
Invested assets $11,704 $12,261 |
| Total assets 15,945 16,637 |
| Shareholders’ equity 5,449 5,929 |
| Book value per share 33.40 35.70 |
| Debt-to-capital ratio 13.6 % 12.7 %
—— —— — |
| Three months ended March 31,
2008 2007 |
| —— —
Performance measures
Comprehensive income (loss) $(313) $13 |
| Return on equity, annualized (3.0) % 11.5 %
Return on equity, annualized, based on comprehensive income (loss) (22.1) 0.8
· $11.704 billion in investment assets at March 31, 2008,
compared with $12.261 billion at year-end 2007. The
decrease in investment assets was largely due to lower
market valuations of equity holdings, primarily in the
financial sector, reflecting broad concerns across the
marketplace about credit quality, liquidity and the general
health of the economy.
· Shareholders’ equity declined to $5.449 billion, or
$33.40 per share, at March 31, 2008, down from $5.929
billion, or $35.70, at year end 2007, largely due to
lower market values for investment assets.
· Lower market values were the primary reason for the
comprehensive loss for the first three months of 2008.
Net and comprehensive loss resulted in negative
returns on equity for the 2008 first quarter.
· $4.027 billion in statutory surplus for the property
casualty insurance group at March 31, 2008, compared with
$4.307 billion at year-end 2007. The ratio of common stock
to statutory surplus for the property casualty insurance
group portfolio was 82.3 percent at March 31, 2008,
compared with 86.0 percent at year-end 2007.
· 27.4 percent ratio of investment securities held at
the holding-company level to total
holding-company-only assets at March 31, 2008,
comfortably within management’s below-40 percent
target.
· Repurchases of the company’s common stock totaled
2.93 million shares at a cost of $109 million in
the first quarter. Approximately 9 million shares
remain authorized for repurchase.
For additional information or to hear a replay of the April 30 conference call webcast, please
visit www.cinfin.com/investors. |
| Cincinnati Financial Corporation
Condensed Balance Sheets and Statements of Operations (unaudited)
(Dollars in millions) March 31, December 31,
2008 2007
—— —
Assets
Investments $11,704 $12,261
Cash and cash equivalents 237 226
Premiums receivable 1,113 1,107
Reinsurance receivable 757 754
Other assets 2,134 2,289
—— —
Total assets ___$ 15,945 ___$ 16,637
—— —
Liabilities
Insurance reserves $5,524 $5,445
Unearned premiums 1,585 1,564
Deferred income tax 750 977
6.125% senior notes due 2034 371 371
6.9% senior debentures due 2028 28 28
6.92% senior debentures due 2028 392 392
Other liabilities 1,846 1,931
—— —
Total liabilities ___10,496 ___10,708
—— —
Shareholders’ Equity
Common stock and paid-in capital 1,448 1,442
Retained earnings 3,298 3,404
Accumulated other comprehensive income 1,880 2,151
Treasury stock (1,177) (1,068)
—— —
Total shareholders’ equity 5,449 5,929
—— —
Total liabilities and shareholders’ equity ___$ 15,945 ___$ 16,637
—— —
(Dollars in millions except per share data) Three months ended March 31,
2008 2007
—— —
Revenues
Earned premiums $780 $815
Investment income, net of expenses 152 148
Realized investment gains and losses (232) 62
Other income 4 6
—— —
Total revenues ___704 ___1,031
—— —
Benefits and Expenses
Insurance losses and policyholder benefits 536 484
Commissions 150 170
Other operating expenses ___118 ___106
—— —
Total benefits and expenses 804 760
—— —
Income Before Income Taxes (100) 271
Provision for Income Taxes (58) 77
—— —
Net Income (Loss) ___$ (42) ___$ 194
—— —
Per Common Share:
Net income-basic $(0.26) $1.12
Net income-diluted $(0.26) $1.11
|
| Other News Releases
Cincinnati Financial Corporation Declares Regular Quarterly Cash Dividend
Cincinnati, May 23, 2008 — Cincinnati Financial
Corporation (Nasdaq: CINF) today announced that the
executive committee of its board of directors has
declared a 39 cents per share regular quarterly cash
dividend payable July 15, 2008, to shareholders of
record on June 20, 2008.
The current dividend level reflects the 9.9 percent
increase in the quarterly dividend rate declared in
February, setting the stage for 2008 to become the 48th
year of consecutive increases in the indicated annual cash
dividend.
Chairman and Chief Executive Officer John J. Schiff,
Jr., CPCU commented, “Our board of directors believes we
have the operating strength to maintain our outstanding
dividend record. We plan to increase shareholder value over
the long term by continuing to focus on strong agency
relationships, front-line underwriting, quality claims
service, solid policy reserves and total return investing.”
Cincinnati Financial Corporation Holds Shareholders’ and Directors’ Meetings
· Directors elected and board committees reaffirmed
· Hollenbeck elevated to corporate officer
Cincinnati, May 5, 2008 — Cincinnati Financial
Corporation (Nasdaq: CINF) today announced that at the
company’s annual meeting on May 3, 2008, shareholders
elected one director for a term of two years and four
directors for terms of three years to the 13 member board.
Shareholders also ratified the selection of Deloitte &
Touche LLP as independent registered public accounting firm
and approved amending the company’s Code of Regulation to
provide express authority for uncertificated shares.
The board of directors also met and named
Martin F. Hollenbeck, CFA, CPCU, as senior vice president
and manager — investments, assistant secretary and
assistant treasurer for Cincinnati Financial Corporation.
Hollenbeck currently is vice president and manager -
investments for the company’s insurance subsidiaries, as
well as president and chief operating officer of CFC
Investment Company and president and member of the board of
CinFin Capital Management Company. In addition to the
chartered financial analyst and chartered property casualty
underwriter professional designations, he holds a master’s
degree in business from Xavier University and a bachelor’s
degree in economics from Northern Kentucky University.
Chairman and Chief Executive Officer John J. Schiff,
Jr., CPCU, commented: “We thank shareholders for approving
our selection of Deloitte & Touche and our nominees to the
board. The directors who were elected Saturday, as well as
our continuing directors, bring their extensive business
knowledge and experience to help guide Cincinnati Financial
through challenges and opportunities. We also welcome Marty
as a corporate officer. Marty has served our company for
more than 20 years. We greatly appreciate his leadership of
our investment operations, which continue to drive the
company’s long-term performance.” Elected to the board were
Kenneth C. Lichtendahl, president, chief executive officer
and director of Tradewinds Beverage Company, based in
Cincinnati;
W. Rodney McMullen, vice chairman of The Kroger Co., based
in Cincinnati; Thomas R. Schiff, chairman, chief executive
officer and agent of John J. & Thomas R. Schiff & Co. Inc.,
a privately owned independent insurance agency, based in
Cincinnati; John F. Steele, Jr., chairman and chief
executive officer of Hilltop Basic Resources Inc., a family
owned aggregates and ready-mixed concrete supplier to the
construction industry, based in Cincinnati; and Larry R.
Webb, CPCU, president, director, principal owner and agent
of Webb Insurance Agency Inc., a privately owned
independent insurance agency based in Lima, Ohio.
The board also announced committee service for
the
coming year, in line with the independence requirements
of applicable law and the listing standards of Nasdaq:
· Audit — William F. Bahl, Gregory T. Bier, Dirk J.
Debbink, Kenneth C. Lichtendahl (chair), Gretchen
W. Price, Douglas S. Skidmore and John F. Steele,
Jr.
· Compensation — Kenneth C. Lichtendahl,
W. Rodney McMullen (chair), Gretchen W. Price and
E. Anthony Woods.
· Executive — William F. Bahl, James E. Benoski,
Dirk J. Debbink, W. Rodney McMullen, John J. Schiff, Jr.
(chair), Larry R. Webb and E. Anthony Woods.
· Investment — William F. Bahl, James E.
Benoski, Gregory T. Bier, W. Rodney
McMullen, John J. Schiff, Jr. (chair),
Thomas R. Schiff and
E. Anthony Woods. Richard M. Burridge, CFA, continues
to serve as committee adviser.
· Nominating — William F. Bahl (chair),
Kenneth C. Lichtendahl, Gretchen W. Price
and Douglas S. Skidmore.
Schiff noted, “Through their committee assignments and
their dedication to understanding our insurance business,
our directors work toward a prosperous future for the
shareholders of Cincinnati Financial, supporting stability
for our agents, policyholders and associates.” |
| Inside Cincinnati
At the company’s annual meeting on May 3, 2008, Martin F. Hollenbeck, CFA, CPCU, was named a
corporate officer at the senior vice president level.
Since our last Letter to Shareholders, these associates merited promotions:
Scott Albaugh, AIM, CPCU — Associate Territory Manager
Greg Anderson — Senior Claims Specialist
Greg Aumann — Senior Systems Specialist
Scott Babb, AIC, AIM — Field Claims Manager
Michelle Baker — Senior Programmer Analyst
Jessica Ball — Senior Underwriter
Jennifer Bartos, AU — Underwriting Specialist
Nick Benjamin — Datacenter Facilities Manager
Ben Bessler — Senior Underwriter
Russ Blessing, AIS — Underwriting Specialist
Mindy Bockewitz, AU — State Agent
Mark Bowling — Senior Programmer Analyst
Christine Brant — Claims Specialist
Chris Byers — Underwriting Superintendent
Mitch Carson, ALCM, ARM, CSP — Loss Control Field Supervisor
Mario Castro, AIC — Claims Specialist
Marcie Caudill — Underwriting Superintendent
Connie Caudill, AIM — Underwriting Specialist
Chris Chapin, AIC, AIM — Field Claims Manager
Scott Chapman — Programmer
Angela Cheek, AIM, API, CPCU — Underwriting Specialist
Robert Cheeseman — Senior Network Engineer
Brian Clapp — Senior Regional Director
Jon Cooper, AIM, SCLA — Field Claims Manager
Steve Corbly, AIM, CPCU — Associate Territory Manager
Lynn Dassel, AIM, AU, CPCU — Senior Underwriting Manager
Dave Dassel, AIM, AIS — Underwriting Superintendent
Melissa Davidson — Claims Specialist
David DeMara, AIC — Field Claims Superintendent
Dumesha Dubose — Senior Underwriter
Mel Ducklo, API — Underwriting Specialist
Jana Emmons, API — Senior Underwriter
Ryan Evans — Senior Programmer
Alan Everson — Underwriting Specialist
Vicki Faller — Regulatory Affairs Analyst
Scot Feldmeyer, AIM — Underwriting Superintendent
Tim Fitz, AIC — Superintendent
Scott Fitzharris, AIM, API, CPCU — Underwriting Specialist
Steve Fogle — Associate Superintendent
Douglas Greer, AIS — Underwriting Superintendent
Forrest Gregg, Jr. — Chief Underwriting Specialist
Antonio Gregov, AIC — Senior Claims Specialist
Michelle Gregov, CPCU — Regional Director
Maureen Grogan, AU — Chief Underwriting Specialist
Michelle Grove — Underwriting Specialist
Tom Habig, AIC — Senior Claims Representative
Melissa Hallbach — Tax Manager
Chris Harrison, CPCU — Senior Field Analyst
Tom Heming — Senior Regional Director
Chris Hill — Underwriting Superintendent
Christine Horton, API — Senior Diamond Support Analyst
Lynn Hovekamp, AIC — Superintendent
Seddrick Hubbard — Underwriting Specialist
Melissa James — Senior Underwriter
Craig Jenkins, AIC — Field Claims Superintendent
Debbie Jenkins, CPCU — Regional Director
Ming Jiang — Senior Programmer Analyst
Josh Johnston, AIC — Claims Specialist
Sean Jones — Senior Underwriter
Pat Kalimootoo, AIS — Specialist
Terron Kemp, AIC — Senior Claims Specialist
Ken Kerby, AIC, AIM, CPCU — Associate Manager Claims Audit
Mark Kinzer — Senior Regional Director
Kevin Klatt, AIC — Senior Claims Representative
Kristy Koerner — Senior Underwriter
Shirley Krieger, AIC — Supervising Examiner
Shane Krummen — Specialist
Paul Kumpar — Senior Investigator
Kristen Kurtz, CPCU — Senior Underwriter
Joel LaFrange, ARM — Senior Loss Control Consultant
Scott Lagedrost — Senior Underwriter
Jason Laub, AIM — Underwriting Superintendent
Matt Laws, Jr. — State Agent
Matt Leugers — Programmer
Aaron Levenson — Programmer Analyst
Jack Lindeman — Underwriting Director
Patrick Loftis — Senior Investment Analyst
Dan Longacre, AIC — Senior Claims Specialist
La’Bri
na Love — Senior Underwriter
Robin Maddox — Regional Director
Dan McCaffrey, AFSB — Underwriting Director
Marcus McClellan, AIC, CPCU — Senior Claims Specialist
Scott McConkey, CLU, LUTCF — Senior Manager
Kurt McKenna, AIS — Underwriting Superintendent
Scott Meyer — Underwriting Specialist
Matthew Miller — Underwriting Specialist
Robert Miller — Personnel Superintendent
Jennifer Mitchell — Senior Requirements Analyst
Chris Monahan, AIM, CIC, CPCU — Field Director
Steven Mosure — Senior Claims Specialist
Dan Mullen — Supervisor Casualty Claims
im Murphy — Underwriting Specialist
Carl Musselman — Senior Machinery & Equipment Specialist
Rhonda Napper, AIM — Underwriting Superintendent
John Nicely — Systems Analyst
Ryan Osborn — Division Manager
Mike Otis — Regional Director
Kay Patch, AIC — Senior Claims Representative
Jay Patel — Systems Analyst
Sean Patrick — Senior Underwriter |
| Darla Pauley, AIC — Senior Claims Specialist
Dennis Phelps — Claims Specialist
Robert Polinchock — Machinery & Equipment Specialist
Betsy Pierce — Senior Programmer Analyst
John Redmond, CPCU — Regional Director
Jody Reisch — Regional Director
Ryan Rhoads — Senior Underwriter
Jody Rhude, CIC, CPCU — Field Director
Lisa Rhude, CIC, CPCU — Field Director
Darren Richter — Underwriting Specialist
Aaron Rieth — Senior Underwriter
Scott Robinson, AIM, ARe, CPCU — Senior Underwriting Manager
Angela Schneider, API — Underwriting Superintendent
Jim Shadle — Claims Specialist
Paul Shadrick, AIC — Senior Claims Representative
Brian Shaffer, AIM — Underwriting Superintendent
Bill Sheldon, CIC — Regional Director
Meg Shumaker — State Agent
Tammy Siler, CPCU — Chief Underwriting Specialist
Chris Snyder — Senior Underwriter
Alok Soni — Senior Systems Analyst
Damian Stark, AIM, API, AU, CPCU — Underwriting Specialist
Scott Stevens — Underwriting Specialist
Jim Stires — Field Director
Jason Stofel — Senior Underwriter
Lisa Sucher, AIC — Claims Specialist
Mary Sweeney — Specialist
Andy Tebbe, AIM, API — Underwriting Manager
Mary Thomas — Underwriting Specialist
Jeffrey Thullen — Lead Network Analyst
Julie Tucker, AIM, AIS, API — Underwriting Specialist
Thomas Ulrich — Senior Underwriter
Tracy Valis — Diamond Support Analyst
James Van Horn — Senior Claims Specialist
Doronna Vickers — Analyst
Jeff Viel, AIM, RPLU — Underwriting Director
Peggy Volk — Claims Specialist
Sherell Walker — Underwriting Specialist
Julie Wallace, AIT — Systems Analyst
Jennifer West, API, CPCU — Underwriting Specialist
Billy Williams — Database Engineer
Michael Wood, AIAF, CIA, CPA, CPCU — Internal Auditor Specialist
Glen Wooldridge — Senior Claims Specialist
Nicholas Wright — Senior Field Underwriter
aren Wright, API — Diamond Senior Analyst
Joe Wurzelbacher — Accountant
Joe Yannetti, CPCU — Underwriting Superintendent
John Zimmer — Chief Underwriting Specialist
Electronic Delivery
Cincinnati Financial Corporation is pleased to offer the convenience of electronic delivery of
shareholder communication, including annual reports, interim letters to shareholders and proxy
statements — even proxy voting online. With your consent and at no cost to you, we can notify you
by e-mail when these materials become available on the Internet at
Electronic delivery benefits you and your company:
· Immediate availability — Immediate availability of important information — no more waiting
for the mail to arrive.
· Less clutter — The average consumer is receiving more mail today than ever, making it easy to
miss important information.
· Cost savings — Electronic delivery saves money for Cincinnati Financial — your company.
Plus, it’s better for the environment.
You can benefit from electronic delivery whether you directly hold registered shares or hold
your investments through a participating brokerage/financial institution. You will need to provide
an e-mail address, account number(s) and the last four digits of the Social Security number of the
account holder. If you provide this information, you can give your consent for electronic delivery
immediately. While you may cancel your consent for electronic delivery at any time, we are
confident that you will find this option an efficient and effective way to receive important
information about your investment.
To enroll, select Electronic Delivery from the Investors page of If you hold multiple accounts
directly or through a
broker, you will need to enroll each account separately — including joint tenant and custodial
acounts — to stop paper mailings.
Enroll Today |
| Professional Development
We continue to build on the education and training
support your company offers to local independent agencies,
using this proven strength to help earn our position as the
preferred carrier in each agency. We have reorganized and
stepped up training activities to introduce newly appointed
agencies to our systems and processes. In June, we are
implementing a new approach, sending a quick-start team to
each new agency. These teams will demonstrate our
commitment to making it easy for agency staff to do
business with Cincinnati, introducing them to individuals
who can help them work effectively with tools from various
departments including Commercial Lines, Personal Lines,
Agency Accounting and Information Technology.
We encourage and reward associates who continue their
professional insurance education, earning credentials by
meeting
high academic, ethical and length-of-experience standards.
Congratulations to Shannon Daugherty and Greg Knifley who
completed a series of courses to earn the Chartered
Property Casualty Underwriter (CPCU) designation; to Ted
Hilgeman, who earned the Certified Public Accountant (CPA)
designation; and to Angela Burns who recently passed the
Ohio Bar Exam.
The ABC Award recognizes exemplary productivity,
service and quality in exceptional associates. The ABC Award
committee recently granted the quarterly Above and Beyond
the Call (ABC) award to Carrie McKitrick, AIM, CPCU,
Personal Lines, and Carol Ward, Headquarters Claims.
Congratulations to these quarterly winners!
Financial Services
The company’s three financial services subsidiaries
continue to successfully leverage our insurance
relationships and broaden our offerings. As of March 31,
2008, CFC Investment Company, which offers equipment and
vehicle leases and loans, reported 2,450 accounts
representing $83 million in net receivables. CinFin Capital
Management Company, which offers asset management services,
reported $957 million under management in 64 accounts.
CSU Producer Resources Inc., the new, wholly owned
insurance brokerage subsidiary of parent-company Cincinnati
Financial Corporation, began accepting excess and surplus
lines risks in Ohio, Indiana, Illinois, Wisconsin and
Georgia. CSU Producer Resources has binding authority on
all classes of business written through The Cincinnati
Specialty Underwriters Insurance Company and maintains
appropriate agent and surplus
lines licenses to process non-admitted business.
Cincinnati Speciality Underwriters and CSU Producer
Resources plan to expand into all states except Delaware
on an excess and surplus lines basis as the new companies
obtain the necessary state regulatory approvals.
We structured our new excess and surplus operations
to exclusively serve the needs of the independent agencies
that currently market our standard market insurance
policies. CSU Producer Resources currently markets and
underwrites general liability coverages and plans to
expand this to include commercial property, multi-peril
insurance, miscellaneous professional liability and excess
casualty in coming months. Our excess and surplus lines
operation issued nearly $1 million of new premiums in the
first quarter of 2008. |
| Safe Harbor
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 2007
Annual Report on Form 10-K, Item 1A, Risk Factors, Page 21.
Although we often review and update our forward-looking
statements when events warrant, we caution our readers that
we undertake no obligation to do so.
Factors that could cause or contribute to such
differences include, but are not limited to:
· Unusually high levels of catastrophe losses due to
risk concentrations, changes in weather patterns,
environmental events, terrorism incidents or other
causes
· Increased frequency and/or severity of claims
· Sustained decline in overall stock market values
negatively affecting the company’s equity portfolio
and book value; in particular a sustained decline
in the market value of Fifth Third shares, a
significant equity holding
· Securities laws that could limit the manner, timing
and volume of our investment transactions
· Recession or other economic conditions or
regulatory, accounting or tax changes resulting
in lower demand for insurance products
· Events, such as the subprime mortgage lending crisis, that lead to:
· Significant decline in the value of a particular
security or group of securities, such as our
financial sector holdings, 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
· Prolonged low interest rate environment or other
factors that limit the company’s ability to generate
growth in investment income or interest-rate
fluctuations that result in declining values of
fixed-maturity investments
· Inaccurate estimates or assumptions used
for critical accounting estimates
· Events or actions, including unauthorized
intentional circumvention of controls, that reduce
the company’s future ability to maintain effective
internal control over financial reporting under the
Sarbanes-Oxley Act of 2002
· Changing consumer buying habits and
consolidation of independent insurance agencies
that could alter our competitive advantages
· 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
· Delays or inadequacies in the development,
implementation, performance and benefits of
technology projects and enhancements
· Ability to obtain adequate reinsurance on
acceptable terms, amount of reinsurance purchased,
financial strength of reinsurers and the potential
for non-payment or delay in payment by reinsurers
· Increased competition that could result in a
significant reduction in the company’s premium
growth rate
· Underwriting and pricing methods adopted by
competitors that could allow them to identify and
flexibly price risks, which could decrease our
competitive advantages
· Personal lines pricing and loss trends that lead
management to conclude that this segment could not
attain sustainable profitability, which could prevent
the capitalization of policy acquisition costs
· Actions of insurance departments, state attorneys
general or other regulatory agencies that:
· Restrict our ability to exit or reduce writings
of unprofitable coverages or lines of business
· Place the insurance industry under greater
regul
atory scrutiny or result in new statutes, rules
and regulations
· Increase our expenses
· 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
· Limit our ability to set fair, adequate and reasonable rates
· Place us at a disadvantage in the marketplace or
· Restrict our ability to execute our business
model, including the way we compensate agents
· Adverse outcomes from litigation or administrative proceedings
· 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
· Investment activities or market value fluctuations
that trigger restrictions applicable to the parent
company under the Investment Company Act of 1940
· Events, such as an epidemic, natural catastrophe,
terrorism or construction delays, that could hamper our
ability to assemble our workforce at our headquarters
location Further, the company’s insurance businesses are
subject to the effects of changing social, 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. |
| Contact Information
Communications directed to the company’s secretary, Kenneth W. Stecher, chief financial officer and
executive vice president, are shared with the appropriate individual(s). Or, you may directly
access services:
Investors: Investor Relations responds to investor inquiries about Cincinnati Financial Corporation
and its performance. Heather J. Wietzel — Vice President, Investor Relations 513-870-2768 or
investor_inquiries@cinfin.com
Shareholders: Shareholder Services provides stock transfer services, fulfills requests for
shareholder materials and assists registered shareholders who wish to update account information or
enroll in shareholder plans.
Jerry L. Litton — Assistant Vice President, Shareholder
Services 513-870-2639 or shareholder_inquiries@cinfin.com
Media: Corporate Communications assists media representatives seeking information or comment from
Cincinnati Financial Corporation or its subsidiaries.
Joan O. Shevchik, CPCU, CLU — Senior Vice President, Corporate Communications
513-603-5323 or media_inquiries@cinfin.com
Cincinnati Financial Corporation
The Cincinnati Insurance Company
The Cincinnati Casualty Company
The Cincinnati Indemnity Company
The Cincinnati Specialty Underwriters Insurance Company
Mailing Address:
P.O. Box 145496
Cincinnati, Ohio 45250-5496
Phone: 513-870-2000
Fax: 513-870-2066
www.cinfin.com
The Cincinnati Life Insurance Company
CSU Producer Resources Inc.
CFC Investment Company
CinFin Capital Management Company
Street Address:
6200 South Gilmore Road
Fairfield, Ohio 45014-5141 |
