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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Commission file number 0-4604
CINCINNATI FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Ohio 31-0746871
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) 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
Item 9. Regulation FD Disclosure (Disclosure of Results of Operations and
Financial Condition). On July 29, 2003, Cincinnati Financial Corporation
announced its financial results for the second quarter and six months ended June
30, 2003. In accordance with the procedural guidance in SEC Release No. 33-8216,
the information in this 8-K and the Exhibit attached to this Form 8-K are being
furnished under "Item 9. Regulation FD Disclosure" to satisfy the requirements
of "Item 12. Disclosure of Results of Operations and Financial Condition." The
news release is furnished as Exhibit 99.1 hereto and is incorporated herein by
reference.
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 thereunto duly authorized.
CINCINNATI FINANCIAL CORPORATION
/S/ Kenneth W. Stecher
-----------------------
Kenneth W. Stecher
Chief Financial Officer, Senior Vice President,
Secretary and Treasurer
(Principal Accounting Officer)
July 29, 2003
Exhibit 99.1
Cincinnati Financial Corporation Reports Second-Quarter Results
-- Second-quarter net income totals $84 million
-- Operating income* reaches 51 cents per share
-- Pre-tax investment income grows 4.8%
-- Property casualty combined ratio at 98.4%
CINCINNATI, July 29 /PRNewswire-FirstCall/ -- Cincinnati Financial
Corporation (Nasdaq: CINF) today reported second-quarter 2003 net income of
$84 million, or 52 cents per diluted share, compared with $35 million, or
21 cents per share, in the second quarter of 2002. Net income per share
included net realized investment gains of 1 cent in 2003 versus net realized
investment losses of 4 cents in the comparable 2002 period.
Revenues from pre-tax investment income, the primary source of profits,
rose 4.8 percent to $114 million. Total second-quarter revenues advanced
$95 million or 13.5 percent, to $798 million.
Financial Highlights
(Dollars in millions,
except share data) Second Quarter Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
Income Statement Data
Net income $84 $35 $141 $110
Net realized investment
gains and losses 1 (6) (39) (12)
Operating income* $83 $41 $180 $122
Per Share Data (diluted)
Net income $0.52 $0.21 $0.87 $0.67
Net realized investment
gains and losses 0.01 (0.04) (0.24) (0.07)
Operating income* $0.51 $0.25 $1.11 $0.74
Cash dividend declared 0.2500 0.2225 0.5000 0.4450
Book value -- -- 36.57 38.03
Average shares
outstanding 161,631,033 164,325,619 161,778,648 163,645,919
* Measures used in this release that are not based on Generally Accepted
Accounting Principles (non-GAAP) are defined and reconciled to the
most directly comparable GAAP measures and operating measures in the
attached Definitions of Non-GAAP Information and Reconciliation to
Comparable GAAP Measures. Statutory data is prepared in accordance
with statutory accounting rules as defined by the National Association
of Insurance Commissioners' Accounting Practices and Procedures Manual
and therefore is not reconciled to GAAP.
The difference between net income and operating income is the
inclusion of net realized investment gains and losses. Management
utilizes operating income to evaluate underlying performance for a
number of reasons. First, quarterly fluctuations in net realized
investment gains and losses are unrelated to trends in the company's
insurance business. Second, net realized investment gains and losses
can include gains related to the sale of investments made at
management's discretion. Third, operating income is a measure commonly
used by investors to evaluate insurance companies. This measure also
is described as net income before realized investment gains and
losses.
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. During the second quarter of 2003, net income
would have been reduced by less than 2 cents per share if option
expense had been calculated using the Black-Scholes and modified
prospective transition methodologies.
Chairman and Chief Executive Officer John J. Schiff, Jr., CPCU, commented,
"At $83 million, or 51 cents per diluted share, operating income was a
second-quarter record, doubling the amount achieved in the comparable 2002
quarter. While catastrophe losses reduced earnings by 19 cents per share in
both periods, the 2003 second quarter benefited from the continued growth of
property casualty premium revenues and improved non-catastrophe underwriting,
primarily in commercial lines, as well as higher investment income."
Six-month Results
For the six months ended June 30, 2003, net income rose 28.1 percent to
$141 million, or 87 cents per share. Operating income, which excludes
realized investment gains and losses, rose 47.5 percent to $180 million, or
$1.11 per share.
Total revenues advanced $115 million to $1.505 billion, up 8.3 percent
over last year's first half. Revenues from pre-tax investment income reached
$230 million, up 5.6 percent from $218 million in last year's first six
months.
Six-month catastrophe losses, net of reinsurance, totaled $49 million,
contributing 3.8 percentage points to the GAAP combined ratio of 96.8 percent
and reducing after-tax earnings by 20 cents per share. For the first half of
2002, catastrophe losses were $62 million, contributing 5.4 percentage points
to the combined ratio of 103.6 percent and reducing after-tax earnings by
24 cents per share.
Schiff commented, "Underwriting profits for the first six months reached
$42 million versus a loss of $41 million last year. While better weather in
this year's first quarter helped our six-month results, the real progress
occurred in non-catastrophe underwriting. Excluding catastrophes, the combined
ratio improved to 93.0 percent in 2003 from 98.2 percent in 2002."
Property Casualty Insurance Operations
(Dollars in
millions - GAAP) Second Quarter Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
Income Statement Data
Earned premiums $654 $580 $1,286 $1,141
Loss and loss expenses
excluding catastrophe
losses 432 428 850 813
Catastrophe losses 47 47 49 62
Expenses 164 152 345 307
Underwriting
profit (loss) $11 $(47) $42 $(41)
Ratio Data
Loss and loss expenses
excluding catastrophe
losses 66.2% 73.7% 66.2% 71.2%
Catastrophe losses 7.1 8.1 3.8 5.4
Expenses 25.1 26.3 26.8 27.0
Combined ratio 98.4% 108.1% 96.8% 103.6%
Statutory net written premiums of the property casualty insurance
affiliates-The Cincinnati Insurance Company, The Cincinnati Indemnity Company
and The Cincinnati Casualty Company-rose 16.0 percent to $726 million compared
with $626 million in last year's second quarter. Written premiums for the
second quarter of 2003 included an additional $18 million, which accounted for
2.5 percentage points of the growth, related to the company's estimation
process for matching written and earned premiums to policy effective dates.
The contribution to pre-tax earnings from property casualty underwriting
was $11 million. On a GAAP basis, the second-quarter combined ratio was
98.4 percent, or 91.3 percent excluding catastrophe losses, comparing
favorably with the 2002 second-quarter combined ratio of 108.1 percent, or
100 percent excluding catastrophes. Schiff noted, "For the fourth consecutive
quarter our combined ratio has been under 100 percent and we have maintained
double-digit premium growth for seven consecutive quarters. Total net written
premiums grew on strong renewal pricing, with average commercial premium
increases in the range of 8 percent to 15 percent. New business written
directly by our agents was $87 million, up 6.2 percent over last year's second
quarter. We continue to take a selective, case-by-case approach to competing
for new business, maintaining an appropriate balance between growth and
profitability."
Commercial Lines
(Dollars in
millions - GAAP) Second Quarter Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
Income Statement Data
Earned premiums $470 $415 $922 $815
Loss and loss expenses
excluding catastrophe
losses 298 294 585 566
Catastrophe losses 14 23 18 28
Expenses 118 112 248 218
Underwriting profit (loss) $40 $(14) $71 $3
Ratio Data
Loss and loss expenses
excluding catastrophe
losses 63.4% 70.8% 63.5% 69.4%
Catastrophe losses 2.9 5.6 2.0 3.4
Expenses 25.1 26.9 26.8 26.8
Combined ratio 91.4% 103.3% 92.3% 99.6%
Net written premiums for commercial lines of insurance rose 15.9 percent
to $507 million, accounting for 69.8 percent of the company's total
second-quarter premiums. New commercial business increased 9 percent to
$71 million for the quarter. The GAAP combined ratio improved 11.9 percentage
points to 91.4 percent. Excluding catastrophe losses, the ratio was
88.5 percent, showing 9.2 percentage points of improvement over last year's
second quarter.
Schiff said, "In the markets served by our local independent agents, the
ability to put together full packages gives Cincinnati an advantage.
Commercial auto coverage is key to any business package, and our improving
results in this line should help us continue to be the agents' No. 1 choice,
as noted in the Crittenden's Property/Casualty Ratings survey results
published in June. For the second quarter, commercial auto net written
premiums rose 9.9 percent to $111 million, including 11 percent new business
growth.
"The ability to include workers compensation coverages also enhances the
value of a business package relationship," Schiff added. "While we chose to be
very selective and not to renew some large workers compensation policies early
in the year, improving trends now are making us positive about including this
coverage in packages for Main Street accounts. Workers compensation net
written premiums rose 6.5 percent for the second quarter, including
9.8 percent new business growth."
Personal Lines
(Dollars in
millions - GAAP) Second Quarter Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
Income Statement Data
Earned premiums $184 $165 $364 $326
Loss and loss expenses
excluding catastrophe
losses 134 134 265 247
Catastrophe losses 33 24 31 34
Expenses 46 40 97 89
Underwriting profit (loss) $(29) $(33) $(29) $(44)
Ratio Data
Loss and loss expenses
excluding catastrophe
losses 73.1% 81.2% 72.9% 75.7%
Catastrophe losses 17.8 14.5 8.4 10.3
Expenses 25.2 24.5 26.8 27.3
Combined ratio 116.1% 120.2% 108.1% 113.3%
Net written premiums for the personal lines segment increased 16.4 percent
to $219 million. New personal lines business decreased 5.1 percent for the
second quarter. On a GAAP basis, the second-quarter combined ratio was
116.1 percent versus 120.2 percent in 2002. Excluding catastrophes, the ratio
was 98.3 percent compared with 105.7 percent in last year's second quarter.
Schiff commented, "In the homeowner line, second-quarter written premiums
rose 17.9 percent due to rate increases, while new business premiums declined
7.2 percent. Loss severity continues, as indicated by the unacceptable loss
and loss expense ratio of 133.9 percent, or 85.1 percent excluding
catastrophes. We continue to seek regulatory approvals for rate increases,
with additional double-digit increases in our largest states already approved
for the second half of 2003 and early 2004. Changes in terms and conditions of
our homeowner policy, introduced late last year to help control water damage
losses, continue to take effect as policies renew over the three-year
homeowner policy period. It will take time for all of these efforts to work
through our homeowner book of business.
"In the meantime, we are emphasizing the package approach by writing
homeowner accounts that include coverages for personal autos, a line with more
positive trends. Personal auto net written premiums rose 16.7 percent for the
second quarter."
Life Insurance Operations
(In millions) Second Quarter Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
Earned premiums $23 $22 $44 $42
Investment income 22 21 44 42
Other income 1 0 1 0
Total revenues excluding
realized investment gains
and losses $46 $43 $89 $84
Policyholder benefits $23 $20 $44 $39
Expenses 12 14 22 25
Total benefits and expenses $35 $34 $66 $64
Income before income tax
and realized investment
gains and losses $11 $9 $23 $20
Federal tax on
operating income 4 3 8 6
Operating income $7 $6 $15 $14
The Cincinnati Life Insurance Company's second-quarter net operating
income increased 15.2 percent to $7 million, compared with $6 million last
year. Including realized net capital losses, net income was $7 million in 2003
versus $2 million in 2002. Net written life insurance premiums rose
9.3 percent to $27 million, compared with $24 million last year.
Cincinnati Life President David H. Popplewell, FALU, LLIF, stated, "For
the first half of 2003, life insurance premiums grew 6.4 percent, and new
submitted applications grew 10 percent. Strong term life insurance sales have
led the premium growth. The introduction of our new individual disability
income riders in July and anticipated enhancements to our term and universal
life products in third quarter of 2003 will strengthen our portfolio of
products."
Investment Operations
(In millions, pre-tax) Second Quarter Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
Investment income,
net of expenses $114 $109 $230 $218
Realized investment
gains and losses:
Valuation of embedded
derivatives (SFAS No. 133) $11 $-- $1 $2
Other-than-temporary
impairment charges (17) (25) (69) (29)
Realized investment gains
and losses on security sales 8 15 9 9
Total realized investment
gains and losses $2 $(10) $(59) $(18)
Consolidated pre-tax investment income rose 4.8 percent for the second
quarter, benefiting from dividend increases announced over the last year by
companies in the equity portfolio. As of June 30, 2003, 14 of the 47 equity
holdings in the portfolio have announced 2003 dividend increases that total
$11 million on an annualized basis.
Vice President Kenneth S. Miller, CLU, ChFC, commented, "We realized
$2 million of capital gains in the second quarter, as the market moved into a
recovery phase and fewer securities were impaired. Of the $17 million impaired
this quarter, $14 million was fixed-income securities. Over the past several
years, we have increased the average credit quality of the bond portfolio, as
rated by Standard & Poor's and Moody's, and have invested in more intermediate
maturities.
"During the second quarter, $169 million was available for new
investments. One-third of that total was invested in common stocks, returning
this allocation to our historical range. Repurchases of the company's common
stock used $12 million, and the remainder was invested in fixed-income
securities."
Balance Sheet
(Dollars in millions) Second Quarter Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
Balance Sheet Data
Total assets -- -- $14,930 $14,591
Invested assets -- -- 11,889 11,939
Shareholders' equity -- -- 5,870 6,170
Ratio Data
Return on equity, annualized 6.1% 2.2% 4.9% 3.6%
Return on equity, annualized,
based on comprehensive
income 55.2 (13.2) 13.7 8.0
At June 30, 2003, total assets rose to a record $14.930 billion, up $808
million from year-end. Shareholders' equity at the end of the second quarter
in 2003 reached $5.870 billion, up $272 million from year-end 2002.
Accumulated other comprehensive income totaled $3.897 billion, up $254 million
from year-end 2002. Book value rose to $36.57, up $1.92 from year-end 2002.
Strong Performance Improves Outlook
Schiff concluded, "As we underwrite and price new and renewal business,
our agents and field representatives continue to work together, accurately
measuring each risk and applying appropriate premiums, terms and conditions.
Year-to-date, these efforts have generated 13.4 percent net written premium
growth and positive underwriting trends. We now have higher expectations for
our full-year performance, anticipating a GAAP combined ratio near the
six-month ratio of 96.8 percent even if catastrophe losses for the year
slightly exceed our normal 3-percentage point estimate. Catastrophe losses
stand at $49 million and 3.8 percentage points on the combined ratio at six
months. On a preliminary basis, we are estimating $21 million in catastrophe
losses from two storms between July 1 and July 22.
"We are seeing the results of our commitment to consistent strategies.
Investors know what to expect from us: conservative underwriting and
reserving, an agent-centered perspective that requires us to manage for market
stability and deliver superior claims service, and an investment focus on
total return. With industry observers paying more attention to financial
strength, Cincinnati Financial and The Cincinnati Insurance Companies are a
better choice than ever for policyholders and investors."
For additional information or to register for this afternoon's conference
call, please visit 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, disability income and long-term care 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.
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 or other causes;
increased frequency and/or severity of claims; environmental events or
changes; insurance regulatory actions, legislation or court decisions that
increase expenses or place the company at a disadvantage in the marketplace;
adverse outcomes from litigation or administrative proceedings; recession or
other economic conditions 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 market value
of Fifth Third Bancorp shares; events that lead to a significant decline in
the market value of a particular security and impairment of the asset; delays
in the development, implementation and benefits of technology enhancements;
and decreased ability to generate growth in investment income.
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 impacting corporate financial reporting and
governance. The ultimate changes and eventual effects, if any, of these
initiatives are uncertain.
Cincinnati Financial Corporation
Consolidated Balance Sheets
(In millions except share data) June 30, December 31,
2003 2002
(unaudited)
ASSETS
Investments
Fixed maturities, at fair
value (amortized cost: 2003
- $3,447; 2002 - $3,220) $3,734 $3,305
Equity securities, at fair
value (cost: 2003 - $2,394;
2002 - $2,375) 8,088 7,884
Other invested assets 67 68
Cash 103 112
Investment income receivable 100 98
Finance receivable 36 33
Premiums receivable 1,062 956
Reinsurance receivable 640 590
Prepaid reinsurance premiums 25 47
Deferred policy acquisition costs 375 343
Property and equipment, net, for
company use (accumulated depreciation:
2003 - $166; 2002 - $155) 124 128
Other assets 117 131
Separate accounts 459 427
Total assets $14,930 $14,122
LIABILITIES
Insurance reserves
Losses and loss expense $3,341 $3,176
Life policy reserves 986 917
Unearned premiums 1,422 1,319
Other liabilities 390 345
Deferred income tax 1,859 1,737
Notes payable 183 183
6.9% senior debenture due 2028 420 420
Separate accounts 459 427
Total liabilities 9,060 8,524
SHAREHOLDERS' EQUITY
Common stock, par value - $2 per share;
authorized 200 million shares;
issued: 2003 - 176 million shares,
2002 - 176 million shares 352 352
Paid-in capital 303 300
Retained earnings 1,833 1,772
Accumulated other comprehensive
income - unrealized gains on investments
and derivatives 3,897 3,643
Treasury stock at cost (2003 - 16 million
shares, 2002 - 14 million shares) (515) (469)
Total shareholders' equity 5,870 5,598
Total liabilities and
shareholders' equity $14,930 $14,122
Cincinnati Financial Corporation
Consolidated Statements of Income
(unaudited)
(In millions except per share data) Six Months Ending June 30,
2003 2002
REVENUES
Earned premiums
Property casualty $1,285 $1,139
Life 44 42
Investment income, net of expenses 230 218
Realized investment gains and losses (59) (18)
Other income 5 9
Total revenues 1,505 1,390
BENEFITS AND EXPENSES
Insurance losses and policyholder benefits 942 912
Commissions 259 225
Other operating expenses 110 97
Taxes, licenses and fees 29 32
Increase in deferred policy acquisition costs (31) (22)
Interest expense 17 17
Other expenses 7 4
Total benefits and expenses 1,333 1,265
INCOME BEFORE INCOME TAXES 172 125
PROVISION (BENEFIT) FOR INCOME TAXES
Current 44 29
Deferred (13) (14)
TOTAL PROVISION (BENEFIT) FOR INCOME TAXES 31 15
NET INCOME $141 $110
PER COMMON SHARE
Net income - basic $0.88 $0.68
Net income - diluted $0.87 $0.67
Cincinnati Financial Corporation
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. Statutory data is prepared in accordance with statutory
accounting rules as defined by the National Association of Insurance
Commissioners' Accounting Practices and Procedures Manual and therefore is not
reconciled to GAAP data. Management believes that investor understanding of
Cincinnati Financial Corporation's performance is enhanced by disclosure of
certain non-GAAP and non-statutory financial measures:
Operating income: The difference between net income and operating income
is the inclusion of net realized investment gains and losses. Management
utilizes operating income to evaluate underlying performance for a number of
reasons. First, quarterly fluctuations in net realized investment gains and
losses are unrelated to trends in the company's insurance business. Second,
among other items, net realized investment gains and losses can include gains
related to the sale of investments made at management's discretion. Third,
operating income is a measure commonly used by investors to evaluate insurance
companies. This measure also is described as net income before realized
investment gains and losses.
Catastrophe losses: Due to the nature of catastrophic events, the
frequency and cost of catastrophe occurrences are unpredictable. Although
management anticipates an average level of catastrophe losses, to aid in
assessing the underlying performance of the business, management evaluates
trends in the company's overall performance and property casualty underwriting
profitability excluding the fluctuating impact of catastrophe losses.
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 National Association of Insurance Commissioners' (NAIC) 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, which is calculated and
used in both statutory and GAAP accounting, is recognized 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 and earned premiums to
policy effective dates, which added $117 million to written premiums. To
better assess ongoing business trends, management excludes this adjustment
when evaluating trends in written premiums and statutory ratios that make use
of written premiums.
Underwriting profit: Underwriting profit for property casualty insurance
represents premiums earned minus loss and loss expenses and other
insurance-related expenses.
In addition to items described above, management has disclosed certain
non-GAAP and non-statutory financial measures for the periods prior to 2002
based on:
One-time charges or adjustments: Management analyzes results excluding
the impact of one-time items.
-- In 2000, the company recorded a one-time charge to impair previously
capitalized costs related to the development of next-generation
software to process property casualty policies.
-- In 2000, the company earned $5.3 million in interest in the first
quarter from a $302.9 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 capital gains and losses from separate accounts generally
accrue directly to the contract holder and, therefore, are not
included in the company's consolidated financials.
-- In 1993, results included a credit related to the method of accounting
for income taxes to confirm with Statement of Accounting Financial
Standards No. 109 and a charge related to the effect of 1993
increases in income tax rates on deferred taxes recorded for various
prior-year items.
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
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.
Cincinnati Financial Corporation and Subsidiaries
Quarterly Net Income
(In millions except
per share data) Quarters ended
6/30/ 3/31/ 12/31/ 9/30/ 6/30/ 3/31/
2003 2003 2002 2002 2002 2002
Net income $84 $57 $56 $72 $35 $75
Net realized
investment gains
and losses 1 (40) (40) (11) (6) (5)
Operating income $83 $97 $96 $83 $41 $80
Catastrophe losses (30) (2) (14) (3) (31) (9)
Operating income
excluding
catastrophe
losses $113 $99 $110 $86 $72 $89
Diluted per
share data
Net income $0.52 $0.35 $0.35 $0.44 $0.21 $0.46
Net realized
investment
gains and
losses 0.01 (0.25) (0.24) (0.07) (0.04) (0.03)
Operating income $0.51 $0.60 $0.59 $0.51 $0.25 $0.49
Catastrophe
losses (0.19) (0.01) (0.08) (0.02) (0.19) (0.06)
Operating income
excluding
catastrophe
losses $0.70 $0.61 $0.67 $0.53 $0.44 $0.55
Cincinnati Financial Corporation and Subsidiaries
Quarterly Net Income
(In millions except
per share data) Six Nine Twelve
months months months
ended ended ended
6/30/2003 6/30/2002 9/30/2002 12/31/2002
Net income $141 $110 $182 $238
Net realized
investment gains
and losses (39) (12) (22) (62)
Operating income $180 $122 $204 $300
Catastrophe losses (32) (40) (43) (57)
Operating income
excluding catastrophe
losses $212 $162 $247 $357
Diluted per
share data
Net income $0.87 $0.67 $1.11 $1.46
Net realized
investment gains
and losses (0.24) (0.07) (0.14) (0.38)
Operating income $1.11 $0.74 $1.25 $1.84
Catastrophe losses (0.20) (0.24) (0.26) (0.35)
Operating income
excluding catastrophe
losses $1.31 $0.98 $1.51 $2.19
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
(In millions except
per share data) Quarters ended
6/30/ 3/31/ 12/31/ 9/30/ 6/30/ 3/31/
2003 2003 2002 2002 2002 2002
Premiums
Adjusted written
premiums
(statutory) $708 $668 $612 $637 $626 $621
Written premium
adjustment --
statutory only 18 19 117 0 0 0
Reported written
premiums
(statutory)* $726 $687 $729 $637 $626 $621
Unearned premiums (72) (56) (87) (27) (46) (60)
Earned premiums $654 $631 $642 $610 $580 $561
Statutory
combined ratio
Reported
post-dividend
statutory
combined ratio* 98.4% 92.8% 93.4% 97.4% 107.2% 96.3%
Written premium
adjustment --
statutory only NM NM 4.7 0.0 0.0 0.0
Adjusted
post-dividend
statutory
combined ratio 98.4% 92.8% 98.1% 97.4% 107.2% 96.3%
Catastrophe
losses (7.1) (0.3) (3.3) (0.8) (8.1) (2.5)
Adjusted
post-dividend
statutory
combined ratio
excluding
catastrophe
losses 91.3% 92.5% 94.8% 96.6% 99.1% 93.8%
Reported commission
expense ratio
(consolidated)* 17.0% 16.4% 14.5% 17.5% 16.1% 15.5%
Written premium
adjustment --
statutory only NM NM 2.8 0.0 0.0 0.0
Adjusted commission
expense ratio 17.0% 16.4% 17.3% 17.5% 16.1% 15.5%
Reported other
expense ratio
(consolidated)* 8.2% 10.0% 9.8% 9.9% 9.2% 9.6%
Written premium
adjustment --
statutory only NM NM 1.9 0.0 0.0 0.0
Adjusted other
expense ratio 8.2% 10.0% 11.7% 9.9% 9.2% 9.6%
Reported post-dividend
statutory expense ratio
(consolidated)* 25.2% 26.4% 24.3% 27.4% 25.3% 25.1%
Written premium
adjustment --
statutory only NM NM 4.7 0.0 0.0 0.0
Adjusted post-dividend
statutory expense
ratio 25.2% 26.4% 29.0% 27.4% 25.3% 25.1%
Post-dividend GAAP
combined ratio
(consolidated) 98.4% 95.1% 95.0% 97.5% 108.1% 98.8%
Cincinnati Insurance Group
Quarterly Property Casualty Data - Consolidated
(In millions except
per share data) Six Nine Twelve
months months months
ended ended ended
6/30/2003 6/30/2002 9/30/2002 12/31/2002
Premiums
Adjusted written
premiums
(statutory) $1,376 $1,247 $1,884 $2,496
Written premium
adjustment --
statutory only 37 0 0 117
Reported written
premiums
(statutory)* $1,413 $1,247 $1,884 $2,613
Unearned premiums (127) (106) (133) (220)
Earned premiums $1,286 $1,141 $1,751 $2,393
Statutory
combined ratio
Reported
post-dividend
statutory
combined ratio* 95.7% 101.9% 100.3% 98.4%
Written premium
adjustment --
statutory only NM 0.0 0.0 1.2
Adjusted
post-dividend
statutory
combined ratio 95.7% 101.9% 100.3% 99.6%
Catastrophe
losses (3.8) (5.4) (3.8) (3.7)
Adjusted
post-dividend
statutory
combined ratio
excluding
catastrophe
losses 91.9% 96.5% 96.5% 95.9%
Reported commission
expense ratio
(consolidated)* 16.7% 15.8% 16.4% 15.8%
Written premium
adjustment --
statutory only NM 0.0 0.0 0.8
Adjusted commission
expense ratio 16.7% 15.8% 16.4% 16.6%
Reported other
expense ratio
(consolidated)* 9.0% 9.5% 9.6% 9.7%
Written premium
adjustment --
statutory only NM 0.0 0.0 0.4
Adjusted other
expense ratio 9.0% 9.5% 9.6% 10.1%
Reported post-dividend
statutory expense ratio
(consolidated)* 25.7% 25.3% 26.0% 25.5%
Written premium
adjustment --
statutory only NM 0.0 0.0 1.2
Adjusted post-dividend
statutory expense
ratio 25.7% 25.3% 26.0% 26.7%
Post-dividend GAAP
combined ratio
(consolidated) 96.8% 103.6% 101.4% 99.7%
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.
Cincinnati Insurance Group
Quarterly Property Casualty Data - Commercial Lines
(In millions except
per share data) Quarters ended
6/30/ 3/31/ 12/31/ 9/30/ 6/30/ 3/31/
2003 2003 2002 2002 2002 2002
Premiums
Adjusted written
premiums
(statutory) $490 $508 $443 $441 $438 $474
Written premium
adjustment --
statutory only 17 18 109 0 0 0
Reported written
premiums
(statutory)* $507 $526 $552 $441 $438 $474
Unearned premiums (37) (74) (84) (1) (23) (74)
Earned premiums $470 $452 $468 $440 $415 $400
Statutory combined
ratio
Reported post-
dividend statutory
combined ratio* 91.8% 90.3% 86.2% 94.7% 102.3% 93.1%
Written premium
adjustment --
statutory only NM NM 5.7 0 0 0
Adjusted post-
dividend statutory
combined
ratio 91.8% 90.3% 91.9% 94.7% 102.3% 93.1%
Catastrophe losses (2.9) (1.0) (1.3) (1.3) (5.6) (1.2)
Adjusted post-
dividend statutory
combined
ratio excluding
catastrophe losses 88.9% 89.3% 90.6% 93.4% 96.7% 92.0%
Post-dividend GAAP
combined ratio
(commercial lines) 91.4% 93.2% 93.9% 94.0% 103.3% 96.6%
Cincinnati Insurance Group
Quarterly Property Casualty Data - Commercial Lines
(In millions except
per share data) Six Nine Twelve
months months months
ended ended ended
6/30/2003 6/30/2002 9/30/2002 12/31/2002
Premiums
Adjusted written
premiums (statutory) $ 998 $912 $1,353 $1,796
Written premium
adjustment --
statutory only 35 0 0 109
Reported written
premiums (statutory)* $1,033 $912 $1,353 $1,905
Unearned premiums (111) (97) (98) (182)
Earned premiums $922 $815 $1,255 $1,723
Statutory combined ratio
Reported post-dividend
statutory
combined ratio* 91.1% 97.8% 96.6% 93.7%
Written premium
adjustment --
statutory only NM 0 0 1.6
Adjusted post-dividend
statutory
combined ratio 91.1% 97.8% 96.6% 95.3%
Catastrophe losses (2.0) (3.4) (2.7) (2.3)
Adjusted post-dividend
statutory
combined ratio
excluding
catastrophe losses 89.1% 94.4% 93.9% 93.0%
Post-dividend GAAP
combined ratio
(commercial lines) 92.3% 99.6% 97.6% 96.6%
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
(In millions except
per share data) Quarters ended
6/30/ 3/31/ 12/31/ 9/30/ 6/30/ 3/31/
2003 2003 2002 2002 2002 2002
Premiums
Adjusted written
premiums
(statutory) $218 $160 $169 $196 $188 $147
Written premium
adjustment --
statutory only 1 1 8 0 0 0
Reported written
premiums
(statutory)* $219 $161 $177 $196 $188 $147
Unearned premiums (35) 18 (3) (26) (23) 14
Earned premiums $184 $179 $174 $170 $165 $161
Statutory combined
ratio
Reported post-
dividend
statutory
combined ratio* 115.3% 99.5% 96.6% 104.4% 119.8% 105.5%
Written premium
adjustment --
statutory only NM NM 1.3 0 0 0
Adjusted post-
dividend
statutory
combined ratio 115.3% 99.5% 97.9% 104.4% 119.8% 105.5%
Catastrophe losses (17.8) 1.3 (8.5) 0.6 (14.5) (6.0)
Adjusted post-
dividend
statutory
combined ratio
excluding
catastrophe
losses 97.5% 100.8% 89.4% 105.0% 105.3% 99.5%
Adjusted post-
dividend GAAP
combined ratio
Post-dividend GAAP
combined ratio
(personal lines) 116.1% 99.9% 98.0% 106.4% 120.2% 104.1%
Cincinnati Insurance Group
Quarterly Property Casualty Data - Personal Lines
(In millions except
per share data) Six Nine Twelve
months months months
ended ended ended
6/30/2003 6/30/2002 9/30/2002 12/31/2002
Premiums
Adjusted written
premiums (statutory) $378 $335 $531 $700
Written premium
adjustment --
statutory only 2 0 0 8
Reported written
premiums
(statutory)* $380 $335 $531 $708
Unearned premiums (16) (9) (35) (38)
Earned premiums $364 $326 $496 $670
Statutory combined ratio
Reported post-
dividend statutory
combined ratio* 107.3% 112.2% 109.6% 106.3%
Written premium
adjustment --
statutory only NM 0 0 0.2
Adjusted post-
dividend statutory
combined ratio 107.3% 112.2% 109.6% 106.5%
Catastrophe losses (8.4) (10.3) (6.8) (7.1)
Adjusted post-
dividend statutory
combined ratio
excluding
catastrophe losses 98.9% 101.9% 102.8% 99.4%
Adjusted post-
dividend GAAP
combined ratio
Post-dividend GAAP
combined ratio
(personal lines) 108.1% 113.3% 111.1% 107.7%
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.
Cincinnati Insurance Group
Quarterly Property Casualty Data - By Line of Business
(Dollars in millions) Six months ended
6/30/2003 6/30/2002 6/30/2003 6/30/2002
Commercial multi-peril:
Earned premium $165 $148 $326 $291
Loss and loss
expenses ratio 65.2% 80.2% 68.1% 72.1%
Catastrophe loss
ratio 8.3 14.2 4.8 8.8
Loss and loss
expenses
excluding
catastrophe ratio 56.9% 66.0% 63.3% 63.3%
Workers
compensation:
Earned premium $72 $68 $144 $137
Loss and loss
expenses ratio 78.2% 81.2% 79.4% 81.7%
Catastrophe loss
ratio 0.0 0.0 0.0 0.0
Loss and loss
expenses
excluding
catastrophe ratio 78.2% 81.2% 79.4% 81.7%
Commercial auto:
Earned premium $100 $93 $204 $181
Loss and loss
expenses ratio 64.1% 71.9% 60.5% 67.3%
Catastrophe loss
ratio 0.1 2.4 1.3 1.2
Loss and loss
expenses excluding
catastrophe ratio 64.0% 69.5% 59.2% 66.1%
Other liability:
Earned premium $83 $66 $162 $128
Loss and loss
expenses ratio 58.7% 75.3% 56.1% 82.9%
Catastrophe loss
ratio 0.0 0.0 0.0 0.0
Loss and loss
expenses
excluding
catastrophe ratio 58.7% 75.3% 56.1% 82.9%
Personal auto:
Earned premium $106 $96 $208 $190
Loss and loss
expenses ratio 72.7% 84.1% 72.4% 73.5%
Catastrophe loss
ratio 2.9 1.9 1.5 1.0
Loss and loss
expenses excluding
catastrophe ratio 69.8% 82.3% 70.9% 72.5%
Homeowner:
Earned premium $59 $52 $117 $102
Loss and loss
expenses ratio 133.9% 137.8% 99.0% 110.7%
Catastrophe loss
ratio 48.8 41.8 22.5 30.4
Loss and loss
expenses excluding
catastrophe ratio 85.1% 96.0% 76.5% 80.3%
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- 07/29/2003
/CONTACT: Investors - Heather J. Wietzel, +1-513-603-5236, Media -
Joan O. Shevchik, +1-513-603-5323, both of Cincinnati Financial Corporation /
/Web site: http://www.cinfin.com /
(CINF)
CO: Cincinnati Financial Corporation
ST: Ohio
IN: FIN INS
SU: ERN
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