1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant. ( x )
Filed by a Party other than the Registrant. ( )
Check the appropriate box:
( ) Preliminary Proxy Statement
( x ) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
( ) Confidential, for use of the Commission only [as permitted by Rule
14a-6(e)(2)]
Cincinnati Financial Corporation
- - - - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - - - --------------------------------------------------------------------------------
[Name of Person(s) Filing Proxy Statement if other than Registrant]
Payment of Filing Fee (Check the appropriate box):
( x ) $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(j)(2)
or Item 22(a)(2) of Schedule 14A.
( ) $500 per each party to the controversy pursuant to Exchange Act Rule
14-a-6(i)(3).
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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February 27, 1995
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of Cincinnati Financial Corporation:
You are hereby notified that the Annual Meeting of Shareholders of Cincinnati
Financial Corporation will be held at 9:30 a.m. on Saturday, April 1, 1995, at
the Cincinnati Art Museum, located in Eden Park, Cincinnati, Ohio, for the
purpose of:
1. Electing six directors for terms of three years; and
2. Transacting such other business as may properly come before the
meeting or any adjournment thereof.
Shareholders of record at the close of business on February 7, 1995, will be
entitled to vote at the meeting and at any adjournment thereof.
Whether or not you plan to attend the meeting, you can ensure that your shares
will be voted as you want by completing, signing and mailing the enclosed form
of proxy. Your interest and participation in the affairs of the Corporation are
appreciated.
/s/ Vincent H. Beckman
VINCENT H. BECKMAN
SECRETARY
3
CINCINNATI FINANCIAL CORPORATION
P.O. Box 145496, Cincinnati, Ohio 45250-5496
PROXY STATEMENT
---------------
Annual Meeting of Shareholders
to be held April 1, 1995
February 27, 1995
The enclosed proxy (which will be found in the pocket of the mailing envelope)
is solicited by the Board of Directors of Cincinnati Financial Corporation for
use at the Annual Meeting of Shareholders to be held at 9:30 a.m., Saturday,
April 1, 1995, at the Cincinnati Art Museum, located in Eden Park, Cincinnati,
Ohio. The proxy and this statement are being distributed to shareholders on
February 27, 1995. Any shareholder giving a proxy may revoke it at any time
before it is voted by a later proxy received by the Corporation or by giving
notice of revocation to the Corporation in writing or in open meeting or by
voting the shares personally.
The cost of soliciting proxies will be borne by the Corporation. The
Corporation has requested banks, brokerage houses, other custodians, nominees
and fiduciaries to forward copies of the proxy material to beneficial owners of
shares or to request authority for the execution of proxies; and the
Corporation has agreed to reimburse such banks, brokerage houses and other
custodians, nominees and fiduciaries for their reasonable out-of-pocket
expenses incurred in connection therewith. In addition to solicitations by
mail, regular employees of the Corporation may, without extra remuneration,
solicit proxies personally or by telephone, telegram or cable.
The Board of Directors has fixed the close of business on February 7, 1995 as
the record date for the determination of voting rights. Only holders of record
of common stock on the record date will be entitled to vote at the meeting. A
majority of such holders, present in person or represented by proxy,
constitutes a quorum.
As stated in the notice of meeting, an election will be held to fill the six
vacancies which occur on the Board of Directors of the Corporation. The six
candidates receiving the greatest number of votes will be elected as directors.
Under Ohio law, an abstention or broker non-vote in the election of directors
will not be the equivalent of a negative vote, although the failure by a broker
to return a proxy card will result in the shares covered by the proxy not being
counted towards a quorum.
Votes cast by proxy will be tabulated prior to the meeting by the holders of
the proxies. Inspectors of election, duly appointed by the presiding officer of
the meeting in accordance with the provisions of Ohio law, will definitively
count and tabulate the votes and determine and announce the results at the
meeting.
The Annual Report for the fiscal year ended December 31, 1994, is enclosed.
OUTSTANDING SECURITIES AND PRINCIPAL SHAREHOLDERS
Only the holders of common stock of the Corporation of record at the close of
business on February 7, 1995, are entitled to vote at the meeting. Each share
of common stock entitles the holder thereof to one vote. As of February 1,
1995, there were 50,451,902 shares outstanding. The Proxy Committee reserves
the right not to vote any proxies which are altered in a manner not intended by
the instructions contained in the proxy.
The following table lists the persons who, to the best of the Corporation's
knowledge, are "beneficial owners" (as defined in Regulations of the SEC) of
more than 5% of the outstanding shares of the Corporation's common stock at
February 1, 1995.
Name and Address Of Shares Bene- Percent of
Beneficial Owner ficially Owned Common Stock
- - - - ----------------------- -------------- ------------
The Capital Group, Inc.
333 South Hope Street
Los Angeles, California 90071 3,043,440 6.03
Robert C. Schiff
Central Trust Building
Cincinnati, Ohio 45202 2,836,027 5.62
NOMINEES FOR ELECTION OF DIRECTORS
The Board of Directors of the Corporation is divided into three classes and
consists of 17 persons. Each year, the directors in one class are elected to
serve terms of three years. The term of office for six of the directors expires
as of the time of the Annual Meeting. In order to fill the resulting vacancies,
it is intended that votes will be cast to elect as directors the following
nominees: Vincent H. Beckman, Michael Brown, John E. Field, John J. Schiff,
Robert C. Schiff and Alan R. Weiler (to serve for terms of three years or until
their respective successors shall be elected). Each of these nominees, except
for John E. Field, is presently serving as a director of the Corporation. The
Board of Directors has no reason to believe that any of the
(1)
4
above-mentioned nominees will refuse or be unable to accept the nomination. In
the event, however, that any of the above nominees should refuse or for any
reason be unable to accept the nomination, it is intended that the persons
acting under the proxies will vote for the election of such person or persons
as the Board of Directors may recommend.
INFORMATION REGARDING NOMINEES, DIRECTORS AND EXECUTIVE OFFICERS
The following table provides information with respect to each nominee for
election to the office of director, each of the current directors whose term
does not expire at this time and each of the executive officers of the
Corporation.
Nominees For Director At This Time
- - - - ----------------------------------
Office, Principal Shares Percent
Occupation During Past Beneficially Of
Five Years & Other Owned As Of Common Term Director
Name and Age Directorships February 1, 1995 Stock Ending Since
- - - - ------------ ----------------------------- ---------------- ----------- ------ ---------
Vincent H. Beckman (79) Sec'y, Cincinnati Financial Corp.;
Partner, Beckman, Weil, Shepardson &
Faller, Attorneys (1) 188,149(10) 0.37 1998 1968
Michael Brown (59) President & Gen'l Mgr., Cincinnati
Bengals, Inc. (professional football
team) 43,988 0.09 1998 1980
John E. Field (61) President, Wallace & Turner, Inc.,
Director, Western Ohio Financial
Corp. 43,465(11)(12) 0.09 1998 --
John J. Schiff (78) Chmn. of the Exec. Committee,
Cincinnati Financial Corp.; Chmn. of
the Exec. Committee, Cincinnati Ins.
Co., a subsidiary of the Corporation;
Chief Exec. Officer, Cincinnati
Financial Corp. (until 1991) (1) 1,723,367(10) 3.41 1998 1968
Robert C. Schiff (71) Chmn. & Chief Exec. Officer, Schiff,
Kreidler-Shell, Inc. (ins. agency) 2,836,027(6)(7)(8) 5.62 1998 1968
Alan R. Weiler (61) Pres., Chief Exec. Officer, Archer-
Meek-Weiler Agency, Inc. (ins. agency);
Director, Glimcher Realty Trust 7,209 0.01 1998 1992
Directors Who Are Not Nominees At This Time
- - - - -------------------------------------------
Richard M. Burridge (65) Pres., The Burridge Group, Inc.
(investment advisors); Director,
Lincoln National Income Fund, Advisory
and Convertible Securities Funds,
St. Joseph Light & Power Co. and
Chairman, Ft. Dearborn Income Fund 8,448 0.02 1996 1987
Robert J. Driehaus (66) Financial Vice Pres. & Treas.,
Cincinnati Financial Corp.; Sr. Vice
Pres. & Sec'y of Cincinnati Ins. Co., a
subsidiary of the Corporation 335,051(9)(10) 0.66 1997 1982
David R. Huhn (57) Retired; Pres., The McAlpin Co., A sub-
sidiary of Mercantile Stores Co., Inc.
1991-1994; Chrmn. & Chief Exec. Officer,
Mercantile Stores Co., Inc. 1988-1991;
Director, E. W. Scripps Co. 5,535 0.01 1996 1990
Kenneth C. Lichtendahl (46) Pres., Chief Exec. Officer & Director,
Hudepohl-Schoenling Brewing Co., Inc. 3,000 0.01 1997 1988
Robert B. Morgan (60) Pres. & Chief Exec. Officer,
Cincinnati Financial Corp.; Pres. &
Chief Exec. Officer, Cincinnati Ins.
Co., a subsidiary of the Corporation;
Director, Fifth Third Bancorp (1) 444,060(10) 0.88 1996 1978
(2)
5
Directors Who Are Not Nominees At This Time
Office, Principal Shares Percent
Occupation During Past Beneficially Of
Five Years & Other Owned As Of Common Term Director
Name and Age Directorships February 1, 1995 Stock Ending Since
- - - - ------------ ------------------------ ---------------- -------- ------ ---------
Jackson H. Randolph (64) Chairman & Chief Exec. Officer
CINergy Corp.; Director, The Union
Light, Heat & Power Co. and PNC
Financial Corp. 10,000 0.02 1997 1986
John Sawyer (69) Pres. & Owner, J. Sawyer Co.
(agricultural co.); Vice President,
Cincinnati Bengals, Inc. (professional
football team) 35,267 0.07 1996 1982
John J. Schiff, Jr. (51) Chmn. of the Board, Cincinnati
Financial Corp., Cincinnati Insurance
Co., and John J. & Thomas R. Schiff
& Co., Inc. (ins. agency); Director, Fifth
Third Bancorp, Standard Register
Co.,CINergy Corp. (1) 1,785,479(2)(3)(4)(5)(10) 3.53 1997 1968
Thomas R. Schiff (47) Pres., John J. & Thomas R. Schiff &
Co., Inc. (ins. agency) 1,398,708(2)(3)(4)(5) 2.77 1996 1975
Larry R. Webb (39) Director, President & Agent, Webb
Ins. Agency, Inc. 30,717 0.06 1996 1979
William H. Zimmer (64) Vice Chmn. of the Board, Cincinnati
Financial Corp.; Director, ALLTEL
Corp. (1) 276,977(10) 0.55 1997 1968
All Nominees, Directors and Executive Officers As A Group
(18 Persons), Including Shares Listed Above 8,757,867 17.32
- - - - --------------------
(1) Also a member of the Executive Committee of the Corporation.
(2) Includes 366,936 shares owned of record by a trust, the trustees of which are John J. Schiff, Jr., Thomas R. Schiff and
Suzanne S. Reid, who share voting and investment power equally.
(3) Includes 122,329 shares owned of record by a trust, the beneficiaries of which include John J. Schiff, Jr. and Thomas R.
Schiff.
(4) Includes 31,659 shares owned of record by the John J. & Thomas R. Schiff & Co., Inc. pension plan, the trustees of which are
John J. Schiff, Jr. and Thomas R. Schiff, who share voting and investment power.
(5) Includes 30,166 shares owned by John J. & Thomas R. Schiff & Co., Inc., of which John J. Schiff, Jr. and Thomas R. Schiff are
principal owners.
(6) Includes 31,263 shares owned of record by the Schiff, Kreidler-Shell, Inc. pension plan, of which Robert C. Schiff is a
trustee.
(7) Includes 69,033 shares owned of record by Schiff, Kreidler-Shell, Inc., which is owned by Robert C. Schiff.
(8) Includes 228,017 shares owned of record by a trust, the trustees of which are Robert C. Schiff and Adele R. Schiff who share
voting and investment power.
(9) Includes 8,264 shares owned of record by a trust, the trustees of which are Robert J. Driehaus and Rita E. Driehaus who share
voting and investment power.
(10) Includes shares available within 60 days from exercise of stock options or conversion of debentures in the amount of 2,609
shares for Mr. Beckman; 9,487 shares for Mr. Driehaus; 141,628 shares for Mr. Morgan; 73,633 shares for Mr. J. Schiff; 89,984
shares for Mr. J. Schiff, Jr.; 13,210 shares for Mr. T. Schiff; 16,016 shares for Mr. Zimmer; and 6,782 shares for other
executive officers.
(11) Includes 1,200 shares owned of record by Wallace & Turner, Inc., of which John E. Field is President.
(12) Includes 30,200 shares owned of record by a trust, the trustee of which is John E. Field, and 10,275 shares owned of record by
a trust, the trustee of which is Alice A. Field, wife of John E. Field.
James G. Miller, age 57, Senior Vice President of the Corporation, has been
designated as an executive officer of the Corporation for successive terms of
one year by action of the Board of Directors since 1991.
Executive officers are elected at the annual meeting of the Board of Directors
for terms of one year.
Each of the executive officers and nominees, other than John E. Field, and each
of the directors whose term does not expire has served as an officer or
director continuously since first elected to that position. John J. Schiff is
the brother of Robert C. Schiff and the father of John J. Schiff, Jr. and
Thomas R. Schiff.
(3)
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COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Corporation met five times and the Executive
Committee of the Board met five times during the previous fiscal year. In
addition, the Board of Directors has standing Audit, Compensation and
Nominating Committees.
The Nominating Committee is composed of John J. Schiff, Jr., Michael Brown,
Jackson H. Randolph and William H. Zimmer, and the members of that committee
met one time during the last year. The Nominating Committee recommends
qualified candidates for election as officers and directors of the Corporation,
including the slate of directors which the Board proposes for election by the
shareholders at the Annual Meeting. Shareholders wishing to nominate directors
for consideration by the Nominating Committee may do so by writing to the
Secretary of the Corporation, giving the candidate's name, biographical data
and qualifications. Such information must be received by November 30 of each
year to be considered for the Annual Meeting held in the following year.
The Audit Committee is composed of John Sawyer, David R. Huhn and Kenneth C.
Lichtendahl, and the members of that committee met two times during the last
year. The functions of the committee include but are not limited to the
following: recommendation to the full Board as to engagement or discharge of
independent auditors, reviewing with independent auditors the plan and results
of the audit engagement, reviewing the scope and results of the Corporation's
internal auditing procedures and reviewing the adequacy of the Corporation's
system of internal accounting controls.
The Compensation Committee is composed of Michael Brown, Lawrence H. Rogers,
II, John Sawyer and Thomas R. Schiff, and the members of that committee met two
times during the last fiscal year. The function of the committee is to
recommend remuneration arrangements to the Board for the members of senior
management and the internal auditor of the Corporation and to administer the
Corporation's stock option plans.
All directors attended at least 75% of the Board and committee meetings they
were required to attend. During 1994, there were no late filings of a Form 3 or
Form 4 by a director, executive officer or principal shareholder.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Nonemployee directors of the Corporation were reimbursed for actual travel
expenses and were paid a fee of $4,500 per meeting for attendance at directors
meetings and $1,500 per meeting for attendance at committee meetings of the
Board, fees for all meetings in any one day not to exceed $6,000.
EXECUTIVE COMPENSATION SUMMARY
The following table summarizes the compensation of the Chief Executive Officer
and each of the four most highly compensated executive officers of the
Corporation other than the Chief Executive Officer for each of the Corporation's
last three years.
Summary Compensation Table (1)
- - - - ---------------------------------------------------------------------------------
Annual Long-Term
Compensation Compensation
----------------- ----------------------
Name and
Principal Year Salary Bonus Options
Position ($) ($) (# Awarded Shares)
- - - - ---------------------------------------------------------------------------------
Robert B. Morgan 1994 549,266 346,984 20,000
President & Chief 1993 524,633 347,030 20,000
Executive Officer 1992 503,833 331,078 45,000
John J. Schiff, Jr. 1994 324,425 157,887 20,000
Chairman, 1993 309,391 157,871 20,000
Board of Directors 1992 297,242 150,334 45,000
William H. Zimmer 1994 305,031 168,484
Vice Chairman, 1993 289,267 168,530
Board of Directors 1992 278,988 160,556 15,000
John J. Schiff 1994 266,248 87,108
Chairman, Executive Committee 1993 253,698 87,155
Board of Directors 1992 253,480 83,056 15,000
Robert J. Driehaus 1994 272,538 70,484
Financial Vice President 1993 259,017 70,530 2,000
1992 179,336 140,556 3,000
(1) Pursuant to Securities and Exchange Commission rules, the column "Other Annual Compensation" was omitted because, in all
cases, the amounts were less than the minimum required to be reported.
(4)
7
STOCK OPTION PLANS
The following table contains information concerning grants of options to
purchase the Corporation's common stock which were made to each of the named
executive officers in 1994.
Option Grants in Last Fiscal Year
- - - - -----------------------------------------------------------------------------------------------------------------------------
Potential Realizable
Value at Assumed
Annual Rates of
% of Total Stock Price
Options Appreciation for
Options Granted to Exercise Option Term(3)
Granted Employees Price Expiration ------------------------------
Name (# Shares) (1) in 1994 $/Sh. (2) Date 5% ($) 10% ($)
- - - - -----------------------------------------------------------------------------------------------------------------------------
Robert B. Morgan 20,000 26.04% 51.00 12/20/04 641,500 1,625,600
John J. Schiff, Jr. 20,000 26.04% 51.00 12/20/04 641,500 1,625,600
William H. Zimmer -0- -- -- -- -- --
John J. Schiff -0- -- -- -- -- --
Robert J. Driehaus -0- -- -- -- -- --
(1) All options were granted December 20, 1994. One third of each option becomes exercisable on the first anniversary of grant in
1995, an additional one third on the second anniversary in 1996, and the remainder on the third aniversary in 1997, so long
as employment with the Corporation or its subsidiaries continues. There are no stock appreciation rights, performance units or
other instruments granted in tandem with these options, nor are there any re-load provisions, tax reimbursement features or
performance-based conditions to exercisability.
(2) The option exercise price is 100% of the NASDAQ National Market's closing price on the day prior to date of grant.
(3) The assumed annual rates of stock price appreciation are prescribed in the proxy rules of the Securities and Exchange
Commission and should not be construed as a forecast of future appreciation in the market price for the Corporation's common
stock.
The following table contains information for each of the named executive
officers concerning the exercise of options during 1994 and the value of
unexercised options at year-end for the Corporation's common stock.
Aggregated Option Exercises in Last Fiscal Year and FY-End Option Values
- - - - -----------------------------------------------------------------------------------------------------------------------------
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at
Shares 12/31/94 12/31/94
Acquired on Value Exercisable (E)/ Exercisable (E)/
Exercise Realized Unexercisable (U) Unexercisable (U)
Name (# Shares) ($) (# Shares) ($)
- - - - -----------------------------------------------------------------------------------------------------------------------------
Robert B. Morgan 6,000 129,480 E 129,454 E 3,509,280
U 48,333 U 121,720
John J. Schiff, Jr. 4,000 50,800 E 32,667 E 253,250
U 48,333 U 121,720
William H. Zimmer 8,400 329,008 E 10,000 E 106,700
U 5,000 U 53,350
John J. Schiff -0- -- E 16,894 E 291,666
U 5,000 U 53,350
Robert J. Driehaus -0- -- E 4,166 E 57,589
U 2,334 U 2,666
(5)
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PENSION PLAN
The following table sets forth the estimated annual benefits payable from the
Corporation's qualified noncontributory pension plan under various assumptions
as to the employee's compensation level and years of service.
Qualified Pension Plan Table
----------------------------
Years of Service on December 31, 1994
-------------------------------------
Average
Annual Earnings 15 20 25 30 35 40
--------------- -- -- -- -- -- --
$350,000 $20,250 $29,250 $38,250 $47,250 $56,250 $65,250
$300,000 $20,250 $29,250 $38,250 $47,250 $56,250 $65,250
$250,000 $20,250 $29,250 $38,250 $47,250 $56,250 $65,250
$200,000 $20,250 $29,250 $38,250 $47,250 $56,250 $65,250
$150,000 $20,250 $29,250 $38,250 $47,250 $56,250 $65,250
$100,000 $13,500 $19,500 $25,500 $31,500 $37,500 $43,500
$ 75,000 $10,125 $14,625 $19,125 $23,625 $28,125 $32,625
$ 50,000 $6,750 $9,750 $12,750 $15,750 $18,750 $21,750
All the persons listed in the Summary Compensation Table other than John J.
Schiff (whose accrued retirement benefit has already been paid) are
participants in the plan. For purposes of computing retirement benefits under
the Corporation's pension plan for the remaining individuals listed in the
Summary Compensation Table, earnings for any given year as defined by the plan
is the base rate of salary in effect on the last day of the plan year, subject
to maximum recognizable compensation under Sec. 401(a)(17) of the Internal
Revenue Code. This differs from Salary as shown in the Summary Compensation
Table. The annual earnings for 1994 qualifying under the plan and the years of
service as of December 31, 1994 under the plan for those individuals are as
follows: Robert J. Driehaus, $150,000 and 40 years; Robert B. Morgan, $150,000
and 29 years; John J. Schiff, Jr., $150,000 and 8 years; William H. Zimmer,
$150,000 and 13 years.
The normal retirement pension is computed as a single life annuity and is the
sum of .009 per year of the employee's highest five-year average earnings for
the first 15 years of service plus .012 per year of the employee's highest
five-year average earnings for years 16 through 40. Vesting is 100% after five
years of service and there are no deductions for Social Security or other
offset amounts.
SUPPLEMENTAL RETIREMENT PLAN
Effective January 1, 1989, the Corporation adopted a nonqualified,
noncontributory Supplemental Retirement Plan for the benefit of thirty-seven
higher paid employees whose projected retirement pension was reduced as a
result of the amendment to the Corporation's qualified pension plan. The
Supplemental Retirement Plan was designed to replace the pension benefit lost
by those employees.
The following table illustrates the retirement income payable under the
Supplemental Retirement Plan computed as a single life annuity on retirement at
age 65 under various asumptions as to the employee's highest five-year average
annual earnings and years of service.
(6)
9
Supplemental Retirement Plan
Years of Service on December 31, 1994
Average
Annual Earnings 15 20 25 30 35 40
--------------- -- -- -- -- -- --
$350,000 $42,084 $51,360 $67,292 $80,013 $92,742 105,468
$300,000 $32,709 $41,992 $51,667 $61,267 $70,867 80,467
$250,000 $23,334 $29,492 $36,042 $42,517 $48,992 55,467
$200,000 $12,788 $16,992 $20,417 $23,767 $27,117 30,467
$150,000 $ 3,788 $ 4,492 $ 4,792 $ 5,017 $ 5,242 5,467
$100,000 $ 1,538 $ 1,742 $ 1,917 $ 2,017 $ 2,117 2,217
$ 75,000 $ 413 $ 367 $ 479 $ 517 $ 554 592
$ 50,000 $ 0 $ 0 $ 0 $ 0 $ 0 0
This Plan is integrated with Social Security and a normal retirement pension is
the sum of .0075 of the employee's highest five-year average annual earnings
below the integration level plus .0125 of the employee's highest five-year
average annual earnings in excess of the integration level, multiplied by the
number of years of service (not to exceed 40). The integration level is equal
to the average of the integration levels for the period of the employee's
employment, using wages paid, with a maximum of $6,000 for years beginning
prior to 1976 and wages subject to Social Security tax for all years after
1975. The retirement benefit paid pursuant to the Supplemental Plan is the
difference between the amount computed by the above formula and the amount
payable from the Qualified Plan.
All of the persons listed in the Summary Compensation Table, except John J.
Schiff, are participants in the plan. For purposes of determining benefits
under the Supplemental Retirement Plan, annual earnings is defined as the base
rate of salary in effect on the last day of the plan year. This differs from
salary under the Summary Compensation Table. The annual earnings for 1994 as
defined in the plan and the years of service as of December 31, 1994, for those
individuals are as follows: Robert J. Driehaus, $282,571 and 40 years; Robert
B. Morgan, $569,485 and 29 years; John J. Schiff, Jr., $336,366 and 8 years;
and William H. Zimmer, $316,260 and 13 years.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Corporation's Compensation Committee for 1994 were Michael
Brown, Lawrence H. Rogers, II, John Sawyer and Thomas R. Schiff.
Thomas R. Schiff is a director of the Corporation, The Cincinnati Insurance
Company, The Cincinnati Casualty Company, The Cincinnati Indemnity Company and
The Cincinnati Life Insurance Company and is the son of John J. Schiff and the
brother of John J. Schiff, Jr. Thomas R. Schiff is the President and one of the
principal owners of John J. & Thomas R. Schiff & Co., Inc., an insurance agency
which represents a number of insurance companies, including the Corporation's
insurance affiliates. During the year ended December 31, 1994, the Corporation's
insurance affiliates paid John J. & Thomas R. Schiff & Co., Inc., commissions of
$2,746,990. Those commissions were paid at the same commission rates and
pursuant to the same agent's contract with the Corporation's insurance
affiliates as other agents of those companies.
John J. Schiff, Jr. was Chairman of the Board of Directors of the Corporation
and, during 1994, also was Chairman of the Board and a director of John J. &
Thomas R. Schiff & Co., Inc.
During 1994, John J. Schiff, Jr. was a director of Cincinnati Bengals, Inc.;
Michael Brown was the President and General Manager of Cincinnati Bengals, Inc;
and John Sawyer was Vice President of Cincinnati Bengals, Inc.
(7)
10
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Corporation's Compensation Committee is charged with the duty of
determining the compensation of the Corporation's internal auditor and members
of senior management. It also administers and grants options under the
Corporation's stock option plan, including options to senior management.
It is the opinion of the Committee that senior management of the Corporation
should receive compensation which will accomplish the following:
* Attract and retain quality personnel.
* Reinforce the attainment of the Corporation's performance objectives.
* Align the interests of senior management with those of the Corporation's
shareholders.
* Encourage the members of senior management to acquire and retain the
Corporation's stock.
* Retain its status as a deductible expense for tax purposes.
A portion of total compensation is paid in the form of a fixed annual salary in
an amount which the Committee feels sufficient to retain top quality
executives. In determining the levels of compensation necessary to be
competitive, the Committee reviews compensation paid by other multiline
insurance companies which constitute the Corporation's most direct competitors
for executive talent. The nine insurance companies for which data has been
readily available comprise part (but not all) of the companies included in the
Standard & Poor s Multiline Insurance Index which is referred to in the
performance graph below. Senior management salaries are reviewed on an annual
basis. In determining salary levels, the Committee considers changes in general
economic conditions, including inflation, and changes in compensation paid by
the Corporation's competitors. The Committee also seeks input from the
Corporation's chief executive officer in setting salaries for senior management
other than the CEO.
A second component of compensation is paid in the form of a bonus, determined
in light of the Corporation's performance during the year. Performance is
measured not only by profit, which is directly affected by the impact of
weather on the profits of the Corporation's property and casualty insurance
subsidiaries, but by a review of such factors as stock price, premium volume,
total expenses, combined ratios of the insurance subsidiaries and ratings
issued by national rating agencies, including A. M. Best Company. Bonuses are
established at the end of each year but do not reflect the application of any
precise formula to the performance indicators listed. Because of the impact
that uncontrollable factors such as weather have on the financial indicators
reviewed, the committee does not feel that the application of a mechanical
system of determining bonuses is appropriate; therefore, the setting of bonuses
is a subjective process, not totally dependent on the objective criteria
listed.
The third component of compensation is awarded through the grant of stock
options. The Compensation Committee considers the value attributable to the
grant of options to be an integral part of total compensation. In addition,
options are the primary mechanism for encouraging the ownership of the
Corpration's shares, aligning the interests of senior management with those of
shareholders and for providing long-term rewards to employees for overall
corporate performance. In granting options to senior management, it is the
Committee's intent not only to reward senior management for services to the
Corporation but to provide incentive for individual option holders to remain in
the employ of the Corporation. Members of senior management are reviewed for
stock option grants each year. In determining the appropriate value of options
to be granted to senior management, the Committee reviews grants by the
Corporation's competitors with the objective of providing the opportunity for
competitive long-term compensation.
The 1994 salaries contained in the Summary Compensation Table were established
in October of 1993. The information available at that time regarding
compensation paid by the Corporation's competitors was for the calendar year
1992. For that year, the salary of Mr. Morgan, President and Chief Executive
Officer, was significantly below the median for CEO salaries of the
Corporation's competitors, but his total salary and bonus for 1992 was only 7%
below the median. Mr. Morgan's salary was increased by 4% for the year 1993
which the Committee felt would maintain his base salary at a level equal to
approximately 75% of the median for base CEO salaries paid by the Corporation's
competitors.
In determining the year-end bonus for senior management, including Mr. Morgan,
the Committee reviewed an analysis of the total salary and bonus payable to
senior management from 1989 through 1993 which revealed that, while gross
revenues of the Corporation had increased approximately 12% per year and net
income had increased approximately 22% per year, salary and bonus had increased
less than 6-1/2% per year. The Committee also reviewed available information
regarding corporate performance for the first three quarters of 1994. At that
time, projected profit from operations was slightly behind 1993 because of the
effect of first-quarter storm losses. Barring extraordinary losses in the
fourth quarter, operating profits were projected to exceed those for 1993.
While profits were slightly down, gross premium volume for the first six months
had increased 6%, and the Corporation's total expenses for the period remained
approximately the same. The Committee felt that Mr. Morgan's leadership was
instrumental in holding any increase in total expenses to a minimum. The
combined loss and expense ratio of the property and
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casualty insurance subsidiaries for the first three quarters was 102, or about
8-10 points better than the industry average, and the ratings from A. M. Best
Company for all insurance subsidiaries were renewed at their current levels.
The market price of the Corporation's stock remained steady through the first
three quarters. In light of all of these indicators, Mr. Morgan's cash bonus
for 1994 was set at an amount equal to his 1993 bonus.
On December 20, 1994, Mr. Morgan received options for 20,000 shares of the
Corporation's stock. The value of the grant, employing Securities and Exchange
Commission evaluation procedures, was approximately 60% of the median value of
grants made by the Corporation's competitors to their chief executive officers
during 1993.
Submitted by the Compensation Committee
Michael Brown, Lawrence H. Rogers, II, John Sawyer, Thomas R. Schiff
FINANCIAL PERFORMANCE
The graph below summarizes the cumulative total shareholder return on the
Corporation's Common Stock compared to the Standard & Poor's 500 Index and the
Standard & Poor's Multiline Insurance Index.
Total Return Analysis
CFC vs. Market Indices
December 31 Totals
1989 1990 1991 1992 1993 1994
- - - - -----------------------------------------------------------------------------
CFC Index 100 109 142 249 221 218
S&P Index 100 97 126 136 150 152
S&P ML Index 100 80 104 116 127 131
OTHER TRANSACTIONS
John E. Field is a nominee for director of the Corporation and a principal
owner and President of Wallace & Turner, Inc., an insurance agency which
represents a number of insurance companies, including the Corporation's
insurance affiliates. During the year ending December 31, 1994, the
Corporation's insurance affiliates paid Wallace & Turner, Inc., commissions of
$788,163.
Robert C. Schiff is a director of the Corporation, The Cincinnati Insurance
Company, The Cincinnati Life Insurance Company, The Cincinnati Indemnity
Company and The Cincinnati Casualty Company. Mr. Schiff is President and
principal owner of Schiff, Kreidler-Shell, Inc., an insurance agency which
represents a number of insurance companies, including the Corporation's
insurance affiliates. During the year ending December 31, 1994, the
Corporation's insurance affiliates paid Schiff, Kreidler-Shell, Inc.,
commissions of
$2,246,904.
John J. Schiff, Jr. is Chairman of the Board and a director of the Corporation,
The Cincinnati Insurance Company and The Cincinnati Indemnity Company; and a
director of The Cincinnati Casualty Company, The Cincinnati Life Insurance
Company and
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CFC Investment Company. Thomas R. Schiff is a director of the Corporation, The
Cincinnati Insurance Company, The Cincinnati Casualty Company, The Cincinnati
Indemnity Company and The Cincinnati Life Insurance Company. John J. Schiff,
Jr. and Thomas R. Schiff are Chairman of the Board and President, respectively,
and principal owners of John J. & Thomas R. Schiff & Co., Inc., an insurance
agency which represents a number of insurance companies, including the
Corporation's insurance affiliates. During the year ended December 31, 1994,
the Corporation's insurance affiliates paid John J. & Thomas R. Schiff & Co.,
Inc., commissions of $2,746,990.
Larry R. Webb is a director of the Corporation, The Cincinnati Insurance
Company and The Cincinnati Indemnity Company; and President and a principal
owner of Webb Insurance Agency, Inc., an insurance agency which represents a
number of insurance companies including the Corporation's insurance affiliates.
During the year ended December 31, 1994, the Corporation's insurance affiliates
paid Webb Insurance Agency, Inc., commissions of $624,408.
Alan R. Weiler is a director of the Corporation; and President and a principal
owner of Archer-Meek-Weiler Agency, Inc., an insurance agency which represents
a number of insurance companies, including the Corporation's insurance
affiliates. During the year ended December 31, 1994, the Corporation's
insurance affiliates paid Archer-Meek-Weiler Agency, Inc., commissions of
$1,417,678.
The foregoing agencies are paid at the same commission rates and have the same
agent's contract with the Corporation's insurance affiliates as other agents of
those companies in similar geographic areas. Each of the aforementioned
agencies has employees and solicitors who are not directors or executive
officers of the Corporation's insurance affiliates.
Vincent H. Beckman is a director and Secretary of the Board of the Corporation
and The Cincinnati Insurance Company and a director of The Cincinnati Indemnity
Company and The Cincinnati Life Insurance Company. Mr. Beckman is a partner in
the law firm of Beckman, Weil, Shepardson & Faller which serves as legal
counsel to the Corporation and its affiliates.
INDEPENDENT PUBLIC ACCOUNTANTS
As has been the Corporation's practice, independent auditors for the current
year will not be selected by the Board of Directors prior to the Annual Meeting
of the Shareholders.
Representatives from Deloitte & Touche, LLP which served as the Corporation's
independent auditors for the last calendar year, will be present at the meeting
and will be afforded the opportunity to make any statements they wish and to
answer appropriate questions.
SHAREHOLDER PROPOSALS
The Corporation has not received any shareholder proposals to be considered for
presentation at the 1995 Annual Meeting of Shareholders. Any shareholder who
wishes a proposal to be considered for presentation at the 1996 Annual Meeting
of Shareholders must submit the proposal to Cincinnati Financial Corporation,
P.O. Box 145496, Cincinnati, Ohio, 45250-5496, on or before November 1, 1995.
OTHER BUSINESS
The management does not know of any other matter or business which may be
brought before the meeting; but if any other matter or business comes before
the meeting, it is intended that a vote will be cast pursuant to the
accompanying proxy in accordance with the judgment of the person or persons
voting the same.
/s/ Vincent H. Beckman
VINCENT H. BECKMAN
SECRETARY
February 27, 1995
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Account #
Number of Shares*
PROXY
CINCINNATI FINANCIAL CORPORATION
P.O. BOX 145496, CINCINNATI, OHIO, 45250-5496
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints John J. Schiff, Vincent H. Beckman, and Robert
J. Driehaus, or any one of them, with power of substitution, as Proxies, and
hereby authorizes them to represent and to vote, as designated below, all the
shares of Cincinnati Financial Corporation held of record on February 7, 1995,
at the Annual Meeting of Shareholders to be held on April 1, 1995, or any
adjournment thereof.
1. ELECTION OF DIRECTORS / / FOR all nominees listed / / WITHHOLD AUTHORITY
below (except as specified to vote for all nominees
to the contrary below) listed below
Vincent H. Beckman, Michael Brown, John E. Field, John J. Schiff, Robert C.
Schiff, Alan R. Weiler.
Instructions: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.
________________________________________________________________________________
2. In their discretion, the Proxies are authorized to vote upon such other
business as may come before the meeting.
This proxy when properly executed will be voted in the manner directed herein
by the undersigned shareholder. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED FOR ALL NOMINEES LISTED.
Please sign exactly as name appears. When shares are held by joint tenants,
both should sign. When signing as attorney, executor, administrator, trustee,
or guardian, please give full title as such. If a corporation, please sign in
full corporate name by President or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
Please mark, sign, date, and return this proxy promptly using the enclosed
envelope.
___________________ _______________________________ _____________, 1995
Signature Signature if held jointly DATED
* Number of shares includes those held in your name directly and those in your
dividend reinvestment account, if applicable.
