PR Newswire
CINCINNATI, Feb. 6, 2019
CINCINNATI, Feb. 6, 2019 /PRNewswire/ -- Cincinnati Financial Corporation (Nasdaq: CINF) today reported:
Financial Highlights | ||||||||||||||||||||
(Dollars in millions except per share data) | Three months ended December 31, | Twelve months ended December 31, | ||||||||||||||||||
2018 | 2017 | % Change | 2018 | 2017 | % Change | |||||||||||||||
Revenue Data | ||||||||||||||||||||
Earned premiums | $ | 1,318 | $ | 1,258 | 5 | $ | 5,170 | $ | 4,954 | 4 | ||||||||||
Investment income, net of expenses | 161 | 156 | 3 | 619 | 609 | 2 | ||||||||||||||
Total revenues | 710 | 1,411 | (50) | 5,407 | 5,732 | (6) | ||||||||||||||
Income Statement Data | ||||||||||||||||||||
Net income (loss) | $ | (452) | $ | 642 | nm | $ | 287 | $ | 1,045 | (73) | ||||||||||
Investment gains and losses, net | (611) | (6) | nm | (318) | 95 | nm | ||||||||||||||
Other non-recurring items | — | 495 | nm | 56 | 495 | (89) | ||||||||||||||
Non-GAAP operating income* | $ | 159 | $ | 153 | 4 | $ | 549 | $ | 455 | 21 | ||||||||||
Per Share Data (diluted) | ||||||||||||||||||||
Net income (loss) | $ | (2.78) | $ | 3.88 | nm | $ | 1.75 | $ | 6.29 | (72) | ||||||||||
Investment gains and losses, net | (3.76) | (0.04) | nm | (1.94) | 0.57 | nm | ||||||||||||||
Other non-recurring items | — | 2.99 | nm | $ | 0.34 | 2.98 | (89) | |||||||||||||
Non-GAAP operating income* | $ | 0.98 | $ | 0.93 | 5 | $ | 3.35 | $ | 2.74 | 22 | ||||||||||
Book value | $ | 48.10 | $ | 50.29 | (4) | |||||||||||||||
Cash dividend declared | $ | 0.53 | $ | 1.00 | (47) | $ | 2.12 | $ | 2.50 | (15) | ||||||||||
Diluted weighted average shares outstanding | 162.8 | 165.6 | (2) | 164.5 | 166.0 | (1) |
* | The Definitions of Non-GAAP Information and Reconciliation to Comparable GAAP Measures defines and reconciles measures presented in this release that are not based on U.S. Generally Accepted Accounting Principles. |
** | Forward-looking statements and related assumptions are subject to the risks outlined in the company's safe harbor statement. |
Insurance Operations Fourth-Quarter Highlights
Investment and Balance Sheet Highlights
Finishing 2018 Strong
Steven J. Johnston, president and chief executive officer, commented: "Non-GAAP operating income finished the year strong, increasing 21 percent to $549 million, compared with year-end 2017. While lower tax rates bolstered the result, even on a pretax basis we achieved healthy non-GAAP operating income growth of 12 percent year over year.
"Full-year 2018 net income declined 73 percent compared with year-end 2017. As I mentioned last year, these large swings in our net income are mostly attributable to a change in accounting rules as required by the Financial Accounting Standards Board. This accounting change will continue to create a lot of volatility in net income as equity security unrealized investment gains and losses flow through the income statement instead of the balance sheet as they would have prior to 2018.
"The communities we serve through our insurance business saw an unusually high level of weather-related catastrophe activity near the end of 2018. While no one likes to witness the pain and destruction these events bring, it is when our field claims representatives shine, delivering support to our policyholders and agents with empathy and warmth.
"Catastrophes added 7.0 points to our fourth-quarter combined ratio, 6.1 points more than for the fourth quarter of 2017, bringing that measure to 93.9 percent. Looking beyond the impact of catastrophe losses and reserve development on prior accident years, we can see that our underlying book of business improved 3.2 points to reach 90.1 percent – our best result in 10 quarters.
"On a full-year basis, our combined ratio improved 1.1 points to 96.4 percent compared with year-end 2017. Our current accident year combined ratio before catastrophe losses remained nearly flat for 2018 at 92.4 percent."
Continuing Property Casualty Growth
"For the first time, full-year property casualty net written premiums exceeded $5 billion. New and renewal business written through our independent agencies grew year over year for each of our property casualty insurance segments. For our life insurance segment, earned premiums rose 8 percent.
"Our profitable growth is the result of focused execution of our strategic initiatives to refine our pricing precision, enter new product lines and marketing territories and to slowly expand our independent agency force.
"We still expect our acquisition of MSP Underwriting Limited to close during the first quarter of 2019. We believe MSP, operating through Beaufort Underwriting Agency Limited, will add profitable premium growth. And, we are looking forward to the additional expertise this team will bring to our organization."
Following Proven Long-Term Investment Strategy
"Despite the pressure on equity markets at the end of the year, at December 31, 2018, our total portfolio still had more than $2.5 billion in appreciated value before taxes. Our insurance business continues to provide cash that we invest in high-quality bonds and dividend-paying stocks. We are poised to further benefit from these purchases when the markets rebound, helping to create value for shareholders over time.
"Our book value declined 4.4 percent to $48.10 at December 31 compared with year-end 2017, resulting in a negative 0.1 percent value creation ratio. However, we maintain a long-term perspective and aren't swayed by the short-term, periodic volatility our equity-investment strategy can produce. On a five-year average basis our value creation ratio is 10.7 percent – within our target range.
"The board of directors' recent decision to increase the cash dividend demonstrates their confidence in the future success of our strategies and sets the stage for a 59th consecutive year of increasing regular annual dividends."
Insurance Operations Highlights | ||||||||||||||||||||
Consolidated Property Casualty Insurance Results | ||||||||||||||||||||
(Dollars in millions) | Three months ended December 31, | Twelve months ended December 31, | ||||||||||||||||||
2018 | 2017 | % Change | 2018 | 2017 | % Change | |||||||||||||||
Earned premiums | $ | 1,253 | $ | 1,199 | 5 | $ | 4,920 | $ | 4,722 | 4 | ||||||||||
Fee revenues | 3 | 3 | 0 | 11 | 11 | 0 | ||||||||||||||
Total revenues | 1,256 | 1,202 | 4 | 4,931 | 4,733 | 4 | ||||||||||||||
Loss and loss expenses | 798 | 741 | 8 | 3,223 | 3,138 | 3 | ||||||||||||||
Underwriting expenses | 379 | 373 | 2 | 1,522 | 1,467 | 4 | ||||||||||||||
Underwriting profit | $ | 79 | $ | 88 | (10) | $ | 186 | $ | 128 | 45 | ||||||||||
Ratios as a percent of earned premiums: | Pt. Change | Pt. Change | ||||||||||||||||||
Loss and loss expenses | 63.7 | % | 61.8 | % | 1.9 | 65.5 | % | 66.4 | % | (0.9) | ||||||||||
Underwriting expenses | 30.2 | 31.1 | (0.9) | 30.9 | 31.1 | (0.2) | ||||||||||||||
Combined ratio | 93.9 | % | 92.9 | % | 1.0 | 96.4 | % | 97.5 | % | (1.1) | ||||||||||
% Change | % Change | |||||||||||||||||||
Agency renewal written premiums | $ | 1,037 | $ | 987 | 5 | $ | 4,358 | $ | 4,198 | 4 | ||||||||||
Agency new business written premiums | 158 | 151 | 5 | 652 | 626 | 4 | ||||||||||||||
Cincinnati Re net written premiums | 28 | 21 | 33 | 158 | 125 | 26 | ||||||||||||||
Other written premiums | (46) | (29) | (59) | (138) | (109) | (27) | ||||||||||||||
Net written premiums | $ | 1,177 | $ | 1,130 | 4 | $ | 5,030 | $ | 4,840 | 4 | ||||||||||
Ratios as a percent of earned premiums: | Pt. Change | Pt. Change | ||||||||||||||||||
Current accident year before catastrophe losses | 59.9 | % | 62.2 | % | (2.3) | 61.5 | % | 61.1 | % | 0.4 | ||||||||||
Current accident year catastrophe losses | 7.4 | 1.5 | 5.9 | 7.4 | 7.8 | (0.4) | ||||||||||||||
Prior accident years before catastrophe losses | (3.2) | (1.3) | (1.9) | (3.1) | (1.9) | (1.2) | ||||||||||||||
Prior accident years catastrophe losses | (0.4) | (0.6) | 0.2 | (0.3) | (0.6) | 0.3 | ||||||||||||||
Loss and loss expense ratio | 63.7 | % | 61.8 | % | 1.9 | 65.5 | % | 66.4 | % | (0.9) | ||||||||||
Current accident year combined ratio before | ||||||||||||||||||||
catastrophe losses | 90.1 | % | 93.3 | % | (3.2) | 92.4 | % | 92.2 | % | 0.2 | ||||||||||
Commercial Lines Insurance Results | ||||||||||||||||||||
(Dollars in millions) | Three months ended December 31, | Twelve months ended December 31, | ||||||||||||||||||
2018 | 2017 | % Change | 2018 | 2017 | % Change | |||||||||||||||
Earned premiums | $ | 811 | $ | 796 | 2 | $ | 3,218 | $ | 3,165 | 2 | ||||||||||
Fee revenues | 2 | 2 | 0 | 5 | 5 | 0 | ||||||||||||||
Total revenues | 813 | 798 | 2 | 3,223 | 3,170 | 2 | ||||||||||||||
Loss and loss expenses | 505 | 487 | 4 | 2,049 | 2,042 | 0 | ||||||||||||||
Underwriting expenses | 253 | 253 | 0 | 1,023 | 1,009 | 1 | ||||||||||||||
Underwriting profit | $ | 55 | $ | 58 | (5) | $ | 151 | $ | 119 | 27 | ||||||||||
Ratios as a percent of earned premiums: | Pt. Change | Pt. Change | ||||||||||||||||||
Loss and loss expenses | 62.3 | % | 61.1 | % | 1.2 | 63.7 | % | 64.5 | % | (0.8) | ||||||||||
Underwriting expenses | 31.1 | 31.8 | (0.7) | 31.7 | 31.9 | (0.2) | ||||||||||||||
Combined ratio | 93.4 | % | 92.9 | % | 0.5 | 95.4 | % | 96.4 | % | (1.0) | ||||||||||
% Change | % Change | |||||||||||||||||||
Agency renewal written premiums | $ | 694 | $ | 672 | 3 | $ | 2,925 | $ | 2,880 | 2 | ||||||||||
Agency new business written premiums | 101 | 96 | 5 | 417 | 397 | 5 | ||||||||||||||
Other written premiums | (34) | (22) | (55) | (97) | (75) | (29) | ||||||||||||||
Net written premiums | $ | 761 | $ | 746 | 2 | $ | 3,245 | $ | 3,202 | 1 | ||||||||||
Ratios as a percent of earned premiums: | Pt. Change | Pt. Change | ||||||||||||||||||
Current accident year before catastrophe losses | 62.8 | % | 62.0 | % | 0.8 | 62.1 | % | 61.1 | % | 1.0 | ||||||||||
Current accident year catastrophe losses | 4.9 | 1.3 | 3.6 | 6.5 | 5.7 | 0.8 | ||||||||||||||
Prior accident years before catastrophe losses | (4.7) | (1.2) | (3.5) | (4.2) | (1.6) | (2.6) | ||||||||||||||
Prior accident years catastrophe losses | (0.7) | (1.0) | 0.3 | (0.7) | (0.7) | 0.0 | ||||||||||||||
Loss and loss expense ratio | 62.3 | % | 61.1 | % | 1.2 | 63.7 | % | 64.5 | % | (0.8) | ||||||||||
Current accident year combined ratio before | ||||||||||||||||||||
catastrophe losses | 93.9 | % | 93.8 | % | 0.1 | 93.8 | % | 93.0 | % | 0.8 | ||||||||||
Personal Lines Insurance Results | ||||||||||||||||||||
(Dollars in millions) | Three months ended December 31, | Twelve months ended December 31, | ||||||||||||||||||
2018 | 2017 | % Change | 2018 | 2017 | % Change | |||||||||||||||
Earned premiums | $ | 342 | $ | 320 | 7 | $ | 1,336 | $ | 1,241 | 8 | ||||||||||
Fee revenues | 1 | 1 | 0 | 5 | 5 | 0 | ||||||||||||||
Total revenues | 343 | 321 | 7 | 1,341 | 1,246 | 8 | ||||||||||||||
Loss and loss expenses | 216 | 212 | 2 | 972 | 918 | 6 | ||||||||||||||
Underwriting expenses | 97 | 93 | 4 | 389 | 360 | 8 | ||||||||||||||
Underwriting profit (loss) | $ | 30 | $ | 16 | 88 | $ | (20) | $ | (32) | 38 | ||||||||||
Ratios as a percent of earned premiums: | Pt. Change | Pt. Change | ||||||||||||||||||
Loss and loss expenses | 63.3 | % | 66.3 | % | (3.0) | 72.8 | % | 74.0 | % | (1.2) | ||||||||||
Underwriting expenses | 28.4 | 29.2 | (0.8) | 29.1 | 29.0 | 0.1 | ||||||||||||||
Combined ratio | 91.7 | % | 95.5 | % | (3.8) | 101.9 | % | 103.0 | % | (1.1) | ||||||||||
% Change | % Change | |||||||||||||||||||
Agency renewal written premiums | $ | 293 | $ | 275 | 7 | $ | 1,241 | $ | 1,156 | 7 | ||||||||||
Agency new business written premiums | 38 | 39 | (3) | 165 | 161 | 2 | ||||||||||||||
Other written premiums | (8) | (5) | (60) | (28) | (23) | (22) | ||||||||||||||
Net written premiums | $ | 323 | $ | 309 | 5 | $ | 1,378 | $ | 1,294 | 6 | ||||||||||
Ratios as a percent of earned premiums: | Pt. Change | Pt. Change | ||||||||||||||||||
Current accident year before catastrophe losses | 56.2 | % | 64.9 | % | (8.7) | 62.8 | % | 64.0 | % | (1.2) | ||||||||||
Current accident year catastrophe losses | 8.0 | 1.8 | 6.2 | 9.1 | 11.2 | (2.1) | ||||||||||||||
Prior accident years before catastrophe losses | (1.1) | (0.5) | (0.6) | 0.6 | (0.9) | 1.5 | ||||||||||||||
Prior accident years catastrophe losses | 0.2 | 0.1 | 0.1 | 0.3 | (0.3) | 0.6 | ||||||||||||||
Loss and loss expense ratio | 63.3 | % | 66.3 | % | (3.0) | 72.8 | % | 74.0 | % | (1.2) | ||||||||||
Current accident year combined ratio before | ||||||||||||||||||||
catastrophe losses | 84.6 | % | 94.1 | % | (9.5) | 91.9 | % | 93.0 | % | (1.1) | ||||||||||
Excess and Surplus Lines Insurance Results | ||||||||||||||||||||
(Dollars in millions) | Three months ended December 31, | Twelve months ended December 31, | ||||||||||||||||||
2018 | 2017 | % Change | 2018 | 2017 | % Change | |||||||||||||||
Earned premiums | $ | 61 | $ | 56 | 9 | $ | 234 | $ | 209 | 12 | ||||||||||
Fee revenues | — | — | 0 | 1 | 1 | 0 | ||||||||||||||
Total revenues | 61 | 56 | 9 | 235 | 210 | 12 | ||||||||||||||
Loss and loss expenses | 29 | 28 | 4 | 104 | 86 | 21 | ||||||||||||||
Underwriting expenses | 17 | 17 | 0 | 68 | 63 | 8 | ||||||||||||||
Underwriting profit | $ | 15 | $ | 11 | 36 | $ | 63 | $ | 61 | 3 | ||||||||||
Ratios as a percent of earned premiums: | Pt. Change | Pt. Change | ||||||||||||||||||
Loss and loss expenses | 46.8 | % | 50.7 | % | (3.9) | 44.4 | % | 41.4 | % | 3.0 | ||||||||||
Underwriting expenses | 28.6 | 29.1 | (0.5) | 29.1 | 29.7 | (0.6) | ||||||||||||||
Combined ratio | 75.4 | % | 79.8 | % | (4.4) | 73.5 | % | 71.1 | % | 2.4 | ||||||||||
% Change | % Change | |||||||||||||||||||
Agency renewal written premiums | $ | 50 | $ | 40 | 25 | $ | 192 | $ | 162 | 19 | ||||||||||
Agency new business written premiums | 19 | 16 | 19 | 70 | 68 | 3 | ||||||||||||||
Other written premiums | (4) | (2) | (100) | (13) | (11) | (18) | ||||||||||||||
Net written premiums | $ | 65 | $ | 54 | 20 | $ | 249 | $ | 219 | 14 | ||||||||||
Ratios as a percent of earned premiums: | Pt. Change | Pt. Change | ||||||||||||||||||
Current accident year before catastrophe losses | 50.9 | % | 57.6 | % | (6.7) | 53.9 | % | 54.0 | % | (0.1) | ||||||||||
Current accident year catastrophe losses | 0.8 | 0.3 | 0.5 | 1.1 | 1.1 | 0.0 | ||||||||||||||
Prior accident years before catastrophe losses | (4.9) | (7.1) | 2.2 | (10.6) | (13.6) | 3.0 | ||||||||||||||
Prior accident years catastrophe losses | 0.0 | (0.1) | 0.1 | 0.0 | (0.1) | 0.1 | ||||||||||||||
Loss and loss expense ratio | 46.8 | % | 50.7 | % | (3.9) | 44.4 | % | 41.4 | % | 3.0 | ||||||||||
Current accident year combined ratio before | ||||||||||||||||||||
catastrophe losses | 79.5 | % | 86.7 | % | (7.2) | 83.0 | % | 83.7 | % | (0.7) | ||||||||||
Life Insurance Subsidiary Results | ||||||||||||||||||||
(Dollars in millions) | Three months ended December 31, | Twelve months ended December 31, | ||||||||||||||||||
2018 | 2017 | % Change | 2018 | 2017 | % Change | |||||||||||||||
Term life insurance | $ | 45 | $ | 40 | 13 | $ | 172 | $ | 158 | 9 | ||||||||||
Universal life insurance | 10 | 10 | 0 | 37 | 38 | (3) | ||||||||||||||
Other life insurance, annuity, and disability income products | 10 | 9 | 11 | 41 | 36 | 14 | ||||||||||||||
Earned premiums | 65 | 59 | 10 | 250 | 232 | 8 | ||||||||||||||
Investment income, net of expenses | 38 | 38 | 0 | 153 | 155 | (1) | ||||||||||||||
Investment gains and losses, net | (4) | 2 | nm | (4) | 6 | nm | ||||||||||||||
Fee revenues | 1 | 1 | 0 | 4 | 5 | (20) | ||||||||||||||
Total revenues | 100 | 100 | 0 | 403 | 398 | 1 | ||||||||||||||
Contract holders' benefits incurred | 76 | 68 | 12 | 267 | 252 | 6 | ||||||||||||||
Underwriting expenses incurred | 19 | 16 | 19 | 75 | 79 | (5) | ||||||||||||||
Total benefits and expenses | 95 | 84 | 13 | 342 | 331 | 3 | ||||||||||||||
Net income before income tax | 5 | 16 | (69) | 61 | 67 | (9) | ||||||||||||||
Income (benefit) tax | 2 | (106) | nm | 13 | (88) | nm | ||||||||||||||
Net income of the life insurance subsidiary | $ | 3 | $ | 122 | (98) | $ | 48 | $ | 155 | (69) | ||||||||||
Investment and Balance Sheet Highlights | ||||||||||||||||||||
Investments Results | ||||||||||||||||||||
(Dollars in millions) | Three months ended December 31, | Twelve months ended December 31, | ||||||||||||||||||
2018 | 2017 | % Change | 2018 | 2017 | % Change | |||||||||||||||
Investment income, net of expenses | $ | 161 | $ | 156 | 3 | $ | 619 | $ | 609 | 2 | ||||||||||
Investment interest credited to contract holders' | (24) | (23) | (4) | (96) | (93) | (3) | ||||||||||||||
Investment gains and losses, net | (774) | (8) | nm | (402) | 148 | (372) | ||||||||||||||
Investment profit | $ | (637) | $ | 125 | nm | $ | 121 | $ | 664 | (82) | ||||||||||
Investment income: | ||||||||||||||||||||
Interest | $ | 112 | $ | 111 | 1 | $ | 445 | $ | 445 | — | ||||||||||
Dividends | 50 | 46 | 9 | 181 | 170 | 6 | ||||||||||||||
Other | 2 | 1 | 100 | 5 | 4 | 25 | ||||||||||||||
Less investment expenses | 3 | 2 | 50 | 12 | 10 | 20 | ||||||||||||||
Investment income, pretax | 161 | 156 | 3 | 619 | 609 | 2 | ||||||||||||||
Less income taxes | 25 | 36 | (31) | 95 | 142 | (33) | ||||||||||||||
Total investment income, after-tax | $ | 136 | $ | 120 | 13 | $ | 524 | $ | 467 | 12 | ||||||||||
Investment returns: | ||||||||||||||||||||
Average invested assets plus cash and cash | $ | 17,756 | $ | 17,128 | $ | 17,397 | $ | 16,657 | ||||||||||||
Average yield pretax | 3.63 | % | 3.64 | % | 3.56 | % | 3.66 | % | ||||||||||||
Average yield after-tax | 3.06 | 2.80 | 3.01 | 2.80 | ||||||||||||||||
Effective tax rate | 15.5 | % | 22.9 | % | 15.4 | % | 23.4 | % | ||||||||||||
Fixed-maturity returns: | ||||||||||||||||||||
Average amortized cost | $ | 10,648 | $ | 10,225 | $ | 10,479 | $ | 10,057 | ||||||||||||
Average yield pretax | 4.21 | % | 4.34 | % | 4.25 | % | 4.42 | % | ||||||||||||
Average yield after-tax | 3.51 | 3.20 | 3.55 | 3.24 | ||||||||||||||||
Effective tax rate | 16.6 | % | 26.3 | % | 16.4 | % | 26.7 | % | ||||||||||||
(Dollars in millions) | Three months ended December 31, | Twelve months ended December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Investment gains and losses on equity securities, net | $ | (5) | $ | (23) | $ | 9 | $ | 120 | ||||||||
Unrealized gains and losses on equity securities still held, net | (758) | — | (404) | — | ||||||||||||
Investment gains and losses on fixed-maturity securities, net | (2) | 9 | 5 | 19 | ||||||||||||
Other | (9) | 6 | (12) | 9 | ||||||||||||
Subtotal - investment gains and losses reported in net income | (774) | (8) | (402) | 148 | ||||||||||||
Change in unrealized investment gains and losses - equity securities | — | 697 | — | 816 | ||||||||||||
Change in unrealized investment gains and losses - fixed maturities | 39 | (323) | (339) | 99 | ||||||||||||
Total | $ | (735) | $ | 366 | $ | (741) | $ | 1,063 | ||||||||
Balance Sheet Highlights | ||||||||
(Dollars in millions except share data) | At December 31, | At December 31, | ||||||
2018 | 2017 | |||||||
Total investments | $ | 16,732 | $ | 17,051 | ||||
Total assets | 21,935 | 21,843 | ||||||
Short-term debt | 32 | 24 | ||||||
Long-term debt | 788 | 787 | ||||||
Shareholders' equity | 7,833 | 8,243 | ||||||
Book value per share | 48.10 | 50.29 | ||||||
Debt-to-total-capital ratio | 9.5 | % | 9.0 | % |
For additional information or to register for our conference call webcast, please visit cinfin.com/investors.
Cincinnati Financial Corporation offers business, home and auto insurance, our main business, through The Cincinnati Insurance Company and its two standard market property casualty companies. The same local independent insurance agencies that market those policies may offer products of our other subsidiaries, including life insurance, fixed annuities and surplus lines property and casualty insurance. For additional information about the company, please visit cinfin.com.
Mailing Address: | Street Address: |
P.O. Box 145496 | 6200 South Gilmore Road |
Cincinnati, Ohio 45250-5496 | Fairfield, Ohio 45014-5141 |
Safe Harbor Statement
This is our "Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995. Our business is subject to certain risks and uncertainties that may cause actual results to differ materially from those suggested by the forward-looking statements in this report. Some of those risks and uncertainties are discussed in our 2017 Annual Report on Form 10-K, Item 1A, Risk Factors, Page 30.
Factors that could cause or contribute to such differences include, but are not limited to:
Further, the company's insurance businesses are subject to the effects of changing social, global, economic and regulatory environments. Public and regulatory initiatives have included efforts to adversely influence and restrict premium rates, restrict the ability to cancel policies, impose underwriting standards and expand overall regulation. The company also is subject to public and regulatory initiatives that can affect the market value for its common stock, such as measures affecting corporate financial reporting and governance. The ultimate changes and eventual effects, if any, of these initiatives are uncertain.
* * *
Cincinnati Financial Corporation | ||||||||
(Dollars in millions except per share data) | December 31, | December 31, | ||||||
2018 | 2017 | |||||||
Assets | ||||||||
Investments | ||||||||
Fixed maturities, at fair value (amortized cost: 2018—$10,643; 2017—$10,314) | $ | 10,689 | $ | 10,699 | ||||
Equity securities, at fair value (cost: 2018—$3,368; 2017—$3,094) | 5,920 | 6,249 | ||||||
Other invested assets | 123 | 103 | ||||||
Total investments | 16,732 | 17,051 | ||||||
Cash and cash equivalents | 784 | 657 | ||||||
Investment income receivable | 132 | 134 | ||||||
Finance receivable | 71 | 61 | ||||||
Premiums receivable | 1,644 | 1,589 | ||||||
Reinsurance recoverable | 484 | 432 | ||||||
Prepaid reinsurance premiums | 44 | 42 | ||||||
Deferred policy acquisition costs | 738 | 670 | ||||||
Land, building and equipment, net, for company use (accumulated depreciation: 2018—$265; 2017—$253) | 195 | 185 | ||||||
Other assets | 308 | 216 | ||||||
Separate accounts | 803 | 806 | ||||||
Total assets | $ | 21,935 | $ | 21,843 | ||||
Liabilities | ||||||||
Insurance reserves | ||||||||
Loss and loss expense reserves | $ | 5,707 | $ | 5,273 | ||||
Life policy and investment contract reserves | 2,779 | 2,729 | ||||||
Unearned premiums | 2,516 | 2,404 | ||||||
Other liabilities | 804 | 792 | ||||||
Deferred income tax | 627 | 745 | ||||||
Note payable | 32 | 24 | ||||||
Long-term debt and capital lease obligations | 834 | 827 | ||||||
Separate accounts | 803 | 806 | ||||||
Total liabilities | 14,102 | 13,600 | ||||||
Shareholders' Equity | ||||||||
Common stock, par value—$2 per share; (authorized: 2018 and 2017—500 million shares; issued: 2018 and 2017—198.3 million shares) | 397 | 397 | ||||||
Paid-in capital | 1,281 | 1,265 | ||||||
Retained earnings | 7,625 | 5,180 | ||||||
Accumulated other comprehensive income | 22 | 2,788 | ||||||
Treasury stock at cost (2018—35.5 million shares and 2017—34.4 million shares) | (1,492) | (1,387) | ||||||
Total shareholders' equity | $ | 7,833 | $ | 8,243 | ||||
Total liabilities and shareholders' equity | $ | 21,935 | $ | 21,843 | ||||
Cincinnati Financial Corporation | |||||||||||||||
(Dollars in millions except per share data) | Three months ended December 31, | Twelve months ended December 31, | |||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenues | |||||||||||||||
Earned premiums | $ | 1,318 | $ | 1,258 | $ | 5,170 | $ | 4,954 | |||||||
Investment income, net of expenses | 161 | 156 | 619 | 609 | |||||||||||
Investment gains and losses, net | (774) | (8) | (402) | 148 | |||||||||||
Fee revenues | 4 | 4 | 15 | 16 | |||||||||||
Other revenues | 1 | 1 | 5 | 5 | |||||||||||
Total revenues | 710 | 1,411 | 5,407 | 5,732 | |||||||||||
Benefits and Expenses | |||||||||||||||
Insurance losses and contract holders' benefits | 874 | 809 | 3,490 | 3,390 | |||||||||||
Underwriting, acquisition and insurance expenses | 398 | 389 | 1,597 | 1,546 | |||||||||||
Interest expense | 13 | 14 | 53 | 53 | |||||||||||
Other operating expenses | 6 | 2 | 16 | 13 | |||||||||||
Total benefits and expenses | 1,291 | 1,214 | 5,156 | 5,002 | |||||||||||
Income (Loss) Before Income Taxes | (581) | 197 | 251 | 730 | |||||||||||
Provision (Benefit) for Income Taxes | |||||||||||||||
Current | 48 | 31 | 11 | 129 | |||||||||||
Deferred | (177) | (476) | (47) | (444) | |||||||||||
Total provision (benefit) for income taxes | (129) | (445) | (36) | (315) | |||||||||||
Net Income (loss) | $ | (452) | $ | 642 | $ | 287 | $ | 1,045 | |||||||
Per Common Share | |||||||||||||||
Net income (loss)—basic | $ | (2.78) | $ | 3.92 | $ | 1.76 | $ | 6.36 | |||||||
Net income (loss)—diluted | (2.78) | 3.88 | 1.75 | 6.29 |
Definitions of Non-GAAP Information and Reconciliation to Comparable GAAP Measures
(See attached tables for reconciliations; additional prior-period reconciliations available at cinfin.com/investors.)
Cincinnati Financial Corporation prepares its public financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP). Statutory data is prepared in accordance with statutory accounting rules as defined by the National Association of Insurance Commissioners' (NAIC) Accounting Practices and Procedures Manual, and therefore is not reconciled to GAAP data.
Management uses certain non-GAAP financial measures to evaluate its primary business areas – property casualty insurance, life insurance and investments. Management uses these measures when analyzing both GAAP and non-GAAP results to improve its understanding of trends in the underlying business and to help avoid incorrect or misleading assumptions and conclusions about the success or failure of company strategies. Management adjustments to GAAP measures generally: apply to non-recurring events that are unrelated to business performance and distort short-term results; involve values that fluctuate based on events outside of management's control; supplement reporting segment disclosures with disclosures for a subsidiary company or for a combination of subsidiaries or reporting segments; or relate to accounting refinements that affect comparability between periods, creating a need to analyze data on the same basis.
Cincinnati Financial Corporation | ||||||||||||||||
Net Income Reconciliation | ||||||||||||||||
(Dollars in millions except per share data) | Three months ended December 31, | Twelve months ended December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Net income (loss) | $ | (452) | $ | 642 | $ | 287 | $ | 1,045 | ||||||||
Less: | ||||||||||||||||
Investment gains and losses, net | (774) | (8) | (402) | 148 | ||||||||||||
Income tax on investment gains and losses | 163 | 2 | 84 | (53) | ||||||||||||
Investment gains and losses, after-tax | (611) | (6) | (318) | 95 | ||||||||||||
Other non-recurring items | — | 495 | 56 | 495 | ||||||||||||
Non-GAAP operating income | $ | 159 | $ | 153 | $ | 549 | $ | 455 | ||||||||
Diluted per share data: | ||||||||||||||||
Net income (loss) | $ | (2.78) | $ | 3.88 | $ | 1.75 | $ | 6.29 | ||||||||
Less: | ||||||||||||||||
Investment gains and losses, net | (4.75) | (0.05) | (2.44) | 0.89 | ||||||||||||
Income tax on investment gains and losses | 0.99 | 0.01 | 0.50 | (0.32) | ||||||||||||
Investment gains and losses, after-tax | (3.76) | (0.04) | (1.94) | 0.57 | ||||||||||||
Other non-recurring items | — | 2.99 | 0.34 | 2.98 | ||||||||||||
Non-GAAP operating income | $ | 0.98 | $ | 0.93 | $ | 3.35 | $ | 2.74 | ||||||||
Life Insurance Reconciliation | ||||||||||||||||
(Dollars in millions) | Three months ended December 31, | Twelve months ended December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Net income of life insurance subsidiary | $ | 3 | $ | 122 | $ | 48 | $ | 155 | ||||||||
Investment gains, net | (4) | 2 | (4) | 6 | ||||||||||||
Income tax on investment gains | — | — | — | 2 | ||||||||||||
Effects of U.S. tax reform legislation | — | 111 | — | 111 | ||||||||||||
Non-GAAP operating income | 7 | 9 | 52 | 40 | ||||||||||||
Investment income, net of expenses | (38) | (38) | (153) | (155) | ||||||||||||
Investment income credited to contract holders' | 24 | 23 | 96 | 93 | ||||||||||||
Income tax excluding tax on investment gains and effects of | 2 | 5 | 13 | 21 | ||||||||||||
Life insurance segment profit (loss) | $ | (5) | $ | (1) | $ | 8 | $ | (1) | ||||||||
Cincinnati Financial Corporation
Other Measures
(Dollars are per share) | Three months ended December 31, | Twelve months ended December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Value creation ratio: | ||||||||||||||||
End of period book value* | $ | 48.10 | $ | 50.29 | $ | 48.10 | $ | 50.29 | ||||||||
Less beginning of period book value | 51.22 | 45.86 | 50.29 | 42.95 | ||||||||||||
Change in book value | (3.12) | 4.43 | (2.19) | 7.34 | ||||||||||||
Dividend declared to shareholders | 0.53 | 1.00 | 2.12 | 2.50 | ||||||||||||
Total value creation | $ | (2.59) | $ | 5.43 | $ | (0.07) | $ | 9.84 | ||||||||
Value creation ratio from change in book value** | (6.1)% | 9.7 | % | (4.3)% | 17.1 | % | ||||||||||
Value creation ratio from dividends declared to | 1.0 | 2.2 | 4.2 | 5.8 | ||||||||||||
Value creation ratio | (5.1)% | 11.9 | % | (0.1)% | 22.9 | % | ||||||||||
* Book value per share is calculated by dividing end of period total shareholders' equity by end of period shares outstanding | ||||||||||||||||
** Change in book value divided by the beginning of period book value | ||||||||||||||||
*** Dividend declared to shareholders divided by beginning of period book value |
Cincinnati Financial Corporation | |||||||||||||||||||||||||
Property Casualty Operations Reconciliation | |||||||||||||||||||||||||
(Dollars in millions) | Three months ended December 31, 2018 | ||||||||||||||||||||||||
Consolidated | Commercial | Personal | E&S | Cincinnati Re | |||||||||||||||||||||
Premiums: | |||||||||||||||||||||||||
Written premiums | $ | 1,177 | $ | 761 | $ | 323 | $ | 65 | $ | 28 | |||||||||||||||
Unearned premiums change | 76 | 50 | 19 | (4) | 11 | ||||||||||||||||||||
Earned premiums | $ | 1,253 | $ | 811 | $ | 342 | $ | 61 | $ | 39 | |||||||||||||||
Statutory ratios: | |||||||||||||||||||||||||
Combined ratio | 95.5 | % | 95.0 | % | 93.1 | % | 76.1 | % | 158.1 | % | |||||||||||||||
Contribution from catastrophe losses | 7.0 | 4.2 | 8.2 | 0.8 | 63.3 | ||||||||||||||||||||
Combined ratio excluding catastrophe losses | 88.5 | % | 90.8 | % | 84.9 | % | 75.3 | % | 94.8 | % | |||||||||||||||
Commission expense ratio | 19.8 | % | 19.5 | % | 18.9 | % | 26.4 | % | 25.3 | % | |||||||||||||||
Other underwriting expense ratio | 12.0 | 13.2 | 10.9 | 2.9 | 8.9 | ||||||||||||||||||||
Total expense ratio | 31.8 | % | 32.7 | % | 29.8 | % | 29.3 | % | 34.2 | % | |||||||||||||||
GAAP ratios: | |||||||||||||||||||||||||
Combined ratio | 93.9 | % | 93.4 | % | 91.7 | % | 75.4 | % | 153.0 | % | |||||||||||||||
Contribution from catastrophe losses | 7.0 | 4.2 | 8.2 | 0.8 | 63.3 | ||||||||||||||||||||
Prior accident years before catastrophe losses | (3.2) | (4.7) | (1.1) | (4.9) | 13.2 | ||||||||||||||||||||
Current accident year combined ratio before catastrophe losses | 90.1 | % | 93.9 | % | 84.6 | % | 79.5 | % | 76.5 | % | |||||||||||||||
(Dollars in millions) | Twelve months ended December 31, 2018 | ||||||||||||||||||||||||
Consolidated | Commercial | Personal | E&S | Cincinnati Re | |||||||||||||||||||||
Premiums: | |||||||||||||||||||||||||
Written premiums | $ | 5,030 | $ | 3,245 | $ | 1,378 | $ | 249 | $ | 158 | |||||||||||||||
Unearned premiums change | (110) | (27) | (42) | (15) | (26) | ||||||||||||||||||||
Earned premiums | $ | 4,920 | $ | 3,218 | $ | 1,336 | $ | 234 | $ | 132 | |||||||||||||||
Statutory ratios: | |||||||||||||||||||||||||
Combined ratio | 96.0 | % | 95.1 | % | 101.2 | % | 73.5 | % | 106.8 | % | |||||||||||||||
Contribution from catastrophe losses | 7.1 | 5.8 | 9.4 | 1.1 | 24.9 | ||||||||||||||||||||
Combined ratio excluding catastrophe losses | 88.9 | % | 89.3 | % | 91.8 | % | 72.4 | % | 81.9 | % | |||||||||||||||
Commission expense ratio | 18.8 | % | 18.3 | % | 17.8 | % | 25.9 | % | 26.2 | % | |||||||||||||||
Other underwriting expense ratio | 11.7 | 13.1 | 10.6 | 3.2 | 6.6 | ||||||||||||||||||||
Total expense ratio | 30.5 | % | 31.4 | % | 28.4 | % | 29.1 | % | 32.8 | % | |||||||||||||||
GAAP ratios: | |||||||||||||||||||||||||
Combined ratio | 96.4 | % | 95.4 | % | 101.9 | % | 73.5 | % | 105.8 | % | |||||||||||||||
Contribution from catastrophe losses | 7.1 | 5.8 | 9.4 | 1.1 | 24.9 | ||||||||||||||||||||
Prior accident years before catastrophe losses | (3.1) | (4.2) | 0.6 | (10.6) | 1.1 | ||||||||||||||||||||
Current accident year combined ratio before catastrophe losses | 92.4 | % | 93.8 | % | 91.9 | % | 83.0 | % | 79.8 | % | |||||||||||||||
Dollar amounts shown are rounded to millions; certain amounts may not add due to rounding. Ratios are calculated based on dollar amounts in thousands. |
View original content to download multimedia:http://www.prnewswire.com/news-releases/cincinnati-financial-reports-fourth-quarter-and-full-year-2018-results-300791115.html
SOURCE Cincinnati Financial Corporation
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