Cincinnati Financial Corporation · NASDAQ:CINF
Cincinnati Financial — Investor Presentation (November 2018)
18 slides from Cincinnati Financial's investor presentation, Nov 5, 2018
Slide 1: Cincinnati Financial Corporation Investor Handbook November 2018
AS CINCINNATI FINANCIAL CORPORATION INVESTOR HANDO! NOVEMBER 2018 NASDAQ: CINF This presentation contains forward-looking statements that involve risks and uncertainties. Please refer to our various filings with the U.S. Securities and Exchange Commission for factors that could cause results to mate
Slide 2: Strategy Overview
STRATEGY OVERVIEW + Competitive advantages: + Relationships leading to agents’ best accounts + Financial strength for stability and confidence + Local decision making and claims excellence * Other distinguishing factors: + 58 years of shareholder dividend increases + Common stocks are approximately
Slide 3: Long-Term Value Creation
LONG-TERM VALUE CREATION + Targeting average Value Creation Ratio of 10% to 13% over the next five-year period + Value creation ratio (VCR) = annual rate of growth in book value plus the percentage of dividends to beginning book value + VCR for 2013 through 2017 averaged 13.9% + 5.0% VCR for the fir
Slide 4: Performance Targets & Trends
PERFORMANCE TARGETS & TRENDS 5.0% VCR for YTD 9-30-18, on an annualized basis, is below target: 10% to 13% annual average over the next five-year period + 4.7% operating earings contribution, no contribution from investment portfolio net gains and losses as 3.6 percentage points of stock portfolio g
Slide 5: Manage Insurance Profitability
MANAGE INSURANCE PROFITABILITY + Ongoing underwriting expertise enhancement + Predictive modeling tools and analytics to improve property casualty pricing precision and segmentation on an individual policy basis + Data management for better underwriting and more granular pricing decisions * Staff sp
Slide 6: Select Group of Agencies in States
SELECT GROUP OF AGENCIES IN 42 STATES 41,741 agency relationships with 2,319 locations (arf Spire 0.2018) (Our Commercial Top Five = 38% Ohio, ilincis, Pennsylvania, Indiana, North Carolina ‘Que Personal Top Five = 5234 ‘Ohio, Georgia, Michigan, Noth Carolina, Indiana P&C Matket Shave: Ohio: 4.5% TE
Slide 7: Third-Quarter 2018 Highlights
THIRD-QUARTER 2018 HIGHLIGHTS EPS of $3.38 per share vs. $0.61 in 3Q17 + Non-GAAP operating income rose 41% to $137 million + Investment income rose 1% + Dividend income was up 5%, interest income was down 1% + Property casualty net written premiums grew 3% + Higher average renewal pricing: personal
Slide 8: Cincinnati Financial at a Glance
CINCINNATI FINANCIAL AT A GLANCE Top 25 U.S. P&C insurer A.M. Best rating: A+ Superior + $5 billion 2017 premiums: 64% Commercial 25% Personal 4% Excess & Surplus 5% Life 2% Cincinnati Res" + Agency-centered business model is time-tested + Agency relationships strengthened over time by in-person app
Slide 9: Income and Shareholder Dividends
INCOME AND SHAREHOLDER DIVIDENDS $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 204 2016 2016 2017 iNon-GAAP Operating Income mmaNet Income 2017 aetincome Inctuded $288 beet ‘fom net deered income to labty auto US. taerolom most? 9 mos 18 -s Ordinary dividends declared STRONG OPERATING CASH FLOW CONTRIBU
Slide 10: Cash Dividend Payout Ratio
CASH DIVIDEND PAYOUT RATIO STRONG CAPITAL, CASH FLOW SUPPORT PAYOUT LEVELS 120% (7% average payout for 2008 rough 2017 100% 80% 60% 40% 20% 0% zo | or 20i2 201821520180 "Dividend Payout Rato- Net Income "avidend Payout Rao - Operating income 120 pate nce 21% pring ane ee) ly owen ooh eshte ee 1 ir i
Slide 11: Property Casualty Reserves
PROPERTY CASUALTY RESERVES. FAVORABLE DEVELOPMENT FOR 29 CONSECUTIVE YEARS \Values shown are carrie lass and loss expense reserves net of reinsurance Vertical bar represents reasonably likely range tations asanoangeat 1231-17 femme) tow end High end $5,155 Canted at 72% percontie (5108) 2016 GREATER
Slide 12: Commercial Casualty Ratios
COMMERCIAL CASUALTY RATIOS LOSS & ALAE BY ACCIDENT YEAR, DEVELOPED THROUGH 12-31-17 ol Los ALA Paddewopetiodee mPa 48 mo 56.0% COMMERCIAL CASUALTY RATIOS _LOSS & ALAE BY ACCIDENT YEAR, DEVELOPED THROUGH 9-30-18, 518% oe ‘aan azine Copyright © 2018 Cincinnati Financial Corporation lights reserved. Do
Slide 13: Outperforming the Industry
OUTPERFORMING THE INDUSTRY FIVE-YEAR AVERAGE COMBINED RATIO 5.6 POINTS BETTER Statutory combined ratio 105% Industry data excludes mortgage and financial guaranty 100% a re —4-——__———4— 95% 0% 5% ow 75% 10% 05% 2013 2014 2015 2016 2017 Cincinna’s historical catastrophe loss annual averages as of 12-
Slide 14: Market for 75% of Agency's Typical Risks
MARKET FOR 75% OF AGENCY'S TYPICAL RISKS 2017 NET EARNED PREMIUMS. Consolidated $4,954 Billion pcg) asunes ts Une Property Casualty | $4.722 Bi Cems. nce \ bona ies ~ Perna prin =n wih een lr <10000 821% 10 HO ct ee ADDITIONAL AGENCY STATISTICS 27% of 2,256 year-end 2017 reporting locations include:
Slide 15: Investment Income
INVESTMENT INCOME 1% GROWTH IN YTD 9-30-18: DIVIDENDS UP 6%, INTEREST DOWN LESS THAN 1% remo) (ta mains) $625 $600 8975 $850 $525 $500 8475 $450 $425 2013 2014 2015 2016 2017 Protax bond ye: 4.90% 476% 470% 4.60% 440% \tentstaneszescon) Pretax book yield for bonds acquired in 2017: 3.61% Pretax book
Slide 16: Diversified Equity Portfolio
DIVERSIFIED EQUITY PORTFOLIO* BALANCES INCOME STABILITY & CAPITAL APPRECIATION POTENTIAL ‘September 30, 2018 Portfolio Highlights at 09-30-18 8p 500 | . apple isieest notin 7 Sector cre | § ppl largest Pong eightings | ” ar erpetcy weed conmon sek portoko «9 et meter oto Information technology | 222
Slide 17: Solid Reinsurance Ceded Program
SOLID REINSURANCE CEDED PROGRAM BALANCES COSTS WITH SHAREHOLDERS’ EQUITY PROTECTION Tre Coverage & Retention Summary conte iat) ea ay a8) Property catastrophe For a single event Ser * Retain 100% of first $100 milion in losses + Regs one reinstatement provision + Retain 8.0% at $100-600 milion 0 nii
Slide 18: Financial Strength Ratings Comparison
FINANCIAL STRENGTH RATINGS COMPARISON jenn bv [ria : 7 ‘anal aay * = —) x * as * [ober our a ca ts ‘ae i ‘oa x ® x [Unie ro * z ‘ [Weet bond g 2 [eta - a pe * we x es * . Souor SEP Oot! Manat alent Cobar 28208 Rata e er conto oi nd bet change ae aan, VALUATION COMPARISON TO PEERS 24 22 Ratio of clos
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