Slide 1: Cincinnati Financial Corporation
Cincinnati Financial Corporation November 2012 ANS CINCINNATI all IN INANCIAT 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 ctors that could cause resul
Slide 2: Cincinnati Financial at a Glance
Cincinnati Financial at a Glance Top 25 U.S. P/C insurer A.M. Best Rating: A+ Superior $3.2 billion 2011 premiums — 69% commercial = 24% personal - 5S% life - 2% excess & surplus Competitive advantages: ~ Relationships leading to agents’ best accounts — Financial strength for stability and confidenc
Slide 3: Long-Term Value Creation
Long-Term Value Creation = Targeting annual rate of growth in book value plus the rate of dividend contribution to average 12% to 15% from 2010 through 2014 — Value creation ratio (VCR) for 2011 was 6.0%; 2009-11 average was 12.3% — 10.1% VCR for YTD 9-30-12, up 10.7 points from YTD 9-30-11 «Realize
Slide 4: Combined Ratio Reflects Improving Profitability
Combined Ratio Reflects Improving + All combined ratios in the graph below exclude the effects of catastrophe losses + 2011 ratios also exclude the effects of $42 million reinsurance reinstatement premium 106.4% 405% 103.8% 100% 95% 90% 85% 80% 75% 70% Year 2010 Year 2011 av 2010 ”— av2011 | Ay2012
Slide 5: Improve Profitability
Improve Profitability Predictive modeling tools in use to improve pricing precision — Workers’ compensation — since second half of 2009 — Homeowner — enhanced in 2010, personal auto ~ since late 2010 — Commercial auto, commercial property and general liability since 2011 — Ongoing enhancement initia
Slide 6: Premium Growth Potential
Premium Growth Potential Historically, we earn approximately 10% market share in new agencies within 10 years after appointment — demonstrated by: ~ 1% share earned in 2011 for all agencies appointed in 2010 ~ 6% share earned in 2010 for all agencies appointed during 2004-07 — $42 million of $402 mi
Slide 7: Appendix
Appendix Income, Dividend & Cash Flow Trends Underwriting & Premium Growth Trends Business Mix & Premium Growth Potential Reserve Adequacy & Development Trends Investment Portfolio Management & Performance Reinsurance, Ratings & Valuation Comparison to Peers A CINCINNATI RNANCIAT CORPORATION Income
Slide 8: Cash Dividend Payout Ratio
Cash Dividend Payout Ratio Strong Capital and Cash Flow Support Recent-Year Payout Level + YTD 9-30-12 payout ratio: 87% (net income basis) 94% (operating income basis) + 2011 payout ratio reflected record-high catastrophe losses: 120% 159% (net income basis) 211% (operating income basis) + 56% aver
Slide 9: Operating Cash Flow
Operating Cash Flow Record-High Catastrophe Losses Lowered Year 2011 Cash Flow (in millions) $600 $500 $400 $300 $200 $100 $0 2008 2009 2010 2011 Qmos11 — 9mos12 Cincinnati Typically Outperforms the Industry Statutory combined ratio Industry data excludes mortgage and financial a 2007 2008 2009 2010
Slide 10: Greater Pricing Precision
Greater Pricing Precision Js Improving Profit Margins Workers’ compensation renewal price increase averages by modeled rating segments Beter= Raing segments consderedhigher quality Worse = Rating segments consideediower qi 10.4% 9.0% Year 2011 ‘YTD 06-30-12 [Beter GMiddle Worse Premium Growth Versus
Slide 11: Market for 75% of Agency's Typical Risks
Market for 75% of Agency's Typical Risks 2011 Net Earned Premiums Consolidated ‘Commercial Lines 69% Property Casualty $3.029 Billion Lite 5% urety and Excess & Personal Surplus Homeowner 10% it ic 2% Lines 24% ay Commercial Specialy Property 17% Packages 5% © Commercial ‘Machinery and Casualty 24%
Slide 12: Property Casualty Reserves
Property Casualty Reserves Favorable Development for 23 Consecutive Years Values shown are carried loss and loss expense reserves net of reinsurance Vertical bar represents reasonably likely range Reserve range al 12-31-11 Jn mitfions Low end $3,677 High end $4,056 Carried at 60" percentile $3,391 D
Slide 13: Investment Income
Investment Income 1% Growth for 2011 and First 9 Months 2012 (pretax; $500 $400 $300 $200 $100 $0 2008 2009 2010 2011 9 mos 12 After-tax yield:(@onds at amortized cost, stocks at fr val} 3.5% 3.5% 3.4% Pre-tax yield to book as of 12-31-11 for bonds maturing in 2012=5.3%, 2013=4.7%, 2014=5.3% Investm
Slide 14: Diversified Equity Portfolio
Diversified Equity Portfolio* Balances Income Stability & Capital Appreciation Potential 6.1% Compound Annual Return in 2011 Versus 2.1% for the S&P 500 Index Largest equity holding at 9-30-12: Pepsico at 4.4% of publicly-traded common stock portfolio, September 30, 2012 December 31, 2010 Weightings
Slide 15: Solid Reinsurance Program
Solid Reinsurance Program Balances Costs with Shareholders’ Equity Protection Maior Treaties re i ry E Melee Treaties, Coverage and Retention Summary at 01-04-12 Property catastrophe Fora single event: ($59 milion) + Retain 100% of first $75 million in losses + Retain 51.7% for losses at $75-100 mil
Slide 16: Valuation Comparison to Peers
Valuation Comparison to Peers Ratio of closing price on 11-01-12 to latest reported tangible book value PLIES AOPL EEE