Cincinnati Financial Corporation · NASDAQ:CINF
Cincinnati Financial — Investor Presentation (September 2018)
18 slides from Cincinnati Financial's investor presentation, Sep 4, 2018
Slide 1: Cincinnati Financial Corporation
A INATI INCIN FINANCIAL CORPORATION NASDAQ: CINF This 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 materially differ from those discussed. The <d-
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: + 57 years of shareholder dividend increases + Common stocks are approximately
Slide 3: Long-Term Value Creation
LONG-TERM VALUE CREATION * Targeting annual rate of growth in book value plus the percentage of dividends to beginning book value to average 10% to 13% over the next five-year period + Value creation ratio (VCR) for 2013 through 2017 averaged 13.9% Three performance drivers: + Premium growth above i
Slide 4: 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 Re™ + Agency-centered business model is time-tested + Agency relationships strengthened over time by in-person
Slide 5: Outperforming the Industry
OUTPERFORMING THE INDUSTRY FIVE-YEAR AVERAGE COMBINED RATIO 5.6 POINTS BETTER Statutory combined ratio 108% Industry data excludes mortgage and financial quaranty a 100% —i 2016 ee nd AM Batt Ln 1231-17: S-yoar= 5.7%, 1-year = 6.8% STRATEGIES FOR LONG-TERM SUCCESS Financial strength for consistent s
Slide 6: 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 7: Select Group of Agencies in States
SELECT GROUP OF AGENCIES IN 42 STATES 1,795 agency relationships with 2,302 locations (or of oe 30,208) ‘Our Commercial Top Five = 38% Otic, tlinois, Pennsylvania, Indiana, North Carolina (Our Personal Top Five = 52% Ohio, Georgia, Michigan, North Carolina, Indiana Market Share Top Five P&C Market S
Slide 8: Second-Quarter 2018 Highlights
Calonnay: Appendix andl Seng Rates Vion Compan Pees SECOND-QUARTER 2018 HIGHLIGHTS EPS of $1.32 per share vs. $0.60 in 2Q17 + Non-GAAP operating income rose 24% to $133 million Investment income rose 2% + Dividend income was up 5%, interest income was up 1% Property casualty net written premiums gre
Slide 9: Income and Shareholder Dividends
INCOME AND SHAREHOLDER DIVIDENDS $6.00 2017 net income Incuded $2.98 benef $5.00 ‘tom net deferes ‘reome tak by revaluation di $4.00 US.taxrefom $3.00 $2.00 $1.00 $0.00 2014 2015 2016 2017 most? 6 mos 18, STRONG OPERATING CASH FLOW CONTRIBUTED TO $518M OF FULL-YEAR 2017 NET PURCHASES IN INVESTMENT P
Slide 10: Cash Dividend Payout Ratio
CASH DIVIDEND PAYOUT RATIO STRONG CAPITAL, CASH FLOW SUPPORT PAYOUT LEVELS. 120% 67% average payout for 2008 through 2017 20082009 "20 | nr 204 6 20182017 DIVIDEND AS A PERCENTAGE OF NET CASH FLOW FROM OPERATIONS 100% 40% 30% 20% 10% 0% zoe | 2009 0t0 | 20H 0rz 2013 0t 2015 2018 0n7 post online,
Slide 11: Property Casualty Reserves
PROPERTY CASUALTY RESERVES FAVORABLE DEVELOPMENT FOR 29 CONSECUTIVE YEARS Values shown are carried loss and loss expense reserves net of reinsurance Vertical bar represents reasonably ikely range ‘wns Reserve range a 12-31-17 Low end $4,709 High end $5,155 Carried st 72 parcentio ceo (fovea 6147) ($
Slide 12: Commercial Casualty Ratios
COMMERCIAL CASUALTY RATIOS LOSS & ALAE FOR ACCIDENT YEARS MEASURED AT 12 MONTHS Une «Ratio Conpenets Pa, NR) 14% COMMERCIAL CASUALTY RATIOS LOSS & ALAE BY ACCIDENT DEVELOPED THROUGH 12-31-17 496% 400% | post online, pa
Slide 13: Premium Growth vs. Industry
PREMIUM GROWTH VS. INDUSTRY 6.8% 5-YEAR CAGR APPROXIMATELY DOUBLED INDUSTRY Property casualty net written premium growth 2013 2014 2015 2016 2017 macicinat -t Estimated industry exuding morgage and franca guaranty (AM. Best) MARKET FOR 75% OF AGENCY'S TYPICAL RISKS 2017 NET EARNED PREMIUMS Consolida
Slide 14: Investment Income
INVESTMENT INCOME 1% GROWTH IN YTD 6-30-18: DIVIDENDS UP 6%, INTEREST FLAT rer) Anmtions) $625 Pretax bond ysl: 4.90% 476% 470% 4.60% 442% Pretax book yield as of 12-81-17 for bonds maturing in 2018=5.56%, 2019-6 09%, 2020=4.75% Portion of bond pertolio maturing: 4.9% in 2018, 5.9% in 2019, 5.9% in
Slide 15: Diversified Equity Portfolio
DIVERSIFIED EQUITY PORTFOLIO* BALANCES INCOME STABILITY & CAPITAL APPRECIATION POTENTIAL June 30, 2018 3a 500] rope attelaliants at 0690-18 Sector CFC | weigntngs | ° “P8Ssttputcy rea connon dock porto Information technology 214% | __ 26.0% Financial 158 138 | * increase income Gonsumer discretionar
Slide 16: Solid Reinsurance Ceded Program
SOLID REINSURANCE CEDED PROGRAM BALANCES COSTS WITH SHAREHOLDERS’ EQUITY PROTECTION Major Treaties Retention Summ (cated Et a) vee teary ae Property catastrophe Fora single event (steriton + Reizin 100% of rt $100 milion in losses ‘Treaty hs one rntatemen provision + Retain 5.0% at $100-600 milion S
Slide 17: Additional Agency Statistics
ADDITIONAL AGENCY STATISTICS * 27% of 2,256 year-end 2017 reporting locations include: + 10% national or regional brokers, 10% private equity, 7% banks + Percentages have approximately doubled in five years + 2017 premium contribution (standard lines market) + 10% private equity-owned agencies 8% ba
Slide 18: Valuation Comparison to Peers
VALUATION COMPARISON TO PEERS PAOLO PEE SS post online, pa
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