Cincinnati Financial Corporation · NASDAQ:CINF
Cincinnati Financial — Investor Presentation (November 2011)
18 slides from Cincinnati Financial's investor presentation, Nov 4, 2011
Slide 1: Cincinnati Financial Corporation
Cincinnati Financial Corporation November 2011 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 materially differ fro
Slide 2: Cincinnati Financial at a Glance
Cincinnati Financial at a Glance Profile = Top 25 U.S. P/C insurer = A.M. Best Rating: A+ Superior = $3.1 billion 2010 premiums: — 70% commercial — 23% personal = 5% life — 2% excess & surplus = Competitive advantages: — Relationships leading to agents’ best accounts — Financial strength for stabili
Slide 3: Increase Value for Shareholders
Increase Value for Shareholders Measured by Value Creation Ratio (VCR) Target for the period 2010-2014: Annual VCR averaging 12% to 15% 10% 15% 20% 25% 2006 2007 2008 2009 2010 [VCR - Investment Income & Other m=IVCR - P&C Underwriting [VCR - Bond Portfolio Gains [VCR - Equity Portfolio Gains + Tota
Slide 4: Strategies for Long-Term Success
Strategies for Long-Term Success = Financial strength for consistent support to agencies — Diversified fixed-maturity portfolio, laddered maturity structure + No corporate exposure exceeded 0.6% of total bond portfolio at 9-30-11, no municipal exposure exceeded 0.3% — 22% of investment portfolio in
Slide 5: Improve Profitability
Improve Profitability Predictive modeling tools in use to improve pricing precision — Workers’ compensation line of business since the second half of 2009 — Homeowner enhanced version in 2010, personal auto since late 2010 — Commercial auto, commercial property and general liability: began using in
Slide 6: Premium Growth Potential
Premium Growth Potential = Historically, we earn approximately 10% market share in new agencies within 10 years after appointment — 4-5% share earned in 2010 for all agencies appointed in TX, NM, & WA — Over 5% share earned in 2009 for all agencies appointed during 2004-07 — $29 million of $9 millio
Slide 7: Appendix
Appendix Income, Dividend and Cash Flow Trends Underwriting and Premium Growth Trends Premium Growth Potential Investment Portfolio Structure and Performance Reserve Adequacy Financial Strength Rating Comparison Income and Shareholder Dividends $1.12 of higher catastrophe losses drove $1.08 YTD decl
Slide 8: Cash Dividend Payout Ratio
Cash Dividend Payout Ratio Strong capital and cash flow support current dividend payout level 140% 120% 100% 80% 60% 1] | we TO 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Ti Dividend Payout Ratio — Net Income Dividend Payout Ratio — Operating Income Dividend as a Percentage of Net Cash F
Slide 9: Operating Cash Flow
Operating Cash Flow $269M 9-month 2011 decline reflects $321M higher P&C claims paid (In millions) $1,000 $800 $600 $400 $200 $0 + 2005 2006 2007 2008 2010 History of Outperforming the Industry Five-year average 98.2% is 1.3 points better than industry 110% Statutory combined ratio 2006 Cincinnati e
Slide 10: 2011 Combined Ratio Reflects Improving Profitability Trends
2011 Combined Ratio Reflects Improving Profitability Trends 2010 and 2011 ratios exclude catastrophe losses 2011 ratios also exclude the effects of $42 millon reinsurance reinstatement premium 106.4% 105.9% 105% + 100% 98.2% 96.1% 95% = 90% 85% 80% 75% 70% 65% ‘@mos 10 ‘@mos 14 AY 2010 at 12 mos” AY
Slide 11: Commercial Lines
Commercial Lines 70% of 2010 consolidated earned premiums 120% GAAP combined ratio = 9 mos11 trend highlights: — Net written premiums up 3%, new business premiums up 9% 5 — 111.9% GAAP combined ratio including 14.9 pts. catastrophe -| — 75.7% YTD loss & LAE ratio before cat losses and prior year res
Slide 12: Economy and Pricing Pressure
Economy and Pricing Pressure Requires disciplined underwriting Property casualty net written premium growth 4.0% 2.0% 0.0% = a ” -=J LJ 4.0% o Cincinnati's five-year compound annual growth rate of negative 0.7% is 0.2 points below the industry average due to our higher mix of commercial lines busine
Slide 13: Potential within Cincinnati Appointed Agencies
Potential within Cincinnati Appointed Agencies New appointments drive opportunity asec 2010 2009 2008 Agency written premiums Cincinnati $3,009 $3,024 $3,166 Agency Total $28,132 $23,136 $21,843 Cincinnati Agency Relationships: 1,245 1,180 1,133 Cincinnati Share of Agency 49.7% 13.1% 14.5% Percent o
Slide 14: Investment Portfolio
Investment Portfolio Invest for income and appreciation $11.5 billion fair value at September 30, 2011 Tax-Exempt Fixed Maturities $2.915 Common Equities $2.509 Taxable Fixed Maturities $5.939 Preferred Equities $0.100 Bond portfolio fair value exceeds insurance reserves liability by 32% Bond Portfo
Slide 15: Bond Portfolio Diversification
Bond Portfolio Diversification At September 30, 2011 No corporate exposure exceeded 0.9% of taxable bond portfolio No municipal exposure exceeded 0.7% of tax-exempt bond portfolio Municipal bond portfolio overview - $2.915 billion fair value — Approximately 1,000 issuers — 74% of fair value is insur
Slide 16: Investment Income
Investment Income 3% growth for 2010, 1% growth for first 9 months 2011 (pre-tax) $600 $500 $400 $300 $200 $100 $0 2006 2007 2008 2009 2010 After-tax yield to market: 3.7% 3.9% 3.6% 3.4% Pre-tax yield to book for bonds maturing in 2011=5.4%, 2012=5.5%, 2013=4.7% Property Casualty Reserves Favorable
Slide 17: Stability and Integrity
Stability and Integrity Insurer Financial Strength Ratings Property Excess & Life Casualty Surplus A.M. Best A+ A A (2 of 16) (3 of 16) (3 of 16) Fitch At n/a At (5 of 24) (5 of 24) Moody’s AL n/a n/a (5 of 214) S&P A n/a A (6 of 21) (6 of 21) Financial Strength Ratings Comparison ‘AM. Best Fitch Mo
Slide 18: Property Catastrophe Reinsurance Treaty
Property Catastrophe Reinsurance Treaty Coverage Summary as of June 30, 2011 $ in millions Loss Range Gross Net Layer Loss Loss Retention $ 0-45 $45 $45 100% $ 45-70 25 25 100% $ 70-105 35 5 15% $105 — 200 95 14 15% $200 - 300 100 1 11.3% $300 — 400 100 7 6.5% $400 — 500 100 _5 5.0% $500 $112 22% =
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