Cincinnati Financial Corporation · NASDAQ:CINF
Cincinnati Financial — Investor Presentation (March 2019)
18 slides from Cincinnati Financial's investor presentation, Mar 11, 2019
Slide 1: Cincinnati Financial Corporation Investor Handout March 2019
CINCINNATI FINANCIAL CORPORATION INVESTOR HANDOUT MARCH 2019 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 materiall
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 2014 through 2018 averaged 10.7% * (0.1)% VCR for 2018
Slide 4: Performance Targets & Trends
PERFORMANCE TARGETS & TRENDS (0.1)% VCR for 2018 was below target: 10% to 13% annual average over the next five-year period + 6.7% contribution from non-GAAP operating income, negative 7.0% contribution from investment portfolio net gains and losses (0.2% net points contributed from other items) + 1
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 43 STATES 1,757 agency relationships with 2,344 locations {2s of December 31,2018) Our Commercial Top Five = 38% Ohio, Illinois, Pennsylvania, Indiana, North Carolina Qur Personal Top Five = 49% Ohio, Georgia, Michigan, North Carolina, Indiana Market Share Top Five P&C Ma
Slide 7: Acquisition of MSP, Beaufort Underwriting Agency
ACQUISITION OF MSP, BEAUFORT UNDERWRITING AGENCY EXPANDS MARKET REACH, DEPLOYING MORE CAPITAL, FURTHER DIVERSIFYING EARNINGS Supports agency-centered strategy with insurance solutions for accounts requiring specialization through Lloyd's Expected to be accretive to earnings in 2019 + Assuming a comb
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 $5.2 billion 2018 premiums: 61% Commercial 26% Personal 5% Excess & Surplus 5% Life 3% Cincinnati Res Agency-centered business model is time-tested + Agency relationships strengthened over time by in-person approa
Slide 9: Income and Shareholder Dividends
INCOME AND SHAREHOLDER DIVIDENDS Per share basis, se 2017 net income 2018 net income included $2.98 benefit included $2.44 net $5.00 — from net deferred investment loss : income tax liability while 2017 revaluation due to included $0.89 net U.S. tax reform investment gain $4.00 9 $3.00 - $2.00 $1.00
Slide 10: Cash Dividend Payout Ratio
CASH DIVIDEND PAYOUT RATIO STRONG CAPITAL, CASH FLOW SUPPORT PAYOUT LEVELS 120% 73% average payout for 2009 through 2018 ‘reteome oss) 100% 80% 60% 40% 20% 0% 2009 2010-2011 —«2012-—S—«2013-—=—2OTA.-—«=S«2TSS2NHSC2ONT™ «OB [ ‘Dividend Payout Ratio — Net Income ‘Dividend Payout Ratio— Operating Incom
Slide 11: Property Casualty Reserves
PROPERTY CASUALTY RESERVES FAVORABLE DEVELOPMENT FOR 30 CONSECUTIVE YEARS Values shown are carried loss and loss expense reserves net of reinsurance Vertical bar represents reasonably likely range (ia millions) nge at 12-31-11 Low end $5,037 High end $5,481 Carried at 84" percentile $4,156 Calendar
Slide 12: Commercial Casualty Ratios
COMMERCIAL CASUALTY RATIOS LOSS & ALAE BY ACCIDENT YEAR, DEVELOPED THROUGH 12-31-18 51.1% Ratio for Pai at Various Measurement Points nes feaTotal Loss & ALAE 51.1% Paid developed to date = oP ais 48 mo = = Paid 38 mo Tez 266 Paid 24 mo Estimated Ultimate Loss & ALAE Ratio to Eamed Premiums Bars = C
Slide 13: Outperforming the Industry
OUTPERFORMING THE INDUSTRY FIVE-YEAR AVERAGE COMBINED RATIO 5.7 POINTS BETTER Statutory combined ratio Industry data excludes mortgage and financial guaranty 105% he 100% — — ——_ —~—_ 95% 0% 36% 80% 75% 70% 65% 2014 2015 2016 2017 2018 mEECincinat- exc, cat losses =IESt, Industry (AM. Best) excl eat
Slide 14: Market for 75% of Agency's Typical Risks
MARKET FOR 75% OF AGENCY’S TYPICAL RISKS 2018 NET EARNED PREMIUMS Consolidated $5.170 Billion Gommoccial E8S Lines 5%, nes 61% Property Casualty \ $4,920 Billion \ Lite 5% Excess & Surplus. 3% ‘Other Commercial Homeowner 11% ro Sas a Cincinnati Re 3% Cincinnati Re 3% | Personal Auto 12% Workers! ‘Co
Slide 15: Investment Income
INVESTMENT INCOME 2% GROWTH IN 2018: DIVIDENDS UP 6%, INTEREST FLAT (pretax) (in millions) $625 $600 $575 $550 $525 $500 $475, $450 $425 2014 2015 2016 2017 2018 Protax bond yield: 4.76% 4.10% 4.60% 442% 425% (Bonds at amortized cost Pretax book yield for bonds acquired in 2018: 4.38% Pretax book yi
Slide 16: Diversified Equity Portfolio
DIVERSIFIED EQUITY PORTFOLIO* BALANCES INCOME STABILITY & CAPITAL APPRECIATION POTENTIAL December 31, 2018 SPH Portfolio Highlights at 18 Ss FC BP 5 + Microsoft is largest holding aE s Weightings + 4.4% of publicly traded common stock portfolio 1.5% of total investment portfolio Information technolo
Slide 17: Solid Reinsurance Ceded Program
SOLID REINSURANCE CEDED PROGRAM BALANCES COSTS WITH SHAREHOLDERS’ EQUITY PROTECTION Mi Treaties Coverage & Retention Summary (stated 2079 coded premiums) (sof Janvary 4, 2019) Property catastrophe For a single event Hes bast sisinasl + Retain 100% of first $100 million in losses + Collateralized cat
Slide 18: Financial Strength Ratings Comparison
FINANCIAL STRENGTH RATINGS COMPARISON {>| >| >| >| >| >| >! >| >| >| >| >| aoe > ‘Source: SAP Global Marke Inteligance as of January 7, 2019. Ratings are under continuous review and subject to change andlor affirmation. VALUATION COMPARISON TO PEERS 28 26 Ratio of closing price on 03-04-19 to latest
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