Cincinnati Financial Corporation · NASDAQ:CINF
Cincinnati Financial — Investor Presentation (August 2010)
16 slides from Cincinnati Financial's investor presentation, Aug 23, 2010
Slide 1: Cincinnati Financial Corporation
Cincinnati Financial Corporation August 2010 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 from
Slide 2: Cincinnati Financial at a Glance
Cincinnati Financial at a Glance Profile 2Q10 Highlights + Top 25 US. P/C insurer + EPS of 17 cents vs. 12 cent loss + AM. Best Rating: A+ Superior ~ Operating earnings 26 cents per + $3.1 billion 2009 premiums: share vs. 3 cent loss primarily due "72% commercal to stronger P/C Insurance results = 2
Slide 3: Increase Value for Shareholders
Increase Value for Shareholders Driven by performance 20% Rolling five-year average as of December 31 VCR for the year 2009 was 19.7% Target forthe period 2010-2014: VCR averaging 12% to 15% 15% 10% 5% o% 5% 2004 2005 20082007 2008 201021 201220132014 Value Creation Ratio (VCR) Total Shareholder Ret
Slide 4: Strategies for Long-Term Success
Strategies for Long-Term Success * Manage capital effectively * Improve insurance profitability * Drive premium growth * Factors impacting 2010 profit and growth performance: ~ Following financial market 2009 rally, investment portfolio valuations could decline or exhibit more volatility ~ Soft insu
Slide 5: Improve Profitability
Improve Profitability + Predictive modeling tool in use for workers’ compensation, enhanced version used for homeowner line of business = In development: all other major commercial tines, personal auto + Technology is improving efficiencies, streamlining processing for agencies and the company ~ Com
Slide 6: Premium Growth Potential
Premium Growth Potential + Historically, we earn approximately 10% market share in new agencies within 10 years after appointment = Over 5% share earned in 2009 for all agencies appointed during 2004 ~ Nearly 2% share earned in 2009 for all agencies appointed during 2008 + Our agencies currently wri
Slide 7: Appendix
Appendix Performance Measure Trends Premium Growth Potential Investment Portfolio Overview Investment Quality and Reserve Strength Financial Strength Rating Comparison Income and Shareholder Dividends $5.00 7Past three years reflect higher catastrophe losses, soft market pricing, and lower investmen
Slide 8: Cash Dividend Payout Ratio
Cash Dividend Payout Ratio 420%, Stfong capital and cash flow support current dividend payout level 110% 100% 70% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 (Bib viderd Payor Ratio Net income _w Dividend Payout Rato~ Operating ore ] Dividend as a Percentage of Net Cash Flow from Operations 60
Slide 9: Operating Cash Flow
Operating Cash Flow $1,000 600 S400 $200 ° i] 2005 ©2008 ©2007 «2008 -~=—-2009_ [6 mos.09 6 mos 10) History of Outperforming the Industry Five-year average 95.4% is 3.4 points better than industry 10% Statutory combined ratio 105% 100% 05% 0% e5% eo% 75% 70% e5% 2008 2008 2007 2008 2008 1H10 statuto
Slide 10: Commercial Lines
Commercial Lines 72% of consolidated earned premiums 120% GAAP combined ratio,» 2040 trend highlights: ~ Net written premiums up 2% for 2Q10, down 3% YTD 6-30-10 em ~ 104.7% GAAP combined ratio for 2940 and 101.9% YTD 6-30-10 so0% = 104.4% YTD combined ratio before cat losses and prior year reserve
Slide 11: Economy and Pricing Pressure
Economy and Pricing Pressure Requires disciplined underwriting Property casualty net written premium growth 40% 20% 00% 20% 0% Cincinnati's five-year average of negative 0.6% is 0.4% better than the industry average 50% 2005 2006 2007 2008 2008 Cincinnati Estimated Industry (AM. Best) Market for 75%
Slide 12: Potential in the Property Casualty Market
Potential in the Property Casualty Market Deve een Cincinnati ace (tars in mitions) — (2008) Penetration Ohio $ 581 |$ 12366 | 4.7% Ilinois 262 19,473 1.3% Indiana 208 7,793 2.7% Pennsylvania 182 18,713 1.0% Georgia 160 12,922 | 1.2% North Carolina 147 14,488 1.3% Alll Active States $3,048 | $ 326,8
Slide 13: Steadily Increase Share of Agency Business
Steadily Increase Share of Agency Business Market share per reporting agency location by year appointed 199% 70% 50% Dom uted rs || Zoos” «2008 2004-2007 "1908-2000 —Pre-1988 ‘secon 208 gancy Wrtan Promtume (esclaing scone and cups thes) Investment Portfolio Invest for income and appreciation $10.95
Slide 14: Stable Capital
Stable Capital Fixed-maturity portfolio - $8.339 billion at 06-30-10 Taxable Rated BBB $5.3 '$2.481 billion (29.8%) billion (64%) Rated BB and below $314 million 3.8%) Unrated $216 million (2.5%) E Diversified Equity Portfolio* Balances income stability and capital appreciation potential June 30, 20
Slide 15: Investment Income
Investment Income 9% growth for 2Q10, 7% for 1H10 (pre-tax) seco seo0 400 se00 200 stoo so 2008 2007 2008 2002 | emosag 8 mos 10 Property Casualty Reserves Favorable development for 21 consecutive years ‘Values shown are carried loss and loss expense reserves net of reinsurance Vertical bar represen
Slide 16: Stability and Integrity
Stability and Integrity Insurer Financial Strength Ratings Property Excess & Life Casualty Surplus A.M. Best At A A (2 of 16) (3 of 16) (3 of 16) Fiteh At na At (6 of 24) (5 of 24) Moody's AL n/a n/a (6 of 24) Sap A n/a A (6 of 24) Financial Strength Ratings Comparison AM, Bost Eten M sap i ey aT n
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