Cincinnati Financial Corporation · NASDAQ:CINF
Cincinnati Financial — Credit Suisse First Boston 2005 Annual Insurance Conference
19 slides from Cincinnati Financial's conference presentation, Nov 17, 2005
Slide 1: Cincinnati Financial Corporation
CINCINNATI FINANCIAL CORPORATION Credit Suisse First Boston 2005 Annual Insurance Conference November 2005 1
Slide 2: Forward-looking statements
Nasdaq: CINF Today’s presentation contains forward-looking statements that involve risks and uncertainties. Please refer to our various filings with the Securities and Exchange Commission for factors that could cause results to materially differ from those discussed. Reconciliations of non-GAAP
Slide 3: Cincinnati Financial Corporation Regional Property Casualty Insurer
Cincinnati Financial Corporation Regional Property Casualty Insurer Market capitalization of $7.8 billion 19th largest publicly traded U.S. property casualty insurer based on revenues Well capitalized and highly rated Distinguished by: Relationships with local independent insurance agents
Slide 4: Record Results in 2004, Strong First Nine Months of 2005
Record Results in 2004 Strong First Nine Months of 2005 $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $0.00 2000* 2001 2002 2003* 2004 9mos 04 9mos 05 Operating Income Net Income Dividends Paid * See the Financials & Analysis tab of the Investors page of www.cinfin.com 4 for non-GAAP and non-statutory r
Slide 5: Outperform in 2005
Outperform in 2005 Strong insurance performance, targeting Written premium growth in low single digits GAAP combined ratio of 92%, presuming catastrophe losses in 4% range Investment income growth of 6.5% to 7.0% Tempered slightly by higher interest expense on long-term debt 5
Slide 6: Strategic Planning – 2004-2008
Strategic Planning – 2004-2008 Improve technology and business processes Expand and penetrate agency force Compete by meeting independent agency needs, leveraging local field authority and agent access to company leaders Identify products and services that add to our mutual success 6
Slide 7: Cultivating the Local Independent Insurance Agent
Cultivating the Local Independent Insurance Agent Regional carrier Wide range of property casualty coverages Market for about 75% of agency’s typical risks 1,100 field associates assigned to agencies Local agents place value on claims service, ease of doing business, market stability, fina
Slide 8: Serving a Select Group of 1,014 Agencies in 32 States
Serving a Select Group of 1,014 Agencies in 32 States Headquarters (no branches) Property Casualty Field Territories 8
Slide 9: Market for 75% of Agency's Typical Risks
Market for 75% of Agency’s Typical Risks Consolidated Property Casualty $3.020 Billion $2.919 Billion Other Liability 14% Other Commercial Lines 10% Commercial 71% Multi-Peril Homeowner 26% Life Property 9% 3% Casualty Personal Lines Personal Auto 26% 15% Commercial Auto 15% Workers' Comp 11% Percen
Slide 10: Successful Agencies
Successful Agencies Agency Billed Premiums 2004 2003 2002 2001 (Open Agencies Only) (Dollars in millions) Agency Relationships 986 963 952 960 Cincinnati $3,058 $2,772 $2,472 $2,135 Total Agency P/C $18,532 $16,996 $14,744 $13,790 Cincinnati Agency 16.5% 16.3% 16.8% 15.5% Penetration 10
Slide 11: Selectively Appoint New Agencies
Selectively Appoint New Agencies Tap growth opportunities within existing states Maintain franchise value 48 new agency relationships in 2004 100 appointments projected 2005 – 2006 51 appointment to-date in 2005 11
Slide 12: Claims Philosophy
Claims Philosophy Modestly redundant reserves in each of the past 10 years 750 claims representatives Based in local communities Serving agencies Headquarter claims staff averaging more than 25 years of experience 12
Slide 13: Total Statutory Reserve Balance
Total Statutory Reserve Balance Objective: modestly redundant reserves Property casualty group (In millions) $2,977 $2,845 $2,608 $2,352 $2,182 2000 2001 2002 2003 2004 13
Slide 14: Further Improvement
Further Improvement Balancing growth with profitability Adjusted statutory combined ratio* Anticipate FY 2005 120% GAAP combined ratio of 92% Catastrophe 110% losses in 4% range 100% Leverage local knowledge/ underwriting 90% Emphasis expense management 80% 2000* 2001* 2002* 2003* 2004 9mos
Slide 15: Investment Philosophy
Investment Philosophy Long-term total return Cover current liabilities with fixed-income investments Allocate new cash flow to equity securities based on: Insurance department regulations Rating agency commentary Common stock to statutory surplus ratio Parent-company investment assets to
Slide 16: Focus on Compounding Cash Flows Over the Long Term
Focus on Compounding Cash Flows Over the Long Term Investment income Pretax investment Dollars in millions income provides $500 primary source of profits $400 Dividend increases from $300 33 equity holdings in the last 12 months = $200 $23 million in annualized investment income $100 Surplus c
Slide 17: Maintain Financial Strength
Maintain Financial Strength Property casualty surplus ratio of 0.7-to-1 vs. industry average 1.1-to-1 (12/31/04) Only 1.7% of property casualty groups rated A++ by A.M. Best Senior Property Life Debentures Casualty A.M. Best aa- A++ A+ Fitch A+ AA AA Moody’s A2 Aa3 -- S&P A AA- AA- 17
Slide 18: Enhancing Return to Shareholders
Enhancing Return to Shareholders Focus on total return – appreciation plus dividends plus share repurchase 67.3% five-year total return 88.8% for industry peer group Negative 11.0% for S&P 500 11.6% 10-year compound growth of paid dividends 15% increase in 2005 indicated annualized cash
Slide 19: Cincinnati Financial Corporation
CINCINNATI FINANCIAL CORPORATION Jack Schiff, Jr., chairman and chief executive officer Ken Stecher, chief financial officer and senior vice president J.F. Scherer, senior vice president – Sales & Marketing Marty Hollenbeck, vice president – Investments Heather Wietzel, vice president – Investor Rel
Cincinnati Financial — Credit Suisse First Boston 2005 Annual Insurance Conference on 6ix