Cincinnati Financial Corporation · NASDAQ:CINF
Cincinnati Financial — Investor Presentation (May 2011)
16 slides from Cincinnati Financial's investor presentation, May 9, 2011
Slide 1: Cincinnati Financial Corporation
Cincinnati Financial Corporation May 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 from tho
Slide 2: Cincinnati Financial at a Glance
Cincinnati Financial at a Glance Profile Top 25 U.S. PIC insurer AM. 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 stability and co
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% 30% 28% 20% 15% 10% 5% 0% 5% 10% 15% -20% 25% 2006 2007 2008 2009 2010 [VCR - Investment Income & Other maVCR - P&C Undenwriting [VCR - Bond Portfolio Gains [VCR -
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 0.7% of bond portfolio at 3-31-11, no municipal exposure exceeded 0.2% — 26% of investment portfolio in common
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: plan release to
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 total inc
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 $55 million I1Q11 operating income, $62 million net inc
Slide 8: Cash Dividend Payout Ratio
Cash Dividend Payout Ratio Strong capital and cash flow support current dividend payout level 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 Flow from Operations 60% , Strong c
Slide 9: Operating Cash Flow
Operating Cash Flow $57 million 1Q11 net cash provided by operating activities $1,000 $600 $400 $200 so + 2005 2006 2007 2008 2010 History of Outperforming the Industry Five-year average 98.2% is 1.3 points better than industry Tats Statutory combined ratio 105% 100% : * 2008 2009 2010 (cineineal ex
Slide 10: Commercial Lines
Commercial Lines 70% of 2010 consolidated earned premiums 120% GAAP combined ratio» 4Q11 trend highlights: — Net written premiums flat, new business premiums up 8% 10% = a ~ 104.0% GAAP combined ratio a—t = including 4.9 points catastrophe ‘0 ~ 74.5% YTD loss & LAE ratio before cat losses and prior
Slide 11: Economy and Pricing Pressure
Economy and Pricing Pressure Requires disciplined underwriting Property casualty net written premium growth 0% = - “ ps D a 4.0% Cincinnati's five-year compound annual growth rate of negative 0.7% is 0.2 points worse than the industry average due to its higher mix of commercial lines business 6.0% 2
Slide 12: Potential within Cincinnati Appointed Agencies
Potential within Cincinnati Appointed Agencies New appointments drive opportunity Ud taller 2009 2008 2007 Cincinnati $3,024 $3,166 $3,267 Agency Total $23,136 $21,843 $23,553 Cincinnati Agency Relationships: 1,180 1,133 4,092 Cincinnati Share of Agency Total: 13.1% 14.5% 13.9% Percent of Locations
Slide 13: Investment Portfolio
Investment Portfolio Invest for income and appreciation $11.6 billion fair value at March 31, 2011 Tax-Exempt Fixed Maturities $2.860 Common Equities $2.996 Taxable Fixed Maturities $5.676 Preferred Equities $0.104 Bond portfolio fair value exceeds insurance reserves liability by 35% Bond Portfolio
Slide 14: Bond Portfolio Diversification
Bond Portfolio Diversification At March 31, 2011 = No corporate exposure exceeded 0.7% of bond portfolio = No municipal exposure exceeded 0.2% of bond portfolio = Municipal bond portfolio overview - $2.860 billion — Approximately 1,000 issuers — 80% of fair value is insured fair value — 93% of insur
Slide 15: Investment Income
Investment Income 3% growth for 2010, 1% growth for first quarter 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=5.5%, 2012=5.5%, 2013=4.7% Property Casualty Reserves Favorable d
Slide 16: 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 A+ n/a At (5 of 24) | (5 of 21) Moody's | AL n/a | n/a (Sof 24) | S&P A n/a A (6 of 21) (6 of 21) Financial Strength Ratings Comparison ‘AM.
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