Cincinnati Financial Corporation · NASDAQ:CINF
Cincinnati Financial — Investor Presentation (August 2011)
17 slides from Cincinnati Financial's investor presentation, Aug 15, 2011
Slide 1: Cincinnati Financial Corporation
Cincinnati Financial Corporation August 2041 NASDAQ: CINF " This presentation contains overt oy statements that involve risks and uncertainties. Please refer fo our various filings with the U.S. Securities and Exchange Commission for factors that could cause results to materially differ from those d
Slide 2: Cincinnati Financial at a Glance
Cincinnati Financial at a Glance Profile 2Q11 Highlights * Top 25 U.S. PIC insurer + EPS of -30 cents vs. 17 cents * AM. Best Rating: A+ Superior = Operating eamings of -67 cents * $3.1 billion 2010 premiums: per share were down 83 cents "70% commercial from 2010, 91cents related to = 23% personal e
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% 10% 5% 0% 7 . 10% 18% 20% 25% 2006 2007 2008 2009 2010 =aVCR - Investment Income & Other mm VCR - P&C Underwriting [SSVCR - Bond Portfolio Gains SVER - Equity P
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 6-30-11, no municipal exposure exceeded 0.2% — 25% 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: pilot nearly
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 Am Gowan Income and Shareholder Dividends $186 of higher catastrophe losses drove SO.87
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% 40% 2% Ll 0% Bn. = oe oe oe 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 [Dividend Payout Ratio Net income [iDvidend Payout Ratio - Operating income Dividend as a Percentage
Slide 9: Operating Cash Flow
Operating Cash Flow $249 million LH11 decline driven by $263 million higher P&C claims paid $1,000 $800 $200 2005 2006 2007 2008 2009 2010 History of Outperforming the Industry Five-year average 98.2% is 1.3 points better than industry Statutory combined ratio. 2006 2007 2008 2009 2010 cinerea besos
Slide 10: Commercial Lines
Commercial Lines 70% of 2010 consolidated earned pi 120% GAAP combined ratio = 1H11 trend highlights: — Net written premiums up 0.4%, new business premiums up 9% — 114.0% GAAP combined ratio including 17.2 pts. catastrophe ~ 75.2% YTD loss & LAE ratio before cat losses and prior year reserve develop
Slide 11: Economy and Pricing Pressure
Economy and Pricing Pressure Requires disciplined underwriting | Property casualty net written premium growth 4.0% a 2.0% 0.0% : 2.0% 4.0% Cincinnat’ five-year compound annual growth rate of negative 0.7% is 0.2 points a. Motae than the Industry average du our higher mix of commercial ines business
Slide 12: Potential within Cincinnati Appointed Agencies
Potential within Cincinnati Appointed Agencies New appointments drive opportunity (Open Agencies Only) 2010 2009 2008 (Collars in millions) 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
Slide 13: Investment Portfolio
Investment Portfolio Invest for income and appreciation $11.7 billion fair value at June 30, 2011 Tax-Exempt Fixed Maturities $2,997 \ \ Common Equities $2,864 Taxable Fixed — Maturities. — $5.790 Preferred Equities $0.107 Bond portfolio fair value exceeds insurance reserves liability by 30% Bond Po
Slide 14: Bond Portfolio Diversification
Bond Portfolio Diversification At June 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 - $2.927 billion fair value — Approximately 1,000 issuers — 74% of fair value is insu
Slide 15: Investment Income
Investment Income 3% growth for 2010, 1% growth for first-half 2011 (pre-tax) $600 $500 $400 $300 $200 $100 $0 207 2008 2009 2010 Aftortax yield to market: “3'7% 3.6% 3.4% Pre-tax yield to book for bonds maturing in 20° 4%, 2012=5.5%, 2013=4.7% Property Casualty Reserves Favorable development for 22
Slide 16: Stability and Integrity
Stability and Integrity Insurer Financial Strength Ratings Property Excess & Life | Ci ‘Surplus |AM. Best At A A (2 of 16) (3 of 16) (3 of 16) |Fitch At va At | (5 of 21) (5 of 21) Moody's AL n/a n/a (5 of 24) S&P A n/a A | (6 of 24) (6 of 21) Financial Strength Ratings Comparison KM Beat ‘Sours Rat
Slide 17: Property Catastrophe Reinsurance Treaty
Property Catastrophe Reinsurance Treaty Coverage Summary as of June 30, 2011 Sin millions LossRange Gross. Net Layer Loss Loss Retention $ 0-45 $45 $45 100% $ 45-70 25 25 100% $ 70-105 35 6 15% $105 - 200 95 14 15% $200 - 300 100 "1 11.3% $300 - 400 100 cs 6.5% $400 - 500 100 = 5.0% $500 $112 22% =
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