CINCINNATI FINANCIAL CORPORATION INVESTOR HANDOUT
NOVEMBER 2021
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 those discussed.
The forward-looking information in this presentation has been publicly disclosed, most recently on October 27, 2021, and should be considered to be effective only as of that date.
Its inclusion in this document is not intended to be an update or reaffirmation of the forward-looking information as of any later date.
Reconciliations of non-GAAP measures are in our most recent quarterly earnings news release, which is available at cinfin.com/investors.
Copyright © 2021 Cincinnati Financial Corporation. All rights reserved. Do not reproduce or post online, in whole or in part, without written permission. | 1 |
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:
- 61 years of shareholder dividend increases
- Common stocks are approximately 41.5% of investment portfolio
- 32 years of favorable reserve development
CUMULATIVE TOTAL RETURN*
Cincinnati Financial Corporation S&P 500 Index S&P Composite 1500 Property & Casualty Insurance Index
$252 | ||||||||
$241 | ||||||||
$199 | $203 | $206 | ||||||
$171 | $168 | $170 | $176 | |||||
$132 | $135 | $136 | $140 | $143 | $135 | |||
$130 | ||||||||
$112 | $116 | |||||||
2016 | 2017 | 2018 | 2019 | 2020 | YTD 10-31-21 |
- $100 invested on December 31, 2015, in CINF stock or indexes shown, including reinvestment of dividends. Periods shown represent each respective fiscal year ending December 31.
Copyright © 2021 Cincinnati Financial Corporation. All rights reserved. Do not reproduce or post online, in whole or in part, without written permission. | 2 |
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 2016 through 2020 averaged 16.5%
- Three performance drivers:
- Premium growth above industry average
- Combined ratio consistently within the range of 95% to 100%
- Investment contribution
- Investment income growth
- Compound annual total return for equity portfolio over five-year period exceeding return for S&P 500 Index
INCREASE VALUE FOR SHAREHOLDERS
MEASURED BY VALUE CREATION RATIO
Target for the next five-year period: Annual VCR averaging 10% to 13%
30% | 40% | ||||||||||||||||||||||
25% | 30% | ||||||||||||||||||||||
20% | |||||||||||||||||||||||
20% | |||||||||||||||||||||||
15% | |||||||||||||||||||||||
Ratio | 10% | 10% | |||||||||||||||||||||
CreationValue | 0% | ||||||||||||||||||||||
5% | 0% | ||||||||||||||||||||||
-5% | Investment Income | -10% | |||||||||||||||||||||
& Other in 2017 | |||||||||||||||||||||||
includes 7.0% benefit | |||||||||||||||||||||||
from tax reform | |||||||||||||||||||||||
-10% | 2016 | 2017 | 2018 | 2019 | 2020 | -20% | |||||||||||||||||
Actual VCR: | 14.5% | 22.9% | (0.1)% | 30.5% | 14.7% | ||||||||||||||||||
VCR - Investment Income & Other | VCR - P&C Underwriting | VCR - Bond Portfolio Gains | |||||||||||||||||||||
VCR - Equity Portfolio Gains | Total Shareholder Return (TSR) | ||||||||||||||||||||||
Total Shareholder Return
Copyright © 2021 Cincinnati Financial Corporation. All rights reserved. Do not reproduce or post online, in whole or in part, without written permission. | 3 |
PERFORMANCE TARGETS & TRENDS
-
12.4% VCR for YTD 9-30-21 was within target:
10% to 13% annual average over the next five-year period - 6.7% contribution from non-GAAP operating income, 5.4% contribution from investment portfolio net gains and losses
- Related performance drivers at YTD 9-30-21 compared with long-term targets:
- 11% growth in P&C net written premiums, vs. 5% full-year 2021 projection for the industry
- 89.8% combined ratio, better than 95% to 100% long-term target range
- 6% investment income growth exceeded 3.2% five-year CAGR as of year-end 2020
- Strong YTD underwriting performance before catastrophe effects; solid cash flow
- 2.5 percentage point improvement in combined ratio for accident year 2021
- 36% increase in net cash flow from operating activities, to $1.5 billion
PANDEMIC FINANCIAL EFFECTS
- Premiums: Growth slowed for several quarters; minimal effect by mid-2021
- Insured exposure levels were reduced for some lines of business due to economic effects
- Growth for net written premiums slowed from 10% growth for 1Q20 and full-year 2019
- Loss and expenses: $85 million full-year 2020 that were pandemic-related
- $31 million for business interruption claims (Cincinnati Re or Cincinnati Global)
- $30 million legal expenses
- $8 million for credit losses-uncollectible premiums
- $16 million personal auto policyholder credit
- Regarding business interruption claims through late-October 2021, the vast majority of trial courts across the country and all of the appellate courts that have considered the issue so far have concluded that business interruption losses are not covered by commercial property policies
Copyright © 2021 Cincinnati Financial Corporation. All rights reserved. Do not reproduce or post online, in whole or in part, without written permission. | 4 |
THIRD-QUARTER 2021 HIGHLIGHTS
- EPS $0.94 per share vs. $2.99 per share in 3Q20
- Non-GAAPoperating income rose 232% to $209 million
- $2.82 of the $2.05 EPS decrease vs. 3Q20 was from the change in the fair value of equity securities still held
- Investment income rose 7%
- Dividend income was up 11%, interest income was up 7%
- Property casualty net written premiums grew 10%
- Higher average renewal pricing: commercial lines up mid-single-digit percentage rate, personal auto up low-single-digit percentage rate, homeowner up mid-single-digit percentage rate and E&S up high-single-digit percentage rate
- Combined ratio of 92.6%, 11.0 points better than 3Q20
- 3Q21 improvement included a decrease of 4.1 points from catastrophe losses
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 9-30-21, no municipal exposure exceeded 0.2%
- 41.5% of investment portfolio in common stocks to grow book value
- No single security exceeded 7.3% of publicly traded common stock portfolio
- Portfolio composition helps mitigate anticipated effects of inflation and a rise in interest rates
- Low reliance on debt, with 6.7% debt-to-total-capital at 9-30-21
- Nonconvertible, noncallable debentures due in 2028 and 2034
- Capacity for growth with premiums-to-surplus at 0.9-to-1
- Operating structure reflects agency-centered model
- Field focus - staffed for local decision making, agency support
- Superior claims service and broad insurance product offerings
- Profit improvement and premium growth initiatives
Copyright © 2021 Cincinnati Financial Corporation. All rights reserved. Do not reproduce or post online, in whole or in part, without written permission. | 5 |
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Cincinnati Financial Corporation published this content on 16 November 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 16 November 2021 21:06:07 UTC.
