Cincinnati Financial : Printable earnings release (PDF 147KB)

The Cincinnati Insurance Company n The Cincinnati Indemnity Company

The Cincinnati Casualty Company n The Cincinnati Specialty Underwriters Insurance Company The Cincinnati Life Insurance Company n CFC Investment Company n CSU Producer Resources Inc.

Cincinnati Global Underwriting Ltd. n Cincinnati Global Underwriting Agency Ltd.

Investor Contact: Dennis E. McDaniel, 513-870-2768

[e-mail]

Media Contact: Betsy E. Ertel, 513-603-5323

[e-mail]

Cincinnati Financial Reports First-Quarter 2022 Results

Cincinnati, April 28, 2022 - Cincinnati Financial Corporation (Nasdaq: CINF) today reported:

• • First-quarter 2022 net loss of $273 million, or $1.70 per share, compared with net income of $620 million, or $3.82 per share, in the first quarter of 2021, after recognizing a $540 million first-quarter 2022 after-tax reduction in the fair value of equity securities still held.

• • $31 million or 14% increase in non-GAAP operating income* to $253 million, or $1.58 per share, compared with $222 million, or $1.37 per share, in the first quarter of last year.

• • $893 million decrease in first-quarter 2022 net income, compared with first-quarter 2021, primarily due to the after-tax net effect of a $924 million decrease in net investment gains partially offset by a $25 million increase in after-tax property casualty underwriting income.

• • $75.43 book value per share at March 31, 2022, down $6.29 since year-end.

• • Negative 6.9% value creation ratio for the first three months of 2022, compared with positive 4.1% for the same period of 2021.

Financial Highlights

(Dollars in millions, except per share data)

Three months ended March 31, 2022 2021 % Change

Revenue Data

Earned premiums	$	1,690	$	1,544	9
Investment income, net of expenses	185	174	6
Total revenues	1,215	2,227	(45)
Income Statement Data
Net income (loss)	$	(273)	$	620	nm
Investment gains and losses, after-tax	(526)	398	nm
Non-GAAP operating income*	$	253	$	222	14
Per Share Data (diluted)
Net income (loss)	$	(1.70)	$	3.82	nm
Investment gains and losses, after-tax	(3.28)	2.45	nm
Non-GAAP operating income*	$	1.58	$	1.37	15
Book value	$	75.43	$	69.16	9
Cash dividend declared	$	0.69	$	0.63	10
Diluted weighted average shares outstanding	160.4	162.5	(1)

* The Definitions of Non-GAAP Information and Reconciliation to Comparable GAAP Measures section defines and reconciles measures presented in this release that are not based on U.S. Generally Accepted Accounting Principles.

Forward-looking statements and related assumptions are subject to the risks outlined in the company's safe harbor statement.

Insurance Operations Highlights

• • 89.9% first-quarter 2022 property casualty combined ratio, improved from 91.2% for the first quarter of 2021.

• • 12% growth in first-quarter net written premiums, largely due to price increases and premium growth initiatives.

• • $244 million first-quarter 2022 property casualty new business written premiums, up 11%. Agencies appointed since the beginning of 2021 contributed $14 million or 6% of total new business written premiums.

• • $10 million first-quarter 2022 life insurance subsidiary net income, matching the first quarter of 2021, and 6% growth in first-quarter 2022 term life insurance earned premiums.

Investment and Balance Sheet Highlights

• • 6% or $11 million increase in first-quarter 2022 pretax investment income, including a 12% increase for stock portfolio dividends and a 4% increase for bond interest income.

• • Three-month decrease of 5% in fair value of total investments at March 31, 2022, including a 5% decrease for the bond portfolio and a 6% decrease for the stock portfolio.

• • $4.730 billion parent company cash and marketable securities at March 31, 2022, down 6% from year-end 2021.

Keeping a Steady Approach to Insurance

Steven J. Johnston, chairman, president and CEO, commented: "Non-GAAP operating income started the year strong, increasing 14% compared with last year's first-quarter result. The swing to a GAAP net loss of $273 million, compared with positive net income of $620 million for the same period last year, is due to accounting rules adopted effective in 2018 by the Financial Accounting Standards Board.

"As I've mentioned before, this accounting treatment will continue to create a lot of volatility in net income as equity security unrealized investment gains and losses flow through the income statement instead of the balance sheet as they would have prior to 2018.

"Turning to our insurance business, property casualty underwriting continued to produce steady results as our first-quarter combined ratio improved 1.3 percentage points to 89.9% compared to the first quarter of 2021.

"A somewhat milder winter, our continued focus on pricing precision and our steady approach to insurance reserves helped us reach $165 million in underwriting profit - our highest first-quarter underwriting profit in at least 16 years."

Achieving Consistent Growth

"We're pleased with the progress of our growth initiatives and the premium increases reported by each of our property casualty segments. Consolidated property casualty first-quarter net written premiums grew 12%, including average price increases at percentages similar to the fourth quarter of 2021. Pricing sophistication allows us to consider each account on its own merits, charging a price we believe to be adequate based on its specific risk characteristics.

"The main driver of our growth continues to come from the excellent relationships we develop with our agencies. Thanks to those strong partnerships, the first quarter of 2022 was our highest-ever single quarter of new business written premiums, reaching $244 million. To keep the momentum going, we continue to look for opportunities to appoint new agents while still preserving the franchise value that our agents appreciate. So far this year, we've appointed 51 agencies to offer our property casualty products.

"Our recent efforts to diversify our product portfolio also support our ability to grow profitably. In February, we launched our first product offered through our wholly owned brokerage, CSU Producer Resources Inc. and underwritten by our Lloyd's of London syndicate, Cincinnati Global Underwriting Ltd.SM. Our agents have responded enthusiastically to this new Wind Hail Deductible Buyback policy, and we've quoted $3.5 million in new business in just eight weeks."

Focusing on a Long-Term Investment Strategy

"Downward pressure in both the equity and bond markets contributed to a 7.7% decline in book value to $75.43 per share at March 31 compared with year-end 2021. Despite this movement, we estimate that our quarter-end total portfolio still held nearly $6.6 billion in appreciated value before taxes.

"We maintain a long-term perspective with our investment philosophy and aren't swayed by periodic market volatility. Our insurance business continues to provide cash that we invest in high-quality bonds and dividend-paying stocks. We are poised to further benefit from these purchases when the markets rebound."

Insurance Operations Highlights

Consolidated Property Casualty Insurance Results

(Dollars in millions)

Three months ended March 31, 2022 2021 % Change

$ 1,618

$ 1,475 10

Earned premiums Fee revenues

3

2 50

Total revenues

1,621

1,477 10

956

923 4

Loss and loss expenses Underwriting expenses

500

421 19

Underwriting profit

$

165

$

133 24

Ratios as a percent of earned premiums:

Pt. Change

28.6 2.2

Loss and loss expenses Underwriting expenses

Combined ratio

59.1 % 30.8 89.9 %

62.6 % (3.5)

91.2 % (1.3)

% Change

$ 1,276 9

Agency renewal written premiums Agency new business written premiums Other written premiums

Net written premiums

$ 1,397 244 258 $ 1,899

220 11

197 31

$ 1,693 12

Ratios as a percent of earned premiums:

Pt. Change

58.5 %

57.6 % 0.9

Current accident year before catastrophe losses Current accident year catastrophe losses

3.1

12.4 (9.3)

(1.2)

(5.4) 4.2

Prior accident years before catastrophe losses Prior accident years catastrophe losses

(1.3)

(2.0) 0.7

Loss and loss expense ratio

59.1 %

62.6 % (3.5)

Current accident year combined ratio before catastrophe losses

89.3 %

86.2 % 3.1

• • $206 million or 12% growth of first-quarter 2022 property casualty net written premiums, reflecting premium growth initiatives, price increases and a higher level of insured exposures. Cincinnati Re® contributed 3 percentage points to property casualty growth for the first three months of 2022.

• • $24 million or 11% increase in first-quarter 2022 new business premiums written by agencies. The growth included a $13 million increase in standard market property casualty production from agencies appointed since the beginning of 2021.

• • 51 new agency appointments in the first three months of 2022, including 21 that market only our personal lines products.

• • 1.3 percentage-point first-quarter 2022 combined ratio improvement, including a decrease for losses from catastrophes of 8.6 points.

• • 2.5 percentage-point first-quarter 2022 benefit from favorable prior accident year reserve development of $41 million, compared with 7.4 points or $110 million for first-quarter 2021.

• • 0.9 percentage-point increase, to 58.5%, for the three-month 2022 ratio of current accident year losses and loss expenses before catastrophes, including an increase of 4.0 points in the ratio for current accident year losses of $1 million or more per claim.

• • 2.2 percentage-point increase in the first-quarter 2022 underwriting expense ratio, compared with the same period of 2021, primarily due to higher levels of profit-sharing commissions for agencies and related expenses.

Commercial Lines Insurance Results

(Dollars in millions)

Three months ended March 31, 2022 2021 % Change

$ 962

$

886 9

Earned premiums Fee revenues

1

1 0

Total revenues

963

887 9

586

503 17

Loss and loss expenses Underwriting expenses

301

254 19

Underwriting profit

$

76

$

130 (42)

Ratios as a percent of earned premiums:

Pt. Change

28.7 2.6

Loss and loss expenses Underwriting expenses

Combined ratio

61.0 % 31.3 92.3 %

56.7 % 4.3

85.4 % 6.9

% Change

$

898 8

(24) (25)Agency renewal written premiums Agency new business written premiums Other written premiums

$ 970 156

145 8

Net written premiums

(30) $ 1,096

$ 1,019 8

Ratios as a percent of earned premiums:

Pt. Change

61.2 %

60.0 % 1.2

Current accident year before catastrophe losses Current accident year catastrophe losses

1.7

6.1 (4.4)

(1.6)

(7.5) 5.9

Prior accident years before catastrophe losses Prior accident years catastrophe losses

(0.3)

(1.9) 1.6

Loss and loss expense ratio

61.0 %

56.7 % 4.3

Current accident year combined ratio before catastrophe losses

88.7 %3.8

• • $77 million or 8% growth in first-quarter 2022 commercial lines net written premiums, primarily due to higher agency renewal written premiums.

• • $72 million or 8% increase in first-quarter renewal written premiums, with commercial lines average renewal pricing increases in the mid-single-digit percent range.

• • $11 million or 8% increase in first-quarter 2022 new business written by agencies, as we continue to carefully underwrite each policy in a highly competitive market.

• • 6.9 percentage-point increase in the first-quarter 2022 combined ratio, including a decrease for losses from catastrophes of 2.8 points.

• • 1.9 percentage-point first-quarter 2022 benefit from favorable prior accident year reserve development of $18 million, compared with 9.4 points or $83 million for first-quarter 2021.

Personal Lines Insurance Results

(Dollars in millions)

Three months ended March 31, 2022 2021 % Change

$ 402

$

376 7

Earned premiums Fee revenues

1

1 0

Total revenues

403

377 7

215

273 (21)

Loss and loss expenses Underwriting expenses

123

107 15

Underwriting profit (loss)

$

65

$

(3)

nm

Ratios as a percent of earned premiums:

Pt. Change

28.5 1.9

Loss and loss expenses Underwriting expenses

Combined ratio

53.5 % 30.4 83.9 %

72.6 % (19.1)

101.1 % (17.2)

% Change

$

302 10

(10) (10)Agency renewal written premiums Agency new business written premiums Other written premiums

$ 333 52

46 13

Net written premiums

(11) $ 374

$

338 11

Ratios as a percent of earned premiums:

Pt. Change

55.0 %

57.3 % (2.3)

Current accident year before catastrophe losses Current accident year catastrophe losses

6.9

20.6 (13.7)

(3.2)

(4.5) 1.3

Prior accident years before catastrophe losses Prior accident years catastrophe losses

(5.2)

(0.8) (4.4)

Loss and loss expense ratio

53.5 %

72.6 % (19.1)

Current accident year combined ratio before catastrophe losses

85.8 %(0.4)

• • $36 million or 11% growth in first-quarter 2022 personal lines net written premiums, including higher renewal written premiums that benefited from rate increases. First-quarter 2022 net written premiums from our agencies' high net worth clients grew 32%, to $176 million.

• • $6 million or 13% increase in first-quarter 2022 new business premiums written by agencies, largely reflecting expanded use of enhanced pricing precision tools.

• • 17.2 percentage-point first-quarter 2022 combined ratio improvement, including a decrease for losses from catastrophes of 18.1 points.

• • 8.4 percentage-point first-quarter 2022 benefit from favorable prior accident year reserve development of $34 million, compared with 5.3 points or $20 million for first-quarter 2021.