Statutory Accounting Information

Insurance companies’ financial statements are presented on the basis of accounting practices prescribed or permitted by applicable state insurance departments of domicile. Insurance companies use statutory accounting practices (SAP) as recognized by various states. We have adopted the National Association of Insurance Commissioners’ (NAIC) Accounting Practices and Procedures manual, version effective January 1, 2001, and updates through the current year as a component of prescribed or permitted practices by laws of the state of domicile. The primary differences between SAP and GAAP include the valuation of unrealized investment gains and losses, expensing of policy acquisition costs, actuarial assumptions for life insurance reserves and deferred income taxes based on differences in statutory and taxable income.

Statutory net income (loss) and capital and surplus are determined in accordance with SAP prescribed or permitted by insurance regulatory authorities for five legal entities, our insurance subsidiary and its four insurance subsidiaries. Statutory capital and surplus for our insurance subsidiary, The Cincinnati Insurance Company, includes capital and surplus of its four insurance subsidiaries. All capital and surplus amounts exceed statutory risk-based capital requirements. The statutory net income (loss) and statutory capital and surplus are presented below:



(In millions)	Net Income (Loss)								Capital and Surplus
	Years ended December 31,								At December 31,
	2013			2012		2011			2013		2012
The Cincinnati Insurance Company	$	418		$	334	$	120		$	4,326	$	3,914
The Cincinnati Casualty Company	10			10		15			317		293
The Cincinnati Indemnity Company	2			2		2			82		76
The Cincinnati Specialty Underwriters Insurance Company	18			6		11			228		199
The Cincinnati Life Insurance Company	(20		)	5		(13		)	247		276