-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JMwJKJd2yevqbm/sF9GU/qMEvj4d9AihGgDRSSimtaGBIgAHGKi6Q7dr/kbb8r3h HJGfYL3RBGMULQtG2mXZ8w== 0001144204-10-039824.txt : 20100728 0001144204-10-039824.hdr.sgml : 20100728 20100728164501 ACCESSION NUMBER: 0001144204-10-039824 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20100728 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20100728 DATE AS OF CHANGE: 20100728 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CINCINNATI FINANCIAL CORP CENTRAL INDEX KEY: 0000020286 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 310746871 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-04604 FILM NUMBER: 10974784 BUSINESS ADDRESS: STREET 1: 6200 S GILMORE RD CITY: FAIRFIELD STATE: OH ZIP: 45014 BUSINESS PHONE: 5138702000 MAIL ADDRESS: STREET 1: P.O. BOX 145496 CITY: CINCINNATI STATE: OH ZIP: 45250 8-K 1 v191296_8k.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934

Date of Report:  July 28, 2010
(Date of earliest event reported)

CINCINNATI FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)

Ohio
0-4604
31-0746871
(State or other jurisdiction
of incorporation)
(Commission
File Number)
(I.R.S. Employer
Identification No.)

6200 S. Gilmore Road, Fairfield, Ohio
45014-5141
(Address of principal executive offices)
(Zip Code)
 
Registrant’s telephone number, including area code:  (513) 870-2000

N/A
(Former name or former address, if changed since last report.)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13a-4(c))

Item 2.02 Results of Operations and Financial Condition.

On July 28, 2010, Cincinnati Financial Corporation issued the attached news release titled “Cincinnati Financial Reports Second-Quarter 2010 Results,” furnished as Exhibit 99.1 hereto and incorporated herein by reference. On July 28, 2010, the company also distributed the attached information titled “Supplemental Financial Data,” furnished as Exhibit 99.2 hereto and incorporated herein by reference. This report should not be deemed an admission as to the materiality of any information contained in the news release or supplemental financial data.

In accordance with general instruction B.2 of Form 8-K, the information furnished in this report shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended.

 
 

 

Item 9.01 Financial Statements and Exhibits.
 
(c)    Exhibits
 
Exhibit 99.1 – News release dated July 28, 2010, “Cincinnati Financial Reports Second-Quarter 2010 Results

Exhibit 99.2 – Supplemental Financial Data for the period ending June 30, 2010 distributed July 28, 2010.

Signature
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
CINCINNATI FINANCIAL CORPORATION
   
Date: July 28, 2010
/S/Steven J. Johnston
 
Steven J. Johnston, FCAS, MAAA, CFA
 
Chief Financial Officer, Senior Vice President, Secretary and Treasurer
 
 
 

 
EX-99.1 2 v191296_ex99-1.htm Unassociated Document
CINCINNATI FINANCIAL CORPORATION
Investor Contact : Dennis E. McDaniel, 513-870-2768
CINF-IR@cinfin.com
Media Contact : Joan O. Shevchik, 513-603-5323
Media_Inquiries@cinfin.com
Cincinnati Financial Reports Second-Quarter 2010 Results
Cincinnati, July 28, 2010 Cincinnati Financial Corporation (Nasdaq: CINF) today reported:
·
$27 million, or 17 cents per share, of net income for second-quarter 2010 compared with a net loss of $19 million, or 12 cents per share, in the second quarter of 2009.
·
$42 million, or 26 cents per share, of operating income* compared with an operating loss of $5 million, or 3 cents per share.
·
Driving the improved second-quarter results were the after-tax net effects of a $7 million rise in investment income and a $44 million decrease in the property casualty insurance underwriting loss. Underwriting results improved despite high weather-related catastrophe losses that moderated somewhat compared with second-quarter 2009 catastrophe losses while exceeding early estimates announced on June 14. Partially offsetting the catastrophe losses were higher contributions from favorable development of reserved loss estimates for insurance claims related to events that occurred prior to 2010.
·
$29.13 book value per share at June 30, 2010, off approximately 2 percent from March 31, 2010, and less than 1 percent from December 31, 2009.
·
2.3 percent value creation ratio for the first six months of 2010, compared with 2.0 percent for the same period of 2009.
Financial Highlights
(Dollars in millions except share data)
 
Three months ended June 30,
 
Six months ended June 30,
 
   
 
2010
   
2009
   
change %
 
2010
 
2009
   
Change %
 
Revenue Highlights
                                   
Earned premiums
  $ 768     $ 770       0     $ 1,515     $ 1,535       (1 )
Investment income, pre-tax
    130       119       9       260       243       7  
Total revenues
    878       874       0       1,765       1,764       0  
Income Statement Data
                                               
Net income (loss)
  $ 27     $ (19 )  
nm
    $ 95     $ 17       459  
Net realized investment gains and losses
    (15 )     (14 )     (7 )     (10 )     (15 )     33  
Operating income (loss)*
  $ 42     $ (5 )  
nm
    $ 105     $ 32       228  
Per Share Data (diluted)
                                               
Net income  (loss)
  $ 0.17     $ (0.12 )  
nm
    $ 0.58     $ 0.10       480  
Net realized investment gains and losses
    (0.09 )     (0.09 )     0       (0.06 )     (0.10 )     40  
Operating income (loss)*
  $ 0.26     $ (0.03 )  
nm
    $ 0.64     $ 0.20       220  
                                                 
Book value
                            29.13       25.49       14  
Cash dividend declared
    0.395       0.39       1       0.79       0.78       1  
Diluted weighted average shares outstanding
    163,284,013       162,556,327       0       163,293,335       162,738,081       0  
                                                 
Insurance Operations Second-quarter Highlights
·
107.6 percent second-quarter 2010 property casualty combined ratio, improved 9.0 percentage points from one year ago.
·
4 percent increase in property casualty net written premiums, including personal lines segment growth of 7 percent.
·
$106 million second-quarter 2010 property casualty new business written by agencies, within $1 million of second-quarter 2009. $11 million was contributed in the second quarter by all agencies appointed since the beginning of 2009.
·
6 cents per share contribution from life insurance to second-quarter 2010 operating income, down slightly from 7 cents.
Investment and Balance Sheet Highlights
·
Investment income, after income tax effects, grew 8 percent in the second quarter, driven by pre-tax interest income growth of 11 percent.
·
1 percent six-month increase in fair value of invested assets plus cash at June 30, 2010, including bond portfolio growth of 6 percent and equity portfolio decline of 3 percent.
·
Parent company cash and marketable securities of $1.011 billion at June 30, 2010, up 1 percent from year-end.
*
The Definitions of Non-GAAP Information and Reconciliation to Comparable GAAP Measures on Page 9 defines and reconciles measures presented in this release that are not based on Generally Accepted Accounting Principles.
**
Forward-looking statements and related assumptions are subject to the risks outlined in the company’s safe harbor statement (see Page 7).

 
1

 
Kenneth W. Stecher, president and chief executive officer, commented, “Cincinnati Financial stayed focused and disciplined in the second quarter, making progress against continuing headwinds of industry, economic and literal storms. The second quarter brought reasonable premium growth, a narrower underwriting loss and solid growth of investment income over last year’s low point. Our position and results as of June 30 showed that we are poised for improved results in our insurance operations, independent of the still-awaited turn in the commercial insurance marketplace. We believe that our strategic initiatives are beginning to produce benefits that will multiply over the coming months and years.”
Expanded Growth Opportunities
“Net written premiums from property casualty operations rose 4 percent over the year-ago second quarter. We have looked beyond our largest book of business in standard commercial lines for additional growth opportunities, finding them by expanding personal lines and adding excess and surplus lines. These two areas together accounted for nearly three-quarters of our second-quarter written premium growth, including strong new business.
“In commercial lines, our retention rate on renewal policies continues at a very satisfactory level while we are writing less new business, including fewer larger accounts that tend to be underpriced due to competition. As planned, agents in our newer commercial states – Texas, Colorado and Wyoming – increased six-month new business premiums by $11 million, partially offsetting declines in established states. We are approximately halfway to our 2010 goal of appointing 65 new agencies that in total write more than $1 billion of annual property casualty premium with all carriers. Second-half 2010 appointments will include our first agencies in Connecticut and Oregon. As new agency relationships mature, we work to become their No. 1 or No. 2 carrier, typically writing about 10 percent of total agency premium volume within 10 years. With expansion to states outside of the Midwest and South, we also expect growth of our market share within these new agencies to support geographical diversification, reducing volatility of financial results from catastrophes.”
Stabilized Ex-Catastrophe Underwriting Results
“While we are never satisfied with a combined ratio over 100 percent, the second-quarter ratio improved 9 percentage points compared with the year-ago ratio. This year’s second-quarter combined ratio benefited from lower catastrophe losses and higher favorable development of reserves. Eliminating those impacts and compared with full-year 2009, the accident-year combined ratio excluding catastrophes is fairly stable in 2010 for our commericial lines segment and improved for our personal lines segment. We believe this slightly better underlying profitability is an early indication of more precise pricing and risk selection we are just beginning to experience through our limited but steadily increasing use of predictive modeling tools in both commercial and personal lines.
As of the June 30, we are using these tools to increase our ability to target high quality risks in our homeowner and workers’ compensation lines of business. We will begin use for commercial and personal auto lines before year-end and will ultimately develop tools for all major commercial lines. We expect to continue gaining new advantages from our broader use of technology, including recently introduced policy administration systems that bring efficiencies for our company and our agents and online tools that give policyholders new ways to receive service. In addition to making it easier to process our policies, our new commercial lines system, now available in 21 states with nine more to launch this year, adds billing and payment options that help attract business from our agents.”
Balanced Risk and Reward
“On the investment side of our operations, we continue to position our portfolio with consideration to both the challenges presented by the current low rate environment and the risks presented by potential future inflation. As bonds in our generally laddered portfolio mature over the near term, we will be challenged to replace their current yield and continue our trend of improving investment income. While our large bond portfolio more than covers our insurance reserve liabilities, we believe one of our best opportunities for long-term growth and profits is our diversified common stock portfolio of mainly blue chip, dividend-paying companies, accounting for 24 percent of invested assets at June 30.
“Overall, our capital and liquidity continued to be very strong at June 30, 2010. Our more than $1 billion of cash and marketable securities at the parent company level would be sufficient to cover all of our corporate debt while preserving our insurance subsidiaries’ very strong surplus and capacity for growth.
“For the first time since April 2009, we used capital to repurchase some of our own shares during the second quarter. As in the past, we were opportunistic, buying shares for a total of $10 million at an average price well below book value. Over 8 million shares remain available per the board’s authorization, which does not specify an expiration date. We tend to use repurchases to support shareholder value by offsetting dilution from stock compensation granted to our associates and directors. The second-quarter repurchases benefited book value per share slightly, although total book value fell short of year-end 2009, reflecting fluctuation of common stock values in our equity portfolio on June 30.
Stecher concluded, “Our property casualty insurance group was named in July to the Ward’s 50, a list of insurers that excel at balancing financial strength with superior performance over a five-year period. Our group is one of only five insurers named to the Ward’s 50 every year since inception of the list 20 years ago. With support from our loyal shareholders, agents, policyholders and associates, we will continue managing our capital to build value that endures over time.”

 
2

 
Consolidated Property Casualty Insurance Operations
(Dollars in millions)
 
Three months ended June 30,
   
Six months ended June 30,
 
   
2010
   
2009
   
Change %
   
2010
   
2009
   
Change %
 
                                     
Agency renewal written premiums
  $ 685     $ 666       3     $ 1,367     $ 1,361       0  
Agency new business written premiums
    106       107       (1 )     198       204       (3 )
Other written premiums
    (42 )     (50 )     16       (60 )     (64 )     6  
Net written premiums
    749       723       4       1,505       1,501       0  
Unearned premium change
    (21 )     10    
nm
      (69 )     (36 )     (92 )
Earned premiums
    728       733       (1 )     1,436       1,465       (2 )
                                                 
Loss and loss expenses
    553       620       (11 )     1,028       1,163       (12 )
Underwriting expenses
    230       235       (2 )     482       479       1  
Underwriting loss
  $ (55 )   $ (122 )     55     $ (74 )   $ (177 )     58  
                                                 
                                                 
 
                 
Pt. Change
                   
Pt. Change
 
Ratios as a percent of earned premiums:
                                               
Current accident year before catastrophe losses
    71.7 %     72.1 %     (0.4 )     70.6 %     69.0 %     1.6  
Current accident year catastrophe losses
    14.3       16.3       (2.0 )     8.8       11.9       (3.1 )
Prior accident years before catastrophe losses
    (9.3 )     (3.7 )     (5.6 )     (7.0 )     (1.2 )     (5.8 )
Prior accident year catastrophe losses
    (0.7 )     (0.2 )     (0.5 )     (0.8 )     (0.3 )     (0.5 )
Total loss and loss expenses
    76.0       84.5       (8.5 )     71.6       79.4       (7.8 )
Underwriting expenses
    31.6       32.1       (0.5 )     33.6       32.7       0.9  
Combined ratio
    107.6 %     116.6 %     (9.0 )     105.2 %     112.1 %     (6.9 )
Contribution from catastrophe losses and prior years reserve development
    4.3       12.4       (8.1 )     1.0       10.4       (9.4 )
Combined ratio before catastrophe losses and prior years reserve development
    103.3 %     104.2 %     (0.9 )     104.2 %     101.7 %     2.5  
                                                 
·
$26 million or 4 percent increase in second-quarter 2010 property casualty net written premiums, reflecting various targeted growth initiatives that produced increases of $14 million in personal lines and $5 million in excess and surplus lines.
·
$1 million decrease in new business written by agencies in the second quarter of 2010 compared with the second quarter of 2009, including a decrease of almost $7 million for commercial lines that were nearly offset by increases of $5 million for personal lines and $1 million for excess and surplus lines.
·
1,201 agency relationships with 1,487 reporting locations marketing standard market property casualty insurance products at June 30, 2010, compared with 1,180 agency relationships with 1,463 reporting locations at year-end 2009. Thirty-eight new agency appointments were made during the first six months of 2010.
·
9.0 percentage-point improvement in the second-quarter GAAP combined ratio, including 2.0 points for lower catastrophe losses from weather events.
·
Underwriting results benefitted from favorable prior accident year reserve development of $73 million for the second quarter of 2010 compared with $29 million for the same period of 2009, accounting for 6.1 percentage points of improvement in the GAAP combined ratio.
 
3

 
The following table shows incurred catastrophe losses for the second quarters of 2010 and 2009.
(In millions, net of reinsurance)
     
Three months ended June 30,
   
Six months ended June 30,
 
           
Commercial
   
Personal
         
Commercial
   
Personal
       
Dates
 
Cause of loss
 
Region
 
lines
   
lines
   
Total
   
lines
   
lines
   
Total
 
2010
                                           
First quarter catastrophes
      $ (2 )   $ -     $ (2 )   $ 8     $ 4     $ 12  
Apr. 4-6
 
Flood, hail, tornado, wind
 
South, Midwest
    5       6       11       5       6       11  
Apr. 30 - May 3
 
Flood, hail, tornado, wind
 
South
    28       6       34       28       6       34  
May 7-8
 
Hail, tornado, wind
 
East, Midwest
    2       10       12       2       10       12  
May 12-16
 
Flood, hail, tornado, wind
 
South, Midwest
    3       2       5       3       2       5  
Jun. 4-6
 
Flood, hail, tornado, wind
 
Midwest
    3       3       6       3       3       6  
Jun. 17-20
 
Flood, hail, tornado, wind
 
Midwest, West
    5       4       9       5       4       9  
Jun. 21-24
 
Flood, hail, tornado, wind
 
Midwest
    4       5       9       4       5       9  
Jun. 25-28
 
Flood, hail, tornado, wind
 
Midwest
    1       4       5       1       4       5  
All other 2010 catastrophes
        11       4       15       17       6       23  
Development on 2009 and prior catastrophes
        (4 )     (1 )     (5 )     (10 )     (2 )     (12 )
Calendar year incurred total
      $ 56     $ 43     $ 99     $ 66     $ 48     $ 114  
                                                         
2009
                                                       
First quarter catastrophes
        4       8       12       21       46       67  
Apr. 9-11
 
Flood, hail, wind
 
South, Midwest
    13       15       28       13       15       28  
May 7-9
 
Flood, hail, wind
 
South, Midwest
    12       17       29       12       17       29  
Jun. 2-6
 
Flood, hail, wind
 
South, Midwest
    6       4       10       6       4       10  
Jun. 10-18
 
Flood, hail, wind
 
South, Midwest
    21       9       30       21       9       30  
All other 2009 catastrophes
        5       6       11       5       6       11  
Development on 2008 and prior catastrophes
        (4 )     2       (2 )     (7 )     3       (4 )
Calendar year incurred total
      $ 57     $ 61     $ 118     $ 71     $ 100     $ 171  
                                                         
Insurance Operations Highlights
Commercial Lines Insurance Operations
(Dollars in millions)
 
Three months ended June 30,
   
Six months ended June 30,
 
   
2010
   
2009
   
Change %
   
2010
   
2009
   
Change %
 
                                     
Agency renewal written premiums
  $ 492     $ 488       1     $ 1,025     $ 1,045       (2 )
Agency new business written premiums
    73       79       (8 )     139       155       (10 )
Other written premiums
    (33 )     (43 )     23       (44 )     (51 )     14  
Net written premiums
    532       524       2       1,120       1,149       (3 )
Unearned premium change
    6       32       (81 )     (59 )     (37 )     (59 )
Earned premiums
    538       556       (3 )     1,061       1,112       (5 )
                                                 
Loss and loss expenses
    378       442       (14 )     731       830       (12 )
Underwriting expenses
    169       175       (3 )     350       355       (1 )
Underwriting loss
  $ (9 )   $ (61 )     85     $ (20 )   $ (73 )     73  
                                                 
                                                 
 
                 
Pt. Change
                   
Pt. Change
 
Ratios as a percent of earned premiums:
                                               
Current accident year before catastrophe losses
    71.7 %     72.5 %     (0.8 )     71.4 %     68.8 %     2.6  
Current accident year catastrophe losses
    11.2       10.9       0.3       7.2       7.0       0.2  
Prior accident years before catastrophe losses
    (11.7 )     (3.2 )     (8.5 )     (8.7 )     (0.6 )     (8.1 )
Prior accident year catastrophe losses
    (0.8 )     (0.7 )     (0.1 )     (1.0 )     (0.6 )     (0.4 )
Total loss and loss expenses
    70.4       79.5       (9.1 )     68.9       74.6       (5.7 )
Underwriting expenses
    31.3       31.4       (0.1 )     33.0       32.0       1.0  
Combined ratio
    101.7 %     110.9 %     (9.2 )     101.9 %     106.6 %     (4.7 )
Contribution from catastrophe losses and prior years reserve development
    (1.3 )     7.0       (8.3 )     (2.5 )     5.8       (8.3 )
Combined ratio before catastrophe losses and prior years reserve development
    103.0 %     103.9 %     (0.9 )     104.4 %     100.8 %     3.6  
                                                 
·
$8 million or 2 percent increase in second-quarter 2010 commercial lines net written premiums. Slightly higher renewal written premiums reflected strong policy retention and included modest pricing declines estimated at approximately 1 percent for the average policy during the first half of 2010.
·
Combined ratio reflected favorable prior accident year reserve development and fairly stable current accident year results.
71.4 percent ratio for current accident year losses and loss expenses before catastrophes, improved slightly from 72.5 percent full-year 2009, with new losses greater than $4 million down 0.8 percentage points.
·
Underwriting expense ratio was essentially flat for the second quarter as lower expenses offset lower earned premiums.
 
4

 
Personal Lines Insurance Operations
(Dollars in millions)
 
Three months ended June 30,
   
Six months ended June 30,
 
   
2010
   
2009
   
Change %
   
2010
   
2009
   
Change %
 
                                     
Agency renewal written premiums
  $ 187     $ 176       6     $ 330     $ 313       5  
Agency new business written premiums
    24       19       26       42       34       24  
Other written premiums
    (7 )     (5 )     (40 )     (13 )     (13 )     0  
Net written premiums
    204       190       7       359       334       7  
Unearned premium change
    (25 )     (18 )     (39 )     (6 )     9    
nm
 
Earned premiums
    179       172       4       353       343       3  
                                                 
Loss and loss expenses
    163       173       (6 )     275       325       (15 )
Underwriting expenses
    57       56       2       124       110       13  
Underwriting loss
  $ (41 )   $ (57 )     28     $ (46 )   $ (92 )     50  
                                                 
                                                 
                   
Pt. Change
                   
Pt. Change
 
Ratios as a percent of earned premiums:
                                               
Current accident year before catastrophe losses
    70.3 %     70.9 %     (0.6 )     67.0 %     69.0 %     (2.0 )
Current accident year catastrophe losses
    24.5       34.3       (9.8 )     14.1       28.1       (14.0 )
Prior accident years before catastrophe losses
    (3.0 )     (5.4 )     2.4       (2.7 )     (3.4 )     0.7  
Prior accident year catastrophe losses
    (0.7 )     1.1       (1.8 )     (0.5 )     0.9       (1.4 )
Total loss and loss expenses
    91.1       100.9       (9.8 )     77.9       94.6       (16.7 )
Underwriting expenses
    32.3       32.3       0.0       35.2       32.3       2.9  
Combined ratio
    123.4 %     133.2 %     (9.8 )     113.1 %     126.9 %     (13.8 )
Contribution from catastrophe losses and prior years reserve development
    20.8       30.0       (9.2 )     10.9       25.6       (14.7 )
Combined ratio before catastrophe losses and prior years reserve development
    102.6 %     103.2 %     (0.6 )     102.2 %     101.3 %     0.9  
                                                 
·
$14 million or 7 percent increase in second-quarter 2010 personal lines net written premiums, reflecting improved pricing and strong new business growth.
·
9.8 percentage-point second-quarter combined ratio improvement primarily from lower weather-related catastrophe losses.
·
67.0 percent ratio for current accident year losses and loss expenses before catastrophes, improved from 70.9 percent full-year 2009 primarily due to better pricing and 1.5 percentage points positive impact from lower new losses greater than $250,000.
·
Flat second-quarter underwriting expense ratio as rising earned premiums kept pace with increased expenses.
Life Insurance Operations
(In millions)
 
Three months ended June 30,
   
Six months ended June 30,
 
   
2010
   
2009
   
change %
   
2010
   
2009
   
Change %
 
                                     
Term life insurance
  $ 24     $ 23       4     $ 47     $ 41       15  
Universal life insurance
    10       7       43       19       15       27  
Other life insurance, annuity, and disability income products
    6       7       (14 )     13       14       (7 )
Earned premiums
    40       37       8       79       70       13  
Investment income, net of expenses
    33       29       14       65       59       10  
Other income
    1       -    
nm
      1       -    
nm
 
Total revenues, excluding realized investment gains and losses
    74       66       12       145       129       12  
Contract holders benefits
    43       39       10       85       78       9  
Underwriting expenses
    16       13       23       32       24       33  
Total benefits and expenses
    59       52       13       117       102       15  
Net income before income tax and realized investment gains and losses
    15       14       7       28       27       4  
Income tax
    5       3       67       10       8       25  
Net income before realized investment gains and losses
  $ 10     $ 11       (9 )   $ 18     $ 19       (5 )
                                                 
·
$3 million or 8 percent increase in second-quarter 2010 earned premiums, reflecting marketing advantages of competitive, up-to-date products, personal service and policies backed by financial strength. 3 percent rise in face amount of life policies in force to $72.180 billion at June 30, 2010, from $69.815 billion at year-end 2009.
·
$52 million in second-quarter 2010 fixed annuity deposits received compared with $30 million in second-quarter 2009 and $181 million in full-year 2009. Cincinnati Life does not offer variable or indexed products.
·
$1 million or 7 percent improvement in second-quarter 2010 pre-tax profit as revenues outgrew expenses. Higher contract holders benefits reflect increased levels of policy reserves while net death claims remained within expectations. Underwriting expenses increased primarily due to commission expense.
·
GAAP shareholders’ equity for The Cincinnati Life Insurance Company increased during the second quarter of 2010 by $28 million, or 4 percent, to $729 million. Net after-tax unrealized gains were up $18 million.
 
5

 
Investment and Balance Sheet Highlights
Investment Operations
(In millions)
 
Three months ended June 30,
   
Six months ended June 30,
 
  
 
2010
   
2009
   
Change %
   
2010
   
2009
   
Change %
 
Total investment income, net of expenses, pre-tax
  $ 130     $ 119       9     $ 260     $ 243       7  
Investment interest credited to contract holders
    (20 )     (17 )     (18 )     (39 )     (33 )     (18 )
Realized investment gains and losses summary:
                                               
Realized investment gains and losses, net
    16       23       (30 )     19       75       (75 )
Change in fair value of securities with embedded derivatives
    (5 )     11    
nm
      1       7       (86 )
Other-than-temporary impairment charges
    (34 )     (52 )     35       (35 )     (102 )     66  
Total realized investment gains and losses, net
    (23 )     (18 )     (28 )     (15 )     (20 )     25  
Investment operations income
  $ 87     $ 84       4     $ 206     $ 190       8  
                                                 

(In millions)
 
Three months ended June 30,
   
Six months ended June 30,
 
  
 
2010
   
2009
   
Change %
   
2010
   
2009
   
Change %
 
Investment income:
                                   
Interest
  $ 107     $ 96       11     $ 214     $ 192       11  
Dividends
    24       24       0       48       50       (4 )
Other
    1       1       0       2       5       (60 )
Investment expenses
    (2 )     (2 )     0       (4 )     (4 )     0  
Total investment income, net of expenses, pre-tax
    130       119       9       260       243       7  
Income taxes
    (32 )     (28 )     (14 )     (64 )     (56 )     (14 )
Total investment income, net of expenses, after-tax
  $ 98     $ 91       8     $ 196     $ 187       5  
                                                 
Effective tax rate
    24.5 %     23.2 %             24.5 %     23.2 %        
                                                 
Average yield pre-tax
    4.6 %     4.9 %             4.6 %     4.9 %        
Average yield after-tax
    3.4 %     3.8 %             3.5 %     3.8 %        
                                                 
·
9 percent growth in second-quarter 2010 pre-tax investment income or 8 percent growth in after-tax net investment income, driven by higher interest income on bonds.
·
$131 million or 12 percent second-quarter 2010 decrease in pre-tax unrealized investment portfolio gains, including a $123 million increase for the bond portfolio, offset by a $254 million decline in unrealized gains for the equity portfolio.
(Dollars in millions except share data)
 
At June 30,
   
At December 31,
 
  
 
2010
   
2009
 
Balance sheet data
           
Invested assets
  $ 11,032     $ 10,643  
Total assets
    14,607       14,440  
Short-term debt
    49       49  
Long-term debt
    790       790  
Shareholders' equity
    4,737       4,760  
Book value per share
    29.13       29.25  
Debt-to-capital ratio
    15.0 %     15.0 %
                 
   
Three months ended June 30,
   
Six months ended June 30,
 
  
 
2010
   
2009
   
2010
   
2009
 
Performance measure
                       
Value creation ratio
    (1.1 ) %     8.4 %     2.3 %     2.0 %
                                 
·
$11.357 billion in cash and invested assets at June 30, 2010, up from $11.200 billion at December 31, 2009.
·
$8.339 billion bond portfolio at June 30, 2010, with an average rating of A2/A and with a 3 percent increase in fair value during the second quarter of 2010.
·
$2.611 billion equity portfolio was 23.7 percent of invested assets, including $495 million in pre-tax unrealized gains at June 30, 2010, after an 8 percent decline in fair value during the second quarter of 2010.
·
$3.537 billion of statutory surplus for the property casualty insurance group at June 30, 2010, down from $3.648 billion at December 31, 2009. Ratio of net written premiums to property casualty statutory surplus for the 12 months ended June 30, 2010, of 0.8-to-1, unchanged from 0.8-to-1 for the 12 months ended December 31, 2009.
·
Value creation ratio of negative 1.1 percent for the second quarter of 2010 is the sum of 1.3 percent from shareholder dividends plus negative 2.4 percent from change in book value per share.
For additional information or to register for our conference call webcast, please visit www.cinfin.com/investors.
6

Cincinnati Financial Corporation offers business, home and auto insurance, our main business, through The Cincinnati Insurance Company and its two standard market property casualty companies. The same local independent insurance agencies that market those policies may offer products of our other subsidiaries, including life and disability income insurance, annuities and surplus lines property and casualty insurance. For additional information about the company, please visit www.cinfin.com.
   
Mailing Address:
Street Address:
P.O. Box 145496
6200 South Gilmore Road
Cincinnati, Ohio 45250-5496
Fairfield, Ohio 45014-5141
Safe Harbor Statement
This is our “Safe Harbor” statement under the Private Securities Litigation Reform Act of 1995. Our business is subject to certain risks and uncertainties that may cause actual results to differ materially from those suggested by the forward-looking statements in this report. Some of those risks and uncertainties are discussed in our 2009 Annual Report on Form 10-K, Item 1A, Risk Factors, Page 23. Although we often review or update our forward-looking statements when events warrant, we caution our readers that we undertake no obligation to do so.
Factors that could cause or contribute to such differences include, but are not limited to:
·
Unusually high levels of catastrophe losses due to risk concentrations, changes in weather patterns, environmental events, terrorism incidents or other causes
·
Increased frequency and/or severity of claims
·
Inadequate estimates or assumptions used for critical accounting estimates
·
Recession or other economic conditions resulting in lower demand for insurance products or increased payment delinquencies
·
Delays in adoption and implementation of underwriting and pricing methods that could increase our pricing accuracy, underwriting profit and competitiveness
·
Inability to defer policy acquisition costs for any business segment if pricing and loss trends would lead management to conclude that segment could not achieve sustainable profitability
·
Declines in overall stock market values negatively affecting the company’s equity portfolio and book value
·
Events, such as the credit crisis, followed by prolonged periods of economic instability or recession, that lead to:
 
o
Significant or prolonged decline in the value of a particular security or group of securities and impairment of the asset(s)
 
o
Significant decline in investment income due to reduced or eliminated dividend payouts from a particular security or group of securities
 
o
Significant rise in losses from surety and director and officer policies written for financial institutions
·
Prolonged low interest rate environment or other factors that limit the company’s ability to generate growth in investment income or interest rate fluctuations that result in declining values of fixed-maturity investments, including declines in accounts in which we hold bank-owned life insurance contract assets
·
Increased competition that could result in a significant reduction in the company’s premium volume
·
Changing consumer insurance-buying habits and consolidation of independent insurance agencies that could alter our competitive advantages
·
Inability to obtain adequate reinsurance on acceptable terms, amount of reinsurance purchased, financial strength of reinsurers and the potential for non-payment or delay in payment by reinsurers
·
Events or conditions that could weaken or harm the company’s relationships with its independent agencies and hamper opportunities to add new agencies, resulting in limitations on the company’s opportunities for growth, such as:
 
o
Downgrades of the company’s financial strength ratings
 
o
Concerns that doing business with the company is too difficult
 
o
Perceptions that the company’s level of service, particularly claims service, is no longer a distinguishing characteristic in the marketplace
 
o
Delays or inadequacies in the development, implementation, performance and benefits of technology projects and enhancements
·
Actions of insurance departments, state attorneys general or other regulatory agencies, including a change to a federal system of regulation from a state-based system, that:
 
o
Restrict our ability to exit or reduce writings of unprofitable coverages or lines of business
 
o
Place the insurance industry under greater regulatory scrutiny or result in new statutes, rules and regulations
 
o
Increase our expenses
 
o
Add assessments for guaranty funds, other insurance related assessments or mandatory reinsurance arrangements; or that impair our ability to recover such assessments through future surcharges or other rate changes
 
o
Limit our ability to set fair, adequate and reasonable rates
 
o
Place us at a disadvantage in the marketplace
 
o
Restrict our ability to execute our business model, including the way we compensate agents
·
Adverse outcomes from litigation or administrative proceedings
·
Events or actions, including unauthorized intentional circumvention of controls, that reduce the company’s future ability to maintain effective internal control over financial reporting under the Sarbanes-Oxley Act of 2002
·
Unforeseen departure of certain executive officers or other key employees due to retirement, health or other causes that could interrupt progress toward important strategic goals or diminish the effectiveness of certain longstanding relationships with insurance agents and others
·
Events, such as an epidemic, natural catastrophe or terrorism, that could hamper our ability to assemble our workforce at our headquarters location
·
Difficulties with technology or data security breaches could negatively affect our ability to conduct business and our relationships with agents, policyholders and others
Further, the company’s insurance businesses are subject to the effects of changing social, economic and regulatory environments. Public and regulatory initiatives have included efforts to adversely influence and restrict premium rates, restrict the ability to cancel policies, impose underwriting standards and expand overall regulation. The company also is subject to public and regulatory initiatives that can affect the market value for its common stock, such as measures affecting corporate financial reporting and governance. The ultimate changes and eventual effects, if any, of these initiatives are uncertain.
* * *

 
7

 
Cincinnati Financial Corporation
Condensed Balance Sheets and Statements of Operations (unaudited)
(Dollars in millions)
           
June 30,
 
December 31,
 
             
2010
 
2009
 
                       
Assets
                       
Investments
              $ 11,032     $ 10,643  
Cash and cash equivalents
                325       557  
Premiums receivable
                1,055       995  
Reinsurance receivable
                543       675  
Other assets
                1,652       1,570  
Total assets
              $ 14,607     $ 14,440  
                             
Liabilities
                           
Insurance reserves
              $ 6,110     $ 5,925  
Unearned premiums
                1,572       1,509  
Long-term debt
                790       790  
Other liabilities
                1,398       1,456  
Total liabilities
                9,870       9,680  
                             
Shareholders' Equity
                           
Common stock and paid-in capital
                1,477       1,474  
Retained earnings
                3,828       3,862  
Accumulated other comprehensive income
                636       624  
Treasury stock
                (1,204 )     (1,200 )
Total shareholders' equity
                4,737       4,760  
Total liabilities and shareholders' equity
              $ 14,607     $ 14,440  
                             
(Dollars in millions except per share data)
Three months ended June 30,
 
Six months ended June 30,
 
   
2010
   
2009
   
2010
   
2009
 
           
Revenues
                           
Earned premiums
  $ 768     $ 770     $ 1,515     $ 1,535  
Investment income, net of expenses
    130       119       260       243  
Realized investment gains and losses
    (23 )     (18 )     (15 )     (20 )
Other income
    3       3       5       6  
Total revenues
    878       874       1,765       1,764  
                                 
Benefits and Expenses
                               
Insurance losses and policyholder benefits
    595       658       1,111       1,239  
Underwriting, acquisition and insurance expenses
    246       248       514       503  
Other operating expenses
    3       4       7       10  
Interest expense
    13       14       27       28  
Total benefits and expenses
    857       924       1,659       1,780  
                                 
Income (loss) before income taxes
    21       (50 )     106       (16 )
                                 
Provision (benefit) for income taxes
    (6 )     (31 )     11       (33 )
Net Income (loss)
  $ 27     $ (19 )   $ 95     $ 17  
                                 
Per Common Share:
                               
Net income (loss)—basic
  $ 0.17     $ (0.12 )   $ 0.59     $ 0.10  
Net income (loss)—diluted
  $ 0.17     $ (0.12 )   $ 0.58     $ 0.10  
                                 

 
8

 
Definitions of Non-GAAP Information and
Reconciliation to Comparable GAAP Measures
(See attached tables for 2010 reconciliations; prior-period reconciliations available at www.cinfin.com/investors.)
  
Cincinnati Financial Corporation prepares its public financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP). Statutory data is prepared in accordance with statutory accounting rules as defined by the National Association of Insurance Commissioners’ (NAIC) Accounting Practices and Procedures Manual and therefore is not reconciled to GAAP data.
Management uses certain non-GAAP and non-statutory financial measures to evaluate its primary business areas – property casualty insurance, life insurance and investments. Management uses these measures when analyzing both GAAP and non-GAAP measures to improve its understanding of trends in the underlying business and to help avoid incorrect or misleading assumptions and conclusions about the success or failure of company strategies. Management adjustments to GAAP measures generally: apply to non-recurring events that are unrelated to business performance and distort short-term results; involve values that fluctuate based on events outside of management’s control; or relate to accounting refinements that affect comparability between periods, creating a need to analyze data on the same basis.
·
Operating income: Operating income is calculated by excluding net realized investment gains and losses (defined as realized investment gains and losses after applicable federal and state income taxes) from net income. Management evaluates operating income to measure the success of pricing, rate and underwriting strategies. While realized investment gains (or losses) are integral to the company’s insurance operations over the long term, the determination to realize investment gains or losses in any period may be subject to management’s discretion and is independent of the insurance underwriting process. Also, under applicable GAAP accounting requirements, gains and losses can be recognized from certain changes in market values of securities without actual realization. Management believes that the level of realized investment gains or losses for any particular period, while it may be material, may not fully indicate the performance of ongoing underlying business operations in that period.
For these reasons, many investors and shareholders consider operating income to be one of the more meaningful measures for evaluating insurance company performance. Equity analysts who report on the insurance industry and the company generally focus on this metric in their analyses. The company presents operating income so that all investors have what management believes to be a useful supplement to GAAP information.
·
Statutory accounting rules: For public reporting, insurance companies prepare financial statements in accordance with GAAP. However, insurers also must calculate certain data according to statutory accounting rules as defined in the NAIC’s Accounting Practices and Procedures Manual, which may be, and has been, modified by various state insurance departments. Statutory data is publicly available, and various organizations use it to calculate aggregate industry data, study industry trends and compare insurance companies.
·
Written premium: Under statutory accounting rules, property casualty written premium is the amount recorded for policies issued and recognized on an annualized basis at the effective date of the policy. Management analyzes trends in written premium to assess business efforts. Earned premium, used in both statutory and GAAP accounting, is calculated ratably over the policy term. The difference between written and earned premium is unearned premium.
Balance Sheet Reconciliation
 
                         
(Dollars are per share)
 
Three months ended June 30,
   
Six months ended June 30,
 
 
2010
   
2009
   
2010
   
2009
 
Value creation ratio
                       
End of period book value
  $ 29.13     $ 25.49     $ 29.13     $ 25.49  
Less beginning of period book value
    29.86       23.88       29.25       25.75  
Change in book value
    (0.73 )     1.61       (0.12 )     (0.26 )
Dividend paid to shareholders
    0.395       0.39       0.79       0.78  
Total contribution to value creation ratio
  $ (0.34 )   $ 2.00     $ 0.67     $ 0.52  
                                 
Contribution to value creation ratio from change in book value*
    (2.4 ) %     6.8 %     (0.4 ) %     (1.0 ) %
Contribution to value creation ratio from dividends paid to shareholders**
    1.3       1.6       2.7       3.0  
Value creation ratio
    (1.1 ) %     8.4 %     2.3 %     2.0 %
                                 
               
*    Change in book value divided by the beginning of period book value
 
**   Dividend paid to shareholders divided by beginning of period book value
 

 
9

 
Net Income Reconciliation
         
(In millions except per share data)
Three months ended
     
Six months ended
 
June 30, 2010
     
June 30, 2010
Net income
  $ 27           $ 95  
Net realized investment gains and losses
    (15 )           (10 )
Operating income
    42             105  
Less catastrophe losses
    (64 )           (74 )
Operating income before catastrophe losses
  $ 106           $ 179  
                       
Diluted per share data:
                     
Net income
  $ 0.17           $ 0.58  
Net realized investment gains and losses
    (0.09 )           (0.06 )
Operating income
    0.26             0.64  
Less catastrophe losses
    (0.40 )           (0.45 )
Operating income before catastrophe losses
  $ 0.66           $ 1.09  
                       
                       
Property Casualty Reconciliation
                       
(Dollars in millions)
Three months ended June 30, 2010
 
Consolidated*
Commercial
Personal
Premiums:
                     
Adjusted written premiums - statutory
  $ 753     $ 536     $ 204  
Written premium adjustment
    (4 )     (4 )     0  
Reported written premiums - statutory
    749       532       204  
Unearned premiums change
    (21 )     6       (25 )
Earned premiums
  $ 728     $ 538     $ 179  
                         
Statutory ratio:
                       
Statutory combined ratio
    107.3 %     102.0 %     121.2 %
Contribution from catastrophe losses
    13.6       10.4       23.8  
Statutory combined ratio excluding catastrophe losses
    93.7 %     91.6 %     97.4 %
                         
Commission expense ratio
    17.9 %     17.6 %     18.1 %
Other expense ratio
    13.4       14.1       12.0  
Statutory expense ratio
    31.3 %     31.7 %     30.1 %
                         
GAAP ratio:
                       
GAAP combined ratio
    107.6 %     101.7 %     123.4 %
Contribution from catastrophe losses
    13.6       10.4       23.8  
Prior accident years before catastrophe losses
    (9.3 )     (11.7 )     (3.0 )
GAAP combined ratio excluding catastrophe losses and prior years reserve development
    103.3 %     103.0 %     102.6 %
                         
(Dollars in millions)
Six months ended June 30, 2010
 
Consolidated*
Commercial
Personal
Premiums:
                       
Adjusted written premiums - statutory
  $ 1,489     $ 1,104     $ 359  
Written premium adjustment
    16       16       0  
Reported written premiums - statutory
    1,505       1,120       359  
Unearned premiums change
    (69 )     (59 )     (6 )
Earned premiums
  $ 1,436     $ 1,061     $ 353  
                         
Statutory ratio:
                       
Statutory combined ratio
    104.3 %     100.7 %     113.2 %
Contribution from catastrophe losses
    8.0       6.2       13.6  
Statutory combined ratio excluding catastrophe losses
    96.3 %     94.5 %     99.6 %
                         
Commission expense ratio
    18.1 %     17.4 %     20.0 %
Other expense ratio
    14.6       14.4       15.3  
Statutory expense ratio
    32.7 %     31.8 %     35.3 %
                         
GAAP ratio:
                       
GAAP combined ratio
    105.2 %     101.9 %     113.1 %
Contribution from catastrophe losses
    8.0       6.2       13.6  
Prior accident years before catastrophe losses
    (7.0 )     (8.7 )     (2.7 )
GAAP combined ratio excluding catastrophe losses and prior years reserve development
    104.2 %     104.4 %     102.2 %
                         
  
Dollar amounts shown are rounded to millions; certain amounts may not add due to rounding. Ratios are calculated based on whole dollar amounts.
* Consolidated property casualty data includes results from our surplus line of business.

 
10

 
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Cincinnati Financial Corporation
Supplemental Financial Data
for the period ending June 30, 2010

6200 South Gilmore Road
Fairfield, Ohio 45014-5141
www.cinfin.com

Investor Contact:
Media Contact:
Shareholder Contact:
Dennis E. McDaniel
Joan O. Shevchik
Jerry L. Litton
(513) 870-2768
(513) 603-5323
(513) 870-2639

   
A.M. Best
   
Fitch
   
Moody’s
   
Standard &
Poor’s
 
Cincinnati Financial Corporation
                       
Corporate Debt
 
a
   
BBB+
   
A3
   
BBB
 
                         
The Cincinnati Insurance Companies
                       
Insurer Financial Strength
                       
                         
Property Casualty Group
                       
Standard Market Subsidiaries:
 
A+
   
   
A1
   
A
 
The Cincinnati Insurance Company
 
A+
   
A+
   
A1
   
A
 
The Cincinnati Indemnity Company
 
A+
   
A+
   
A1
   
A
 
The Cincinnati Casualty Company
 
A+
   
A+
   
A1
   
A
 
Surplus Lines Subsidiary:
                       
The Cincinnati Specialty Underwriters Insurance Company
 
A
   
   
   
 
               
 
       
The Cincinnati Life Insurance Company
 
A
   
A+
   
   
A
 
 
Ratings are as of July 28, 2010, under continuous review and subject to change and/or affirmation. For the current ratings, select Financial Strength Ratings on www.cinfin.com.
 
The consolidated financial statements and financial exhibits that follow are unaudited. These consolidated financial statements and exhibits should be read in conjunction with the consolidated financial statements and notes included our periodic filings with the U.S. Securities and Exchange Commission. The results of operations for interim periods may not be indicative of results to be expected for the full year.

 
 

 

Cincinnati Financial Corporation
Supplemental Financial Data
Second Quarter 2010

   
Page
 
Definitions of Non-GAAP Information and Reconciliation to Comparable GAAP Measures
3
     
Consolidated
 
 
Quick Reference
4
 
CFC and Subsidiaries Consolidation – Six Months Ended June 30, 2010
5
 
CFC and Subsidiaries Consolidation – Three Months Ended June 30, 2010
6
 
CFC Insurance Subsidiaries – Selected Balance Sheet Data
7
     
Consolidated Property Casualty Insurance Operations
 
   (Includes Cincinnati Specialty Underwriters Insurance Company (CSU))
 
 
Statutory Statements of Income
8
 
Cincinnati Insurance Companies – Losses Incurred Detail
9
 
Cincinnati Insurance Companies – Loss Ratio Detail
10
 
Cincinnati Insurance Companies – Loss Claim Count Detail
11
 
Direct Written Premiums by Line of Business and State
12
 
Quarterly Property Casualty Data – Commercial Lines of Business
13
 
Quarterly Property Casualty Data – Personal Lines of Business
14
 
Loss and Loss Expense Analysis
15
     
Reconciliation Data
 
 
Quarterly Property Casualty Data – Consolidated
16
 
Quarterly Property Casualty Data – Commercial Lines
17
 
Quarterly Property Casualty Data – Personal Lines
18
     
Life Insurance Operations
 
 
Statutory Statements of Income
19

 
 

 
 
Definitions of Non-GAAP Information and
Reconciliation to Comparable GAAP Measures
 
Cincinnati Financial Corporation prepares its public financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP). Statutory data is prepared in accordance with statutory accounting rules as defined by the National Association of Insurance Commissioners’ (NAIC) Accounting Practices and Procedures Manual and therefore is not reconciled to GAAP data.
 
Management uses certain non-GAAP and non-statutory financial measures to evaluate its primary business areas – property casualty insurance, life insurance and investments. Management uses these measures when analyzing both GAAP and non-GAAP measures to improve its understanding of trends in the underlying business and to help avoid incorrect or misleading assumptions and conclusions about the success or failure of company strategies. Management adjustments to GAAP measures generally: apply to non-recurring events that are unrelated to business performance and distort short-term results; involve values that fluctuate based on events outside of management’s control; or relate to accounting refinements that affect comparability between periods, creating a need to analyze data on the same basis.
 
·  
Operating income: Operating income is calculated by excluding net realized investment gains and losses (defined as realized investment gains and losses after applicable federal and state income taxes) from net income. Management evaluates operating income to measure the success of pricing, rate and underwriting strategies. While realized investment gains (or losses) are integral to the company’s insurance operations over the long term, the determination to realize investment gains or losses in any period may be subject to management’s discretion and is independent of the insurance underwriting process. Also, under applicable GAAP accounting requirements, gains and losses can be recognized from certain changes in market values of securities without actual realization. Management believes that the level of realized investment gains or losses for any particular period, while it may be material, may not fully indicate the performance of ongoing underlying business operations in that period.
For these reasons, many investors and shareholders consider operating income to be one of the more meaningful measures for evaluating insurance company performance. Equity analysts who report on the insurance industry and the company generally focus on this metric in their analyses. The company presents operating income so that all investors have what management believes to be a useful supplement to GAAP information.
·  
Statutory accounting rules: For public reporting, insurance companies prepare financial statements in accordance with GAAP. However, insurers also must calculate certain data according to statutory accounting rules as defined in the NAIC’s Accounting Practices and Procedures Manual, which may be, and has been, modified by various state insurance departments. Statutory data is publicly available, and various organizations use it to calculate aggregate industry data, study industry trends and compare insurance companies.
·  
Written premium: Under statutory accounting rules, property casualty written premium is the amount recorded for policies issued and recognized on an annualized basis at the effective date of the policy. Management analyzes trends in written premium to assess business efforts. Earned premium, used in both statutory and GAAP accounting, is calculated ratably over the policy term. The difference between written and earned premium is unearned premium.
 
 
3

 

Cincinnati Financial Corporation
Quick Reference - Second Quarter 2010
(all data shown is for the three months ended or as of June 30, 2010)

   
6/30/2010
   
Year over year 
change %
      
6/30/2010
   
Year over year 
change %
 
Revenues:
           
Benefits and expenses:
           
                           
Commercial lines net written premiums
  $ 532       2  
Commercial lines loss and loss expenses
  $ 378     (14 )
Personal lines net written premiums
    204       7  
Personal lines loss and loss expenses
    163     (6 )
Surplus lines net written premiums
    13       31  
Surplus lines loss and loss expenses
    12     200  
Property casualty net written premiums
    749       4  
Life and accident and health losses and policy benefits
    43     10  
Life and accident and health net written premiums
    44       3  
Underwriting, acquisition and insurance expenses
    246    
nm
 
Annuity net written premiums
    51       70  
Other operating expenses
    3     (30 )
Life, annuity and accident and health net written premiums
    95       31  
Interest expenses
    13     (3 )
Commercial lines net earned premiums
    538       (3 )
Total expenses
    857     (7 )
Personal lines net earned premiums
    179       4  
Net income before income taxes
    21    
nm
 
Surplus lines net earned premiums
    11       120  
Total income tax
    (6 )   81  
Property casualty net earned premiums
    728       (1 )                
Life and accident and health net earned premiums
    40       8  
Balance Sheet:
             
Investment income
    130       9                  
Realized gains on investments
    (23 )     (28 )
Fixed maturity investments
  $ 8,339        
Other income
    3    
nm
 
Equity securities
    2,611        
Total revenues
    878    
0
 
Short-term investments
    -        
                 
Other invested assets
    82        
Income:
               
  Total invested assets
  $ 11,032        
                                 
                 
Equity in net assets of subsidiaries
  $ 4,467        
                                 
Operating income
  $ 42    
nm
 
Loss and loss expense reserves
  $ 4,184        
Net realized investment gains and losses
    (15 )     (7 )
Total debt
    839        
Net income
    27    
nm
 
Shareholders' equity
    4,737        
                                 
Per share (diluted):
               
Key ratios:
             
                                 
Operating income
  $ 0.26    
nm
 
Commercial lines GAAP combined ratio
    101.7 %      
Net realized investment gains and losses
    (0.09 )  
nm
 
Personal lines GAAP combined ratio
    123.4        
Net income
    0.17    
nm
 
Property casualty GAAP combined ratio
    107.6        
Book value
    29.13       14                  
Weighted average shares – diluted
    163,284,013    
nm
 
Commercial lines STAT combined ratio
    102.0 %      
                 
Personal lines STAT combined ratio
    121.2        
                 
Property casualty STAT combined ratio
    107.3        
                                 
                 
Value creation ratio
    (1.1 ) %      
 
4

 

Consolidated Statements of Income for the Six Months Ended June 30, 2010

(In millions)
 
CFC
   
CONSOL P&C
   
CLIC
   
CFC-I
   
CINFIN
   
C-SUPR
   
ELIM
   
Total
 
Revenues:
                                               
Premiums earned:
                                               
Property casualty
  $ -     $ 1,518     $ -     $ -     $ -     $ -     $ -     $ 1,518  
Life
    -       -       100       -       -       -       -       100  
Accident health
    -       -       4       -       -       -       -       4  
Premiums ceded
    -       (82 )     (25 )     -       -       -       -       (107 )
Total earned premium
    -       1,436       79       -       -       -       -       1,515  
Investment income
    21       174       65       -       -       -       -       260  
Realized gain on investments
    1       (13 )     (2 )     (1 )     -       -       -       (15 )
Other income
    7       2       -       4       -       7       (15 )     5  
Total revenues
  $ 29     $ 1,599     $ 142     $ 3     $ -     $ 7     $ (15 )   $ 1,765  
                                                                 
Benefits & expenses:
                                                               
Losses & policy benefits
  $ -     $ 984     $ 115     $ -     $ -     $ -     $ (3 )   $ 1,096  
Reinsurance recoveries
    -       44       (29 )     -       -       -       -       15  
Underwriting, acquisition and insurance expenses
    -       482       32       -       -       -       -       514  
Other operating expenses
    12       -       -       2       -       6       (13 )     7  
Interest expense
    26       -       -       1       -       -       -       27  
Total expenses
  $ 38     $ 1,510     $ 118     $ 3     $ -     $ 6     $ (16 )   $ 1,659  
                                                                 
Income (loss) before income taxes
  $ (9 )   $ 89     $ 24     $ -     $ -     $ 1     $ 1     $ 106  
                                                                 
Provision (benefit) for income taxes:
                                                               
Current operating income
  $ 3     $ 28     $ (2 )   $ 1     $ -     $ -     $ -     $ 30  
Capital gains/losses
    -       (4 )     (1 )     -       -       -       -       (5 )
Deferred
    (9 )     (16 )     11       -       -       -       -       (14 )
Total provision for income taxes
  $ (6 )   $ 8     $ 8     $ 1     $ -     $ -     $ -     $ 11  
                                                                 
Operating income (loss)
  $ (4 )   $ 90     $ 17     $ -     $ -     $ 1     $ 1     $ 105  
                                                                 
Net income (loss) - current year
  $ (3 )   $ 81     $ 16     $ (1 )   $ -     $ 1     $ 1     $ 95  
                                                                 
Net income (loss) - prior year
  $ 40     $ (18 )   $ (4 )   $ -     $ (1 )   $ -     $ -     $ 17  
*Dollar amounts shown are rounded to millions; certain amounts may not add due to rounding. Ratios are calculated based on whole dollar amounts.
 
 
5

 

Cincinnati Financial Corporation and Subsidiaries
Consolidated Statements of Income for the Three Months Ended June 30, 2010

(In millions)
 
CFC
   
CONSOL P&C
   
CLIC
   
CFC-I
   
CINFIN
   
C-SUPR
   
ELIM
   
Total
 
Revenues:
                                               
Premiums earned:
                                               
Property casualty
  $ -     $ 771     $ -     $ -     $ -     $ -     $ -     $ 771  
Life
    -       -       52       -       -       -       -       52  
Accident health
    -       -       2       -       -       -       -       2  
Premiums ceded
    -       (43 )     (14 )     -       -       -       -       (57 )
Total earned premium
    -       728       40       -       -       -       -       768  
Investment income
    10       87       33       -       -       -       -       130  
Realized gain (loss) on investments
    (6 )     (17 )     -       -       -       -       -       (23 )
Other income
    3       1       1       2       -       4       (8 )     3  
Total revenues
  $ 7     $ 799     $ 74     $ 2     $ -     $ 4     $ (8 )   $ 878  
                                                                 
Benefits & expenses:
                                                               
Losses & policy benefits
  $ -     $ 533     $ 57     $ -     $ -     $ -     $ (2 )   $ 588  
Reinsurance recoveries
    -       21       (14 )     -       -       -       -       7  
Underwriting, acquisition and insurance expenses
    -       229       16       1       -       -       -       246  
Other operating expenses
    5       -       -       -       -       4       (6 )     3  
Interest expense
    13       -       -       -       -       -       -       13  
Total expenses
  $ 18     $ 783     $ 59     $ 1     $ -     $ 4     $ (8 )   $ 857  
                                                                 
Income before income taxes
  $ (11 )   $ 17     $ 14     $ 1     $ -     $ -     $ -     $ 21  
                                                                 
Provision (benefit) for income taxes:
                                                               
Current operating income
  $ 5     $ 11     $ 1     $ 1     $ -     $ -     $ -     $ 18  
Capital gains/losses
    (2 )     (6 )     -       -       -       -       -       (8 )
Deferred
    (8 )     (12 )     4       -       -       -       -       (16 )
Total provision (benefit) for income taxes
  $ (5 )   $ (7 )   $ 5     $ 1     $ -     $ -     $ -     $ (6 )
                                                                 
Operating income (loss)
  $ (2 )   $ 35     $ 9     $ -     $ -     $ -     $ -     $ 42  
                                                                 
Net income - current year
  $ (6 )   $ 24     $ 9     $ -     $ -     $ -     $ -     $ 27  
                                                                 
Net income (loss)- prior year
  $ (10 )   $ (14 )   $ 5     $ -     $ -     $ -     $ -     $ (19 )

 *Dollar amounts shown are rounded to millions; certain amounts may not add due to rounding. Ratios are calculated based on whole dollar amounts.
 
 
6

 

Cincinnati Financial Corporation Insurance Subsidiaries
Selected Balance Sheet Data


(In millions)
 
12/31/2010
   
9/30/2010
   
6/30/2010
   
3/31/2010
   
12/31/2009
   
9/30/2009
   
6/30/2009
   
3/31/2009
 
Cincinnati Insurance Consolidated (including CSU)
                                               
Fixed maturities (fair value)
              $ 5,804     $ 5,759     $ 5,663     $ 5,521     $ 5,169     $ 4,804  
Equities (fair value)
                1,862       2,013       1,910       2,477       2,247       1,986  
Short-term investments (fair value)
                -       -       5       10       11       13  
Fixed maturities - pretax net unrealized gain (loss)
                363       287       242       301       25       (36 )
Equities - pretax net unrealized gain
                457       635       592       594       487       347  
Loss and loss expense reserves - STAT
                3,781       3,689       3,639       3,656       3,674       3,555  
Equity GAAP
                4,429       4,506       4,405       4,283       3,795       3,512  
Surplus - STAT
                3,537       3,692       3,648       3,472       3,241       3,105  
                                                             
The Cincinnati Life Insurance Company
                                                           
Fixed maturities (fair value)
              $ 2,259     $ 2,055     $ 1,927     $ 1,868     $ 1,694     $ 1,534  
Equities (fair value)
                100       114       108       123       103       89  
Short-term investments (fair value)
                -       -       -       1       1       -  
Fixed maturities - pretax net unrealized gain (loss)
                156       110       72       67       (43 )     (94 )
Equities - pretax net unrealized gain (loss)
                (7 )     7       1       11       (8 )     (27 )
Equity - GAAP
                729       700       666       653       563       454  
Surplus - STAT
                307       310       300       283       270       254  
                                                             
   
12/31/2008
   
9/30/2008
   
6/30/2008
   
3/31/2008
   
12/31/2007
   
9/30/2007
   
6/30/2007
   
3/31/2007
 
Cincinnati Insurance Consolidated (including CSU)
                                                           
Fixed maturities (fair value)
  $ 4,309     $ 4,183     $ 4,304     $ 4,351     $ 4,295     $ 4,366     $ 4,367     $ 4,362  
Equities (fair value)
    2,432       3,210       3,537       4,226       4,595       5,201       5,411       5,472  
Short-term investments (fair value)
    19       162       -       51       50       19       72       3  
Fixed maturities - pretax net unrealized gain (loss)
    (108 )     (132 )     (33 )     39       58       23       (30 )     44  
Equities - pretax net unrealized gain
    627       1,012       1,227       1,831       2,077       2,657       2,917       3,017  
Loss and loss expense reserves - STAT
    3,494       3,507       3,534       3,448       3,398       3,461       3,374       3,373  
Equity GAAP
    3,667       3,947       4,011       4,498       4,784       5,282       5,404       5,272  
Surplus - STAT
    3,360       3,687       3,650       4,027       4,307       4,782       4,937       4,741  
                                                                 
The Cincinnati Life Insurance Company
                                                               
Fixed maturities (fair value)
  $ 1,467     $ 1,483     $ 1,551     $ 1,534     $ 1,465     $ 1,475     $ 1,415     $ 1,384  
Equities (fair value)
    122       200       265       307       371       459       478       539  
Short-term investments (fair value)
    -       -       -       -       51       18       29       16  
Fixed maturities - pretax net unrealized gain (loss)
    (115 )     (79 )     (35 )     -       6       4       (4 )     20  
Equities - pretax net unrealized gain
    (7 )     61       92       127       162       225       254       305  
Equity - GAAP
    471       530       617       661       685       724       730       739  
Surplus - STAT
    290       371       420       453       477       485       491       483  
 
7

 
 
Consolidated Cincinnati Insurance Companies
Statutory Statements of Income

   
For the Three Months Ended June 30,
   
For the Six Months Ended June 30,
 
(Dollars in millions)
 
2010
   
2009
   
Change
   
% Change
   
2010
   
2009
   
Change
   
% Change
 
Underwriting income                                                 
Net premiums written
  $ 750     $ 723     $ 27       4     $ 1,505     $ 1,501     $ 4       0  
Unearned premiums increase
    22       (10 )     32    
nm
      69       36       33       92  
Earned premiums
  $ 728     $ 733     $ (5 )     (1 )   $ 1,436     $ 1,465     $ (29 )     (2 )
                                                                 
Losses incurred
  $ 475     $ 524     $ (49 )     (9 )   $ 859     $ 982     $ (123 )     (13 )
Allocated loss expenses incurred
    41       49       (8 )     (16 )     84       85       (1 )     (1 )
Unallocated loss expenses incurred
    38       46       (8 )     (17 )     85       96       (11 )     (11 )
Other underwriting expenses incurred
    231       226       5       2       485       462       23       5  
Workers compensation dividend incurred
    3       6       (3 )     (50 )     7       10       (3 )     (30 )
                                                                 
Total underwriting deductions
  $ 788     $ 851     $ (63 )  
nm
    $ 1,520     $ 1,635     $ (115 )     (7 )
Net underwriting losses
  $ (60 )   $ (118 )   $ 58       49     $ (84 )   $ (170 )   $ 86       51  
                                                                 
Investment income
                                                               
Gross investment income earned
  $ 90     $ 81     $ 9       11     $ 180     $ 167     $ 13       8  
Net investment income earned
    88       80       8       10       177       165       12       7  
Net realized capital gains (losses)
    (8 )     (6 )     (2 )     (33 )     (6 )     (39 )     33       85  
Net investment gains (excl. subs)
  $ 80     $ 74     $ 6       8     $ 171     $ 126     $ 45       36  
Dividend from subsidiary
    -       -       -    
nm
      -       -       -    
nm
 
Net investment gains (net of tax)
  $ 80     $ 74     $ 6       8     $ 171     $ 126     $ 45       36  
                                                                 
Other income
  $ 1     $ 1     $ -    
nm
    $ 2     $ 2     $ -    
nm
 
                                                                 
Net income before federal income taxes
  $ 21     $ (43 )   $ 64    
nm
    $ 89     $ (42 )   $ 131    
nm
 
Federal and foreign income taxes incurred
  $ 9     $ (29 )   $ 38    
nm
    $ 26     $ (30 )   $ 56    
nm
 
Net income (statutory)
  $ 12     $ (14 )   $ 26    
nm
    $ 63     $ (12 )   $ 75    
nm
 
 
*
Dollar amounts shown are rounded to millions; certain amounts may not add due to rounding. Ratios are calculated based on whole dollar amounts.
*
Statutory data prepared in accordance with statutory accounting rules as defined by the National Association of Insurance Commissioners and filed with the appropriate regulatory bodies.
 
 
8

 


Cincinnati Insurance Companies
Losses Incurred Detail

(In millions)
 
Three months ended
   
Six months ended
   
Nine months ended
   
Twelve months ended
 
   
12/31/10
   
9/30/10
   
6/30/10
   
3/31/10
   
12/31/09
   
9/30/09
   
6/30/09
   
3/31/09
   
6/30/10
   
6/30/09
   
9/30/10
   
9/30/09
   
12/31/10
   
12/31/09
 
Consolidated Loss Detail                                                                                    
New losses greater than $4,000,000
                  $ 11     $ 6     $ 9     $ 18     $ 21     $ 9     $ 17     $ 30             $ 48             $ 57  
New losses $1,000,000-$4,000,000
                    30       35       37       43       39       28       64       67               110               147  
New losses $250,000-$1,000,000
                    52       52       48       55       47       62       104       109               164               212  
Case reserve development above $250,000
                    30       37       89       51       70       56       68       125               177               265  
Large losses subtotal
                  $ 123     $ 130     $ 183     $ 167     $ 177     $ 155     $ 253     $ 331             $ 499             $ 681  
IBNR incurred
                    11       12       19       12       39       18       23       58               69               89  
Catastrophe losses incurred
                    99       15       (12 )     7       118       53       114       171               177               165  
Remaining incurred
                    241       228       166       182       191       232       468       422               605               771  
Total losses incurred
                  $ 474     $ 385     $ 356     $ 368     $ 525     $ 458     $ 858     $ 982             $ 1,350             $ 1,706  
Commercial Loss Detail
                                                                                                               
New losses greater than $4,000,000
                  $ 11     $ 6     $ 9     $ 13     $ 21     $ 9     $ 17     $ 30             $ 43             $ 52  
New losses $1,000,000-$4,000,000
                    22       32       34       33       36       26       54       62               96               130  
New losses $250,000-$1,000,000
                    40       40       35       43       39       47       80       86               129               164  
Case reserve development above $250,000
                    29       32       83       49       63       51       61       114               163               245  
Large losses subtotal
                  $ 102     $ 110     $ 161     $ 138     $ 159     $ 133     $ 212     $ 292             $ 431             $ 591  
IBNR incurred
                    7       9       28       11       37       18       17       56               67               95  
Catastrophe losses incurred
                    57       10       (10 )     (7 )     57       14       66       71               64               54  
Remaining incurred
                    152       152       88       113       113       156       304       268               382               470  
Total losses incurred
                  $ 318     $ 281     $ 267     $ 255     $ 366     $ 321     $ 599     $ 687             $ 944             $ 1,210  
Personal Loss Detail
                                                                                                               
New losses greater than $4,000,000
                  $ -     $ -     $ -     $ 5     $ -     $ -     $ -     $ -             $ 5             $ 5  
New losses $1,000,000-$4,000,000
                    7       3       3       10       3       2       10       5               14               17  
New losses $250,000-$1,000,000
                    10       10       13       12       8       15       20       23               35               48  
Case reserve development above $250,000
                    1       3       5       2       7       5       4       11               14               19  
Large losses subtotal
                  $ 18     $ 16     $ 21     $ 29     $ 18     $ 22     $ 34     $ 39             $ 68             $ 89  
IBNR incurred
                    2       1       (10 )     -       -       (1 )     2       (1 )             (1 )             (11 )
Catastrophe losses incurred
                    43       5       (2 )     14       61       39       48       100               113               111  
Remaining incurred
                    83       75       76       65       76       75       159       151               216               292  
Total losses incurred
                  $ 146     $ 97     $ 85     $ 108     $ 155     $ 135     $ 243     $ 289             $ 396             $ 481  
Excess & Surplus Loss Detail
                                                                                                               
New losses greater than $4,000,000
                  $ -     $ -     $ -     $ -     $ -     $ -     $ -     $ -             $ -             $ -  
New losses $1,000,000-$4,000,000
                    -       -       -       -       -       -       -       -               -               -  
New losses $250,000-$1,000,000
                    3       2       -       -       -       -       5       -               -               -  
Case reserve development above $250,000
                    -       2       1       -       -       -       2       -               -               1  
Large losses subtotal
                  $ 3     $ 4     $ 1     $ -     $ -     $ -     $ 7     $ -             $ -             $ 1  
IBNR incurred
                    2       2       1       1       2       1       5       3               3               5  
Catastrophe losses incurred
                    -       -       -       -       -       -       -       -               -               -  
Remaining incurred
                    4       1       2       4       2       1       4       3               7               9  
Total losses incurred
                  $ 9     $ 7     $ 4     $ 5     $ 4     $ 2     $ 16     $ 6             $ 10             $ 15  
 
*
Dollar amounts shown are rounded to millions; certain amounts may not add due to rounding. The sum of quarterly amounts may not equal the full year as each is computed independently.
*
Statutory data prepared in accordance with statutory accounting rules as defined by the National Association of Insurance Commissioners and filed with the appropriate regulatory bodies.
 
 
9

 

Cincinnati Insurance Companies
Loss Ratio Detail
 
   
Three months ended
   
Six months ended
   
Nine months ended
   
Twelve months ended
 
   
12/31/10
   
9/30/10
   
6/30/10
   
3/31/10
   
12/31/09
   
9/30/09
   
6/30/09
   
3/31/09
   
6/30/10
   
6/30/09
   
9/30/10
   
9/30/09
   
12/31/10
   
12/31/09
 
Consolidated Loss Ratio                                                                                     
New losses greater than $4,000,000
                    1.5 %     0.8 %     1.3 %     2.5 %     2.8 %     1.3 %     1.2 %     2.0 %             2.2 %             2.0 %
New losses $1,000,000-$4,000,000
                    4.0       4.9       5.2       5.9       5.3       3.8       4.6       4.5               5.0               5.1  
New losses $250,000-$1,000,000
                    7.2       7.4       6.7       7.5       6.4       8.4       7.2       7.5               7.4               7.3  
Case reserve development above $250,000
                    4.2       5.3       12.4       7.0       9.6       7.6       4.7       8.5               8.0               9.0  
Large losses subtotal
                    16.9 %     18.4 %     25.6 %     22.9 %     24.1 %     21.1 %     17.7 %     22.5 %             22.6 %             23.4 %
IBNR incurred
                    1.6       1.7       2.7       1.7       5.3       2.5       1.6       3.9               3.2               3.0  
Total catastrophe losses incurred
                    13.6       2.1       (1.7 )     0.9       16.1       7.2       7.9       11.6               8.1               5.7  
Remaining incurred
                    33.0       32.1       23.3       24.7       26.1       31.7       32.6       29.0               27.5               26.5  
Total loss ratio
                    65.1 %     54.3 %     49.9 %     50.2 %     71.6 %     62.5 %     59.8 %     67.0 %             61.4 %             58.6 %
Commercial Loss Ratio
                                                                                                               
New losses greater than $4,000,000
                    2.0 %     1.1 %     1.7 %     2.4 %     3.7 %     1.7 %     1.6 %     2.7 %             2.6 %             2.4 %
New losses $1,000,000-$4,000,000
                    4.1       6.1       6.4       6.1       6.5       4.7       5.1       5.6               5.8               5.9  
New losses $250,000-$1,000,000
                    7.4       7.7       6.5       7.8       7.0       8.4       7.5       7.7               7.8               7.5  
Case reserve development above $250,000
                    5.4       6.2       15.5       8.8       11.4       9.1       5.8       10.3               9.8               11.1  
Large losses subtotal
                    18.9 %     21.1 %     30.1 %     25.1 %     28.6 %     23.9 %     20.0 %     26.3 %             26.0 %             26.9 %
IBNR incurred
                    1.3       1.8       5.3       2.0       6.7       3.3       1.6       5.0               4.0               4.3  
Total catastrophe losses incurred
                    10.5       1.8       (1.8 )     (1.2 )     10.3       2.5       6.2       6.4               3.8               2.5  
Remaining incurred
                    28.3       29.0       16.6       20.3       20.4       27.9       28.6       24.1               22.9               21.4  
Total loss ratio
                    59.0 %     53.7 %     50.2 %     46.2 %     66.0 %     57.6 %     56.4 %     61.8 %             56.7 %             55.1 %
Personal Loss Ratio
                                                                                                               
New losses greater than $4,000,000
                    0.0 %     0.0 %     0.0 %     2.9 %     0.0 %     0.0 %     0.0 %     0.0 %             1.0 %             0.7 %
New losses $1,000,000-$4,000,000
                    4.4       1.5       1.6       5.7       1.9       0.8       3.0       1.4               2.8               2.5  
New losses $250,000-$1,000,000
                    5.6       5.5       7.5       7.0       4.8       8.6       5.6       6.7               6.7               6.9  
Case reserve development above $250,000
                    0.6       1.9       3.2       1.3       3.7       3.0       1.2       3.3               2.7               2.9  
Large losses subtotal
                    10.6 %     8.9 %     12.3 %     16.9 %     10.4 %     12.4 %     9.8 %     11.4 %             13.2 %             13.0 %
IBNR incurred
                    0.9       0.3       (5.7 )     (0.2 )     0.1       (0.6 )     0.6       (0.3 )             (0.3 )             (1.6 )
Total catastrophe losses incurred
                    23.8       3.0       (1.4 )     7.9       35.4       22.6       13.5       29.0               22.0               16.1  
Remaining incurred
                    47.1       43.1       44.2       38.5       44.2       43.9       45.1       44.1               42.2               42.7  
Total loss ratio
                    82.4 %     55.3 %     49.4 %     63.1 %     90.1 %     78.3 %     69.0 %     84.2 %             77.1 %             70.2 %
Excess & Surplus Loss Ratio
                                                                                                               
New losses greater than $4,000,000
                    0.0 %     0.0 %     0.0 %     0.0 %     0.0 %     0.0 %     0.0 %     0.0 %             0.0 %             0.0 %
New losses $1,000,000-$4,000,000
                    0.0       0.0       0.0       0.0       0.0       0.0       0.0       0.0               0.0               0.0  
New losses $250,000-$1,000,000
                    22.8       16.9       4.4       0.0       0.0       0.0       19.9       0.0               0.0               1.5  
Case reserve development above $250,000
                    2.7       20.7       5.5       0.0       0.0       0.0       11.6       0.0               0.0               1.9  
Large losses subtotal
                    25.5 %     37.6 %     9.9 %     0.0 %     0.0 %     0.0 %     31.5 %     0.0 %             0.0 %             3.4 %
IBNR incurred
                    23.5       18.4       11.4       5.6       26.7       22.4       23.7       24.9               16.5               14.8  
Total catastrophe losses incurred
                    0.0       0.0       0.0       0.0       0.0       0.0       0.0       0.0               0.0               0.0  
Remaining incurred
                    32.5       9.4       21.1       46.7       32.8       29.1       18.3       31.3               38.0               32.3  
Total loss ratio
                    81.5 %     65.4 %     42.4 %     52.3 %     59.5 %     51.5 %     73.5 %     56.2 %             54.5 %             50.5 %
 
*
Certain amounts may not add due to rounding. Ratios are calculated based on whole dollar amounts.
*
Statutory data prepared in accordance with statutory accounting rules as defined by the National Association of Insurance Commissioners and filed with the appropriate regulatory bodies.
 
 
10

 

Cincinnati Insurance Companies
Loss Claim Count Detail

   
Three months ended
   
Six months ended
   
Nine months ended
   
Twelve months ended
 
   
12/31/10
   
9/30/10
   
6/30/10
   
3/31/10
   
12/31/09
   
9/30/09
   
6/30/09
   
3/31/09
   
6/30/10
   
6/30/09
   
9/30/10
   
9/30/09
   
12/31/10
   
12/31/09
 
Consolidated Loss Claim Count                                                                                     
New losses greater than $4,000,000
                2       1       2       4       4       2       3       6             10             12  
New losses $1,000,000-$4,000,000
                18       19       19       26       22       16       37       38             64             83  
New losses $250,000-$1,000,000
                117       123       107       130       114       149       240       263             393             500  
Case reserve development above $250,000
                73       77       122       81       108       89       150       197             278             400  
Large losses total
                210       220       250       241       248       256       430       504             745             995  
Commercial Loss Claim Count
                                                                                                       
New losses greater than $4,000,000
                2       1       2       3       4       2       3       6             9             11  
New losses $1,000,000-$4,000,000
                12       17       17       20       19       15       29       34             54             71  
New losses $250,000-$1,000,000
                88       95       77       101       92       112       183       204             305             382  
Case reserve development above $250,000
                70       67       108       74       93       77       137       170             244             352  
Large losses total
                172       180       204       198       208       206       352       414             612             816  
Personal Loss Claim Count
                                                                                                       
New losses greater than $4,000,000
                -       -       -       1       -       -       -       -             1             1  
New losses $1,000,000-$4,000,000
                6       2       2       6       3       1       8       4             10             12  
New losses $250,000-$1,000,000
                24       24       29       29       22       37       48       59             88             117  
Case reserve development above $250,000
                2       5       13       7       15       12       7       27             34             47  
Large losses total
                32       31       44       43       40       50       63       90             133             177  
Excess & Surplus Loss Claim Count
                                                                                                       
New losses greater than $4,000,000
                -       -       -       -       -       -       -       -             -             -  
New losses $1,000,000-$4,000,000
                -       -       -       -       -       -       -       -             -             -  
New losses $250,000-$1,000,000
                5       4       1       -       -       -       9       -             -             1  
Case reserve development above $250,000
                1       5       1       -       -       -       6       -             -             1  
Large losses total
                6       9       2       -       -       -       15       -             -             2  
 
The sum of quarterly amounts may not equal the full year as each is computed independently.
*
Statutory data prepared in accordance with statutory accounting rules as defined by the National Association of Insurance Commissioners and filed with the appropriate regulatory bodies.
 
 
11

 
 
Consolidated Cincinnati Insurance Companies
 Agency Direct Written Premiums by Risk State by Line of Business for the Six Months Ended June 30, 2010
 
(Dollars in millions)
 
Standard Market
   
Surplus Lines
         
Standard Market
   
*Consolidated
 
   
Commercial Lines
   
Personal Lines
   
Commercial
   
Consolidated
   
Commercial
   
Personal
   
Total
 
   
Comm
Casualty
 
Comm
 
Comm
   
Workers'
   
Specialty
   
Surety &
   
Mach. &
   
Pers
   
Home
   
Other
   
Casualty
   
2010
   
2009
   
Change
   
Change
   
Change
 
 Risk State
Prop
 
Auto
   
Comp
   
Packages
   
Exec Risk
   
Equip
   
Auto
   
Owner
   
Personal
   
& Prop
   
Total
   
Total
   
%
   
%
   
%
 
                                                                                             
 AL
  $ 8.6   $ 9.3   $ 3.7     $ 0.3     $ 4.4     $ 1.0     $ 0.5     $ 8.1     $ 12.3     $ 2.8     $ 0.9     $ 51.7     $ 51.1       0.7       (0.2 )     1.3  
 AZ
    4.9     3.6     4.4       0.8       0.4       0.4       0.4       0.6       0.5       0.2       0.5       16.7       16.5       (3.7 )     60.0       1.3  
 AR
    4.1     5.5     3.2       1.8       2.3       0.7       0.3       1.6       1.7       0.6       0.5       22.2       21.9       (2.2 )     13.5       1.2  
 CO
    1.5     1.9     0.9       0.2       -       0.2       0.1       -       0.1       -       0.3       5.1       0.7       592.7       10.0       558.4  
 DE
    1.1     0.9     0.9       1.5       0.2       0.1       0.1       -       -       -       -       4.6       3.1       47.1    
nm
      47.2  
 FL
    11.1     11.4     4.6       0.5       1.0       1.3       0.5       4.9       7.0       1.4       0.9       44.6       48.1       (5.1 )     (17.6 )     (7.4 )
 GA
    12.7     10.7     9.2       6.6       4.0       3.0       0.6       15.8       14.4       4.3       2.0       83.2       83.3       (4.3 )     4.5       (0.1 )
 ID
    3.8     2.4     2.8       -       0.5       0.5       0.1       0.5       0.3       0.1       0.2       11.3       11.0       (5.9 )     594.3       2.4  
 IL
    29.6     21.5     14.8       26.2       6.0       3.5       1.5       13.1       10.0       3.5       2.2       132.0       135.4       (5.5 )     9.7       (2.4 )
 IN
    20.9     18.3     11.2       12.1       4.0       3.2       1.3       13.7       12.7       3.6       3.0       104.1       108.1       (8.1 )     6.2       (3.6 )
 IA
    9.9     6.7     4.9       10.5       2.2       1.5       0.6       1.8       1.8       0.9       0.5       41.4       44.0       (8.5 )     8.4       (6.1 )
 KS
    4.1     4.5     2.4       4.5       1.7       0.8       0.3       2.2       2.8       0.6       0.3       24.1       23.2       2.0       8.9       4.0  
 KY
    10.6     10.9     6.8       1.7       2.9       1.5       0.5       11.1       8.3       2.4       1.1       57.9       56.2       (2.2 )     10.6       3.0  
 MD
    6.4     3.6     5.0       4.2       0.7       0.9       0.2       0.3       0.9       0.3       0.6       23.2       23.2       (2.7 )     23.1       (0.1 )
 MI
    14.5     10.7     6.9       7.5       5.4       3.1       0.9       6.3       6.8       1.6       1.4       65.3       65.6       (3.6 )     7.7       (0.5 )
 MN
    10.3     8.4     4.5       3.9       1.8       1.1       0.6       3.6       3.2       1.6       0.8       39.7       39.5       (2.5 )     9.8       0.4  
 MO
    10.6     9.9     6.1       6.1       3.0       1.4       0.6       1.9       2.5       0.6       1.2       43.8       44.9       (6.4 )     21.4       (2.4 )
 MT
    6.0     3.5     3.4       0.1       0.6       0.3       0.2       0.7       0.6       0.1       0.2       15.7       16.5       (8.3 )     47.9       (4.8 )
 NE
    3.4     3.1     2.1       3.4       0.8       0.6       0.2       0.3       0.4       0.2       0.3       14.7       14.5       0.7       (9.7 )     1.4  
 NH
    1.7     1.0     0.6       1.3       0.5       0.2       0.1       0.4       0.4       0.2       0.3       6.6       5.8       12.1       11.1       14.2  
 NM
    1.3     0.5     0.8       0.3       0.1       0.3       -       -       -       -       0.2       3.5       3.3       0.7    
nm
      5.6  
 NY
    16.7     5.3     6.1       1.2       0.8       1.6       0.4       -       -       -       0.4       32.5       32.5       (0.7 )  
nm
      (0.1 )
 NC
    15.2     13.4     9.9       10.3       7.0       3.8       0.9       4.9       3.9       2.0       1.0       72.3       71.0       (6.6 )     99.5       2.0  
 ND
    2.8     1.6     1.3       -       0.4       0.4       0.1       0.2       0.2       0.1       0.1       7.2       7.5       (5.2 )     7.6       (4.0 )
 OH
    67.3     45.4     30.7       -       10.7       11.9       2.6       59.3       42.6       15.8       3.7       290.0       295.0       (5.4 )     2.8       (1.7 )
 PA
    23.7     16.0     15.9       26.3       5.0       3.3       1.0       3.6       2.9       1.7       1.4       100.8       98.7       1.3       3.5       2.2  
 SC
    5.1     4.2     3.2       2.1       1.5       1.1       0.2       0.7       0.5       0.2       0.4       19.2       18.5       (2.7 )     336.6       3.9  
 SD
    1.1     1.0     0.9       1.4       0.3       0.2       0.1       -       -       -       0.1       5.0       7.8       (36.5 )  
nm
      (36.3 )
 TN
    12.1     10.3     7.3       5.1       5.1       2.4       0.7       4.8       5.1       1.9       0.8       55.5       52.9       1.9       15.2       4.9  
 TX
    6.1     6.1     3.5       1.0       0.3       0.5       0.5       -       -       -       1.4       19.4       6.3       196.9    
nm
      214.9  
 UT
    4.8     2.3     2.9       -       0.4       1.3       0.2       1.3       0.5       0.1       0.7       14.6       14.1       (7.8 )     214.9       3.0  
 VT
    2.0     1.6     1.5       3.7       0.4       0.5       0.1       0.4       0.4       0.1       0.2       10.8       10.9       (2.9 )     10.1       (1.5 )
 VA
    15.7     12.5     9.8       9.0       2.5       3.1       0.6       4.6       3.8       1.4       0.9       64.1       64.0       (1.6 )     6.0       0.1  
 WA
    1.0     0.7     0.8       -       -       0.3       0.1       -       -       -       0.1       3.0       1.8       58.5    
nm
      62.5  
 WV
    3.0     2.3     2.2       1.0       1.1       0.3       0.1       -       0.3       0.1       0.7       11.1       11.0       (1.1 )     (12.7 )     0.7  
 WI
    12.8     8.5     6.3       15.3       2.0       1.3       0.8       4.4       3.5       1.7       0.9       57.5       59.7       (6.1 )     5.5       (3.7 )
 WY
    0.2     0.1     0.1       -       -       -       -       -       -       -       -       0.4       0.5       (1.2 )     9.7       1.4  
 All Other
    1.4     1.4     1.1       2.0       0.1       0.6       0.1       -       -       -       -       6.6       7.4       (9.6 )     55.1       (9.5 )
 Total
  $ 368.2   $ 280.5   $ 202.9     $ 171.6     $ 80.0     $ 58.2     $ 17.9     $ 171.1     $ 150.6     $ 50.1     $ 30.0     $ 1,581.4     $ 1,575.5       (2.6 )     7.1       0.4  
 Other Direct
    -     0.6     -       1.9       -       -       -       -       0.1       -       -       2.6       4.4       (11.5 )     (92.8 )     (41.4 )
 Total Direct
  $ 368.2   $ 281.1   $ 202.9     $ 173.5     $ 80.0     $ 58.2     $ 17.9     $ 171.1     $ 150.7     $ 50.1     $ 30.0     $ 1,584.0     $ 1,579.9       (2.6 )     6.7       0.3  
 
Surplus direct premiums written were $30.0 million and $17.9 million for the six months ended June 30, 2010 and 2009, respectively.
*Consolidated change consists of commercial lines, personal lines and E&S.
 Dollar amounts shown are rounded to millions; certain amounts may not add due to rounding. Percentage changes are calculated based on whole dollar amounts.
 
 
12

 

Quarterly Property Casualty Data - Commercial Lines
 
(Dollars in millions) 
 
Three months ended
   
Six months ended
 
Nine months ended
 
Twelve months ended
 
   
12/31/10
 
9/30/10
 
6/30/10
   
3/31/10
   
12/31/09
   
9/30/09
   
6/30/09
   
3/31/09
   
6/30/10
   
6/30/09
 
9/30/10
 
9/30/09
 
12/31/10
 
12/31/09
 
                                                                         
Commercial casualty: 
                                                                                           
Written premiums
          $ 168     $ 191     $ 156     $ 168     $ 171     $ 209     $ 359     $ 379       $ 548       $ 704  
Earned premiums
            172       164       166       180       180       187       336       366         546         712  
Loss and loss expenses ratio
            48.3 %     58.3 %     64.7 %     45.0 %     54.2 %     55.2 %     53.2 %     54.7 %       51.5 %       54.6 %
Less catastrophe loss ratio
            -       -       -       -       -       -       -       -         -         -  
Loss and loss expenses excluding catastrophe loss ratio
            48.3 %     58.3 %     64.7 %     45.0 %     54.2 %     55.2 %     53.2 %     54.7 %       51.5 %       54.6 %
                                                                                             
Commercial property:
                                                                                           
Written premiums
          $ 124     $ 129     $ 115     $ 124     $ 113     $ 132     $ 253     $ 245       $ 370       $ 485  
Earned premiums
            121       121       122       122       120       121       242       241         362         485  
Loss and loss expenses ratio
            90.1 %     71.0 %     34.9 %     42.8 %     88.3 %     69.0 %     80.5 %     78.6 %       66.6 %       58.6 %
Less catastrophe loss ratio
            36.7       8.3       (5.1 )     0.6       23.5       7.4       22.5       15.4         10.4         6.6  
Loss and loss expenses excluding catastrophe loss ratio
            53.4 %     62.7 %     40.0 %     42.2 %     64.8 %     61.6 %     58.0 %     63.2 %       56.2 %       52.1 %
                                                                                             
Commercial auto:
                                                                                           
Written premiums
          $ 99     $ 103     $ 93     $ 92     $ 94     $ 110     $ 202     $ 204       $ 296       $ 388  
Earned premiums
            96       95       98       99       98       99       191       197         296         394  
Loss and loss expenses ratio
            72.9 %     61.0 %     69.3 %     67.9 %     62.5 %     59.7 %     67.0 %     61.1 %       63.4 %       64.9 %
Less catastrophe loss ratio
            4.2       (1.0 )     0.4       (0.8 )     3.3       (0.1 )     1.6       1.6         0.8         0.7  
Loss and loss expenses excluding catastrophe loss ratio
            68.7 %     62.0 %     68.9 %     68.7 %     59.2 %     59.8 %     65.4 %     59.5 %       62.6 %       64.2 %
                                                                                             
Workers' compensation:
                                                                                           
Written premiums
          $ 72     $ 95     $ 71     $ 69     $ 79     $ 104     $ 167     $ 183       $ 252       $ 323  
Earned premiums
            79       74       74       82       88       83       153       171         253         326  
Loss and loss expenses ratio
            89.9 %     91.4 %     137.1 %     110.2 %     130.2 %     117.5 %     90.6 %     124.0 %       119.5 %       123.5 %
Less catastrophe loss ratio
            -       -       -       -       -       -       -       -         -         -  
Loss and loss expenses excluding catastrophe loss ratio
            89.9 %     91.4 %     137.1 %     110.2 %     130.2 %     117.5 %     90.6 %     124.0 %       119.5 %       123.5 %
                                                                                             
Specialty package:
                                                                                           
Written premiums
          $ 36     $ 39     $ 37     $ 38     $ 35     $ 38     $ 75     $ 73       $ 110       $ 148  
Earned premiums
            37       37       37       37       37       35       74       72         110         147  
Loss and loss expenses ratio
            85.6 %     89.0 %     40.5 %     33.5 %     114.3 %     96.0 %     87.3 %     105.4 %       81.0 %       70.6 %
Less catastrophe loss ratio
            20.2       1.1       (10.2 )     (18.2 )     68.8       13.7       10.8       41.9         21.5         13.4  
Loss and loss expenses excluding catastrophe loss ratio
            65.4 %     87.9 %     50.7 %     51.7 %     45.5 %     82.3 %     76.5 %     63.5 %       59.5 %       57.2 %
                                                                                             
Surety and executive risk:
                                                                                           
Written premiums
          $ 24     $ 23     $ 23     $ 28     $ 25     $ 25     $ 47     $ 50       $ 78       $ 101  
Earned premiums
            25       24       27       27       25       25       49       50         77         104  
Loss and loss expenses ratio
            36.2 %     51.1 %     95.7 %     85.6 %     67.0 %     30.3 %     43.6 %     48.8 %       61.7 %       70.5 %
Less catastrophe loss ratio
            -       -       -       -       -       -       -       -         -         -  
Loss and loss expenses excluding catastrophe loss ratio
            36.2 %     51.1 %     95.7 %     85.6 %     67.0 %     30.3 %     43.6 %     48.8 %       61.7 %       70.5 %
                                                                                             
Machinery and equipment:
                                                                                           
Written premiums
          $ 9     $ 8     $ 8     $ 9     $ 7     $ 8     $ 17     $ 15       $ 24       $ 32  
Earned premiums
            8       8       8       8       8       7       16       15         23         31  
Loss and loss expense ratio
            51.9 %     6.1 %     (47.6 ) %     38.4 %     39.7 %     59.3 %     29.3 %     49.3 %       45.6 %       21.6 %
Less catastrophe loss ratio
            1.8       (1.0 )     (3.5 )     (0.1 )     1.2       4.5       0.4       2.8         1.8         0.5  
Loss and loss expense excluding catastrophe loss ratio
            50.1 %     7.1 %     (44.1 ) %     38.5 %     38.5 %     54.8 %     28.9 %     46.5 %       43.8 %       21.1 %
 
*Dollar amounts shown are rounded to millions; certain amounts may not add due to rounding. Ratios are calculated based on whole dollar amounts. The sum of quarterly amounts may not equal the full year as each is computed
 
 
13

 
 

Quarterly Property Casualty Data - Personal Lines

(Dollars in millions)
 
Three months ended
   
Six months ended
   
Nine months ended
   
Twelve months ended
 
    
12/31/10
   
9/30/10
   
6/30/10
   
3/31/10
   
12/31/09
   
9/30/09
   
6/30/09
   
3/31/09
   
6/30/10
   
6/30/09
   
9/30/10
   
9/30/09
   
12/31/10
   
12/31/09
 
Personal auto: 
                                                                                   
Written premiums
                  $ 97     $ 73     $ 77     $ 90     $ 89     $ 68     $ 170     $ 157             $ 246             $ 324  
Earned premiums
                    83       81       80       80       80       79       164       159               239               319  
Loss and loss expenses ratio
                    73.6 %     58.2 %     71.8 %     64.9 %     75.7 %     63.6 %     66.0 %     69.7 %             68.1 %             69.0 %
Less catastrophe loss ratio
                    4.0       (0.1 )     (0.8 )     0.6       3.1       0.3       2.0       1.7               1.4               0.8  
Loss and loss expenses excluding catastrophe loss ratio
                    69.6 %     58.3 %     72.6 %     64.3 %     72.6 %     63.3 %     64.0 %     68.0 %             66.7 %             68.2 %
                                                                                                                 
Homeowner:
                                                                                                               
Written premiums
                  $ 81     $ 60     $ 68     $ 75     $ 76     $ 56     $ 141     $ 132             $ 208             $ 275  
Earned premiums
                    72       70       69       68       70       70       142       140               207               276  
Loss and loss expenses ratio
                    123.8 %     76.0 %     53.0 %     96.4 %     147.8 %     132.9 %     100.2 %     140.3 %             126.0 %             107.8 %
Less catastrophe loss ratio
                    52.8       6.9       (2.6 )     18.0       77.6       51.5       30.1       64.5               49.4               36.4  
Loss and loss expenses excluding catastrophe loss ratio
                    71.0 %     69.1 %     55.6 %     78.4 %     70.2 %     81.4 %     70.1 %     75.8 %             76.6 %             71.4 %
                                                                                                                 
Other personal:
                                                                                                               
Written premiums
                  $ 26     $ 22     $ 22     $ 25     $ 25     $ 21     $ 48     $ 45             $ 70             $ 92  
Earned premiums
                    24       23       23       22       22       22       47       44               67               90  
Loss and loss expenses ratio
                    53.0 %     51.5 %     33.8 %     33.8 %     42.6 %     37.8 %     52.3 %     40.2 %             38.0 %             36.9 %
Less catastrophe loss ratio
                    5.3       2.8       0.5       3.4       18.7       11.0       4.1       14.8               11.0               8.3  
Loss and loss expenses excluding catastrophe loss ratio
                    47.7 %     48.7 %     33.3 %     30.4 %     23.9 %     26.8 %     48.2 %     25.4 %             27.0 %             28.6 %

*Dollar amounts shown are rounded to millions; certain amounts may not add due to rounding. Ratios are calculated based on whole dollar amounts. The sum of quarterly amounts may not equal the full year as each is computed independently.
 
2010 Second-Quarter Supplement
 
 
14

 
 
Cincinnati Insurance Group (Excludes CSU)
Loss and Loss Expense Analysis

(In millions)
       
Paid
                     
Loss
                     
Loss
       
    
Paid
   
loss
   
Total
   
Case
   
IBNR
   
expense
   
Total
   
Case
   
IBNR
   
expense
   
Total
 
    
losses
   
expense
   
paid
   
reserves
   
reserves
   
reserves
   
reserves
   
incurred
   
incurred
   
incurred
   
incurred
 
Gross loss and loss expense incurred at June 30, 2010
                                                                 
Commercial casualty
  $ 152     $ 51     $ 203     $ (26 )   $ (19 )   $ (19 )   $ (64 )   $ 126     $ (19 )   $ 32     $ 139  
Commercial property
    125       22       147       38       6       3       47       163       6       25       194  
Commercial auto
    102       17       119       6       3       -       9       108       3       17       128  
Workers' compensation
    115       20       135       3       4       1       8       118       4       21       143  
Specialty packages
    41       9       50       15       (1 )     1       15       56       (1 )     10       65  
Surety and executive risk
    31       6       37       (20 )     2       (1 )     (19 )     11       2       5       18  
Machinery and equipment
    3       1       4       1       -       -       1       4       -       1       5  
Total commercial lines
    569       126       695       17       (5 )     (15 )     (3 )     586       (5 )     111       692  
                                                                                         
Personal auto
    97       14       111       (5 )     2       -       (3 )     92       2       14       108  
Homeowners
    99       16       115       17       6       2       25       116       6       18       140  
Other personal
    22       3       25       (3 )     1       -       (2 )     19       1       3       23  
Total personal lines
    218       33       252       9       9       2       20       227       9       35       271  
Total property casualty group
  $ 787     $ 159     $ 947     $ 26     $ 4     $ (13 )   $ 17     $ 813     $ 4     $ 146     $ 963  
                                                                                         
Ceded loss and loss expense incurred at June 30, 2010
                                                                                       
Commercial casualty
  $ 61     $ 1     $ 62     $ (40 )   $ (34 )   $ (27 )   $ (101 )   $ 21     $ (34 )   $ (26 )   $ (39 )
Commercial property
    4       3       7       (5 )     (3 )     -       (8 )     (1 )     (3 )     3       (1 )
Commercial auto
    -       -       -       -       -       -       -       -       -       -       -  
Workers' compensation
    5       -       5       (1 )     -       -       (1 )     4       -       -       4  
Specialty packages
    -       1       1       -       (1 )     -       (1 )     -       (1 )     1       -  
Surety and executive risk
    2       1       3       (6 )     -       -       (6 )     (4 )     -       1       (3 )
Machinery and equipment
    -       -       -       -       -       -       -       -       -       -       -  
Total commercial lines
    72       6       78       (52 )     (38 )     (27 )     (117 )     20       (38 )     (21 )     (39 )
                                                                                         
Personal auto
    -       -       -       -       -       -       -       -       -       -       -  
Homeowners
    1       3       4       (1 )     (5 )     -       (6 )     -       (5 )     3       (2 )
Other personal
    -       -       -       -       (2 )     -       (2 )     -       (2 )     -       (2 )
Total personal lines
    1       3       4       (1 )     (7 )     -       (8 )     -       (7 )     3       (4 )
Total property casualty group
  $ 73     $ 9     $ 82     $ (53 )   $ (45 )   $ (27 )   $ (125 )   $ 20     $ (45 )   $ (18 )   $ (43 )
                                                                                         
Net loss and loss expense incurred at June 30, 2010
                                                                                       
Commercial casualty
  $ 91     $ 50     $ 141     $ 14     $ 15     $ 8     $ 37     $ 105     $ 15     $ 58     $ 178  
Commercial property
    121       19       140       43       9       3       55       164       9       22       195  
Commercial auto
    102       17       119       6       3       -       9       108       3       17       128  
Workers' compensation
    110       20       130       4       4       1       9       114       4       21       139  
Specialty packages
    41       8       49       15       -       1       16       56       -       9       65  
Surety and executive risk
    29       5       34       (14 )     2       (1 )     (13 )     15       2       4       21  
Machinery and equipment
    3       1       4       1       -       -       1       4       -       1       5  
Total commercial lines
    497       120       617       69       33       12       114       566       33       132       731  
                                                                                         
Personal auto
    97       14       111       (5 )     2       -       (3 )     92       2       14       108  
Homeowners
    98       13       111       18       11       2       31       116       11       15       142  
Other personal
    22       3       25       (3 )     3       -       -       19       3       3       25  
Total personal lines
    217       30       247       10       16       2       28       227       16       32       275  
Total property casualty group
  $ 714     $ 150     $ 864     $ 79     $ 49     $ 14     $ 142     $ 793     $ 49     $ 164     $ 1,006  

*Dollar amounts shown are rounded to millions; certain amounts may not add due to rounding.
 
2010 Second-Quarter Supplement

 
15

 

Consolidated Cincinnati Insurance Companies
Quarterly Property Casualty Data - Consolidated

(Dollars in millions)
 
Three months ended
   
Six months ended
   
Nine months ended
   
Twelve months ended
 
   
12/31/10
   
9/30/10
   
6/30/10
   
3/31/10
   
12/31/09
   
9/30/09
   
6/30/09
   
3/31/09
   
6/30/10
   
6/30/09
   
9/30/10
   
9/30/09
   
12/31/10
   
12/31/09
 
Premiums   
 
   
 
                                                   
 
         
 
       
Agency renewal written premiums
                  $ 685     $ 682     $ 635     $ 669     $ 666     $ 695     $ 1,367     $ 1,361             $ 2,030             $ 2,665  
Agency new business written premiums
                    106       92       94       107       107       97       198       204               311               405  
Other written premiums
                    (42 )     (18 )     (49 )     (46 )     (50 )     (14 )     (60 )     (64 )             (110 )             (159 )
Reported written premiums – statutory*
                  $ 749     $ 756     $ 680     $ 730     $ 723     $ 778     $ 1,505     $ 1,501             $ 2,231             $ 2,911  
Unearned premium change
                    (21 )     (48 )     33       3       10       (46 )     (69 )     (36 )             (33 )             -  
Earned premiums
                  $ 728     $ 708     $ 713     $ 733     $ 733     $ 732     $ 1,436     $ 1,465             $ 2,198             $ 2,911  
Year over year change %
                                                                                                               
Agency renewal written premiums
                    3 %     (2 ) %     (5 ) %     (3 ) %     (10 ) %     (5 ) %     0 %     (8 ) %             (6 ) %             (6 ) %
Agency new business written premiums
                    (1 )     (5 )     (6 )     15       7       28       (3 )     17               16               10  
Other written premiums
                    16       (29 )     4       13       (4 )     58       6       21               19               15  
Reported written premiums – statutory*
                    4       (3 )     (5 )     0       (8 )     0       0       (4 )             (3 )             (3 )
Paid losses and loss expenses
                                                                                                               
Losses paid
                  $ 382     $ 334     $ 381     $ 390     $ 412     $ 401     $ 716     $ 813             $ 1,203             $ 1,584  
Loss expenses paid
                    72       80       96       83       84       78       151       162               245               340  
Loss and loss expenses paid
                  $ 454     $ 414     $ 477     $ 473     $ 496     $ 479     $ 867     $ 975             $ 1,448             $ 1,924  
Statutory combined ratio
                                                                                                               
Loss ratio
                    65.1 %     54.3 %     49.9 %     50.2 %     71.6 %     62.5 %     59.8 %     67.0 %             61.4 %             58.6 %
Allocated loss expense ratio
                    5.7       6.0       7.4       6.1       6.7       4.9       5.8       5.8               5.9               6.3  
Unallocated loss expense ratio
                    5.2       6.7       7.7       6.4       6.3       6.8       6.0       6.6               6.5               6.8  
Net underwriting expense ratio
                    31.3       34.1       34.1       34.2       32.0       30.9       32.7       31.4               32.4               32.7  
Statutory combined ratio
                    107.3 %     101.1 %     99.1 %     96.9 %     116.6 %     105.1 %     104.3 %     110.8 %             106.2 %             104.4 %
Contribution from catastrophe losses
                    13.6       2.1       (1.7 )     0.9       16.1       7.2       8.0       11.6               8.1               5.7  
Statutory combined ratio excluding catastrophe losses
                    93.7 %     99.0 %     100.8 %     96.0 %     100.5 %     97.9 %     96.3 %     99.2 %             98.1 %             98.7 %
Commission expense ratio
                    17.9 %     18.4 %     20.4 %     20.1 %     18.2 %     17.7 %     18.1 %     17.9 %             18.7 %             19.0 %
Other expense ratio
                    13.4       15.7       13.7       14.1       13.8       13.2       14.6       13.5               13.7               13.7  
Statutory expense ratio
                    31.3 %     34.1 %     34.1 %     34.2 %     32.0 %     30.9 %     32.7 %     31.4 %             32.4 %             32.7 %
GAAP combined ratio
                                                                                                               
GAAP combined ratio
                    107.6 %     102.6 %     98.6 %     95.1 %     116.6 %     107.5 %     105.2 %     112.1 %             106.4 %             104.5 %
Contribution from catastrophe losses
                    13.6       2.1       (1.7 )     0.9       16.1       7.2       8.0       11.6               8.1               5.7  
GAAP combined ratio excluding catastrophe losses
                    94.0 %     100.5 %     100.3 %     94.2 %     100.5 %     100.3 %     97.2 %     100.5 %             98.3 %             98.8 %

*Dollar amounts shown are rounded to millions; certain amounts may not add due to rounding. Ratios are calculated based on whole dollar amounts.The sum of quarterly amounts may not equal the full year as each is computed independently.
*nm - - Not meaningful
* Statutory data prepared in accordance with statutory accounting rules as defined by the National Association of Insurance Commissioners and filed with the appropriate regulatory bodies.
 
2010 Second-Quarter Supplement
 
 
16

 

Consolidated Cincinnati Insurance Companies
Quarterly Property Casualty Data - Commercial Lines

(Dollars in millions)
 
Three months ended
   
Six months ended
   
Nine months ended
   
Twelve months ended
 
   
12/31/10
   
9/30/10
   
6/30/10
   
3/31/10
   
12/31/09
   
9/30/09
   
6/30/09
   
3/31/09
   
6/30/10
   
6/30/09
   
9/30/10
   
9/30/09
   
12/31/10
   
12/31/09
 
Premiums                                                                  
 
         
 
       
Agency renewal written premiums
                  $ 492     $ 533     $ 478     $ 489     $ 488     $ 557     $ 1,025     $ 1,045             $ 1,535             $ 2,013  
Agency new business written premiums
                    73       66       67       76       79       76       139       155               231               298  
Other written premiums
                    (33 )     (11 )     (42 )     (37 )     (43 )     (7 )     (44 )     (51 )             (88 )             (130 )
Reported written premiums – statutory*
                  $ 532     $ 588     $ 503     $ 528     $ 524     $ 626     $ 1,120     $ 1,149             $ 1,678             $ 2,181  
Unearned premium change
                    6       (65 )     29       27       32       (69 )     (59 )     (37 )             (11 )             18  
Earned premiums
                  $ 538     $ 523     $ 532     $ 555     $ 556     $ 557     $ 1,061     $ 1,112             $ 1,667             $ 2,199  
Year over year change %
                                                                                                               
Agency renewal written premiums
                    1 %     (4 ) %     (7 ) %     (3 ) %     (12 ) %     (5 ) %     (2 ) %     (8 ) %             (7 ) %             (7 ) %
Agency new business written premiums
                    (8 )     (13 )     (19 )     0       (9 )     15       (10 )     1               1               (4 )
Other written premiums
                    23       (57 )     7       10       (5 )     76       14       28               21               17  
Reported written premiums – statutory*
                    2       (6 )     (9 )     (2 )     (12 )     0       (3 )     (6 )             (5 )             (6 )
Paid losses and loss expenses
                                                                                                               
Losses paid
                  $ 266     $ 230     $ 267     $ 267     $ 275     $ 271     $ 497     $ 546             $ 813             $ 1,080  
Loss expenses paid
                    58       63       76       66       67       60       120       126               192               268  
Loss and loss expenses paid
                  $ 324     $ 293     $ 343     $ 333     $ 342     $ 331     $ 617     $ 672             $ 1,005             $ 1,348  
Statutory combined ratio
                                                                                                               
Loss ratio
                    59.0 %     53.8 %     50.2 %     46.2 %     66.0 %     57.6 %     56.4 %     61.8 %             56.7 %             55.1 %
Allocated loss expense ratio
                    6.5       7.1       8.7       7.1       7.8       5.8       6.8       6.8               6.9               7.3  
Unallocated loss expense ratio
                    4.8       6.6       7.9       6.0       5.7       6.4       5.7       6.0               6.0               6.5  
Net underwriting expense ratio
                    31.7       31.9       35.1       35.6       32.5       29.2       31.8       30.8               32.2               32.9  
Statutory combined ratio
                    102.0 %     99.3 %     102.0 %     94.9 %     112.0 %     99.0 %     100.7 %     105.4 %             101.8 %             101.8 %
Contribution from catastrophe losses
                    10.4       1.8       (1.8 )     (1.2 )     10.2       2.5       6.2       6.4               3.8               2.5  
Statutory combined ratio excluding catastrophe losses
                    91.6 %     97.5 %     103.8 %     96.1 %     101.8 %     96.5 %     94.5 %     99.0 %             98.0 %             99.3 %
Commission expense ratio
                    17.6 %     17.2 %     20.0 %     20.3 %     18.1 %     16.4 %     17.4 %     17.2 %             18.2 %             18.6 %
Other expense ratio
                    14.1       14.7       15.1       15.3       14.4       12.8       14.4       13.5               14.0               14.3  
Statutory expense ratio
                    31.7 %     31.9 %     35.1 %     35.6 %     32.5 %     29.2 %     31.8 %     30.7 %             32.2 %             32.9 %
GAAP combined ratio
                                                                                                               
GAAP combined ratio
                    101.7 %     102.1 %     100.8 %     92.4 %     110.9 %     102.2 %     101.9 %     106.6 %             101.9 %             101.6 %
Contribution from catastrophe losses
                    10.4       1.8       (1.8 )     (1.2 )     10.2       2.5       6.2       6.4               3.8               2.5  
GAAP combined ratio excluding catastrophe losses
                    91.3 %     100.3 %     102.6 %     93.6 %     100.7 %     99.7 %     95.7 %     100.2 %             98.1 %             99.1 %
 
*Dollar amounts shown are rounded to millions; certain amounts may not add due to rounding. Ratios are calculated based on whole dollar amounts.The sum of quarterly amounts may not equal the full year as each is computed independently.
*nm - - Not meaningful
* Statutory data prepared in accordance with statutory accounting rules as defined by the National Association of Insurance Commissioners and filed with the appropriate regulatory bodies.
 
2010 Second-Quarter Supplement
 
 
17

 

Consolidated Cincinnati Insurance Companies
Quarterly Property Casualty Data - Personal Lines

(Dollars in millions)
 
Three months ended
   
Six months ended
   
Nine months ended
   
Twelve months ended
 
   
12/31/10
   
9/30/10
   
6/30/10
   
3/31/10
   
12/31/09
   
9/30/09
   
6/30/09
   
3/31/09
   
6/30/10
   
6/30/09
   
9/30/10
   
9/30/09
   
12/31/10
   
12/31/09
 
Premiums   
 
   
 
                                                   
 
         
 
       
Agency renewal written premiums
                  $ 187     $ 143     $ 153     $ 177     $ 176     $ 137     $ 330     $ 313             $ 490             $ 642  
Agency new business written premiums
                    24       18       20       21       19       14       42       34               55               75  
Other written premiums
                    (7 )     (6 )     (6 )     (8 )     (5 )     (6 )     (13 )     (13 )             (21 )             (26 )
Reported written premiums – statutory*
                  $ 204     $ 155     $ 167     $ 190     $ 190     $ 145     $ 359     $ 334             $ 524             $ 691  
Unearned premium change
                    (25 )     19       5       (20 )     (18 )     26       (6 )     9               (11 )             (6 )
Earned premiums
                  $ 179     $ 174     $ 172     $ 170     $ 172     $ 171     $ 353     $ 343             $ 513             $ 685  
Year over year change %
                                                                                                               
Agency renewal written premiums
                    6 %     4 %     (2 ) %     (4 ) %     (5 ) %     (6 ) %     5 %     (6 ) %             (5 ) %             (4 ) %
Agency new business written premiums
                    26       29       82       91       90       75       24       79               83               79  
Other written premiums
                    (40 )     0       25       33       0       (50 )     0       (30 )             5               10  
Reported written premiums – statutory*
                    7       7       5       3       (1 )     (3 )     7       (2 )             0               1  
Paid losses and loss expenses
                                                                                                               
Losses paid
                  $ 114     $ 103     $ 112     $ 121     $ 137     $ 130     $ 217     $ 267             $ 389             $ 501  
Loss expenses paid
                    14       17       19       18       18       18       30       35               52               71  
Loss and loss expenses paid
                  $ 128     $ 120     $ 131     $ 139     $ 155     $ 148     $ 247     $ 302             $ 441             $ 572  
Statutory combined ratio
                                                                                                               
Loss ratio
                    82.4 %     55.3 %     49.4 %     63.1 %     90.1 %     78.3 %     69.0 %     84.2 %             77.1 %             70.2 %
Allocated loss expense ratio
                    2.0       1.9       2.7       2.4       2.4       1.9       2.0       2.2               2.2               2.4  
Unallocated loss expense ratio
                    6.7       7.2       7.1       7.8       8.2       8.3       6.9       8.3               8.1               7.8  
Net underwriting expense ratio
                    30.1       42.1       30.2       29.5       29.8       35.4       35.3       32.1               31.2               31.0  
Statutory combined ratio
                    121.2 %     106.5 %     89.4 %     102.8 %     130.5 %     123.9 %     113.2 %     126.8 %             118.7 %             111.4 %
Contribution from catastrophe losses
                    23.8       3.0       (1.4 )     7.9       35.4       22.6       13.6       29.0               22.0               16.1  
Statutory combined ratio excluding catastrophe losses
                    97.4 %     103.5 %     90.8 %     94.9 %     95.1 %     101.3 %     99.6 %     97.8 %             96.7 %             95.3 %
Commission expense ratio
                    18.1 %     22.4 %     20.9 %     19.1 %     18.0 %     22.5 %     20.0 %     20.0 %             19.6 %             20.0 %
Other expense ratio
                    12.0       19.7       9.3       10.4       11.7       12.9       15.3       12.2               11.6               11.0  
Statutory expense ratio
                    30.1 %     42.1 %     30.2 %     29.5 %     29.7 %     35.4 %     35.3 %     32.2 %             31.2 %             31.0 %
GAAP combined ratio
                                                                                                               
GAAP combined ratio
                    123.4 %     102.5 %     90.9 %     102.3 %     133.2 %     120.7 %     113.1 %     126.9 %             118.7 %             111.8 %
Contribution from catastrophe losses
                    23.8       3.0       (1.4 )     7.9       35.4       22.6       13.6       29.0               22.0               16.1  
GAAP combined ratio excluding catastrophe losses
                    99.6 %     99.5 %     92.3 %     94.4 %     97.8 %     98.1 %     99.5 %     97.9 %             96.7 %             95.7 %
 
*Dollar amounts shown are rounded to millions; certain amounts may not add due to rounding. Ratios are calculated based on whole dollar amounts.The sum of quarterly amounts may not equal the full year as each is computed independently.
*nm - - Not meaningful
* Statutory data prepared in accordance with statutory accounting rules as defined by the National Association of Insurance Commissioners and filed with the appropriate regulatory bodies.
 
2010 Second-Quarter Supplement
 
 
18

 

The Cincinnati Life Insurance Company
Statutory Statements of Income

   
For the Three Months Ended June 30,
   
For the Six Months Ended June 30,
 
(Dollars in millions)
 
2010
   
2009
   
Change
   
% Change
   
2010
   
2009
   
Change
   
% Change
 
                                                 
Net premiums written
  $ 93     $ 71     $ 22       31     $ 198     $ 119     $ 79       66  
Net investment income
    34       31       3       10       67       61       6       10  
Amortization of interest maintenance reserve
    (1 )     (2 )     1       50       (1 )     (3 )     2       67  
Commissions and expense allowances on reinsurance ceded
    2       2       -    
nm
      3       3       -    
nm
 
Income from fees associated with Separate Accounts
    1       -       1    
nm
      1       -       1    
nm
 
Total revenues
  $ 129     $ 102     $ 27       26     $ 268     $ 180     $ 88       49  
                                                                 
Death benefits and matured endowments
  $ 13     $ 12     $ 1       8     $ 26     $ 29     $ (3 )     (10 )
Annuity benefits
    8       7       1       14       18       17       1       6  
Disability benefits and benefits under accident and health contracts
    1       -       1    
nm
      1       1       -    
nm
 
Surrender benefits and group conversions
    5       6       (1 )     (17 )     11       11       -    
nm
 
Interest and adjustments on deposit-type contract funds
    3       3       -    
nm
      5       5       -    
nm
 
Increase in aggregate reserves for life and accident and health contracts
    78       58       20       34       162       85       77       91  
Payments on supplementary contracts with life contingencies
    -       -       -    
nm
      -       -       -    
nm
 
Total benefit expenses
  $ 108     $ 86     $ 22       26     $ 223     $ 148     $ 75       51  
                                                                 
Commissions
  $ 12     $ 10     $ 2       20     $ 23     $ 18     $ 5       28  
General insurance expenses and taxes
    9       9       -    
nm
      19       18       1       6  
Increase in loading on deferred and uncollected premiums
    (3 )     (3 )     -    
nm
      (4 )     (3 )     (1 )     (33 )
Net transfers from Separate Accounts
    -       -       -    
nm
      -       (2 )     2    
nm
 
Other deductions
    -       -       -    
nm
      -       -       -    
nm
 
Total operating expenses
  $ 18     $ 16     $ 2       13     $ 38     $ 31     $ 7       23  
                                                                 
Federal and foreign income tax benefit
    1       (1 )     2       200       (3 )     (4 )     1       25  
                                                                 
Net gain from operations before realized capital gains or (losses)
  $ 2     $ 1     $ 1       100     $ 10     $ 5     $ 5       100  
                                                                 
Net realized gains or (losses) net of capital gains tax
    -       -       -    
nm
      1       (6 )     7    
nm
 
                                                                 
Net income (loss) (statutory)
  $ 2     $ 1     $ 1       100     $ 11     $ (1 )   $ 12    
nm
 
 
*Dollar amounts shown are rounded to millions; certain amounts may not add due to rounding. Ratios are calculated based on whole dollar amounts.
* Statutory data prepared in accordance with statutory accounting rules as defined by the National Association of Insurance Commissioners and filed with the appropriate regulatory bodies.
 
2010 Second-Quarter Supplement
 
 
19

 
 
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