CINCINNATI, July 30, 2019 /PRNewswire/ -- Cincinnati Financial Corporation (CINF) today reported:
- Second-quarter 2019 net income of $428 million, or $2.59 per share, compared with $217 million, or $1.32 per share, in the second quarter of 2018.
- $7 million or 5% increase in non-GAAP operating income* to $140 million, or 85 cents per share, compared with $133 million, or 81 cents per share, in the second quarter of last year.
- $211 million increase in second-quarter 2019 net income, primarily due to the after-tax net effect of a $204 million increase in net investment gains and a $9 million increase in after-tax property casualty underwriting income.
- $55.92 book value per share at June 30, 2019, a record high, up $7.82 or 16.3% since year-end.
- 18.6% value creation ratio for the first six months of 2019, compared with negative 1.1% for the 2018 period.
Financial Highlights
(Dollars in millions, except per share data) | Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||
2019 | 2018 | % Change | 2019 | 2018 | % Change | |||||||||||||||
Revenue Data | ||||||||||||||||||||
Earned premiums | $ | 1,384 | $ | 1,294 | 7 | $ | 2,717 | $ | 2,554 | 6 | ||||||||||
Investment income, net of expenses | 160 | 154 | 4 | 317 | 304 | 4 | ||||||||||||||
Total revenues | 1,913 | 1,558 | 23 | 4,072 | 2,782 | 46 | ||||||||||||||
Income Statement Data | ||||||||||||||||||||
Net income | $ | 428 | $ | 217 | 97 | $ | 1,123 | $ | 186 | 504 | ||||||||||
Investment gains and losses, after-tax | 288 | 84 | 243 | 811 | (67) | nm | ||||||||||||||
Non-GAAP operating income* | $ | 140 | $ | 133 | 5 | $ | 312 | $ | 253 | 23 | ||||||||||
Per Share Data (diluted) | ||||||||||||||||||||
Net income | $ | 2.59 | $ | 1.32 | 96 | $ | 6.81 | $ | 1.12 | 508 | ||||||||||
Investment gains and losses, after-tax | 1.74 | 0.51 | 241 | 4.92 | (0.41) | nm | ||||||||||||||
Non-GAAP operating income* | $ | 0.85 | $ | 0.81 | 5 | $ | 1.89 | $ | 1.53 | 24 | ||||||||||
Book value | $ | 55.92 | $ | 48.68 | 15 | |||||||||||||||
Cash dividend declared | $ | 0.56 | $ | 0.53 | 6 | $ | 1.12 | $ | 1.06 | 6 | ||||||||||
Diluted weighted average shares outstanding | 165.2 | 164.5 | 0 | 164.9 | 165.0 | 0 | ||||||||||||||
* The Definitions of Non-GAAP Information and Reconciliation to Comparable GAAP Measures defines and reconciles measures presented in this release that are not based | ||||||||||||||||||||
** Forward-looking statements and related assumptions are subject to the risks outlined in the company's safe harbor statement. | ||||||||||||||||||||
Insurance Operations Second-Quarter Highlights
- 96.5% second-quarter 2019 property casualty combined ratio, improved from 97.2% for the second quarter of 2018.
- 9% growth in second-quarter net written premiums, reflecting price increases and premium growth initiatives.
- $212 million second-quarter 2019 property casualty new business written premiums, up 17%. Agencies appointed since the beginning of 2018 contributed $25 million or 12% of total new business written premiums.
- $8 million of life insurance subsidiary net income, down $9 million from the second quarter of 2018, and 7% growth in second-quarter 2019 term life insurance earned premiums.
Investment and Balance Sheet Highlights
- 4% or $6 million increase in second-quarter 2019 pretax investment income, including a 14% increase for stock portfolio dividends and a 1% decrease for bond interest income.
- Three-month increase of 4% in fair value of total investments at June 30, 2019, including a 7% increase for the stock portfolio and a 3% increase for the bond portfolio.
- $2.939 billion parent company cash and marketable securities at June 30, 2019, up 19% from year-end 2018.
Diversification Improving Results
Steven J. Johnston, president and chief executive officer, commented: "Higher insurance underwriting profits in the second quarter – up 33% – supported by steadily rising income from our investment portfolio improved our non-GAAP operating income 5% compared with last year's second quarter result.
"Spring storms across the country impacted our policyholders, including powerful tornadoes that hit in Dayton, Ohio, just a short drive from our headquarters office, resulting in nearly $130 million in losses. I'm proud of our associates who jumped into action, comforting those who had experienced damage and getting them moving toward recovery.
"Despite a 2.9-point ratio increase in weather-related catastrophe losses, our second-quarter combined ratio of 96.5% improved 0.7 points compared with last year's result.
"In the past five years, our E&S net written premiums have nearly doubled, we launched Cincinnati ReSM and we acquired Cincinnati Global. Those areas were among our most profitable during the second quarter and contributed to our performance exceeding last year's results. Supporting our belief that our focus on diversification and segmentation is paying off, our first half 2019 combined ratio of 94.8% is our best result in the past six years."
Balancing Growth and Profitability
"Second-quarter property casualty new business written premiums topped $200 million for the first time in any single quarter, growing 17% compared with last year, as production from recently appointed agencies accelerates.
"Total property casualty net written premiums saw double-digit growth for the first six months, increasing 10% compared with the first half of 2018. Overall renewal pricing trends developed satisfactorily with standard and excess and surplus commercial lines policies averaging percentage increases in the low-single-digit range and personal lines experiencing rate change percentages that averaged in the mid-single-digit range.
"By seeking increased pricing on those accounts that need it most and remaining very competitive on our agents' best-performing accounts, we are able to maintain a nice balance between growth and profitability."
Book Value at Record High
"At June 30, our book value again reached a record high, increasing 16.3% since December 31, 2018. Consolidated cash and total investments also reached a new high, topping $19 billion.
"Our ample capital allows us to execute on our long-term strategies and, at the same time continue to pay dividends to shareholders. Our value creation ratio, which considers the dividends we pay as well as growth in book value, was 18.6% for the first half of 2019, above our 10% to 13% average annual target for this measure."
Insurance Operations Highlights | ||||||||||||||||||||||
Consolidated Property Casualty Insurance Results | ||||||||||||||||||||||
(Dollars in millions) | Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||
2019 | 2018 | % Change | 2019 | 2018 | % Change | |||||||||||||||||
Earned premiums | $ | 1,317 | $ | 1,230 | 7 | $ | 2,584 | $ | 2,430 | 6 | ||||||||||||
Fee revenues | 2 | 3 | (33) | 5 | 6 | (17) | ||||||||||||||||
Total revenues | 1,319 | 1,233 | 7 | 2,589 | 2,436 | 6 | ||||||||||||||||
Loss and loss expenses | 863 | 821 | 5 | 1,653 | 1,612 | 3 | ||||||||||||||||
Underwriting expenses | 408 | 376 | 9 | 797 | 759 | 5 | ||||||||||||||||
Underwriting profit | $ | 48 | $ | 36 | 33 | $ | 139 | $ | 65 | 114 | ||||||||||||
Ratios as a percent of earned premiums: | Pt. Change | Pt. Change | ||||||||||||||||||||
Loss and loss expenses | 65.6 | % | 66.7 | % | (1.1) | 64.0 | % | 66.3 | % | (2.3) | ||||||||||||
Underwriting expenses | 30.9 | 30.5 | 0.4 | 30.8 | 31.2 | (0.4) | ||||||||||||||||
Combined ratio | 96.5 | % | 97.2 | % | (0.7) | 94.8 | % | 97.5 | % | (2.7) | ||||||||||||
% Change | % Change | |||||||||||||||||||||
Agency renewal written premiums | $ | 1,186 | $ | 1,150 | 3 | $ | 2,316 | $ | 2,233 | 4 | ||||||||||||
Agency new business written premiums | 212 | 181 | 17 | 393 | 340 | 16 | ||||||||||||||||
Other written premiums | 78 | 18 | 333 | 148 | 34 | 335 | ||||||||||||||||
Net written premiums | $ | 1,476 | $ | 1,349 | 9 | $ | 2,857 | $ | 2,607 | 10 | ||||||||||||
Ratios as a percent of earned premiums: | Pt. Change | Pt. Change | ||||||||||||||||||||
Current accident year before catastrophe losses | 60.9 | % | 62.2 | % | (1.3) | 61.5 | % | 63.5 | % | (2.0) | ||||||||||||
Current accident year catastrophe losses | 11.1 | 7.1 | 4.0 | 8.4 | 6.1 | 2.3 | ||||||||||||||||
Prior accident years before catastrophe losses | (5.3) | (2.6) | (2.7) | (5.4) | (3.0) | (2.4) | ||||||||||||||||
Prior accident years catastrophe losses | (1.1) | 0.0 | (1.1) | (0.5) | (0.3) | (0.2) | ||||||||||||||||
Loss and loss expense ratio | 65.6 | % | 66.7 | % | (1.1) | 64.0 | % | 66.3 | % | (2.3) | ||||||||||||
Current accident year combined ratio before catastrophe | 91.8 | % | 92.7 | % | (0.9) | 92.3 | % | 94.7 | % | (2.4) | ||||||||||||
- $127 million or 9% growth of second-quarter 2019 property casualty net written premiums, and six-month growth of 10%, reflecting premium growth initiatives and price increases. Second-quarter growth included contributions of 2% from Cincinnati Re and 3% from Cincinnati Global Underwriting Ltd.SM, formerly known as MSP.
- $31 million or 17% increase in second-quarter 2019 new business premiums written by agencies and six-month growth of 16%. The second-quarter growth included an $11 million increase in standard market property casualty production from agencies appointed since the beginning of 2018.
- 92 new agency appointments in the first six months of 2019, including 37 that market only our personal lines products.
- 0.7 percentage-point improvement in the second-quarter 2019 combined ratio and a 2.7 percentage-point improvement for the six-month period, despite increases for losses from natural catastrophes of 2.9 points for the second quarter of 2019 and 2.1 points the six-month period.
- 6.4 percentage-point second-quarter 2019 benefit from favorable prior accident year reserve development of $84 million, compared with 2.6 points or $31 million for second-quarter 2018.
- 5.9 percentage-point six-month 2019 benefit from favorable prior accident year reserve development, compared with 3.3 points for the first six months of 2018.
- 2.0 percentage-point decrease, to 61.5%, for the six-month 2019 ratio of current accident year losses and loss expenses before catastrophes, including a decrease of 0.7 points in the ratio for current accident year losses of $1 million or more per claim, and lower noncatastrophe weather-related losses representing approximately 0.6 points of the decrease.
- 0.4 percentage-point decrease in the first-half 2019 underwriting expense ratio, compared with the same period of 2018, keeping generally in line with our longer-term historical average and reflecting higher earned premiums and ongoing expense management.
Commercial Lines Insurance Results | ||||||||||||||||||||||
(Dollars in millions) | Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||
2019 | 2018 | % Change | 2019 | 2018 | % Change | |||||||||||||||||
Earned premiums | $ | 823 | $ | 812 | 1 | $ | 1,633 | $ | 1,602 | 2 | ||||||||||||
Fee revenues | 1 | — | nm | 2 | 2 | 0 | ||||||||||||||||
Total revenues | 824 | 812 | 1 | 1,635 | 1,604 | 2 | ||||||||||||||||
Loss and loss expenses | 550 | 510 | 8 | 1,031 | 1,029 | 0 | ||||||||||||||||
Underwriting expenses | 262 | 255 | 3 | 516 | 513 | 1 | ||||||||||||||||
Underwriting profit | $ | 12 | $ | 47 | (74) | $ | 88 | $ | 62 | 42 | ||||||||||||
Ratios as a percent of earned premiums: | Pt. Change | Pt. Change | ||||||||||||||||||||
Loss and loss expenses | 66.8 | % | 62.9 | % | 3.9 | 63.1 | % | 64.2 | % | (1.1) | ||||||||||||
Underwriting expenses | 31.8 | 31.3 | 0.5 | 31.6 | 32.0 | (0.4) | ||||||||||||||||
Combined ratio | 98.6 | % | 94.2 | % | 4.4 | 94.7 | % | 96.2 | % | (1.5) | ||||||||||||
% Change | % Change | |||||||||||||||||||||
Agency renewal written premiums | $ | 767 | $ | 758 | 1 | $ | 1,566 | $ | 1,529 | 2 | ||||||||||||
Agency new business written premiums | 137 | 118 | 16 | 257 | 222 | 16 | ||||||||||||||||
Other written premiums | (25) | (20) | (25) | (48) | (41) | (17) | ||||||||||||||||
Net written premiums | $ | 879 | $ | 856 | 3 | $ | 1,775 | $ | 1,710 | 4 | ||||||||||||
Ratios as a percent of earned premiums: | Pt. Change | Pt. Change | ||||||||||||||||||||
Current accident year before catastrophe losses | 61.2 | % | 61.3 | % | (0.1) | 62.1 | % | 63.7 | % | (1.6) | ||||||||||||
Current accident year catastrophe losses | 12.7 | 6.8 | 5.9 | 8.4 | 5.3 | 3.1 | ||||||||||||||||
Prior accident years before catastrophe losses | (6.1) | (4.9) | (1.2) | (6.5) | (4.2) | (2.3) | ||||||||||||||||
Prior accident years catastrophe losses | (1.0) | (0.3) | (0.7) | (0.9) | (0.6) | (0.3) | ||||||||||||||||
Loss and loss expense ratio | 66.8 | % | 62.9 | % | 3.9 | 63.1 | % | 64.2 | % | (1.1) | ||||||||||||
Current accident year combined ratio before catastrophe | 93.0 | % | 92.6 | % | 0.4 | 93.7 | % | 95.7 | % | (2.0) | ||||||||||||
- $23 million or 3% increase in second-quarter 2019 commercial lines net written premiums, including higher renewal and new business written premiums. Four percent increase in six-month net written premiums.
- $9 million or 1% increase in second-quarter renewal written premiums, with commercial lines average renewal pricing increases in the low-single-digit percent range, and including commercial auto increases in the high-single-digit range.
- $19 million or 16% increase in second-quarter 2019 new business written by agencies, reflecting growth for each major line of business. For the six-month period, the increase was also 16 percent.
- 4.4 percentage-point second-quarter 2019 combined ratio increase, reflecting an increase of 5.2 points for losses from natural catastrophes.
- 1.5 percentage-point improvement in the six-month 2019 combined ratio, despite increases for losses from natural catastrophes of 2.8 points
- 7.1 percentage-point second-quarter 2019 benefit from favorable prior accident year reserve development of $58 million, compared with 5.2 points or $42 million for second-quarter 2018.
- 7.4 percentage-point six-month 2019 benefit from favorable prior accident year reserve development, compared with 4.8 points for the first six months of 2018.
Personal Lines Insurance Results | ||||||||||||||||||||||
(Dollars in millions) | Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||
2019 | 2018 | % Change | 2019 | 2018 | % Change | |||||||||||||||||
Earned premiums | $ | 348 | $ | 331 | 5 | $ | 692 | $ | 656 | 5 | ||||||||||||
Fee revenues | 1 | 2 | (50) | 2 | 3 | (33) | ||||||||||||||||
Total revenues | 349 | 333 | 5 | 694 | 659 | 5 | ||||||||||||||||
Loss and loss expenses | 240 | 269 | (11) | 490 | 507 | (3) | ||||||||||||||||
Underwriting expenses | 104 | 96 | 8 | 203 | 193 | 5 | ||||||||||||||||
Underwriting profit (loss) | $ | 5 | $ | (32) | nm | $ | 1 | $ | (41) | nm | ||||||||||||
Ratios as a percent of earned premiums: | Pt. Change | Pt. Change | ||||||||||||||||||||
Loss and loss expenses | 68.9 | % | 81.1 | % | (12.2) | 70.7 | % | 77.2 | % | (6.5) | ||||||||||||
Underwriting expenses | 30.0 | 29.0 | 1.0 | 29.4 | 29.5 | (0.1) | ||||||||||||||||
Combined ratio | 98.9 | % | 110.1 | % | (11.2) | 100.1 | % | 106.7 | % | (6.6) | ||||||||||||
% Change | % Change | |||||||||||||||||||||
Agency renewal written premiums | $ | 365 | $ | 342 | 7 | $ | 647 | $ | 606 | 7 | ||||||||||||
Agency new business written premiums | 47 | 46 | 2 | 82 | 85 | (4) | ||||||||||||||||
Other written premiums | (10) | (7) | (43) | (18) | (13) | (38) | ||||||||||||||||
Net written premiums | $ | 402 | $ | 381 | 6 | $ | 711 | $ | 678 | 5 | ||||||||||||
Ratios as a percent of earned premiums: | Pt. Change | Pt. Change | ||||||||||||||||||||
Current accident year before catastrophe losses | 62.1 | % | 66.6 | % | (4.5) | 61.4 | % | 65.5 | % | (4.1) | ||||||||||||
Current accident year catastrophe losses | 11.0 | 9.6 | 1.4 | 10.9 | 9.3 | 1.6 | ||||||||||||||||
Prior accident years before catastrophe losses | (3.2) | 4.3 | (7.5) | (2.3) | 2.1 | (4.4) | ||||||||||||||||
Prior accident years catastrophe losses | (1.0) | 0.6 | (1.6) | 0.7 | 0.3 | 0.4 | ||||||||||||||||
Loss and loss expense ratio | 68.9 | % | 81.1 | % | (12.2) | 70.7 | % | 77.2 | % | (6.5) | ||||||||||||
Current accident year combined ratio before catastrophe | 92.1 | % | 95.6 | % | (3.5) | 90.8 | % | 95.0 | % | (4.2) | ||||||||||||
- $21 million or 6% increase in second-quarter 2019 personal lines net written premiums, driven by higher renewal written premiums that benefited from rate increases averaging in the mid-single-digit percent range, including personal auto increases near the low end of the high-single-digit range. Net written premiums from our agencies' high net worth clients grew 35%. Five percent increase in six-month net written premiums.
- $1 million or 2% increase in second-quarter 2019 new business written by agencies, and a six-month decrease of 4%, reflecting pricing discipline.
- 11.2 percentage-point improvement in the second-quarter 2019 combined ratio and improvement of 6.6 points for the six-month period, primarily due to better experience in the ratio for current accident year loss and loss expenses before catastrophe losses and favorable reserve development on prior accident years.
- 4.2 percentage-point second-quarter 2019 benefit from favorable prior accident year reserve development of $14 million, compared with unfavorable development of 4.9 points or $17 million for second-quarter 2018.
- 1.6 percentage-point six-month 2019 benefit from favorable prior accident year reserve development, compared with unfavorable development of 2.4 points for the first six months of 2018.
Excess and Surplus Lines Insurance Results | ||||||||||||||||||||||
(Dollars in millions) | Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||
2019 | 2018 | % Change | 2019 | 2018 | % Change | |||||||||||||||||
Earned premiums | $ | 67 | $ | 57 | 18 | $ | 130 | $ | 113 | 15 | ||||||||||||
Fee revenues | — | 1 | nm | 1 | 1 | 0 | ||||||||||||||||
Total revenues | 67 | 58 | 16 | 131 | 114 | 15 | ||||||||||||||||
Loss and loss expenses | 29 | 29 | 0 | 62 | 50 | 24 | ||||||||||||||||
Underwriting expenses | 21 | 16 | 31 | 41 | 33 | 24 | ||||||||||||||||
Underwriting profit | $ | 17 | $ | 13 | 31 | $ | 28 | $ | 31 | (10) | ||||||||||||
Ratios as a percent of earned premiums: | Pt. Change | Pt. Change | ||||||||||||||||||||
Loss and loss expenses | 45.1 | % | 48.5 | % | (3.4) | 48.3 | % | 44.0 | % | 4.3 | ||||||||||||
Underwriting expenses | 31.0 | 29.1 | 1.9 | 31.4 | 29.3 | 2.1 | ||||||||||||||||
Combined ratio | 76.1 | % | 77.6 | % | (1.5) | 79.7 | % | 73.3 | % | 6.4 | ||||||||||||
% Change | % Change | |||||||||||||||||||||
Agency renewal written premiums | $ | 54 | $ | 50 | 8 | $ | 103 | $ | 98 | 5 | ||||||||||||
Agency new business written premiums | 28 | 17 | 65 | 54 | 33 | 64 | ||||||||||||||||
Other written premiums | (4) | (3) | (33) | (8) | (6) | (33) | ||||||||||||||||
Net written premiums | $ | 78 | $ | 64 | 22 | $ | 149 | $ | 125 | 19 | ||||||||||||
Ratios as a percent of earned premiums: | Pt. Change | Pt. Change | ||||||||||||||||||||
Current accident year before catastrophe losses | 50.8 | % | 56.9 | % | (6.1) | 53.1 | % | 55.8 | % | (2.7) | ||||||||||||
Current accident year catastrophe losses | 0.7 | 1.0 | (0.3) | 0.5 | 1.4 | (0.9) | ||||||||||||||||
Prior accident years before catastrophe losses | (6.2) | (9.6) | 3.4 | (5.2) | (13.3) | 8.1 | ||||||||||||||||
Prior accident years catastrophe losses | (0.2) | 0.2 | (0.4) | (0.1) | 0.1 | (0.2) | ||||||||||||||||
Loss and loss expense ratio | 45.1 | % | 48.5 | % | (3.4) | 48.3 | % | 44.0 | % | 4.3 | ||||||||||||
Current accident year combined ratio before catastrophe | 81.8 | % | 86.0 | % | (4.2) | 84.5 | % | 85.1 | % | (0.6) | ||||||||||||
- $14 million or 22% increase in second-quarter 2019 excess and surplus lines net written premiums, including higher renewal written premiums that benefited from rate increases averaging in the low-single-digit percent range. Nineteen percent increase in six-month net written premiums.
- $11 million increase in second-quarter new business written by agencies, reflecting more opportunities in the marketplace for insurance companies to obtain higher premium rates, plus our additional marketing efforts.
- 1.5 percentage-point improvement in the second-quarter 2019 combined ratio and an increase of 6.4 points for the six-month period, with the six-month increase primarily due to less favorable prior accident year reserve development.
- 6.4 percentage-point second-quarter 2019 benefit from favorable prior accident year reserve development of $5 million, compared with 9.4 points or $4 million for second-quarter 2018.
- 5.3 percentage-point six-month 2019 benefit from favorable prior accident year reserve development, compared with 13.2 points for the first six months of 2018.
Life Insurance Subsidiary Results | |||||||||||||||||||||||
(Dollars in millions) | Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||
2019 | 2018 | % Change | 2019 | 2018 | % Change | ||||||||||||||||||
Term life insurance | $ | 47 | $ | 44 | 7 | $ | 92 | $ | 85 | 8 | |||||||||||||
Universal life insurance | 10 | 9 | 11 | 20 | 18 | 11 | |||||||||||||||||
Other life insurance, annuity, and disability income products | 10 | 11 | (9) | 21 | 21 | 0 | |||||||||||||||||
Earned premiums | 67 | 64 | 5 | 133 | 124 | 7 | |||||||||||||||||
Investment income, net of expenses | 38 | 38 | 0 | 76 | 76 | 0 | |||||||||||||||||
Investment gains and losses, net | (1) | — | nm | (2) | — | nm | |||||||||||||||||
Fee revenues | 1 | 1 | 0 | 2 | 2 | 0 | |||||||||||||||||
Total revenues | 105 | 103 | 2 | 209 | 202 | 3 | |||||||||||||||||
Contract holders' benefits incurred | 73 | 62 | 18 | 143 | 125 | 14 | |||||||||||||||||
Underwriting expenses incurred | 22 | 19 | 16 | 44 | |||||||||||||||||||