10-QPeriod: Q2 FY2010

CINCINNATI FINANCIAL CORP Quarterly Report for Q2 Ended Jun 30, 2010

Filed July 29, 2010For Securities:CINF

Summary

Cincinnati Financial Corporation (CINF) reported a net income of $27 million for the second quarter of 2010, a significant improvement from a net loss of $19 million in the same period of 2009. For the first six months of 2010, net income reached $95 million, up from $17 million in the prior year. This turnaround was primarily driven by improved property casualty underwriting results and a notable increase in investment income. Total revenues remained relatively flat year-over-year for both the quarter and the six-month period. However, the company's balance sheet showed modest growth, with total assets increasing to $14.6 billion from $14.4 billion at year-end 2009. Shareholders' equity saw a slight decrease to $4.737 billion from $4.760 billion, resulting in a marginal decline in book value per share. The company continued to return value to shareholders through dividends, with cash dividends declared increasing slightly in the first half of 2010.

Financial Statements
Beta

Key Highlights

  • 1Net income of $27 million for Q2 2010, a substantial turnaround from a $19 million loss in Q2 2009.
  • 2Year-to-date net income of $95 million, a significant increase from $17 million in the first six months of 2009, driven by improved underwriting and investment income.
  • 3Earned premiums remained stable year-over-year, with a slight decrease of 1% for the quarter and 2% for the six-month period.
  • 4Investment income, net of expenses, increased by 9% for the quarter and 7% for the six-month period.
  • 5Total assets grew to $14.6 billion as of June 30, 2010, from $14.4 billion at December 31, 2009.
  • 6Shareholders' equity slightly decreased to $4.737 billion from $4.760 billion at year-end 2009, with book value per share declining marginally.
  • 7The company declared cash dividends totaling $0.79 per share for the first six months of 2010, a 1% increase year-over-year.

Frequently Asked Questions

Cincinnati Financial Corporation reported a net income of $27 million for the second quarter of 2010, a significant improvement from a net loss of $19 million in the same period of 2009. For the first six months of 2010, net income was $95 million, up from $17 million in the prior year. This improvement was primarily driven by better underwriting results in property casualty insurance and increased investment income.

The investment segment contributed positively to the company's results. Investment income, net of expenses, increased by 9% for the quarter and 7% for the six-month period. The total investment portfolio value grew to $10.95 billion at June 30, 2010, from $10.56 billion at year-end 2009. However, realized investment losses were noted, largely due to other-than-temporary impairment charges and changes in the fair value of securities with embedded derivatives.

As of June 30, 2010, Cincinnati Financial's total assets stood at $14.6 billion, a slight increase from $14.4 billion at December 31, 2009. Shareholders' equity decreased marginally to $4.737 billion from $4.760 billion at year-end 2009, resulting in a slight decline in book value per share to $29.13 from $29.25. The company maintained a stable debt-to-capital ratio of 15.0%.

Earned premiums remained relatively stable, showing a slight decrease of 1% for the quarter and 2% for the six-month period. The property casualty underwriting results showed improvement, with the combined ratio for the first six months of 2010 at 105.2% compared to 112.1% in the prior year. However, the commercial lines segment still reported an underwriting loss, though reduced, primarily due to higher catastrophe losses and prior accident year reserve development.