10-QPeriod: Q3 FY2010

CINCINNATI FINANCIAL CORP Quarterly Report for Q3 Ended Sep 30, 2010

Filed October 27, 2010For Securities:CINF

Summary

Cincinnati Financial Corporation (CINF) reported solid financial results for the nine months ended September 30, 2010. The company's total revenues increased by 2% to $2.836 billion, primarily driven by a 5% rise in net investment income and a significant 56% increase in realized investment gains. Net income for the period saw a substantial improvement, rising by 34% to $251 million, or $1.53 per diluted share, compared to the same period in 2009. This growth was supported by improved property casualty underwriting results and increased investment income, which offset slightly lower earned premiums. The balance sheet remains strong, with total assets growing to $15.07 billion and shareholders' equity increasing to $5.01 billion. The company's debt-to-total-capital ratio improved to 14.3%, indicating a healthy capital structure. CINF also demonstrated its commitment to shareholders by increasing its cash dividend for the 50th consecutive year, with a dividend of $0.40 per share declared for the fourth quarter. The company continues to focus on its long-term strategies of managing capital effectively, improving insurance profitability, and driving premium growth.

Financial Highlights

30 data points
Beta

Revenue

$1.07B

Net Income

$156.00M

14.6% Net Margin

EPS (Diluted)

$0.95

Total Assets

$15.07B

Cash & Equivalents

$445.00M

Free Cash Flow

$161.00M

Financial Statements
Beta
Revenue$1.07B
Interest Expense$13.00M
Net Income$156.00M
EPS (Basic)$0.95
EPS (Diluted)$0.95

Key Highlights

  • 1Total revenues increased to $2.836 billion for the first nine months of 2010, up 2% from the prior year.
  • 2Net income for the nine-month period rose significantly by 34% to $251 million ($1.53 per diluted share) compared to $187 million ($1.15 per diluted share) in the same period of 2009.
  • 3Realized investment gains, net, increased by 56% to $140 million for the nine months ended September 30, 2010.
  • 4Shareholders' equity grew to $5.01 billion, and book value per share increased to $30.80 as of September 30, 2010.
  • 5The debt-to-total-capital ratio improved to 14.3% from 15.0% at year-end 2009.
  • 6The company achieved its 50th consecutive year of increasing cash dividends, declaring $0.40 per share for the fourth quarter.
  • 7Property casualty insurance operations saw an underwriting loss of $103 million for the nine months, an improvement from $141 million in the prior year, driven by favorable reserve development and lower catastrophe losses.

Frequently Asked Questions

The significant increase in net income was primarily driven by a $32 million increase in realized investment gains, a $25 million improvement in property casualty underwriting results, and a $10 million increase in investment income, all on an after-tax basis, compared to the same period in 2009.

The investment portfolio showed strong performance. Total investment income, net of expenses, increased by 5% to $388 million for the nine months ended September 30, 2010. Realized investment gains also saw a substantial increase of 56% to $140 million, largely due to the sale of Verisk Analytics Inc. common stock.

The company aims for premium growth to exceed industry averages over five-year periods and targets a GAAP combined ratio below 100%. For the first nine months of 2010, property casualty net written premiums increased slightly, while the GAAP combined ratio was 104.7%, impacted by catastrophe losses and prior accident year development. Management is focused on disciplined underwriting and pricing to improve profitability.

Cincinnati Financial maintains a strong capital position, with shareholders' equity at $5.01 billion and an improved debt-to-total-capital ratio of 14.3%. The company continues its long-standing tradition of returning capital to shareholders through dividends, marking its 50th consecutive year of dividend increases. Additionally, it repurchased shares to offset those issued through equity compensation plans.