10-QPeriod: Q2 FY2011

CINCINNATI FINANCIAL CORP Quarterly Report for Q2 Ended Jun 30, 2011

Filed July 27, 2011For Securities:CINF

Summary

Cincinnati Financial Corporation (CINF) reported a net loss of $49 million for the second quarter of 2011, a significant swing from a net income of $27 million in the same period of 2010. This loss was primarily driven by substantial catastrophe losses, particularly weather-related events, which significantly impacted the property casualty segments. Earned premiums showed a modest increase of 1% year-over-year to $773 million for the quarter, indicating some resilience in revenue generation. The company's investment portfolio remains a strong contributor, with net realized investment gains of $67 million in the quarter, up from a net loss of $23 million in the prior year's second quarter. This gain was largely driven by strategic sales of equity securities and favorable market movements in fixed-maturity securities. Despite the underwriting challenges, the company maintained its financial strength, with shareholders' equity growing slightly to $5.06 billion, and a stable debt-to-total-capital ratio.

Financial Highlights

32 data points
Beta

Revenue

$975.00M

Net Income

-$50.00M

-5.1% Net Margin

EPS (Diluted)

$-0.31

Total Assets

$15.70B

Cash & Equivalents

$313.00M

Free Cash Flow

-$55.00M

Financial Statements
Beta
Revenue$975.00M
Interest Expense$14.00M
Net Income-$50.00M
EPS (Basic)$-0.31
EPS (Diluted)$-0.31
Shares Outstanding (Basic)163.07M
Shares Outstanding (Diluted)163.07M

Key Highlights

  • 1Net loss of $49 million ($0.30 per diluted share) in Q2 2011, compared to net income of $27 million ($0.17 per diluted share) in Q2 2010.
  • 2Property casualty underwriting loss increased significantly due to $290 million in catastrophe losses (net of reinsurance), primarily weather-related.
  • 3Earned premiums increased slightly to $773 million in Q2 2011, up from $768 million in Q2 2010.
  • 4Net realized investment gains were $67 million in Q2 2011, a significant improvement from a net realized loss of $23 million in Q2 2010.
  • 5Shareholders' equity increased slightly to $5.06 billion as of June 30, 2011, from $5.03 billion as of December 31, 2010.
  • 6The company maintained strong insurer financial strength ratings from major agencies.

Frequently Asked Questions

The primary driver for the net loss of $49 million in Q2 2011, compared to a net income of $27 million in Q2 2010, was a substantial increase in catastrophe losses, particularly weather-related events. These losses significantly impacted the underwriting results of the property casualty segments, leading to a higher underwriting loss for the quarter.

The investment portfolio performed positively, generating net realized investment gains of $67 million in Q2 2011, a substantial improvement from a net realized loss of $23 million in the same period of 2010. This was driven by gains from investment sales and favorable movements in fixed-maturity securities, offsetting some of the underwriting weakness.

The company experienced significant catastrophe losses in Q2 2011, leading to a substantial underwriting loss. The combined ratio for property casualty operations was 136.6% for the quarter. Management's strategy focuses on improving insurance profitability through precise pricing using predictive analytics and driving premium growth, aiming to mitigate future volatility. However, the current quarter's results highlight the inherent risks associated with weather-related events.

Shareholders' equity saw a modest increase to $5.06 billion as of June 30, 2011, and the debt-to-total-capital ratio remained stable. The company also maintained its strong insurer financial strength ratings from key agencies (A.M. Best, Fitch, Moody's, S&P), indicating continued financial stability despite the quarterly loss.