10-QPeriod: Q2 FY2012

CINCINNATI FINANCIAL CORP Quarterly Report for Q2 Ended Jun 30, 2012

Filed July 26, 2012For Securities:CINF

Summary

Cincinnati Financial Corporation (CINF) reported a net income of $32 million for the second quarter of 2012, a significant improvement from a net loss of $50 million in the same period of 2011. This turnaround was primarily driven by stronger property casualty underwriting income, which saw a substantial increase of $124 million after taxes, largely attributed to lower catastrophe losses and improved underlying underwriting results. For the first six months of 2012, net income reached $118 million, a considerable rise from $11 million in the prior year, also benefiting from improved property casualty results and reduced catastrophe losses. The company's total revenues grew by 5% for the quarter and 5% for the first six months, driven by a notable 13% increase in earned premiums for the quarter and 10% for the six-month period, indicating strong premium growth across its insurance segments. Shareholders' equity also saw a healthy increase of 2% in the first half of the year, pushing book value per share to $31.66. CINF maintained a solid financial position with a debt-to-total-capital ratio of 14.8% at June 30, 2012.

Financial Highlights

34 data points
Beta

Revenue

$1.02B

Net Income

$32.00M

3.1% Net Margin

EPS (Diluted)

$0.20

Total Assets

$16.09B

Cash & Equivalents

$263.00M

Free Cash Flow

$115.00M

Financial Statements
Beta
Revenue$1.02B
Interest Expense$13.00M
Net Income$32.00M
EPS (Basic)$0.20
EPS (Diluted)$0.20
Shares Outstanding (Basic)162.43M
Shares Outstanding (Diluted)163.51M

Key Highlights

  • 1Net income for Q2 2012 was $32 million, a strong recovery from a net loss of $50 million in Q2 2011.
  • 2Earned premiums increased significantly, up 13% for the quarter and 10% for the first six months, signaling robust growth in the core insurance business.
  • 3Property casualty underwriting income showed substantial improvement, driven by a significant reduction in catastrophe losses and better underlying pricing.
  • 4Shareholders' equity grew by 2% in the first six months of 2012, resulting in a book value per share of $31.66.
  • 5Total assets increased by 3% to $16.09 billion as of June 30, 2012, driven by growth in invested assets.
  • 6The company maintained a conservative capital structure with a debt-to-total-capital ratio of 14.8%.
  • 7Investment income remained stable, with pretax investment income of $132 million for both Q2 2012 and Q2 2011.

Frequently Asked Questions

The primary driver of the improved net income was the significant turnaround in the property casualty underwriting segment. This was largely due to a substantial decrease in catastrophe losses compared to the prior year's quarter and underlying improvements in pricing and loss experience.

Cincinnati Financial Corporation experienced strong premium growth. Earned premiums increased by 13% for the three months ended June 30, 2012, and by 10% for the six months ended June 30, 2012, compared to the respective periods in 2011, indicating successful execution of its premium growth strategies.

The company maintains a strong financial position. Shareholders' equity increased by 2% in the first half of 2012, reaching $5.14 billion. The debt-to-total-capital ratio remained conservative at 14.8% as of June 30, 2012, indicating a well-managed capital structure.

The investment portfolio performed steadily. Pretax investment income remained flat at $132 million for the second quarter of 2012 compared to the prior year. The fair value of the investment portfolio increased to $12.16 billion, driven by both purchases and positive market valuation changes.