Cincinnati Financial Reports First-Quarter 2018 Results - 25.04.18 - News

CINCINNATI, April 25, 2018

First-quarter 2018 net loss of $31 million, or 19 cents per share, compared with $201 million of net income, or $1.21 per share, in the first quarter of 2017, after recognizing a $156 million reduction in the fair value of equity securities still held that prior to 2018 would have been reported in other comprehensive income instead of net income.
$22 million increase in non-GAAP operating income* to $120 million, or 72 cents per share, compared with $98 million, or 59 cents per share, in the first quarter of last year.
$232 million decrease in first-quarter 2018 net income, reflecting the after-tax net effect of a $254 million decrease in net investment gains. Included in the $254 million decrease in net investment gains was a reduction of $98 million in net gains of securities sold, in addition to the $156 million noted above related to adopting a new accounting standard.
$48.42 book value per share at March 31, 2018, down $1.87 or 3.7 percent since year-end.
Negative 2.7 percent value creation ratio for the first three months of 2018, compared with positive 3.8 percent for the same period of 2017.

Financial Highlights

(Dollars in millions, except per share data)

Three months ended March 31,

2018

2017

% Change

ARIVA.DE Börsen-Geflüster

Kurse

Cincinnati Financial

119,92 $

0,00%

Revenue Data

Earned premiums

$

1,260

$

1,208

4

Investment income, net of expenses

150

149

1

Total revenues

1,224

1,523

(20)

Income Statement Data

Net income (loss)

$

(31)

$

201

nm

Investment gains and losses, after-tax

(151)

103

nm

Non-GAAP operating income*

$

120

$

98

22

Per Share Data (diluted)

Net income (loss)

$

(0.19)

$

1.21

nm

Investment gains and losses, after-tax

(0.91)

0.62

nm

Non-GAAP operating income*

$

0.72

$

0.59

22

Book value

$

48.42

$

44.07

10

Cash dividend declared

$

0.53

$

0.50

6

Diluted weighted average shares outstanding

164.0

166.5

(2)

*	The Definitions of Non-GAAP Information and Reconciliation to Comparable GAAP Measures defines and reconciles measures presented in this release that are not based on U.S. Generally Accepted Accounting Principles.
**	Forward-looking statements and related assumptions are subject to the risks outlined in the company's safe harbor statement.

Insurance Operations First-Quarter Highlights

97.9 percent first-quarter 2018 property casualty combined ratio, down from 99.7 percent for the first quarter of 2017.
2 percent growth in first-quarter net written premiums, reflecting price increases and premium growth initiatives.
$159 million first-quarter 2018 property casualty new business written premiums, up 4 percent. Agencies appointed since the beginning of 2017 contributed $14 million or 9 percent of total new business written premiums.
$13 million of life insurance subsidiary net income, up less than $1 million from first-quarter 2017, and 8 percent growth in first-quarter 2018 term life insurance earned premiums.

Investment and Balance Sheet Highlights

1 percent or $1 million increase in first-quarter 2018 pretax investment income, including an 8 percent increase for stock portfolio dividends and a 1 percent decrease for bond interest income.
Three-month decrease of 2 percent in fair value of total investments at March 31, 2018, including a 3 percent decrease for the stock portfolio and a decrease of 2 percent for the bond portfolio.
$2.494 billion parent company cash and marketable securities at March 31, 2018, down less than 1 percent from year-end 2017.

Property Casualty Underwriting Producing Steady Results

Steven J. Johnston, president and chief executive officer, commented: "Non-GAAP operating income started the year strong, increasing 22 percent compared with last year's first-quarter result. While our swing in net income may be surprising to some, it's mostly due to a change in accounting rules as required by the Financial Accounting Standards Board. This was the first quarter we had to recognize investment gains or losses on all equity securities we still hold as part of net income. In the past, these gains or losses would have been reported in other comprehensive income.

"Going forward, this accounting change will produce more volatility than we are used to seeing in our net income results. While this quarter it had a negative effect, if this rule would have been in place at the end of last year, our fourth quarter net income would have increased by $256 million.

"Turning to our insurance business, property casualty underwriting continued to produce steady results as our first quarter combined ratio improved 1.8 points to 97.9 percent compared with first-quarter 2017. While lower weather-related catastrophes helped the combined ratio this quarter by nearly 5 points, an increase in losses caused by weather, but not part of a named catastrophe event for the industry, contributed 6.4 points to the first quarter ratio this year compared with 2.9 points a year ago.

"Looking through to our results without the effects of those weather-related losses, our combined ratio decreased by half of a percentage point compared with first-quarter 2017. That decrease helps to show the steady, ongoing benefits of our initiatives to improve profitability through pricing precision and the use of predictive analytics."

Balancing Growth and Profitability

"Net written premiums for our property casualty business grew 2 percent in the quarter with growth in our personal lines business up 9 percent and our excess and surplus lines business up 15 percent, both compared to first-quarter 2017. Our commercial lines business experienced a small decline in net written premiums for the quarter due to a combination of underwriting discipline and timing of renewals for larger accounts.

"We've grown faster than the industry in each of the past 5 years. And, we believe we can sustain that trend as we continue to execute on our premium growth strategies. Already in 2018, we've appointed 46 new agencies, written $15 million in new business for our agencies' high net worth personal lines customers and grown net written premiums through Cincinnati Re^SM by 15 percent.

"We now have relationships with 1,724 premier independent agencies. We're confident in the abilities of our teams of associates – both in the field and at our headquarters – to fulfill the promise we make to deliver outstanding customer service, earning our agents' best business and balancing growth and profitability for the long-term."

Focusing on a Long-Term Investment Strategy

"Downward pressure in both the equity and bond markets contributed to a 3.7 percent decline in book value to $48.42 per share at March 31 compared with year-end 2017. Despite this movement, we estimate that our total portfolio still holds nearly $3 billion in appreciated value before taxes.

"We maintain a long-term perspective with our investment philosophy and aren't swayed by periodic market volatility. Our insurance business continues to provide cash that we invest in high-quality bonds and dividend-paying stocks. We are poised to further benefit from these purchases when the markets rebound."

Insurance Operations Highlights

Consolidated Property Casualty Insurance Results

(Dollars in millions)

Three months ended March 31,

2018

2017

% Change

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