Cincinnati Financial(US:CINF)2022-02-23 16:00Financial Ratios and Capital Strength - The debt-to-total-capital ratio was 6.0% at year-end 2021, with long-term debt totaling $789 million, up $1 million from 2020[39] - The risk-based capital (RBC) ratio for property casualty insurance was 0.9-to-1 at year-end 2021, compared to the industry average of 0.7-to-1[41] - Statutory capital and surplus for the standard market property casualty insurance subsidiary was $7,247 million at year-end 2021, up from $5,838 million in 2020[41] - The life statutory adjusted risk-based surplus to liabilities ratio was 7.4% at year-end 2021, indicating strong capital strength for the life insurance subsidiary[41] - Cincinnati Financial's commercial lines premium trends are significantly influenced by the construction industry, with an estimated 39% of general liability premiums coming from this sector[87] Revenue and Premiums - In 2021, Cincinnati Financial Corporation reported total revenues of $6.825 billion, an increase from $6.192 billion in 2020, representing a growth of 10.2%[69] - The commercial lines insurance segment generated net earned premiums of $3.674 billion, accounting for 38.2% of consolidated total revenues, with a profit before income taxes of $598 million[73] - Personal lines insurance contributed net earned premiums of $1.594 billion, representing 16.0% of total revenues, with a profit before income taxes of $97 million[88] - The commercial lines insurance segment saw a 6% increase in net earned premiums in 2021, following a 5% increase in 2020[73] - The personal lines insurance segment's net earned premiums rose by 5% in 2021, following a 4% increase in 2020[88] Agency and Market Presence - The company employed 5,166 associates at the end of 2021, with a voluntary turnover rate increasing to approximately 10%[59] - The top 10 states accounted for 52.1% of consolidated property casualty earned premium volume in 2021, with Ohio being the largest at $889 million[46] - At year-end 2021, Cincinnati Financial marketed personal lines insurance products through approximately 73% of its agency reporting locations[90] - Approximately 80% of the 1,921 property casualty agency relationships offered Cincinnati Life products to their clients by the end of 2021[112] Investment Portfolio - The fair value of the investment portfolio increased to $24.337 billion at year-end 2021, up from $21.194 billion in 2020, reflecting unrealized gains primarily due to rising equity markets[118] - Total investment portfolio at year-end 2021 was $24.337 billion, with fixed-maturity investments comprising 51.0% and equity investments 22.6%[119] - Tax-exempt fixed-maturity securities totaled $4.164 billion, representing 17.1% of the total portfolio, with an average rating of Aa2/AA[128] - Net unrealized investment gains in the equity portfolio at year-end 2021 amounted to $7.194 billion, indicating significant appreciation[131] - The weighted average yield-to-amortized cost for fixed-maturity securities was 4.02% at year-end 2021, slightly down from 4.12% in 2020[126] Regulatory and Risk Management - Cincinnati Financial Corporation's domestic insurance subsidiaries must provide a 10-day advance notice to the insurance commissioner before paying any dividends, with a maximum payout of the greater of 10% of statutory capital and surplus or 100% of statutory net income for the prior year[141] - The company is subject to risk-based capital (RBC) requirements, which serve as an early warning tool for identifying undercapitalized insurers, emphasizing the importance of maintaining adequate capital levels[143] - The company operates under the regulatory oversight of the Ohio Department of Insurance, which imposes restrictions on dividend payments to ensure solvency and liquidity[215] - Cincinnati Financial Corporation's risk management framework includes a committee responsible for overseeing risk activities and providing quarterly reports on risk metrics to senior management[150] Challenges and Emerging Risks - The company faces challenges in hiring and retaining qualified associates due to low unemployment rates and labor shortages in many markets[219] - Changes in industry practices and regulations could adversely affect the company's ability to obtain adequate rates for covered risks and may lead to increased claims[220] - Future changes in tax laws could materially impact the company's investment income and overall financial condition[222] - The company continues to study emerging risks, including climate change, which could impact the credit quality of its investment portfolios and lead to increased losses without corresponding premium increases[153] Technology and Cybersecurity - Technology enhancements have improved service access for agencies and policyholders, reducing costs and increasing efficiency[50] - The company relies heavily on technology for critical business functions, and any system failures could significantly impair operations and customer relationships[226] - Cybersecurity threats pose a risk to the company's data security, potentially leading to operational disruptions and increased compliance costs[230] - A breach of security could result in unauthorized access to data, leading to litigation, fines, and reputational damage[231]