Cincinnati Financial(US:CINF)2023-02-22 16:00Insurance Segments Performance - The personal lines insurance segment contributed net earned premiums of $1.689 billion in 2022, accounting for 25.8% of total revenues, with a profit before income taxes of $18 million[140]. - Personal lines net earned premiums increased by 10% in 2022 and 5% in 2021[140]. - The commercial lines insurance segment generated net earned premiums of $4,024 million, accounting for 61.4% of total revenues, with a 10% increase from the previous year[165]. - The personal lines insurance segment reported net written premiums of $1,831 million, representing a 14.9% increase from $1,594 million in 2021[162]. - The excess and surplus lines segment contributed net earned premiums of $485 million, which is 7.4% of total revenues, with a 22% increase in both 2022 and 2021[175]. - Life insurance segment revenues were primarily driven by term life insurance, which accounted for $226 million in premiums, a 3.7% increase from the previous year[180]. - Net written premiums for Cincinnati Re increased to $585 million in 2022, up from $461 million in 2021, with approximately 31% attributed to property exposures and 53% to casualty exposures[194]. - Net written premiums for Cincinnati Global totaled $230 million in 2022, up from $187 million in 2021, with 61% classified as direct and facultative[255]. Market Presence and Strategy - The company aims to attract high-quality independent insurance agencies, providing training and support to enhance agency-client relationships[157]. - Approximately 85% of agencies offer some or all of the standard market commercial insurance products, indicating a strong market presence[166]. - The company operates in 42 states for excess and surplus lines, enhancing its market reach and service capabilities[176]. - At year-end 2022, personal lines insurance products were marketed through 2,076 agency locations, covering 73% of total agency locations[172]. - The 10 highest volume personal lines states accounted for 64.5% of earned premiums in 2022, down from 64.8% in 2021, indicating progress towards geographic diversification[201]. - The 10 highest volume commercial lines states generated 56.2% of earned premiums in 2022, a slight decrease from 56.7% in 2021[195]. Financial Performance and Ratios - The company reported a debt-to-total-capital ratio of 7.4% at year-end 2022, with long-term debt totaling $789 million[147]. - The company maintains a risk-based capital to authorized control level risk-based capital ratio of 5.5 at year-end 2022[148]. - The total net written premiums reached $7,646 million in 2022, a 12% increase from $6,825 million in 2021[162]. - The company reported a net loss of $486 million in 2022, a decrease of $3.432 billion compared to net income in 2021, which included a $3.062 billion reduction in net investment gains after tax[59]. - The fair value of the investment portfolio decreased to $21.973 billion at year-end 2022 from $24.337 billion in 2021, primarily due to a decline in equity markets and an increase in interest rates[214]. Investment Strategy and Portfolio - The investment department adheres to risk guidelines set by the investment policy, ensuring a structured approach to asset allocation[186]. - The company’s investment strategy focuses on a buy-and-hold approach to manage interest rate and credit risks[216]. - At year-end 2022, the net unrealized investment gains in the equity portfolio amounted to $5.547 billion[220]. - The weighted average yield-to-amortized cost of the fixed-maturity portfolio was 4.22% at December 31, 2022, up from 4.02% in 2021[217]. - The taxable fixed-maturity portfolio included $234 million of commercial mortgage-backed securities with an average rating of Aa2/AA- at year-end 2022[218]. - At December 31, 2022, the investment-grade fixed-maturity securities represented 80.1% of the portfolio, while noninvestment-grade fixed-maturity securities accounted for 4.2%[249]. - The company has $3.833 billion of tax-exempt fixed-maturity securities with an average rating of Aa2/AA, well-diversified among approximately 1,700 municipal bond issuers[251]. Risk Management and Challenges - The company’s risk management framework includes an enterprise risk management committee overseeing risk activities[230]. - Increased competition in the insurance market could lead to fewer submissions, lower premium rates, and less favorable policy terms, adversely affecting underwriting margins[247]. - The company is exposed to risks from global climate change, which may lead to higher overall losses and increased reinsurance costs[244]. - The company continues to study emerging risks, including climate change risk, and its potential financial effects on operations and insured entities[263]. Claims and Legal Matters - The company emphasizes a claims philosophy focused on prompt payment and preventing false claims, enhancing financial strength for future obligations[155]. - Legal expenses for business interruption claims are influenced by various factors, including attorney fees and litigation trends[64]. - The company noted that future losses may be reduced due to factors such as decreased miles driven and reduced sales and payrolls for businesses[66]. - Incurred losses and expenses related to the pandemic for full-year 2020 totaled $85 million, including $30 million for legal expenses, $19 million for Cincinnati Re losses, and $12 million for Cincinnati Global losses[64]. - Cincinnati Re's estimated share of pandemic-related business interruption losses is approximately half of its total losses, with the remainder primarily from professional liability treaties[65].