Cincinnati Financial’s Q2 Profit Up 58% Over Last Year’s

July 30, 2003

Multi-line insurer Cincinnati Financial Corp. reported second-quarter net income of $84 million, or 52 cents per diluted share, compared with $35 million, or 21 cents per share, in the second quarter of 2002. These figures were a second-quarter record for the company.

Net income per share included net realized investment gains of 1 cent in 2003 versus net realized investment losses of 4 cents in the comparable 2002 period. Revenues from pre-tax investment income, the primary source of profits, rose 4.8 percent to $114 million. Total second-quarter revenues advanced $95 million or 13.5 percent, to $798 million.

CEO John J. Schiff attributed the success to premium growth, higher investment income and improved non-catastrophe underwriting in commercial lines.

For the six months ended June 30, 2003, net income rose 28.1 percent to $141 million, or 87 cents per share. Operating income, which excludes realized investment gains and losses, rose 47.5 percent to $180 million, or $1.11 per share.

Total revenues advanced $115 million to $1.505 billion, up 8.3 percent over last year’s first half. Revenues from pre-tax investment income reached $230 million, up 5.6 percent from $218 million in last year’s first six months.

Six-month catastrophe losses, net of reinsurance, totaled $49 million, contributing 3.8 percentage points to the GAAP combined ratio of 96.8 percent and reducing after-tax earnings by 20 cents per share. For the first half of 2002, catastrophe losses were $62 million, contributing 5.4 percentage points to the combined ratio of 103.6 percent and reducing after-tax earnings by 24 cents per share.

Statutory net written premiums of the property casualty insurance affiliates—the Cincinnati Insurance Co., the Cincinnati Indemnity Co. and the Cincinnati Casualty Co.—rose 16 percent to $726 million compared with $626 million in last year’s second quarter. Written premiums for the second quarter of 2003 included an additional $18 million, which accounted for 2.5 percentage points of the growth, related to the company’s estimation process for matching written and earned premiums to policy effective dates.

The contribution to pre-tax earnings from property casualty underwriting was $11 million. On a GAAP basis, the second-quarter combined ratio was 98.4 percent, or 91.3 percent excluding catastrophe losses, comparing favorably with the 2002 second-quarter combined ratio of 108.1 percent, or 100 percent excluding catastrophes.

Net written premiums for commercial lines of insurance rose 15.9 percent to $507 million, accounting for 69.8 percent of the company’s total second-quarter premiums. New commercial business increased 9 percent to $71 million for the quarter. The GAAP combined ratio improved 11.9 percentage points to 91.4 percent. Excluding catastrophe losses, the ratio was 88.5 percent, showing 9.2 percentage points of improvement over last year’s second quarter.

Net written premiums for the personal lines segment increased 16.4 percent to $219 million. New personal lines business decreased 5.1 percent for the second quarter. On a GAAP basis, the second-quarter combined ratio was 116.1 percent versus 120.2 percent in 2002. Excluding catastrophes, the ratio was 98.3 percent compared with 105.7 percent in last year’s second quarter.

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