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1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1993 Commission file number
0-4604
CINCINNATI FINANCIAL CORPORATION
-------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 31-0746871
-------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6200 S. Gilmore Road, Fairfield, Ohio 45014-5141
- ----------------------------------------- ---------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (513)870-2000
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Exchange on Which
Title of Each Class Registered
------------------- -----------------
$2.00 Par, Common Over The Counter
5-1/2% Convertible Senior Debentures Due 2002 Over The Counter
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
The aggregate market value of voting stock held by nonaffiliates of
Cincinnati Financial Corporation was $2,189,596,088 as of March 1, 1994.
As of March 1, 1994, there were 50,328,235 shares of common stock
outstanding.
Documents Incorporated by Reference
-----------------------------------
Annual Report to Shareholders for year ended December 31, 1993 (in part)
into Parts I, II and IV and Registrant's Proxy Statement dated February 26,
1994 into Parts I, III and IV.
2
PART I
ITEM 1. BUSINESS
--------
Cincinnati Financial Corporation ("CFC") was incorporated on
September 20, 1968 under the laws of the State of Delaware. On April 4, 1992,
the shareholders voted to adopt an Agreement of Merger by means of which the
reincorporation of the Corporation from the State of Delaware to the State of
Ohio was accomplished. CFC owns 100% of The Cincinnati Insurance Company
("CIC") and 100% of CFC Investment Company ("CFC-I"). The principal purpose of
CFC is to be a holding company for CIC and CFC-I and in addition for the
purpose of acquiring other companies.
CIC, incorporated in August, 1950, is an insurance carrier presently
licensed to conduct multiple line underwriting in accordance with Section
3941.02 of the Revised Code of Ohio. This includes the sale of fire,
automobile, casualty, bonds, and all related forms of property and casualty
insurance in 50 states and the District of Columbia. CIC is not authorized to
write any other forms of insurance. CIC is in a highly competitive industry
and competes in varying degrees with a large number of stock and mutual
companies. CIC also owns 100% of the stock of the following insurance
companies.
1. The Cincinnati Life Insurance Company ("CLIC") incorporated in 1987 under
the laws of Ohio for the purpose of acquiring the business of Inter-Ocean
and The Life Insurance Company of Cincinnati. CLIC acquired The Life
Insurance Company of Cincinnati and Inter-Ocean Insurance Company on
February 1, 1988. CLIC is engaged in the sale of life insurance and
accident and health insurance in 45 states and the District of Columbia.
2. The Cincinnati Casualty Company ("CCC") (formerly the Queen City Indemnity
Company), incorporated in 1972 under the laws of Ohio, is engaged in the
fire and casualty insurance business on a direct billing basis in 26
states. The business of CIC and CCC is conducted separately, and there are
no plans for combining the business of said companies.
3. The Cincinnati Indemnity Company ("CID"), incorporated in 1988 under the
laws of Ohio, is engaged in the writing of nonpreferred personal and
casualty lines of insurance in 20 states. The business of CIC and CID is
conducted separately, and there are no plans for combining the business of
said companies.
CFC-I, organized in 1970, owns certain real estate in the Greater
Cincinnati area and is in the business of leasing or financing various items,
principally automobiles, trucks, computer equipment, machine tools,
construction equipment, and office equipment.
Industry segment information for revenue, operating profits, and
identifiable assets is included on page 30 of the Company's Annual Report to
Shareholders and is incorporated herein by reference (see Exhibit 13 to this
filing).
3
As more fully discussed in pages 7 and 9 to 12 in the Company's Annual
Report to Shareholders, incorporated herein by reference (see Exhibit 13 to
this filing), the company sells insurance primarily in the Midwest and
Southeast through a network of a limited number (965 in 23 states at December
31, 1993) of selectively appointed independent agents, most of whom own stock
in the Company. Gross written premiums by property/ casualty lines for 1993
are shown in the table on page 9 of the Annual Report to Shareholders (see
Exhibit 13 to this filing). As indicated therein, the Company's mix of
property/casualty business did not change significantly in 1993. Life and
accident and health insurance (which constituted only 4% of the Company's
premium income for 1993) is also sold primarily through property/casualty
agencies and did not change significantly in 1993.
The consolidated financial statements include the estimated liability
for unpaid losses and loss adjustment expenses ("LAE") of the Company's
property/casualty ("P/C") insurance subsidiaries. The subsidiaries write
property and casualty insurance in 50 states and the District of Columbia. The
liabilities for losses and LAE are determined using case-basis evaluations and
statistical projections and represent estimates of the ultimate net cost of all
unpaid losses and LAE incurred through December 31 of each year. These
estimates are subject to the effect of trends in future claim severity and
frequency. These estimates are continually reviewed; and as experience
develops and new information becomes known, the liability is adjusted as
necessary. Such adjustments, if any, are reflected in current operations.
The Company does not discount any of its property/casualty liabilities
for unpaid losses and unpaid loss adjustment expenses.
The accompanying tables present an analysis of losses and LAE. The
following table provides a reconciliation of beginning and ending liability
balances for 1993, 1992, and 1991. The next table shows the development of the
estimated liability for the ten years prior to 1993.
4
RECONCILIATION OF NET LIABILITY FOR LOSSES AND LOSS ADJUSTMENT EXPENSES
(000 omitted)
1993 1992 1991
---- ---- ----
Liability for losses and LAE at
beginning of year (net of
reinsurance recoverable) $1,137,833 $ 986,209 $ 832,581
---------- ---------- ----------
Provision for losses and LAE for
claims occurring in the
current year 828,978 752,993 603,635
Increase (decrease) in estimated
losses and LAE for claims
occurring in prior years (39,769) (30,351) 36,456
------- ------- ------
789,209 722,642 640,091
------- ------- -------
Losses and LAE payments for
claims occurring during:
The current year 323,616 291,508 254,205
Prior years 310,065 279,510 232,258
------- ------- -------
633,681 571,018 486,463
------- ------- -------
Liability for losses and LAE at
end of year (net of reinsur-
ance recoverable) $1,293,361 $1,137,833 $ 986,209
========== ========== ==========
Gross amount (per financial
statement Schedule V included
herein) $1,365,052 $1,200,182 $1,056,923
Less reinsurance recoverable 71,691 62,349 70,714
------ ------ ------
Net amount $1,293,361 $1,137,833 $ 986,209
========== ========== ==========
The reconciliation shows a 1993 recognition of $39,769,000 redundancy in
the December 31, 1992 liability. This redundancy is due in part to the effects
of settling case reserves established in prior years for less than expected and
also in part to the over estimation of the severity of IBNR losses. Average
severity continues to increase primarily because of increases in medical costs
related to workers' compensation and auto liability insurance. Also, litigation
expenses for recent court cases on pending liability claims continue to be very
costly; and judgments continue to be high and difficult to estimate.
The anticipated effect of inflation is implicitly considered when
estimating liabilities for losses and LAE. While anticipated price increases
due to inflation are considered in estimating the ultimate claim costs, the
increase in average severities of claims is caused by a number of factors that
vary with the individual type of policy written. Future average severities are
projected based on historical trends adjusted for anticipated changes in
underwriting standards, policy provisions, and general economic trends. These
trends are monitored based on actual development and are modified if necessary.
The limits on risks retained by the Company vary by type of policy, and
risks in excess of the retention limits are reinsured. Because of the growth in
the Company's capacity to underwrite risks and
5
reinsurance market conditions, in 1987, the Company raised its retention
limits from $500,000 to $750,000 for casualty lines of insurance. In 1989, the
casualty and property lines retention limits were further raised to $1,000,000.
There are no differences between the liability reported in the
accompanying consolidated financial statements in accordance with generally
accepted accounting principles ("GAAP") and that reported in the annual
statement filed with state insurance departments in accordance with statutory
accounting practices ("SAP").
ANALYSIS OF LOSS AND LOSS ADJUSTMENT EXPENSE DEVELOPMENT
(Millions of Dollars)
Year Ended December 31 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993
- ---------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Net Liability for Unpaid
Losses and Loss
Adjustment Expenses $184 $212 $272 $377 $534 $631 $742 $833 $986 $1,138 $1,293
Net Liability Reestimated
as of:
One Year Later 187 229 344 444 548 671 751 869 956 1,098
Two Years Later 197 266 382 460 584 634 747 816 928
Three Years Later 210 279 382 480 544 622 696 795
Four Years Later 217 284 383 452 535 596 676
Five Years Later 222 280 370 447 523 580
Six Years Later 218 273 370 443 508
Seven Years Later 215 272 367 429
Eight Years Later 214 274 364
Nine Years Later 217 275
Ten Years Later 218
Net Cumulative Redundancy
(Deficiency) $(34) $(63) $(92) $(52) $ 26 $ 51 $ 66 $ 38 $ 58 $ 40
==== ==== ==== ==== ==== ==== ==== ==== ==== ======
Net Cumulative Amount of
Liability Paid
Through:
One Year Later $81 $ 99 $137 $153 $178 $204 $238 $232 $280 $ 310
Two Years Later 124 159 217 247 292 321 356 397 440
Three Years Later 156 198 266 313 362 390 446 493
Four Years Later 175 220 300 351 398 441 497
Five Years Later 185 237 316 367 427 467
Six Years Later 193 245 324 387 441
Seven Years Later 196 247 338 394
Eight Years Later 198 253 340
Nine Years Later 202 255
Ten Years Later 203
Gross Liability--End of Year $1,200 $1,365
Reinsurance Recoverable 62 72
-- --
Net Liability--End of Year $1,138 $1,293
====== ======
Gross Reestimated Liability--Latest $1,160
Reestimated Recoverable--Latest 62
--
Net Reestimated Liability--Latest $1,098
======
Gross Cumulative Redundancy $ 40
======
The table above presents the development of balance sheet liabilities
for 1983 through 1993. The top line of the table shows the
6
estimated liability for unpaid losses and LAE recorded at the balance sheet
date for each of the indicated years. This liability represents the estimated
amount of losses and LAE for claims arising in all prior years that are
unpaid at the balance sheet date, including losses that had been incurred but
not yet reported to the Company. The upper portion of the table shows the
reestimated amount of the previously recorded liability based on experience as
of the end of each succeeding year. The estimate is increased or decreased as
more information becomes known about the frequency and severity of claims for
individual years.
The "cumulative redundancy (deficiency)" represents the aggregate
change in the estimates over all prior years. For example, the 1987 liability
has developed a $26,000,000 redundancy over six years and has been reflected in
income over the six years. The effects on income of the past three years of
changes in estimates of the liabilities for losses and LAE for all accident
years is shown in the reconciliation table.
The lower section of the table shows the cumulative amount paid with
respect to the previously recorded liability as of the end of each succeeding
year. For example, as of December 31, 1992, the Company had paid $441,000,000
of the currently estimated $508,000,000 of losses and LAE that have been
incurred as of the end of 1987; thus an estimated $67,000,000 of losses
incurred as of the end of 1987 remain unpaid as of the current financial
statement date.
In evaluating this information, it should be noted that each amount
includes the effects of all changes in amounts for prior periods. For example,
the amount of deficiency or redundancy related to losses settled in 1992, but
incurred in 1987, will be included in the cumulative deficiency or redundancy
amount for 1987 and each subsequent year. This table does not present accident
or policy year development data which readers may be more accustomed to
analyzing. Conditions and trends that have affected development of the
liability in the past may not necessarily occur in the future. Accordingly, it
may not be appropriate to extrapolate future redundancies or deficiencies based
on this table.
The Company limits the maximum net loss that can arise by large
risks or risks concentrated in areas of exposure by reinsuring (ceding) with
other insurers or reinsurers. Related thereto, the Company's retention levels
were last increased from $750,000 to $1,000,000 during 1989. Management does
not presently intend to raise such retention levels in 1994. The Company
reinsures with only financially sound companies. The composition of its
reinsurers has not changed, and the Company has not experienced any
uncollectible reinsurance amounts or coverage disputes with its reinsurers in
more than ten years.
Information concerning the Company's investment strategy and philosophy
is contained in page 32 of the Annual Report to Shareholders, incorporated
herein by reference (see Exhibit 13 to this filing). The Company's primary
strategy is to maintain liquidity to meet both its immediate and long-range
insurance obligations through the purchase and maintenance of medium-risk fixed
maturity and equity securities, while earning optimal returns on medium-risk
equity securities which offer growing dividends and capital appreciation. The
Company usually holds these securities to maturity unless there is a change in
credit risk or the securities are called by the issuer. Historically,
municipal bonds (with concentrations in the essential services, i.e. schools,
sewer,
7
water, etc.) have been attractive to the Company due to their tax exempt
features. Because of Alternative Mininum Tax matters, the Company uses a blend
of tax-exempt and taxable fixed maturity securities. Investments in common
stocks have been made with an emphasis on securities with an annual
dividend yield of at least 4 to 5 percent and annual dividend increases. The
Company's strategy in equity investments is to identify approximately 10 to 12
companies in which it can accumulate 10 to 20 percent of their common stock.
As a long-term investor, a buy and hold strategy has been followed for many
years, resulting in an accumulation of a significant amount of unrealized
appreciation on equity securities.
As of December 31, 1993, CFC employed 1,975 persons.
ITEM 2. PROPERTIES
----------
CFC-I owns a fully leased 85,000 square feet office building in
downtown Cincinnati that is currently leased to Proctor and Gamble Company, a
non-affiliated company, on a net, net, net lease basis. This property is
carried in the financial statements at $747,782 as of December 31, 1993.
CFC-I also owns the Home Office building located on 75 acres of land in
Fairfield, Ohio. This building contains approximately 380,000 square feet.
The John J. and Thomas R. Schiff & Company occupies approximately 5,300 square
feet, and the balance of the building is occupied by CFC and its subsidiaries.
The property is carried in the financial statements at $13,024,736 as of
December 31, 1993.
CFC-I also owns the Fairfield Executive Center which is located on the
northwest corner of the home office property in Fairfield, Ohio. This is a
four-story office building containing approximately 124,000 square feet. CFC
and its subsidiaries occupy approximately 9% of the building, unaffiliated
tenants occupy approximately 78% of the building, and the balance is currently
available for lease. The property is carried in the financial statements at
$10,415,112 as of December 31, 1993.
The CLIC owns a four-story office building in the Tri-County area of
Cincinnati containing approximately 127,000 square feet. At the present time,
100% of the building is currently being leased. This property is carried in
the financial statements at $5,650,634 as of December 31, 1993.
ITEM 3. LEGAL PROCEEDINGS
-----------------
The Company is involved in no material litigation other than routine
litigation incident to the nature of the insurance industry.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
CFC filed with the commission on February 25, 1994, definitive proxy
statements and annual reports pursuant to Regulation 14A. Material filed was
the same as that described in Item 4 and is incorporated herein by reference.
No matters were submitted during the fourth quarter.
8
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
-----------------------------------------------------------------
MATTERS
-------
This information is included in the Annual Report of the Registrant
to its shareholders on page 5 for the year ended December 31, 1993 and is
incorporated herein by reference (see Exhibit 13 to this filing).
ITEM 6. SELECTED FINANCIAL DATA
-----------------------
This information is included in the Annual Report of the Registrant
to its shareholders on pages 18 and 19 for the year ended December 31, 1993 and
is incorporated herein by reference (see Exhibit 13 to this filing).
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
----------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
This information is included in the Annual Report of the Registrant
to its shareholders on pages 31 and 32 for the year ended December 31, 1993
and is incorporated herein by reference (see Exhibit 13 to this filing).
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
--------- ---------- --- ------------- ----
(a) Financial Statements
The following consolidated financial statements of the
Registrant and its subsidiaries, included in the Annual
Report of the Registrant to its shareholders on pages 19 to
29 for the year ended December 31, 1993, are incorporated
herein by reference (see Exhibit 13 to this filing).
Independent Auditors' Report
Consolidated Balance Sheets--December 31, 1993 and 1992
Consolidated Statements of Income--Years ended
December 31, 1993, 1992, and 1991
Consolidated Statements of Cash Flows--Years ended
December 31, 1993, 1992, and 1991.
Consolidated Statements of Shareholders' Equity--Years
ended December 31, 1993, 1992, and 1991
Notes to Consolidated Financial Statements
(b) Supplementary Data
Selected quarterly financial data, included in the Annual
Report of the Registrant to its shareholders on Page 1 for
the year ended December 31, 1993, is incorporated herein by
reference (see Exhibit 13 to this filing).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
------------------------------------------------------------
AND FINANCIAL DISCLOSURE
------------------------
There were no disagreements on accounting and financial disclosure
requirements with accountants within the last 24 months prior to December 31,
1993.
9
PART III
CFC filed with the Commission on February 25, 1994 definitive proxy
statements pursuant to regulation 14-A. Material filed was the same as that
described in Item 10, Directors and Executive Officers of the Registrant; Item
11, Executive Compensation; Item 12, Security Ownership of Certain Beneficial
Owners and Management; Item 13, Certain Relationships and Related Transactions,
and is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
----------------------------------------------------------------
(a) Filed Documents. The following documents are filed as part of
this report:
1. Financial Statements--incorporated herein by reference
(see Exhibit 13 to this filing) as listed in Part II
of this Report.
2. Financial Statement Schedules and Independent
Auditors' Report:
Independent Auditors' Report
Schedule I--Summary of Investments Other than
Investments in Related Parties
Schedule V--Supplementary Insurance Information
Schedule VI--Reinsurance
Schedule IX--Short-Term Borrowings
Schedule X--Supplemental Information Concerning
Property-Casualty Insurance Operations
All other schedules are omitted because they are
not required, inapplicable or the information is
included in the financial statements or notes thereto.
3. Exhibits:
---------
Exhibit 11--Statement re computation of per share
earnings for years ended December 31, 1993, 1992,
and 1991
Exhibit 13--Material incorporated by reference from the
annual report of the registrant to its shareholders
for the year ended December 31, 1993
Exhibit 21--Subsidiaries of the registrant--information
contained in Part I of this report.
Exhibit 22--Notice of Annual Meeting of Shareholders
and Proxy Statement dated February 26, 1994 filed
with Securities and Exchange Commission,
Washington, D.C., 20549
Exhibit 23--Independent Auditors' Consent
Exhibit 28--Information from reports furnished to
state insurance regulatory authorities
(b) Reports on Form 8-K--NONE
10
INDEPENDENT AUDITORS' REPORT
To The Shareholders and Board of Directors of
Cincinnati Financial Corporation
We have audited the consolidated financial statements of Cincinnati Financial
Corporation and its subsidiaries as of December 31, 1993 and 1992 and for each
of the three years in the period ended December 31, 1993, and have issued our
report thereon dated February 14, 1994; such consolidated financial statements
and report are included in your 1993 Annual Report to Shareholders and are
incorporated herein by reference. Our audits also included the consolidated
financial statement schedules of Cincinnati Financial Corporation and its
subsidiaries listed in Item 14(a)(2). These financial statement schedules are
the responsibility of the Company's management. Our responsibility is to
express an opinion based on our audits. In our opinion, such consolidated
financial statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
DELOITTE & TOUCHE
/s/ Deloitte & Touche
Cincinnati, Ohio
February 14, 1994
11
SCHEDULE I
CINCINNATI FINANCIAL CORPORATION AND SUBSIDIARIES
SUMMARY OF INVESTMENTS--OTHER THAN INVESTMENTS IN RELATED PARTIES
DECEMBER 31, 1993
(000 omitted)
Amount at
which shown
Fair in balance
Type of Investment Cost Value sheet (b)
------------------ ---- ----- -----------
Fixed Maturities:
Bonds:
United States Government and
government agencies and
authorities
The Cincinnati Indemnity Company. $ 196 $ 237 $ 199
The Cincinnati Casualty Company. 448 505 450
The Cincinnati Life Insurance
Company . . . . . . . . . . . . 4,024 4,591 4,065
---------- ---------- ----------
Total . . . . . . . . . . . . . . . . 4,668 5,333 4,714
---------- ---------- ----------
States, municipalities and political
subdivisions:
The Cincinnati Insurance Company . 672,493 715,337 673,053
The Cincinnati Indemnity Company . 4,341 4,768 4,343
The Cincinnati Casualty Company . 77,376 83,179 77,479
The Cincinnati Life Insurance
Company . . . . . . . . . . . . 4,641 4,563 4,642
---------- ---------- ----------
Total . . . . . . . . . . . . . . . . 758,851 807,847 759,517
---------- ---------- ----------
Public Utilities:
The Cincinnati Insurance Company . 28,128 28,808 28,175
The Cincinnati Casualty Company . 9,183 9,812 9,195
The Cincinnati Life Insurance
Company . . . . . . . . . . . . 28,860 30,490 28,881
---------- ---------- ----------
Total . . . . . . . . . . . . . . . . 66,171 69,110 66,251
---------- ---------- ----------
Convertibles and Bonds with warrants
attached:
The Cincinnati Insurance Company . 116,589 134,351 116,486
The Cincinnati Casualty Company . 8,958 9,796 8,960
The Cincinnati Life Insurance
Company. . . . . . . . . . . . . 27,508 28,909 27,572
Cincinnati Financial Corporation . 11,193 11,629 11,239
---------- ---------- ----------
Total . . . . . . . . . . . . . . . . 164,248 184,685 164,257
---------- ---------- ----------
All other Corporate Bonds:
The Cincinnati Insurance Company . 262,485 280,605 262,953
The Cincinnati Indemnity Company . 18,946 20,252 18,959
The Cincinnati Casualty Company . 64,816 70,265 64,956
The Cincinnati Life Insurance
Company . . . . . . . . . . . . 272,750 291,810 273,081
Cincinnati Financial Corporation . 145,013 151,810 144,967
---------- ---------- ----------
Total . . . . . . . . . . . . . . . . 764,010 814,742 764,916
---------- ---------- ----------
TOTAL FIXED MATURITIES $1,757,948 $1,881,717 $1,759,655
---------- ---------- ----------
12
(000 omitted)
Amount at
which shown
Fair in balance
Type of Investment Cost Value sheet (b)
------------------ ---- ----- -----------
Equity Securities:
Common Stocks
Public Utilities
The Cincinnati Insurance Company
Alltel Corp . . . . . . . . . . . $ 35,138 $ 115,820 $ 115,820
Other . . . . . . . . . . . . . . 34,485 51,971 51,971
The Cincinnati Indemnity Company
Other . . . . . . . . . . . . . . 884 978 978
The Cincinnati Casualty Company
Alltel Corp . . . . . . . . . . . 1,384 3,318 3,318
Other . . . . . . . . . . . . . . 13,436 18,455 18,455
The Cincinnati Life Ins. Company
Alltel Corp . . . . . . . . . . . 3,425 27,730 27,730
Other . . . . . . . . . . . . . . 32,882 53,903 53,903
Cincinnati Financial Corp.
Alltel Corp . . . . . . . . . . . 50,459 222,624 222,624
Other . . . . . . . . . . . . . . 34,751 51,848 51,848
--------- --------- ---------
Total . . . . . . . . . . . . . . . . 206,844 546,647 546,647
--------- --------- ---------
Banks, trust and insurance companies
The Cincinnati Insurance Company
Fifth Third Bancorp . . . . . . . 17,822 139,466 139,466
PNC Financial Corporation . . . . 12,456 40,455 40,455
Other . . . . . . . . . . . . . . 6,964 11,072 11,072
The Cincinnati Casualty Company
Fifth Third Bancorp . . . . . . . 1,716 10,868 10,868
The Cincinnati Life Ins. Company
Fifth Third Bancorp . . . . . . . 3,511 10,573 10,573
PNC Financial Corporation . . . . 747 4,350 4,350
Other . . . . . . . . . . . . . . 1,510 2,836 2,836
Cincinnati Financial Corporation
Fifth Third Bancorp . . . . . . . 100,624 476,618 476,618
PNC Financial Corporation . . . . 36,639 74,414 74,414
Other . . . . . . . . . . . . . . 50,760 74,497 74,497
--------- --------- ---------
Total . . . . . . . . . . . . . . . . 232,749 845,149 845,149
--------- --------- ---------
13
(000 omitted)
Amount at
which shown
Fair in balance
Type of Investment Cost Value sheet (b)
------------------ ---- ----- -----------
Industrial miscellaneous and all other
The Cincinnati Insurance Company
Exxon Corporation . . . . . . . . $ 39,929 $ 58,511 $ 58,511
All Other . . . . . . . . . . . . 123,940 189,329 189,329
The Cincinnati Indemnity Company
Exxon Corporation . . . . . . . . 4,484 4,734 4,734
All Other . . . . . . . . . . . . 2,707 2,622 2,622
The Cincinnati Casualty Company
Exxon Corporation . . . . . . . . 9,977 11,363 11,363
All Other . . . . . . . . . . . . 5,837 5,901 5,901
The Cincinnati Life Insurance Company
Exxon Corporation . . . . . . . . 9,724 14,613 14,613
All Other . . . . . . . . . . . . 6,026 14,181 14,181
Cincinnati Financial Corporation
Exxon Corporation . . . . . . . . 12,648 14,519 14,519
All Other . . . . . . . . . . . . 30,795 39,930 39,930
CFC Investment Company. . . . . . . 6,044 6,044 6,044
---------- ---------- ----------
Total . . . . . . . . . . . . . . . . 252,111 361,747 361,747
---------- ---------- ----------
Nonredeemable preferred stocks
The Cincinnati Insurance Company. . 348,103 401,893 401,893
The Cincinnati Casualty Company . . 27,647 31,726 31,726
The Cincinnati Life Ins. Company. . 108,778 122,021 122,021
Cincinnati Financial Corporation. . 7,940 9,620 9.620
---------- ---------- ----------
Total . . . . . . . . . . . . . . . . 492,468 565,260 565,260
---------- ---------- ----------
TOTAL EQUITY SECURITIES . . . . . . . . $1,184,172 $2,318,803 $2,318,803
---------- ---------- ----------
Mortgage loans on real estate
The Cincinnati Life Ins. Company . $ 2,227 XXXXXXXXXX $ 2,227
CFC-I Investment Company . . . . . 2,515 XXXXXXXXXX 2,515
------ ------
Total . . . . . . . . . . . . . . . 4,742 XXXXXXXXXX 4,742
------ ------
Real Estate
The Cincinnati Life Ins. Company. . 5,667 XXXXXXXXXX 5,667
CFC-I Investment Company . . . . . 11,163 XXXXXXXXXX 11,163
------ ------
Total . . . . . . . . . . . . . . . . 16,830 XXXXXXXXXX 16,830
------ ------
Policy Loans
The Cincinnati Life Ins. Company. . 16,792 XXXXXXXXXX 16,792
------ ------
TOTAL OTHER INVESTED ASSETS . . . . . . 38,364 XXXXXXXXXX 38,364
------ ------
TOTAL INVESTMENTS . . . . . . . . . . . $2,980,484 XXXXXXXXXX $4,116,822
========== ==========
(b) equal to amount at which carried in balance sheet
(1) Securities of the Fifth Third Bancorp are equal to 13.85% of the assets of the registrant.
(2) Securities of the Alltel Corp. are equal to 8.03% of the assets of the registrant.
(3) Securities of PNC Financial Corporation are equal to 2.59% of the assets of the registrant.
(4) Securities of Exxon Corporation are equal to 2.25% of the assets of the registrant.
14
SCHEDULE V CINCINNATI FINANCIAL CORPORATION & SUBSIDIARIES
SUPPLEMENTARY INSURANCE INFORMATION
FOR YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
(000 omitted)
Column A Column B Column C Column D Column E Column F Column G
- -------- -------- --------- -------- -------- -------- --------
Policy
Benefits, Other
Deferred Losses, Policy
Policy Claims & Claims & Net
Acquisition Expense Unearned Benefits Premium Investment
Segment Cost Losses Premiums Payable Revenue Income
- ----------------------------------------------------------------------------------------------------------------------------------
1993
Property
and Liability
Insurance $ 64,086 $1,365,052 $357,515 $21,582 $1,092,135 $ 168,190
Life/Health
Insuance 40,005 354,028 1,762 10,557 48,656 45,844
--------- ---------- -------- ------- ---------- --------
Total $ 104,091 $1,719,080 $359,277 $32,139 $1,140,791 $ 214,034
========= ========== ======== ======= ========== ========
1992
Property
and Liability
Insurance $ 58,883 $1,200,182 $321,173 $19,688 $ 992,335 $ 156,958
Life/Health
Insurance 38,451 322,682 1,297 12,334 46,437 44,328
--------- ---------- -------- ------- ---------- --------
Total $ 97,334 $1,522,864 $322,470 $32,022 $1,038,772 $201,286
========= ========== ======== ======= ========== ========
1991
Property
and Liability
Insurance $ 55,157 $1,056,923 $296,723 $17,226 $ 903,465 $ 126,332
Life/Health
Insurance 38,424 278,824 1,554 12,089 44,111 41,847
--------- ---------- -------- ------- ---------- --------
$ 93,581 $1,335,747 $298,277 $29,315 $ 947,576 $ 168,179
========= ========== ======== ======= ========== ========
Column H Column I Column J Column K
- -------- -------- -------- --------
Benefits, Amortization
Claims of Deferred
Losses & Policy Other
Settlement Acquisition Operating Premium
Expenses Costs Expenses Written
- ----------------------------------------------------------------------------------
$788,318 $58,883 $252,456 $1,123,780
44,160 7,760 13,146 7,459(4)
- -------- ------- -------- ----------
$832,478 $66,643 $265,602 $1,131,239
======== ======= ======== ==========
$721,800 $55,157 $241,983 $1,014,971
44,310 9,719 13,343 8,402(4)
- -------- ------- -------- ----------
$766,110 $64,876 $255,326 $1,023,373
======== ======= ======== ==========
$639,187 $50,872 $222,250 $ 930,296
40,761 9,252 12,725 7,560(4)
- -------- ------- -------- ----------
$679,948 $60,124 $234,975 $ 937,856
======== ======= ======== ==========
Notes to Schedule V:
- -------------------
(1) The sum of columns C, D, & E is equal to the sum of Losses and
loss expense reserves, Life policy reserves, and Unearned
premium reserves reported in the Company's consolidated balance
sheets.
(2) The sum of columns I & J is equal to the sum of Commissions,
Other operating expenses, Taxes, licenses, and fees, Increase in
deferred acquisition costs, and Other expenses shown in the
consolidated statements of income, less other expenses not
applicable to the above insurance segments.
(3) Investment income amounts for the above insurance segments
represent investment income on the actual investment securities
in each such segment. Investment expenses, which are deducted
from investment income, and other operating expenses include
both expenses incurred directly in the insurance segments and
expenses allocated to and among the insurance segments based on
historical usage factors. The life/health segment is conducted
totally within one subsidiary that has no other segments.
(4) Amounts represent written premiums on accident and health
insurance business only.
15
SCHEDULE VI
CINCINNATI FINANCIAL CORPORATION AND SUBSIDIARIES
REINSURANCE
FOR YEARS ENDING DECEMBER 31, 1993, 1992, AND 1991
(000 omitted)
Column A Column B Column C Column D Column E Column F
- -------- -------- -------- -------- -------- --------
Ceded to Assumed Percentage of
Gross Other from Other Net Amount Assumed
Amount Companies Companies Amount to Net
- ----------------------------------------------------------------------------------------------------------------------------
1993
- ----
Life Insurance in Force $6,740,142 $761,452 $ 25,712 $6,004,402 .4%
========== ======== ======== ==========
Premiums
Life/Health Insurance $ 51,011 $ 2,521 $ 166 $ 48,656 .3%
Property/Liability Ins. 1,114,330 87,820 65,625 1,092,135 6.0%
---------- -------- -------- ---------- ----
Total Premiums $1,165,341 $ 90,341 $ 65,791 $1,140,791 5.8%
========== ======== ======== ==========
1992
- ----
Life Insurance in Force $6,079,681 $640,756 $ 31,540 $5,470,465 .6%
========== ======== ======== ==========
Premiums
Life/Health Insurance $ 48,655 $ 2,432 $ 214 $ 46,437 .5%
Property/Liability Ins. 1,017,814 72,415 46,936 992,335 4.7%
---------- -------- -------- ---------- ----
Total Premiums $1,066,469 $ 74,847 $ 47,150 $1,038,772 4.5%
========== ======== ======== ==========
1991
- ----
Life Insurance in Force $5,557,675 $553,016 $ 40,916 $5,045,575 .8%
========== ======== ======== ==========
Premiums
Life/Health Insurance $ 46,261 $ 2,321 $ 171 $ 44,111 .4%
Property/Liability Ins. 941,544 64,635 26,556 903,465 2.9%
---------- -------- -------- ---------- ----
Total Premiums $ 987,805 $ 66,956 $ 26,727 $ 947,576 2.8%
========== ======== ======== ==========
16
SCHEDULE IX
CINCINNATI FINANCIAL CORPORATION AND SUBSIDIARIES
SHORT-TERM BORROWINGS
DECEMBER 31, 1993, 1992, 1991
(000 omitted)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
-------- -------- -------- -------- -------- --------
Weighted
Category of Maximum Amount Average Amount Average
Aggregate Outstanding Outstanding Interest
Short-Term Balance at Weighted Average During the During the Rate During
Borrowings End of Period Interest Rate Period Period The Period
- ----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1993:
Bank Demand
Notes $55,746 4.3% $71,745 $54,741 4.6%
Commercial
Paper $22,320 3.4% $25,073 $14,285 3.4%
YEAR ENDED DECEMBER 31, 1992:
Bank Demand
Notes $50,251 4.5% $97,987 $66,859 4.9%
Commercial
Paper $16,701 3.4% $20,892 $14,309 3.9%
YEAR ENDED DECEMBER 31, 1991:
Bank Demand
Notes $97,022 6.2% $97,022 $77,595 7.4%
Commercial
Paper $ 9,349 4.5% $18,063 $13,943 6.1%
The average interest rate was determined by dividing the total interest
expenses incurred by the average daily borrowing.
17
SCHEDULE X
CINCINNATI FINANCIAL CORPORATION & SUBSIDIARIES
SUPPLEMENTAL INFORMATION CONCERNING PROPERTY/CASUALTY INSURANCE OPERATIONS
FOR YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
(000 omitted)
Column A Column B Column C Column D Column E Column F Column G Column H
- -------- -------- -------- -------- -------- -------- -------- --------
Claims and
Claim
Adjustment
Expenses
Reserves for Incurred
Deferred Unpaid Claims Discount, Related to
Affiliation Policy and Claim if any, Net (1) ----------
with Acquisition Adjustment Deducted in Unearned Earned Investment Current
Registrant Costs Expenses Column C Premiums Premiums Incomes Year
- ------------------------------------------------------------------------------------------------------------------------------------
Consolidated
Property-Casualty
Entities
1993 $64,086 $1,365,052 $-0- $357,515 $1,092,135 $168,190 $828,978
======= ========== ==== ======== ========== ======== ========
1992 $58,883 $1,200,182 $-0- $321,173 $ 992,335 $156,958 $752,993
======= ========== ==== ======== ========== ======== ========
1991 $55,157 $1,056,923 $-0- $296,723 $ 903,465 $126,332 $603,635
======= ========== ==== ======== ========== ======== ========
Column H Column I Column J Column K
- -------- -------- -------- --------
Claims and
Claim
Adjustment
Expenses
Incurred Amortization Paid
Related to of Deferred Claims
- ---------- (2) Policy and Claim
Prior Acquisition Adjustment Premiums
Years Costs Expenses Written
- ----------------------------------------------------------------------------------
$(39,769) $58,883 $633,677 $1,123,780
======== ======= ======== ==========
$(30,351) $55,157 $571,018 $1,014,971
======== ======= ======== ==========
$ 36,456 $50,872 $486,463 $ 930,296
======== ======= ======== ==========
18
S I G N A T U R E S
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly authorized.
CINCINNATI FINANCIAL CORPORATION
Signature Title Date
--------- ----- ----
/S/ Robert B. Morgan Chief Executive March 18, 1994
- ------------------------------------------------ Officer, President
Robert B. Morgan and Director
/S/ Robert J. Driehaus Financial Vice President March 18, 1994
- ------------------------------------------------ Treasurer and Director
Robert J. Driehaus (Principal Financial Officer)
(Principal Accounting Officer)
- ------------------------------------------------ Secretary and March , 1994
Vincent H. Beckman Director
Director March , 1994
- ------------------------------------------------
Michael Brown
/S/ Richard M. Burridge Director March 18, 1994
- ------------------------------------------------
Richard M. Burridge
- ------------------------------------------------ Director March , 1994
David R. Huhn
/S/ Kenneth C. Lichtendahl Director March 22, 1994
- ------------------------------------------------
Kenneth C. Lichtendahl
/S/ Jackson H. Randolph Director March 18, 1994
- ------------------------------------------------
Jackson H. Randolph
19
Signature Title Date
--------- ----- ----
- ------------------------------------------------------- Director March , 1994
John Sawyer
/S/ John J. Schiff Director March 18, 1994
- -------------------------------------------------------
John J. Schiff
/S/ John J. Schiff, Jr. Chairman of the March 18, 1994
- ------------------------------------------------------- Board and
John J. Schiff, Jr. Director
Director March , 1994
- -------------------------------------------------------
Robert C. Schiff
/S/ Thomas R. Schiff Director March 22, 1994
- -------------------------------------------------------
Thomas R. Schiff
- ------------------------------------------------------- Director March , 1994
Harry M. Turner
- ------------------------------------------------------- Director March , 1994
Larry R. Webb
- ------------------------------------------------------- Director March , 1994
Alan R. Weiler
/S/ William H. Zimmer Vice Chairman of the Board March 18, 1994
- ------------------------------------------------------- and Director
William H. Zimmer
20
Index of Exhibits
Exhibit 11-- Statement re computation of per share earnings for
the years ended December 31, 1993, 1992, and 1991.
Exhibit 13-- Material incorporated by reference from the annual report of
the registrant to the shareholders for the year ended December
31, 1993.
Segment information from page 30 (incorporated into Item 1).
Text data from pages 7, 9, 10, 11 and 12 (incorporated into
Item 1).
1993 Premium chart from page 9 (incorporated into Item 1).
"Price range of Common Stock" section from page 5
(incorporated into Item 5).
"Selected Financial Information" from pages 18 and 19
(incorporated into Item 6).
"Management Discussion" from pages 31 and 32 (incorporated
into Items 1 and 7).
Independent Auditors' Report and Financial Statements from
pages 19 thru 29 (incorporated into Item 8).
"Selected Quarterly Financial Data" from page 1 (incorporated
into Item 8).
Exhibit 23-- Independent Auditors' Consent
Exhibit 28-- Information from reports furnished to state insurance
regulatory authorities.