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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, 1995 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 $2,919,384,518 as of March 1, 1996.
As of March 1, 1996, there were 53,090,056 shares of common stock
outstanding.
Documents Incorporated by Reference
-----------------------------------
Annual Report to Shareholders for year ended December 31, 1995 (in part)
into Parts I, II and IV and Registrant's Proxy Statement dated March 2, 1996
into Parts I, III and IV.
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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, the District of Columbia, and Puerto Rico. 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 46 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 29 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 21 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 of financing various items
principally automobiles, trucks, computer equipment, machine tools,
construction equipment, and office equipment.
Industry segment information for 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).
As more fully discussed in pages 7, 9, and 11 through 13 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 (988 in 26
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states at December 31, 1995) of selectively appointed independent agents, most
of whom own stock in the Company. Gross written premiums by property/casualty
lines increased 7% to $1.377 billion in 1995. The Company's mix of
property/casualty business did not change significantly in 1995. Life and
accident and health insurance (which constituted only 4% of the Company's
premium income for 1995) is also sold primarily through property/casualty
agencies and did not change significantly in 1995.
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. Property and casualty
insurance is written in 50 states, the District of Columbia, and Puerto Rico.
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.
There are two tables used to present an analysis of losses and LAE.
The first table, providing a reconciliation of beginning and ending liability
balances for 1995, 1994, and 1993, is on page 27 in the Company's Annual Report
to Shareholders, incorporated herein by reference (see Exhibit 13 to this
filing). The second table, showing the development of the estimated liability
for the ten years prior to 1995 is presented on the next page.
The reconciliation referred to in the preceding paragraph shows a 1995
recognition of $126,509,000 redundancy in the December 31, 1994 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. 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. Reserves for
environmental claims have been reviewed and the Company believes that the
reserves are adequate. Environmental exposures are minimal as a result of the
types of risks we have insured in the past. Historically, most commercial
accounts written post-date the coverages which afford clean-up costs and
Superfund responses.
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.
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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 reinsurance market conditions, in
1987 and 1989, the Company raised its retention limits from $500,000 to $750,000
to $1,000,000, respectively, for casualty and property lines of insurance. In
1995, the casualty and property lines retention limits were further raised to
$2,000,000.
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
statements 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 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
- ---------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Net Liability for Unpaid
Losses and Loss
Adjustment Expenses $272 $377 $534 $631 $742 $833 $986 $1,138 $1,293 $1,432 $1,581
Net Liability Reestimated
as of:
One Year Later 344 444 548 671 751 869 956 1,098 1,200 1,306
Two Years Later 382 460 584 634 747 816 928 993 1,116
Three Years Later 382 480 544 622 696 795 823 949
Four Years Later 383 452 535 596 676 723 814
Five Years Later 370 447 523 580 635 720
Six Years Later 370 443 508 551 637
Seven Years Later 367 429 496 502
Eight Years Later 364 431 505
Nine Years Later 366 439
Ten Years Later 370
Net Cumulative Redundancy
(Deficiency) $(98) $(62) $ 29 $129 $105 $113 $172 $ 189 $ 177 $ 126
===== ===== ===== ===== ==== ==== ==== ====== ===== ======
Net Cumulative Amount of
Liability Paid
Through:
One Year Later $137 $153 $178 $204 $238 $232 $280 $310 $343 $ 368
Two Years Later 217 247 292 321 356 397 440 498 538
Three Years Later 266 313 362 390 446 493 546 612
Four Years Later 300 351 398 441 497 552 611
Five Years Later 316 367 427 467 528 588
Six Years Later 324 387 441 485 550
Seven Years Later 338 394 454 496
Eight Years Later 340 402 461
Nine Years Later 348 408
Ten Years Later 349
Gross Liability--End of Year $1,200 $1,365 $1,510 $1,690
Reinsurance Recoverable 62 72 78 109
------ ------ ------ ------
Net Liability--End of Year $1,138 $1,293 $1,432 $1,581
====== ====== ====== ======
Gross Reestimated Liability--Latest $1,032 $1,203 $1,407
Reestimated Recoverable--Latest 83 87 101
------ ------- ------
Net Reestimated Liability--Latest $ 949 $1,116 $1,306
====== ====== ======
Gross Cumulative Redundancy $ 189 $ 177 $ 126
====== ====== ======
The table above presents the development of balance sheet liabilities
for 1985 through 1995. The top line of the table shows the
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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 $29,000,000 redundancy over eight years and has been reflected
in income over the eight 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, 1995, the Company had paid $461,000,000
of the currently estimated $505,000,000 of losses and LAE that have been
incurred as of the end of 1987; thus an estimated $44,000,000 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 $1,000,000 to $2,000,000 in 1995. 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
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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, 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 2
to 3 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, 1995, CFC employed 2,289 persons.
ITEM 2. PROPERTIES
----------
CFC-I owns a fully leased 85,000 square feet office building in
downtown Cincinnati that is currently leased to Procter and Gamble Company, an
unaffiliated company, on a net, net, net lease basis. This property is carried
in the financial statements at $634,298 as of December 31, 1995.
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, an affiliated company, occupies
approximately 5,350 square feet, and the balance of the building is occupied by
CFC and its subsidiaries. The property is carried in the financial statements
at $12,450,028 as of December 31, 1995.
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 47% of the building, unaffiliated
tenants occupy approximately 34% of the building, and the balance is available
for Company expansion. The property is carried in the financial statements at
$10,290,635 as of December 31, 1995.
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 by an unaffiliated tenant. This
property is carried in the financial statements at $4,560,999 as of December
31, 1995.
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 March 4, 1996, 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.
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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, 1995 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, 1995 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 30 through 32 for the year ended December 31, 1995
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
30 for the year ended December 31, 1995, are incorporated
herein by reference (see Exhibit 13 to this filing).
Independent Auditors' Report
Consolidated Balance Sheets--December 31, 1995 and 1994
Consolidated Statements of Income--Years ended
December 31, 1995, 1994, and 1993
Consolidated Statements of Shareholders' Equity--Years
ended December 31, 1995, 1994, and 1993
Consolidated Statements of Cash Flows--Years ended
December 31, 1995, 1994, and 1993.
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, 1995, 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,
1995.
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PART III
CFC filed with the Commission on March 4, 1996 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 II-- Condensed Financial Information of Registrant
Schedule III-- Supplementary Insurance Information
Schedule IV-- Reinsurance
Schedule VI-- 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, 1995, 1994, and 1993
Exhibit 13--Material incorporated by reference from the
annual report of the registrant to its shareholders
for the year ended December 31, 1995
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 March 4, 1996 filed with
Securities and Exchange Commission, Washington, D.C.,
20549
Exhibit 23--Independent Auditors' Consent
Exhibit 27--Financial Data Schedule
Exhibit 28--Information from reports furnished to state
insurance regulatory authorities
(b) Reports on Form 8-K--NONE
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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, 1995 and 1994, and for each
of the three years in the period ended December 31, 1995, and have issued our
report thereon dated February 9, 1996; such consolidated financial statements
and report are included in your 1995 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 LLP
/S/ Deloitte & Touche LLP
Cincinnati, Ohio
February 9, 1996
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SCHEDULE I
CINCINNATI FINANCIAL CORPORATION AND SUBSIDIARIES
SUMMARY OF INVESTMENTS--OTHER THAN INVESTMENTS IN RELATED PARTIES
DECEMBER 31, 1995
(000 omitted)
Amount at
which shown
Fair in balance
Type of Investment Cost Value sheet
------------------ ---- ----- -----------
Fixed Maturities:
Bonds:
United States Government and
government agencies and
authorities
The Cincinnati Insurance Company . $ 252 $ 278 $ 278
The Cincinnati Indemnity Company . 203 223 223
The Cincinnati Casualty Company . 150 171 171
The Cincinnati Life Insurance
Company . . . . . . . . . . . . . 3,750 3,812 3,812
---------- ---------- ----------
Total. . . . . . . . . . . . . . . . . 4,355 4,484 4,484
---------- ---------- ----------
States, municipalities and political
subdivisions:
The Cincinnati Insurance Company . 761,037 800,271 800,271
The Cincinnati Indemnity Company . 6,897 7,367 7,367
The Cincinnati Casualty Company . 48,569 52,175 52,175
The Cincinnati Life Insurance
Company . . . . . . . . . . . . 3,638 3,933 3,933
---------- ---------- ----------
Total . . . . . . . . . . . . . . . . 820,141 863,746 863,746
---------- ---------- ----------
Public Utilities:
The Cincinnati Insurance Company . 40,171 40,417 40,417
The Cincinnati Casualty Company . 6,520 7,431 7,431
The Cincinnati Life Insurance
Company . . . . . . . . . . . . 35,274 37,013 37,013
The Cincinnati Financial
Corporation . . . . . . . . . . 900 1,020 1,020
---------- ---------- ----------
Total . . . . . . . . . . . . . . . . 82,865 85,881 85,881
---------- ---------- ----------
Convertibles and Bonds with warrants
attached:
The Cincinnati Insurance Company . 144,518 148,533 148,533
The Cincinnati Casualty Company . 1,533 1,400 1,400
The Cincinnati Life Insurance
Company . . . . . . . . . . . . 22,261 22,959 22,959
Cincinnati Financial Corporation . 12,770 12,889 12,889
---------- ---------- ----------
Total . . . . . . . . . . . . . . . . 181,082 185,781 185,781
---------- ---------- ----------
All other Corporate Bonds:
The Cincinnati Insurance Company . 435,362 480,375 480,375
The Cincinnati Indemnity Company . 16,510 17,809 17,809
The Cincinnati Casualty Company . 53,573 60,367 60,367
The Cincinnati Life Insurance
Company . . . . . . . . . . . . 354,233 389,686 389,686
Cincinnati Financial Corporation . 350,597 358,866 358,866
---------- ---------- ----------
Total . . . . . . . . . . . . . . . . 1,210,275 1,307,103 1,307,103
---------- ---------- ----------
TOTAL FIXED MATURITIES $2,298,718 $2,446,995 $2,446,995
---------- ---------- ----------
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(000 omitted)
Amount at
which shown
Fair in balance
Type of Investment Cost Value sheet
------------------ ---- ----- -----------
Equity Securities:
Common Stocks
Public Utilities
The Cincinnati Insurance Company. . $ 74,079 $ 174,714 $ 174,714
The Cincinnati Casualty Company . . 7,762 14,382 14,382
The Cincinnati Life Ins. Company. . 26,130 67,177 67,177
Cincinnati Financial Corp . . . . . 75,519 268,094 268,094
---------- ---------- ----------
Total . . . . . . . . . . . . . . . . 183,490 524,367 524,367
---------- ---------- ----------
Banks, trust and insurance companies
The Cincinnati Insurance Company. . 80,545 319,847 319,847
The Cincinnati Casualty Company . . 3,716 19,004 19,004
The Cincinnati Life Ins. Company. . 14,185 34,026 34,026
Cincinnati Financial Corporation. . 280,118 962,943 962,943
---------- ---------- ----------
Total . . . . . . . . . . . . . . . . 378,564 1,335,820 1,335,820
---------- ---------- ----------
Industrial miscellaneous and all other
The Cincinnati Insurance Company . 237,714 421,109 421,109
The Cincinnati Indemnity Company . 8,576 10,624 10,624
The Cincinnati Casualty Company. . 21,723 30,095 30,095
The Cincinnati Life Ins. Company . 40,791 64,250 64,250
Cincinnati Financial Corporation . 55,473 78,201 78,201
---------- ---------- ----------
Total . . . . . . . . . . . . . . . . . 364,277 604,279 604,279
---------- ---------- ----------
Nonredeemable preferred stocks
The Cincinnati Insurance Company. 399,873 458,023 458,023
The Cincinnati Casualty Company . 9,793 12,503 12,503
The Cincinnati Life Ins. Company. 64,458 80,259 80,259
Cincinnati Financial Corporation. 23,216 26,511 26,511
---------- ---------- ----------
Total . . . . . . . . . . . . . . . . . . 497,340 577,296 577,296
---------- ---------- ----------
TOTAL EQUITY SECURITIES . . . . . . . . . . $1,423,671 $3,041,762 $3,041,762
---------- ---------- ----------
Other Invested Assets:
Mortgage loans on real estate
The Cincinnati Life Ins. Company. . . $ 1,983 XXXXXXXXXX $ 1,983
CFC-I Investment Company . . . . . . 3,506 XXXXXXXXXX 3,506
---------- ----------
Total . . . . . . . . . . . . . . . . 5,489 XXXXXXXXXX 5,489
---------- ----------
Real Estate
The Cincinnati Life Ins. Company. . . 4,561 XXXXXXXXXX 4,561
CFC-I Investment Company . . . . . . 10,925 XXXXXXXXXX 10,925
---------- ----------
Total . . . . . . . . . . . . . . . . . . 15,486 XXXXXXXXXX 15,486
---------- ----------
Policy Loans
The Cincinnati Life Ins. Company. . . 18,827 XXXXXXXXXX 18,827
---------- ----------
TOTAL OTHER INVESTED ASSETS . . . . . . . . 39,802 XXXXXXXXXX 39,802
---------- ----------
TOTAL INVESTMENTS . . . . . . . . . . . . . $3,762,191 XXXXXXXXXX $5,528,559
========== ==========
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SCHEDULE II CINCINNATI FINANCIAL CORPORATION
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(OOO OMITTED)
Condensed Statements of Income (Parent Company Only)
For the Years ended December 31 1995 1994 1993
---- ---- ----
Income
- ------
Dividends from Subsidiaries $149,000 $ 78,000 $ 140,000
Investment Income 65,839 50,276 38,679
Realized Gains on Investments 742 (453) 3,063
-------- ---------- ----------
Total Income $215,581 $ 127,823 $ 181,742
-------- ---------- ----------
Expenses
- --------
Interest $ 17,229 $ 9,937 $ 7,389
Other 3,071 3,119 2,643
-------- ---------- ----------
Total Expenses 20,300 13,056 10,032
-------- ---------- ----------
Income Before Taxes and
Cumulative Effect of
Accounting Change and
Earnings of Subsidiaries 195,281 114,767 171,710
Applicable Income Taxes 8,286 5,113 10,890
-------- ---------- ----------
Income Before
Cumulative Effect of
Accounting Change and Undistributed
Earnings of Subsidiaries 186,995 109,654 160,820
Cumulative Effect of a Change
in Accounting for Taxes 0 0 507
-------- ---------- ----------
Net Income Before Change in
Undistributed Earnings of
Subsidiaries 186,995 109,654 161,327
Increase in Undistributed
Earnings of Subsidiaries 40,355 91,576 54,697
-------- ---------- ----------
Net Income $227,350 $ 201,230 $ 216,024
======== ========== ==========
Condensed Balance Sheets (Parent Company Only)
December 31 1995 1994
---- ----
Assets
- ------
Cash $ 1,354 $ 1,013
Fixed Maturities, at Fair Value 372,776 208,698
Equity Securities, at Fair Value 1,335,749 945,688
Investment Income Receivable 15,739 11,149
Inter-Company Dividends Receivable 12,527 8,300
Equity in Net Assets of Subsidiaries 1,569,026 1,196,940
Other Assets 3,590 3,796
---------- ----------
Total Assets $3,310,761 $2,375,584
========== ==========
Liabilities
- -----------
Notes Payable $ 221,005 $ 129,116
Dividends Declared but Unpaid 18,038 16,134
Federal Income Tax
Current 7,689 5,453
Deferred 321,094 198,027
5.5% Convertible Senior Debentures
Due 2002 80,000 80,000
Other Liabilities 4,964 6,807
---------- ----------
Total Liabilities $ 652,790 $ 435,537
Stockholders' Equity 2,657,971 1,940,047
---------- ----------
Total Liabilities and Stockholders' Equity $3,310,761 $2,375,584
========== ==========
12
13
SCHEDULE II CINCINNATI FINANCIAL CORPORATION
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(OOO OMITTED)
Condensed Statements of Cash Flows (Parent Company Only)
For the Years ended December 31 1995 1994 1993
---- ---- ----
Operating Activities
- --------------------
Net Income $ 227,350 $ 201,230 $ 216,024
Adjustments to Reconcile Net
Income to Net Cash Provided
by Operating Activities:
Amortization (706) (188) (62)
Increase in investment
income receivable (4,590) (2,576) (1,745)
Increase in Current Federal
Income Taxes Payable 2,236 607 489
Provision for Deferred
Income Taxes 1,125 0 5,865
Decrease (Increase) in
Dividends Receivable
from Subsidiaries (4,227) 7,700 (16,000)
Decrease (Increase) in
Other Assets 206 1,820 (2,832)
(Decrease) Increase in Accrued
Expenses and Other Liabilities (1,843) 1,407 (12,637)
Increase in Undistributed
Earnings of Subsidiaries (40,355) (91,576) (54,697)
Realized Gains (Losses) on
Investments (742) 453 (3,063)
--------- --------- ---------
Net Cash Provided by Operating
Activities 178,454 118,877 131,342
--------- --------- ---------
Investing Activities
- --------------------
Sale of Fixed Maturity Invest. 44,063 17,224 18,417
Maturity of Fixed Maturity Invest. 14,641 2,794 15,368
Sale of Equity Security Invest. 19,830 25,268 18,180
Purchase of Fixed
Maturity Investments (203,081) (86,711) (93,580)
Purchase of Equity
Security Investments (79,739) (70,874) (58,867)
--------- --------- ---------
Net Cash Used in
Investing Activities (204,286) (112,299) (100,482)
--------- --------- ---------
Financing Activities
- --------------------
Increase in Other
Short-Term Borrowings 91,889 51,050 11,114
Payment of Cash Dividends (69,542) (62,436) (55,103)
(Purchase) Issuance of Treasury
Shares) (287) (460) 5,179
Proceeds from Stock
Options Exercised 4,113 3,745 7,102
--------- --------- ---------
Net Cash Provided (Used)
in Financing Activities 26,173 (8,101) (31,708)
--------- --------- ---------
Increase (Decrease) in Cash 341 (1,523) (848)
Cash at Beginning of Year 1,013 2,536 3,384
--------- --------- ---------
Cash at End of Year $ 1,354 $ 1,013 $ 2,536
========= ========= =========
13
14
SCHEDULE III CINCINNATI FINANCIAL CORPORATION & SUBSIDIARIES
SUPPLEMENTARY INSURANCE INFORMATION
FOR YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
(000 omitted)
Column A Column B Column C Column D Column E Column F
- -------- -------- -------- -------- -------- --------
Future
Policy
Benefits, Other
Deferred Losses, Policy
Policy Claims & Claims &
Acquisition Expense Unearned Benefits Premium
Segment Cost Losses Premiums Payable Revenue
- ------------------------------------------------------------------------------------------------------------------------
1995
Property
and Liability
Insurance $ 76,365 $1,690,461 $407,254 $32,180 $1,263,257
Life/Health
Insurance 43,224 412,552 1,371 11,604 50,869
-------- ---------- -------- ------- ----------
Total $119,589 $2,103,013 $408,625 $43,784 $1,314,126
======== ========== ======== ======== ==========
1994
Property
and Liability
Insurance $ 69,169 $1,510,150 $377,764 $24,654 $1,169,940
Life/Health
Insurance 40,334 378,432 1,655 11,856 49,093
-------- ---------- -------- ------- ----------
Total $109,503 $1,888,582 $379,419 $36,510 $1,219,033
======== ========== ======== ======= ==========
1993
Property
and Liability
Insurance $ 64,086 $1,365,052 $357,515 $21,582 $1,092,135
Life/Health
Insurance 40,005 354,028 1,762 10,557 48,656
-------- ---------- -------- ------- ----------
Total $104,091 $1,719,080 $359,277 $32,139 $1,140,791
======== ========== ======== ======= ==========
Column A Column G Column H Column I Column J Column K
- -------- -------- -------- -------- -------- ----------
Benefits, Amortization
Claims of Deferred
Net Losses & Policy Other
Investment Settlement Acquisition Operating Premium
Segment Income Expenses Costs Expenses Written
- -----------------------------------------------------------------------------------------------------------------
1995
Property
and Liability
Insurance $180,074 $913,139 $264,281 $ 87,420 $1,295,852
Life/Health
Insurance 52,440 51,077 8,032 15,289 7,277(4)
-------- -------- -------- -------- ----------
Total $232,514 $964,216 $272,313 $102,709 $1,303,129
======== ======== ========= ======== ==========
1994
Property
and Liability
Insurance $165,260 $854,804 $244,856 $ 80,205 $1,190,824
Life/Health
Insurance 48,339 46,010 8,824 14,579 7,204(4)
-------- -------- -------- -------- ----------
Total $213,599 $900,814 $253,680 $ 94,784 $1,198,028
======== ======== ======== ======== ==========
1993
Property
and Liability
Insurance $168,190 $788,318 $235,704 $ 75,635 $1,123,780
Life/Health
Insurance 45,844 44,160 7,760 13,146 7,459(4)
-------- -------- -------- -------- ----------
Total $214,034 $832,478 $243,464 $ 88,781 $1,131,239
======== ======== ======== ======== ==========
Notes to Schedule III:
- ---------------------
(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.
14
15
SCHEDULE IV
CINCINNATI FINANCIAL CORPORATION AND SUBSIDIARIES
REINSURANCE
FOR YEARS ENDING DECEMBER 31, 1995, 1994, AND 1993
(000 omitted)
Column A Column B Column C Column D
-------- -------- -------- --------
Ceded to Assumed
Gross Other from Other
Amount Companies Companies
- ---------------------------------------------------------------------------------------------
1995
- ----
Life Insurance in Force $8,328,764 $980,023 $ 20,047
========== ======== ========
Premiums
Life/Health Insurance $ 54,437 $ 3,713 $ 145
Property/Liability Ins. 1,310,105 83,804 36,956
---------- -------- --------
Total Premiums $1,364,542 $ 87,517 $ 37,101
========== ======== ========
1994
- ----
Life Insurance in Force $7,473,906 $855,389 $ 23,102
========== ======== ========
Premiums
Life/Health Insurance $ 52,251 $ 3,303 $ 145
Property/Liability Ins. 1,207,036 100,842 63,746
---------- -------- --------
Total Premiums $1,259,287 $104,145 $ 63,891
========== ======== ========
1993
- ----
Life Insurance in Force $6,740,142 $761,452 $ 25,712
========== ======== ========
Premiums
Life/Health Insurance $ 51,011 $ 2,521 $ 166
Property/Liability Ins. 1,114,330 87,820 65,625
---------- -------- --------
Total Premiums $1,165,341 $ 90,341 $ 65,791
========== ======== ========
Column A Column E Column F
-------- -------- --------
Percentage of
Net Amount Assumed
Amount to Net
- ------------------------------------------------------------------
1995
- ----
Life Insurance in Force $7,368,788 .3%
========== ====
Premiums
Life/Health Insurance $ 50,869 .3%
Property/Liability Ins. 1,263,257 2.9%
---------- ----
Total Premiums $1,314,126 2.8%
========== ====
1994
- ----
Life Insurance in Force $6,641,619 .3%
========== ====
Premiums
Life/Health Insurance $ 49,093 .3%
Property/Liability Ins. 1,169,940 5.4%
---------- ----
Total Premiums $1,219,033 5.2%
========== ====
1993
- ----
Life Insurance in Force $6,004,402 .4%
========== ====
Premiums
Life/Health Insurance $ 48,656 .3%
Property/Liability Ins. 1,092,135 6.0%
---------- ----
Total Premiums $1,140,791 5.8%
========== ====
15
16
SCHEDULE VI
CINCINNATI FINANCIAL CORPORATION & SUBSIDIARIES
SUPPLEMENTAL INFORMATION CONCERNING PROPERTY/CASUALTY INSURANCE OPERATIONS
FOR YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
(000 omitted)
Column A Column B Column C Column D Column E Column F
- -------- -------- -------- -------- -------- -------
Reserves for
Deferred Unpaid Claims Discount,
Affiliation Policy and Claim if any,
with Acquisition Adjustment Deducted in Unearned Earned
Registrant Costs Expenses Column C Premiums Premiums
- ----------------------------------------------------------------------------------------------------------------
Consolidated
Property-Casualty
Entities
1995 $76,365 $1,690,461 $-0- $407,254 $1,263,257
======= ========== ==== ======== ==========
1994 $69,169 $1,510,150 $-0- $377,764 $1,169,940
======= ========== ==== ======== ==========
1993 $64,086 $1,365,052 $-0- $357,515 $1,092,135
======= ========== ==== ======== ==========
Column G Column H Column I Column J Column K
-------- -------- -------- -------- --------
Claims and
Claim
Adjustment
Expenses
Incurred
Related to Amortization Paid
---------- of Deferred Claims
Affiliation Net (1) (2) Policy and Claim
with Investment Current Prior Acquisition Adjustment Premiums
Registrant Income Year Years Costs Expenses Written
- ------------------------------------------------------------------------------------------------------------------------------
Consolidated
Property-Casualty
Entities
1995 $180,074 $1,040,541 $(126,509) $264,281 $765,315 $1,295,852
======== ========== ========= ======== ======== ==========
1994 $165,260 $ 948,581 $ (92,892) $244,856 $717,025 $1,190,824
======== ========== ========= ======== ======== ==========
1993 $168,190 $ 828,978 $ (39,769) $235,704 $633,681 $1,123,780
======== ========== ========= ======== ======== ==========
16
17
Index of Exhibits
Exhibit 11-- Statement re computation of per share earnings for the
years ended December 31, 1995, 1994, and 1993.
Exhibit 13-- Material incorporated by reference from the annual report
of the registrant to the shareholders for the year ended December
31, 1995.
Exhibit 23-- Independent Auditors' Consent
Exhibit 27-- Financial Data Schedule
Exhibit 28-- Information from reports furnished to state insurance
regulatory authorities.
17
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 19, 1996
Robert B. Morgan Officer, President
and Director
/s/ Robert J. Driehaus
- -------------------------------------- Financial Vice President March 19, 1996
Robert J. Driehaus Treasurer and Director
(Principal Financial Officer)
(Principal Accounting Officer)
/s/ William F. Bahl
- -------------------------------------- Director March 19, 1996
William F. Bahl
-------------------------------------- Secretary and March , 1996
Vincent H. Beckman Director
/s/ Michael Brown
- -------------------------------------- Director March 19, 1996
Michael Brown
-------------------------------------- Director March , 1996
Richard M. Burridge
-------------------------------------- Director March , 1996
John E. Field
-------------------------------------- Director March , 1996
David R. Huhn
/s/ Kenneth C. Lichtendahl
- -------------------------------------- Director March 19, 1996
Kenneth C. Lichtendahl
/s/ Jackson H. Randolph
- -------------------------------------- Director March 19, 1996
Jackson H. Randolph
19
Signature Title Date
--------- ----- ----
- ----------------------------------------- Director March , 1996
John J. Schiff
/s/ John J. Schiff, Jr.
- ----------------------------------------- Chairman of the March 19, 1996
John J. Schiff, Jr. Board and
Director
/s/ Robert C. Schiff
- ----------------------------------------- Director March 19, 1996
Robert C. Schiff
/s/ Thomas R. Shiff
- ----------------------------------------- Director March 19, 1996
Thomas R. Schiff
- ----------------------------------------- Director March , 1996
Frank J. Schultheis
- ----------------------------------------- Director March , 1996
Larry R. Webb
- ----------------------------------------- Director March , 1996
Alan R. Weiler