Cincinnati Financial Corporation Announces Preliminary Estimate for Recent Storm Losses

CINCINNATI, Oct. 12, 2018 /PRNewswire/ -- Cincinnati Financial Corporation (Nasdaq: CINF) today announced that The Cincinnati Insurance Companies' property casualty group expects its third-quarter results to include pretax catastrophe losses of approximately $120 million, representing an impact on the third-quarter 2018 combined ratio of approximately 9.5 to 10.0 percentage points, based on estimated property casualty earned premiums. The company's 10‑year historical average contribution of catastrophe losses to the combined ratio is 5.6 percentage points for the third quarter. Losses from natural catastrophe events affect property casualty insurance underwriting income, one of the sources of consolidated net income along with profits from investment operations and life insurance operations.

This estimate for catastrophe losses includes approximately $92 million for Hurricane Florence, including approximately $7 million for our reinsurance assumed operations known as Cincinnati Re^sm. The estimate for total third-quarter 2018 catastrophe losses incurred is approximately $77 million for our commercial lines insurance segment, $34 million for our personal lines insurance segment and $9 million for Cincinnati Re.

The company estimates its third-quarter 2018 property casualty combined ratio will be in the range of 96 percent to 98 percent, including the effect of catastrophe losses. The ratio also reflects net favorable reserve development on prior accident years for the company's commercial casualty line of business.

The company also announced that Hurricane Michael is expected to impact fourth-quarter 2018 results, but that it currently cannot predict the magnitude, as many damaged areas are not yet accessible. Based on initial claims reports received, most of the claims covered by the company's standard market lines business are for personal lines accounts with nearly half located in Georgia and approximately one-quarter in Alabama.

Steven J. Johnston, president and chief executive officer, commented, "Hurricanes Florence and Michael left a wide path of destruction across the southeast, changing lives forever. However, it's in these tough times when our field claims representatives shine, helping our agents and policyholders quickly and in-person so that these families and communities can begin to rebuild. We take the responsibility of paying our claims seriously and manage our capital to ensure we have ample capacity to pay insured losses promptly."

Cincinnati Financial plans to report final results for third-quarter 2018 on Thursday, October 25, after the close of regular trading on the Nasdaq Stock Market. A conference call to discuss the results will be held at 11 a.m. ET on Friday, October 26, with a live, audio-only internet broadcast available at cinfin.com/investors.

About Cincinnati Financial
Cincinnati Financial Corporation offers business, home and auto insurance, our main business, through The Cincinnati Insurance Company and its two standard market property casualty companies. The same local independent insurance agencies that market those policies may offer products of our other subsidiaries, including life and disability income insurance, fixed annuities and surplus lines property and casualty insurance. For additional information about the company, please visit cinfin.com.

Safe Harbor Statement
This is our "Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995. Our business is subject to certain risks and uncertainties that may cause actual results to differ materially from those suggested by the forward-looking statements in this report. Some of those risks and uncertainties are discussed in our 2017 Annual Report on Form 10-K, Item 1A, Risk Factors, Page 30.

Factors that could cause or contribute to such differences include, but are not limited to:

• The fact that the consummation of the Transaction is subject to closing conditions, one or more of which may not be satisfied, or that the Transaction is not consummated for any other reason
• Our inability to integrate MSP and its subsidiaries into our on-going operations, or disruptions to our on-going operations due to such integration
• Unusually high levels of catastrophe losses due to risk concentrations, changes in weather patterns, environmental events, terrorism incidents or other causes
• Increased frequency and/or severity of claims or development of claims that are unforeseen at the time of policy issuance
• Inadequate estimates, assumptions or reliance on third-party data used for critical accounting estimates
• Declines in overall stock market values negatively affecting the company's equity portfolio and book value
• Prolonged low interest rate environment or other factors that limit the company's ability to generate growth in investment income or interest rate fluctuations that result in declining values of fixed-maturity investments, including declines in accounts in which we hold bank-owned life insurance contract assets
• Domestic and global events resulting in capital market or credit market uncertainty, followed by prolonged periods of economic instability or recession, that lead to:
• Significant or prolonged decline in the fair value of a particular security or group of securities and impairment of the asset(s)
• Significant decline in investment income due to reduced or eliminated dividend payouts from a particular security or group of securities
• Significant rise in losses from surety and director and officer policies written for financial institutions or other insured entities
• Recession or other economic conditions resulting in lower demand for insurance products or increased payment delinquencies
• Difficulties with technology or data security breaches, including cyberattacks, that could negatively affect our ability to conduct business; disrupt our relationships with agents, policyholders and others; cause reputational damage, mitigation expenses and data loss and expose us to liability under federal and state laws.
• Disruption of the insurance market caused by technology innovations such as driverless cars that could decrease consumer demand for insurance products
• Delays, inadequate data developed internally or from third parties, or performance inadequacies from ongoing development and implementation of underwriting and pricing methods, including telematics and other usage-based insurance methods, or technology projects and enhancements expected to increase our pricing accuracy, underwriting profit and competitiveness
• Increased competition that could result in a significant reduction in the company's premium volume
• Changing consumer insurance-buying habits and consolidation of independent insurance agencies that could alter our competitive advantages
• Inability to obtain adequate ceded reinsurance on acceptable terms, amount of reinsurance coverage purchased, financial strength of reinsurers and the potential for nonpayment or delay in payment by reinsurers
• Inability to defer policy acquisition costs for any business segment if pricing and loss trends would lead management to conclude that segment could not achieve sustainable profitability
• Inability of our subsidiaries to pay dividends consistent with current or past levels
• Events or conditions that could weaken or harm the company's relationships with its independent agencies and hamper opportunities to add new agencies, resulting in limitations on the company's opportunities for growth, such as:
• Downgrades of the company's financial strength ratings
• Concerns that doing business with the company is too difficult
• Perceptions that the company's level of service, particularly claims service, is no longer a distinguishing characteristic in the marketplace
• Inability or unwillingness to nimbly develop and introduce coverage product updates and innovations that our competitors offer and consumers expect to find in the marketplace
• Actions of insurance departments, state attorneys general or other regulatory agencies, including a change to a federal system of regulation from a state-based system, that:
• Impose new obligations on us that increase our expenses or change the assumptions underlying our critical accounting estimates
• Place the insurance industry under greater regulatory scrutiny or result in new statutes, rules and regulations
• Restrict our ability to exit or reduce writings of unprofitable coverages or lines of business
• Add assessments for guaranty funds, other insurance‑related assessments or mandatory reinsurance arrangements; or that impair our ability to recover such assessments through future surcharges or other rate changes
• Increase our provision for federal income taxes due to changes in tax law
• Increase our other expenses
• Limit our ability to set fair, adequate and reasonable rates
• Place us at a disadvantage in the marketplace
• Restrict our ability to execute our business model, including the way we compensate agents
• Adverse outcomes from litigation or administrative proceedings
• Events or actions, including unauthorized intentional circumvention of controls, that reduce the company's future ability to maintain effective internal control over financial reporting under the Sarbanes-Oxley Act of 2002
• Unforeseen departure of certain executive officers or other key employees due to retirement, health or other causes that could interrupt progress toward important strategic goals or diminish the effectiveness of certain longstanding relationships with insurance agents and others
• Events, such as an epidemic, natural catastrophe or terrorism, that could hamper our ability to assemble our workforce at our headquarters location

Further, the company's insurance businesses are subject to the effects of changing social, global, economic and regulatory environments. Public and regulatory initiatives have included efforts to adversely influence and restrict premium rates, restrict the ability to cancel policies, impose underwriting standards and expand overall regulation. The company also is subject to public and regulatory initiatives that can affect the market value for its common stock, such as measures affecting corporate financial reporting and governance. The ultimate changes and eventual effects, if any, of these initiatives are uncertain.

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SOURCE Cincinnati Financial Corporation