Cincinnati Financial Earnings 2020-12-31

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

cinf-20201231

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, 2020.


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from _____________________ to _____________________.

Commission file number 000-04604

Cincinnati Financial Corporation

(Exact name of registrant as specified in its charter)


Ohio			31-0746871
(State of incorporation)			(I.R.S. Employer Identification No.)

6200 S. Gilmore Road

Fairfield, Ohio 45014-5141

(Address of principal executive offices) (Zip Code)

(513) 870-2000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, $2.00 par

CINF

Nasdaq Global Select Market

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑

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 ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 if Regulation S-T(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Cincinnati Financial Corporation - 2020 10-K - Page 1

Large accelerated filer ☑ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑

The aggregate market value of voting stock held by nonaffiliates of the Registrant based on the closing price of $64.03 per share as reported on Nasdaq Global Select Market on June 30, 2020, was $9,621,748,017.

As of February 19, 2021, there were 161,201,922 shares of common stock outstanding.

Document Incorporated by Reference

Portions of the definitive Proxy Statement for Cincinnati Financial Corporation’s Annual Meeting of Shareholders to be held on May 8, 2021, are incorporated by reference into Part III of this Form 10-K.

Cincinnati Financial Corporation - 2020 10-K - Page 2

2020 ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS


Part I		4
Item 1.	Business	4
	Cincinnati Financial Corporation – Introduction	4
	Our Business and Our Strategy	5
	Our Segments	16
	Other	29
	Regulation	30
Item 1A.	Risk Factors	34
Item 1B.	Unresolved Staff Comments	45
Item 2.	Properties	45
Item 3.	Legal Proceedings	45
Item 4.	Mine Safety Disclosures	45
Part II		46
Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	46
Item 6	Selected Financial Data	48
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	49
	Introduction	49
	Executive Summary	50
	Critical Accounting Estimates	56
	Recent Accounting Pronouncements	63
	Financial Results	64
	Liquidity and Capital Resources	99
	Safe Harbor Statement	115
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	118
Item 8.	Financial Statements and Supplementary Data	124
	Responsibility for Financial Statements	124
	Management’s Annual Report on Internal Control Over Financial Reporting	125
	Report of Independent Registered Public Accounting Firm	126
	Consolidated Balance Sheets	128
	Consolidated Statements of Income	129
	Consolidated Statements of Comprehensive Income	130
	Consolidated Statements of Shareholders’ Equity	131
	Consolidated Statements of Cash Flows	132
	Notes to Consolidated Financial Statements	133
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	182
Item 9A.	Controls and Procedures	182
Item 9B.	Other Information	182
Part III		183
Item 10.	Directors, Executive Officers and Corporate Governance	183
Item 11.	Executive Compensation	185
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	185
Item 13.	Certain Relationships and Related Transactions, and Director Independence	186
Item 14.	Principal Accounting Fees and Services	186
Part IV		187
Item 15.	Exhibit and Financial Statement Schedules	187

Cincinnati Financial Corporation - 2020 10-K - Page 3

Part I

ITEM 1. Business

Cincinnati Financial Corporation – Introduction

We are an Ohio corporation formed in 1968. Our lead subsidiary, The Cincinnati Insurance Company, was founded in 1950. Our main business is property casualty insurance marketed through independent insurance agencies in 45 states. Our headquarters is in Fairfield, Ohio.

Cincinnati Financial Corporation owns 100% of four subsidiaries: The Cincinnati Insurance Company (Cincinnati Insurance), Cincinnati Global Underwriting Ltd.SM (Cincinnati Global), CSU Producer Resources Inc. and CFC Investment Company. In addition, the parent company has an investment portfolio, owns the headquarters property and is responsible for corporate borrowings and shareholder dividends.

The Cincinnati Insurance Company owns 100% of four additional insurance subsidiaries. Our standard market property casualty insurance group includes two of those subsidiaries – The Cincinnati Casualty Company and The Cincinnati Indemnity Company. This group writes a broad range of business, homeowner and auto policies. The Cincinnati Insurance Company also conducts the business of our reinsurance assumed operations, known as Cincinnati Re®. Other subsidiaries of The Cincinnati Insurance Company include: The Cincinnati Life Insurance Company (Cincinnati Life), which provides life insurance policies and fixed annuities; and The Cincinnati Specialty Underwriters Insurance Company (Cincinnati Specialty Underwriters), which offers excess and surplus lines insurance products. In this report and elsewhere we often refer to any or all of these five companies as The Cincinnati Insurance Companies.

Cincinnati Global owns 100% of Cincinnati Global Underwriting Agency Ltd.SM, a London-based, global specialty underwriter for Lloyd's Syndicate 318, and Cincinnati Global Dedicated No. 2 Ltd.SM, a Lloyd’s corporate member and vehicle through which capital is provided by Cincinnati Financial Corporation and third-party names at Lloyd’s.

The two noninsurance subsidiaries of Cincinnati Financial Corporation are CSU Producer Resources, which offers insurance brokerage services to our independent agencies so their clients can access our excess and surplus lines insurance products; and CFC Investment Company, which offers commercial leasing and financing services to our agencies, their clients and other customers.

Our filings with the U.S. Securities and Exchange Commission (SEC) are available on our website,

cinfin.com/investors, as soon as possible after they have been filed with the SEC. Reports filed with the SEC may also be viewed at sec.gov. These filings include annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. In this report we reference various websites. These websites, including our own, are not incorporated by reference in this Annual Report on Form 10-K.

Periodically, we refer to estimated industry data so that we can give information about our performance versus the overall U.S. insurance industry. Unless otherwise noted, the industry data is prepared by A.M. Best, a leading insurance industry statistical, analytical and insurer financial strength and credit rating organization. Information from A.M. Best is presented on a statutory accounting basis for insurance company regulation in the United States of America. When we provide our results on a comparable statutory accounting basis, we label it as such; all other company data is presented in accordance with accounting principles generally accepted in the United States of America (GAAP).

Cincinnati Financial Corporation - 2020 10-K - Page 4

Our Business and Our Strategy

Introduction

The Cincinnati Insurance Company was founded more than 70 years ago by four independent insurance agents. They established the mission that continues to guide all of the companies in the Cincinnati Financial Corporation family – to grow profitably and enhance the ability of local independent insurance agents to deliver quality financial protection to the people and businesses they serve by:

•providing insurance market stability through financial strength

•producing competitive, up-to-date products and services

•developing associates committed to superior service

At the end of 2020, we employed 5,266 associates, including 3,362 headquarters associates who provide support to 1,849 field associates and 55 associates for Cincinnati Global. The associate voluntary turnover rate has been approximately 5% for several years.

We believe our compensation, training, technology, inclusive culture and other support help to develop, attract and retain our associates, which is critical to our strategy that emphasizes superior service to agencies and their clients, as described in this report. Our goal is to hire job candidates with promise, matching their strengths to positions within the company and providing resources to help them meet professional and personal goals. We are committed to providing equal opportunity for all associates, encouraging a work environment free from unlawful discrimination and harassment.

We use multiple channels to ensure we recruit a diverse workforce rich with ideas and knowledge. For example, we build relationships with future talent by partnering with career services department, faculty and staff, and Diversity and Inclusion Offices at local and regional colleges and universities along with historically Black colleges and universities.

We offer a base pay level for all roles that is competitive, market-based and re-evaluated on a recurring basis. The base pay is complemented by a matching 401(k) program, annual cash bonus and stock ownership opportunities along with healthcare benefits to provide a comprehensive compensation and benefits package. In addition, we have many special programs that appeal to associates while aligning with our corporate values. We believe our voluntary turnover rate indicates overall associate satisfaction with their working environment, compensation and benefits.

We strive to offer equal pay for equal work and use independent consultants to conduct gender and ethnic minority pay equity studies examining total direct compensation, which consists of base salary, cash bonus and equity awards. Using a multivariate regression analysis, the independent studies in 2020 showed that we administer pay fairly and equitably because the factors used to make compensation decisions, such as role, salary grade, tenure and performance do in fact drive compensation awarded to each associate. The studies also showed that there remains an adjusted gender pay gap of 1.0%, in favor of men, and an adjusted ethnic minority pay gap of 1.5%, in favor of ethnic minorities.

We offer all regular, full- and part-time associates the opportunity to participate in the CFC Savings Plan, our 401(k) plan. We also offer all full-time associates the opportunity to purchase health, prescription, vision and dental insurance. Associates enrolled in our health plan can receive a free biometric screening – either onsite at our headquarters or with their personal physician.

While providing stock compensation at all levels of an organization may not be a common business practice, we firmly believe that stock ownership helps drive good decision making and encourages a long-term view by associates. We historically grant annual stock-based compensation to full-time, salaried associates in the form of stock options and restricted stock units that vest over time. In addition, each year all regular, full-time associates – salaried and hourly – are awarded one share of stock for each full calendar year of service, up to 10 shares, through our Holiday Stock Plan.

Additional human capital information is available in our Environmental, Social and Governance Report available on the Sustainability page of our website, cinfin.com/sustainability.

Cincinnati Financial Corporation - 2020 10-K - Page 5

At year-end 2020, a select group of independent agencies in 45 states actively marketed our property casualty insurance within their communities. Standard market commercial lines and excess and surplus lines policies were marketed in 41 of those states. Personal lines policies were marketed in 43 of those states. Within our select group of agencies, we also seek to become the life insurance carrier of choice and to help agents and their clients – our policyholders – by offering leasing and financing services.

Three competitive advantages distinguish our company, positioning us to build shareholder value and to be successful overall:

•Commitment to our professional independent insurance agencies and to their continued success

•Financial strength to fulfill our promises and be a consistent market for our agents’ business, supporting stability and confidence

•Operating structure that supports local decision making, showcasing our claims excellence and allowing us to balance growth with underwriting discipline

The primary sources of our company’s net income are summarized below. We discuss the contribution to net income from each source in Item 7, Corporate Financial Highlights of Management’s Discussion and Analysis.

•Underwriting profit (loss) – Includes revenues from earned premiums for insurance and reinsurance policies or contracts, reduced by losses and loss expenses from associated insurance coverages. Those revenues are further reduced by underwriting expenses associated with marketing policies or related to administration of our insurance operation. The net result represents an underwriting profit when revenues exceed losses and expenses.

•Investment income – Is generated primarily from investing the premiums collected for insurance policies sold, until funds are needed to pay losses for insurance claims or other expenses. Interest income from bond investments or dividend income from stock investments are the main categories of our investment income, with additional contribution from compounding effects over time.

•Investment gains and losses – Occur from appreciation or depreciation of invested assets over time. Gains or losses are generally recognized from changes in market values of equity securities without a sale or when invested assets are sold or become impaired.

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Independent Insurance Agency Marketplace

The U.S. property casualty insurance industry is a highly competitive marketplace with more than 2,000 stock and mutual companies operating independently or in groups. No single company or group dominates across all product lines and states. Standard market insurance companies (carriers) can market a broad array of products nationally or:

•choose to sell a limited product line or only one type of insurance (monoline carrier)

•target a certain segment of the market (for example, personal insurance)

•focus on one or more states or regions (regional carrier)

Standard market property casualty insurers generally offer insurance products through one or more distribution channels:

•independent agents, who represent multiple carriers

•captive agents, who represent one carrier exclusively

•direct marketing to consumers

For the most part, we compete with standard market insurance companies that market through independent insurance agents. Agencies marketing our commercial lines or personal lines products typically represent several standard market insurance carriers, including both national and regional carriers, many which are mutual companies. We also compete with carriers that market personal lines products through captive agents and direct writers. Some of our agencies describe their roles as brokers instead of agents. Distribution through independent insurance agents or brokers represents nearly 60% of overall U.S. property casualty insurance premiums and approximately 80% of commercial property casualty insurance premiums, according to studies by the Independent Insurance Agents and Brokers of America.

We are fully committed to the independent agency channel for marketing our insurance policies, while Cincinnati Re typically markets through broker organizations or similar intermediaries that specialize in reinsurance. Cincinnati Global markets much of its business through coverholders, which are entities that help insurance companies with processes such as writing policies and collecting premiums. For marketing standard lines insurance products, we choose independent agencies that share our philosophies. They do business person to person; offer broad, value-added services; maintain sound balance sheets; and manage their agencies professionally, targeting long-term success. We develop our relationships with agencies that are active in their communities, providing important knowledge of local market trends, opportunities and challenges.

Our associates work to support agencies with tools and resources that help communicate the value of choosing an independent insurance agent and our insurance policies to their clients and prospective clients. We plan to build on our recent marketing efforts and continue with our national advertising campaign in 2021. Our intent is to increase the visibility of our company, supporting our agents' efforts as they recommend policies and services offered through The Cincinnati Insurance Companies. We also continue to build our social media presence, focusing on providing content that agents can share on their own sites.

We help our agencies meet the broader needs of their clients and increase and diversify their revenues and profitability by offering insurance solutions beyond our standard market property casualty insurance products. We market life insurance products through the agencies that offer our property casualty products and through other independent life agencies that represent Cincinnati Life without also representing our other subsidiaries. We operate our own excess and surplus lines insurance brokerage firm and insurance carrier so that we can offer our excess and surplus lines products exclusively to the independent agencies who market our other property casualty insurance products.

For our life insurance operation, property casualty agencies make up the main distribution system. To help that operation build scale, we also develop life insurance business from other independent life insurance agencies in geographic markets underserved through our property casualty agencies. We are careful to solicit business from these other agencies in a manner that does not compete with the life insurance marketing and sales efforts of our property casualty agencies. Cincinnati Life emphasizes up-to-date products, responsive underwriting, high-quality service and competitive pricing.

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Our excess and surplus lines insurance operation helps meet the specific insurance needs of certain agency clients. Generally, excess and surplus lines insurance carriers provide insurance that is unavailable in the standard market due to market conditions or characteristics of the insured persons or organizations that are caused by their nature, claim history or the characteristics of their business. Insurers operating in the excess and surplus lines marketplace generally market business through excess and surplus lines brokers, whether they are small specialty insurers or specialized divisions of larger insurance organizations. Agencies have access to Cincinnati Specialty Underwriters' product line through CSU Producer Resources, the wholly owned insurance brokerage subsidiary of Cincinnati Financial Corporation. By providing superior service, we can help our agencies grow while also profitably growing our property casualty insurance business.

The table below includes data about property casualty agency relationships that market our standard market insurance products. It does not include Lloyd's brokers or coverholders that source business for Cincinnati Global.


Agency Data	Years ended December 31,
	2020	2019
Property casualty agency relationships, January 1	1,796	1,757
New appointments that market all or most of The Cincinnati Insurance Companies' products	133	117
New appointments that market only personal lines insurance products for Cincinnati Insurance	58	70
Changes due to consolidation and other	(139)	(148)
Property casualty agency relationships, December 31	1,848	1,796

Property casualty reporting locations	2,578	2,458

New relationship appointments	119	112

Active states	45	45

The annual total of agency new appointments may be partially offset by other changes in agency structures, such as consolidation through mergers or acquisitions. An increasing number of agencies have multiple, separately identifiable locations, reflecting their growth as well as consolidation of ownership within the independent agency marketplace. The number of reporting agency locations indicates our agents’ regional scope and the extent of our presence within our active states. The difference between new appointments in total and the number of new relationships represents either: new branch offices opened by existing Cincinnati agencies; or agencies that merged with another Cincinnati agency and we still believed would produce a meaningful amount of new business premiums.

On average, we have a 6.6% share of the standard lines property casualty insurance purchased through our reporting agency locations, according to 2019 data from agency surveys. Our share is 12.5% in reporting agency locations that have represented us for more than 10 years; 5.7% in agencies that have represented us for six to 10 years; 2.4% in agencies that have represented us for two to five years; and 0.3% in agencies that have represented us for one year or less.

Our largest single agency relationship accounted for approximately 1.3% of our total property casualty earned premiums in 2020. No aggregate locations under a single ownership structure accounted for more than 4% of our earned premiums in 2020.

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Financial Strength

We believe that our financial strength and strong capital and surplus position, reflected in our insurer financial strength ratings, are clear, competitive advantages in the segments of the insurance marketplace that we serve. This strength supports the consistent, predictable performance that our policyholders, agents, associates and shareholders have always expected and received, helping us withstand significant challenges.

While the potential exists for short-term financial performance variability due to our exposures to possible natural or man-made catastrophes or to significant capital market losses, the rating agencies consistently assert that we have built appropriate financial strength and flexibility to manage that variability. We remain committed to strategies that emphasize being a consistent, stable market for our agents’ business rather than seeking short-term benefits that might accrue by quick, opportunistic reaction to changes in market conditions.

We use various principles and practices such as diversification and enterprise risk management to maintain strong capital. For example, we maintain a diversified investment portfolio by reviewing and applying specific parameters and tolerances.

•Our $12.338 billion fixed-maturity portfolio is diversified and exceeds total insurance reserves. The portfolio had an average rating of A3/A, and its fair value exceeded total insurance reserve liabilities by approximately 28% at December 31, 2020. No corporate bond exposure accounted for more than 0.7% of our fixed-maturity portfolio, and no municipal exposure accounted for more than 0.2%.

•The strength of our fixed-maturity portfolio provides an opportunity to invest for potential capital appreciation by purchasing equity securities. Our $8.856 billion equity portfolio minimizes concentrations in single stocks or industries. At December 31, 2020, no single security accounted for more than 7.6% of our portfolio of publicly traded common stocks, and no single sector accounted for more than 29%.

Strong liquidity increases our flexibility through all periods to maintain our cash dividend and to continue to invest in and expand our insurance operations. At December 31, 2020, we held $3.916 billion of our cash and invested assets at the parent-company level, of which $3.686 billion, or 94.1%, was invested in common stocks, and $16 million, or 0.4%, was cash and cash equivalents.

We minimize reliance on debt as a source of capital, with a debt-to-total-capital ratio of 7.2% at year-end 2020. Long-term debt at year-end 2020 totaled $788 million, matching year-end 2019, and our short-term debt was $54 million, up from $39 million at the end of the prior year. The long-term debt consists of three nonconvertible, noncallable debentures, two due in 2028 and one in 2034. Ratings for our long-term debt are discussed in Item 7, Liquidity and Capital Resources, Long-Term Debt of Management’s Discussion and Analysis.

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At year-end 2020 and 2019, risk-based capital (RBC) for our standard market property casualty insurance, excess and surplus lines insurance and life insurance subsidiaries was strong, far exceeding regulatory requirements.

•We ended 2020 with a 1.0-to-1 ratio of property casualty premiums to surplus, a key measure of property casualty insurance company capacity and security. A lower ratio indicates more security for policyholders and greater capacity for growth by an insurer. We believe our ratio provides ample flexibility to diversify risk by expanding our operations into new geographies and product areas. The estimated industry average ratio was 0.7-to-1 at year-end 2020.

•We ended 2020 with a 7.1% ratio of life statutory adjusted risk-based surplus to liabilities, a key measure of life insurance company capital strength. A higher ratio indicates an insurer’s stronger security for policyholders and capacity to support business growth.


(Dollars in millions) Statutory Information	At December 31,
	2020		2019
Standard market property casualty insurance subsidiary
Statutory capital and surplus	$	5,838	$	5,620
Risk-based capital	5,860		5,654
Authorized control level risk-based capital	924		823

Risk-based capital to authorized control level risk-based capital ratio	6.3		6.9
Written premium to surplus ratio	1.0		1.0
Excess and surplus lines insurance subsidiary
Statutory capital and surplus	$	528	$	526
Risk-based capital	528		526
Authorized control level risk-based capital	69		54

Risk-based capital to authorized control level risk-based capital ratio	7.7		9.8
Written premium to surplus ratio	0.7		0.6
Life insurance subsidiary
Statutory capital and surplus	$	241	$	204
Risk-based capital	263		239
Authorized control level risk-based capital	58		53
Total liabilities excluding separate account business	3,723		3,643

Risk-based capital to authorized control level risk-based capital ratio	4.6		4.5
Life statutory risk-based adjusted surplus to liabilities ratio	7.1		6.6

On a statutory consolidated property casualty insurance basis, the ratio of investments in common stock, at fair value, to statutory capital and surplus was 82.6% at year-end 2020 compared with 78.7% at year-end 2019.

Cincinnati Financial Corporation - 2020 10-K - Page 10

Cincinnati Financial Corporation’s senior debt is rated by four independent rating firms. In addition, the rating firms award our property casualty and life operations insurance financial strength ratings based on their quantitative and qualitative analyses. These ratings assess an insurer’s ability to meet financial obligations to policyholders and do not necessarily address all of the matters that may be important to shareholders. Ratings may be subject to revision or withdrawal at any time by the ratings agency, and each rating should be evaluated independently of any other rating.

At February 24, 2021, our insurance subsidiaries continued to be highly rated.

Insurer Financial Strength Ratings

Rating
agency

Standard market property
casualty insurance subsidiary

Life insurance
subsidiary

Excess and surplus lines
insurance subsidiary

Outlook

Rating
Tier

A.M. Best Company

ambest.com

A+

Superior

2 of 16

A+

Superior

2 of 16

A+

Superior

2 of 16

Stable

Fitch Ratings

fitchratings.com

A+

Strong

5 of 21

A+

Strong

5 of 21

Stable

Moody's Investors

Service

moodys.com

Good

5 of 21

Stable

S&P Global Ratings

spratings.com

A+

Strong

5 of 21

A+

Strong

5 of 21

Stable

On January 27, 2021, A.M. Best affirmed its ratings, continuing its stable outlook. On November 24, 2020, Fitch affirmed its ratings, continuing its stable outlook. On July 6, 2020, Moody's affirmed its ratings, returning its outlook to stable. On June 30, 2020, S&P affirmed its ratings, continuing its stable outlook.

Our debt ratings are discussed in Item 7, Liquidity and Capital Resources, Long-Term Debt of Management’s Discussion and Analysis.

Cincinnati Financial Corporation - 2020 10-K - Page 11

Operating Structure

We offer our broad array of insurance products through the independent agency distribution channel. We recognize that locally based independent agencies have relationships in their communities and local marketplace intelligence that can lead to profitable business and policyholder satisfaction and loyalty. Several of our strategic initiatives are intended not only to help us compete but also to enhance support of agencies that represent us, thereby contributing to agency success. We seek to be a consistent and predictable property casualty carrier that agencies can rely on to serve their clients.

In our 10 highest volume states for consolidated property casualty premiums, 1,316 reporting agency locations wrote 53.3% of our 2020 consolidated property casualty earned premium volume compared with 1,200 locations and 54.8% in 2019. We continue efforts to geographically diversify our property casualty risks.

Our 10 largest states based on property casualty premium volume, excluding Cincinnati Re and Cincinnati Global, are shown in the table below.


(Dollars in millions)	Earned premiums		% of total earned		Agency locations	Average premium per location
Year ended December 31, 2020
Ohio	$	844	14.8	%	251	$	3.4
Illinois	310		5.4		165	1.9
Georgia	291		5.1		106	2.7
North Carolina	283		5.0		112	2.5
Pennsylvania	269		4.7		147	1.8
Indiana	258		4.5		114	2.3
New York	211		3.7		146	1.4
Michigan	199		3.5		137	1.5
Tennessee	193		3.4		66	2.9
Virginia	184		3.2		72	2.6

Field Focus Emphasizing Service

We rely on our force of 1,849 field associates to provide service and be accountable to our agencies for decisions we make at the local level. These associates live in the communities our agents serve, so they are readily available when agencies or policyholders need them. While their work is often conducted at the premises of the agency or policyholder, they also work from offices in their homes. Headquarters associates support agencies and field associates with underwriting, accounting, technology assistance, training and other services. Company executives and headquarters associates typically travel to visit agencies, strengthening the personal relationships we have with these organizations. Agents have opportunities for direct, personal conversations with our senior management team, and headquarters associates have opportunities to refresh their knowledge of marketplace conditions and field activities.

The field team is coordinated by field marketing representatives responsible for underwriting new commercial lines business. They are joined by field representatives specializing in claims, loss control, commercial lines key accounts, personal lines, excess and surplus lines, machinery and equipment, management liability and surety, premium audit and life insurance. The field team provides a variety of services, such as recommending specific actions to improve the safety of the policyholder’s operations. We seek to develop long-term relationships by understanding the unique needs of each agency's clients, who are also our policyholders.

Technology enhances our service to agencies, allowing them to more easily access our systems and process business transactions. Policyholders can conveniently access pertinent policy information online, helping to reduce costs for agencies and the company. Technology and ongoing training also help our associates collaborate and process business efficiently, providing more time for personal service to agencies and their clients.

We also provide and continue to develop enhanced, tailored services offered at the time a claim is reported for an insured loss event. Those services include assisting with car rental or towing, arranging temporary housing and coordinating emergency repairs to homes so additional damage is minimized.

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Our claims philosophy reflects our belief that we prosper as a company by responding to claims person to person, paying covered claims promptly, preventing false claims from unfairly adding to overall premiums and building financial strength to meet future obligations.

Our 944 locally based field claims associates work from their homes and are assigned to specific agencies. They respond personally to policyholders and claimants and are equipped to handle a claim from nearly anywhere. We believe we have a competitive advantage because of the person-to-person approach and the resulting high level of service that our field claims representatives and Express Claims Center associates deliver. For field claims associates handling excess and surplus lines claims, guidance is provided by headquarters-based excess and surplus lines claims managers. Claims may be reported directly to us by calling our claims call center, online via our company website or through the MyCincinnati app using a mobile device.

Catastrophe response teams are comprised of our experienced field claims associates who have the authority they need to do their jobs. In times of widespread loss, our field claims representatives confidently and quickly resolve claims, with the ability to provide claims payments on the same day they inspect the loss. Technology helps to enable fast initial contact with policyholders and easy sharing of information and data among storm teams, headquarters associates and local field claims representatives. When hurricanes or other weather events are predicted, we can identify through mapping technologies the expected number of our policyholders that may be impacted by the event and choose to have catastrophe response team members travel to strategic locations near the expected impact area. They are then in position to quickly get to the affected area and begin providing service to policyholders.

Our 30 associates working in the Special Investigations Unit (SIU) include former law enforcement and claims professionals whose qualifications make them well suited to gathering facts to uncover potential fraud. While we believe our job is to pay what is due under each policy contract, we also want to prevent false claims from unfairly increasing overall premiums. Our SIU also operates a computer forensics lab that supports field investigation efforts in various ways including assistance with video evidence and data recovery.

We seek to attract and retain high-quality independent insurance agencies with knowledgeable, professional staffs. In turn, we make an exceptionally strong commitment to assist them in keeping their knowledge up to date and educating new people they bring on board as they grow. This includes offering classes, usually at no cost to agencies, except travel-related expenses they may incur, and other training support. We also offer noninsurance financial services. We believe that providing these services enhances agency relationships with the company and their clients, increasing loyalty while diversifying the agency’s revenues.

Cincinnati Financial Corporation - 2020 10-K - Page 13

Insurance Products

We provide well-designed property casualty and life insurance products to bring policyholders convenience, discounts and a reduced risk of coverage gaps or disputes. For most agencies that represent us, we believe we offer insurance solutions for approximately 75% of the typical insurable risks of their clients. Products for various business lines within our reporting segments include insurance coverages for business property and liability, automobiles and homes.

The following table shows net written premiums by segment and business line at year-end 2020, 2019 and 2018:


(Dollars in millions)	2020		2019		2018		Percent of total 2020
Segment:
Commercial lines insurance	$	3,534	$	3,410	$	3,245	57.1	%
Personal lines insurance	1,503		1,435		1,378		24.3
Excess and surplus lines insurance	348		303		249		5.6
Life insurance	328		318		298		5.3
Other	479		368		158		7.7
Total	$	6,192	$	5,834	$	5,328	100.0	%

Business line:
Commercial lines insurance:
Commercial casualty	$	1,205	$	1,131	$	1,080	19.5	%
Commercial property	1,019		985		932		16.5
Commercial auto	763		735		682		12.3
Workers' compensation	266		294		311		4.3
Other commercial	281		265		240		4.5
Total commercial lines insurance	3,534		3,410		3,245		57.1

Personal lines insurance:
Personal auto	611		620		622		9.9
Homeowner	693		631		588		11.2
Other personal	199		184		168		3.2
Total personal lines insurance	1,503		1,435		1,378		24.3

Excess and surplus lines insurance	348		303		249		5.6

Life insurance:
Term life insurance	202		196		181		3.3
Universal life insurance	34		37		44		0.5
Other life insurance and annuity products	92		85		73		1.5
Subtotal	328		318		298		5.3

Other	479		368		158		7.7
Total	$	6,192	$	5,834	$	5,328	100.0	%

Price	115.10	EPS	5
Shares	198	P/E	25
MCap	22,824	P/FCF	26
Net Debt	60	EBIT	1,279
TEV	22,884	TEV/EBIT	18
TTM 2019-09-30, in MM, except price, ratios

10-K	2020-12-31	Filed 2021-02-25
10-Q	2020-09-30	Filed 2020-10-26
10-Q	2020-06-30	Filed 2020-07-27
10-Q	2020-03-31	Filed 2020-04-27
10-K	2019-12-31	Filed 2020-02-25
10-Q	2019-09-30	Filed 2019-10-25
10-Q	2019-06-30	Filed 2019-07-30
10-Q	2019-03-31	Filed 2019-04-24
10-K	2018-12-31	Filed 2019-02-22
10-Q	2018-09-30	Filed 2018-10-25
10-Q	2018-06-30	Filed 2018-07-26
10-Q	2018-03-31	Filed 2018-04-25
10-K	2017-12-31	Filed 2018-02-23
10-Q	2017-09-30	Filed 2017-10-26
10-Q	2017-06-30	Filed 2017-08-02
10-Q	2017-03-31	Filed 2017-04-26
10-K	2016-12-31	Filed 2017-02-24
10-Q	2016-09-30	Filed 2016-10-25
10-Q	2016-06-30	Filed 2016-07-26
10-Q	2016-03-31	Filed 2016-04-26
10-K	2015-12-31	Filed 2016-02-26
10-Q	2015-09-30	Filed 2015-10-27
10-Q	2015-06-30	Filed 2015-07-28
10-Q	2015-03-31	Filed 2015-04-28
10-K	2014-12-31	Filed 2015-02-27
10-Q	2014-09-30	Filed 2014-10-28
10-Q	2014-06-30	Filed 2014-07-29
10-Q	2014-03-31	Filed 2014-04-24
10-K	2013-12-31	Filed 2014-02-27
10-Q	2013-09-30	Filed 2013-10-24
10-Q	2013-06-30	Filed 2013-07-25
10-Q	2013-03-31	Filed 2013-04-25
10-K	2012-12-31	Filed 2013-02-27
10-Q	2012-09-30	Filed 2012-10-25
10-Q	2012-06-30	Filed 2012-07-26
10-Q	2012-03-31	Filed 2012-04-26
10-K	2011-12-31	Filed 2012-02-29
10-Q	2011-09-30	Filed 2011-10-27
10-Q	2011-06-30	Filed 2011-07-27
10-Q	2011-03-31	Filed 2011-04-27
10-K	2010-12-31	Filed 2011-02-25
10-Q	2010-09-30	Filed 2010-10-27
10-Q	2010-06-30	Filed 2010-07-29
10-Q	2010-03-31	Filed 2010-04-28
10-K	2009-12-31	Filed 2010-02-26

EX-4.8	exhibit4802-25x21.htm
EX-10.2	exhibit102amendmenttodirec.htm
EX-10.3	exhibit103directordeferred.htm
EX-10.6	exhibit106cfcannualincenti.htm
EX-23	exhibit23-02x25x21.htm
EX-31.A	exhibit31a-02x25x21.htm
EX-31.B	exhibit31b-02x25x21.htm
EX-32	exhibit32-02x25x21.htm

8-K	2020-11-16
8-K	2020-11-13
8-K	2020-11-04
8-K	2020-10-30
8-K	2020-10-26
8-K	2020-10-15
8-K	2020-09-08
8-K	2020-08-14
8-K	2020-08-06
8-K	2020-08-04
8-K	2020-07-27
8-K	2020-07-14
8-K	2020-05-18
8-K	2020-05-02
8-K	2020-04-27
8-K	2020-04-13
8-K	2020-04-01
8-K	2020-03-09
8-K	2020-02-05
8-K	2020-01-31
8-K	2019-12-06
8-K	2019-11-15
8-K	2019-11-12
8-K	2019-11-04
8-K	2019-10-24
8-K	2019-08-26
8-K	2019-08-09
8-K	2019-07-30
8-K	2019-06-25
8-K	2019-05-13
8-K	2019-04-27
8-K	2019-04-24
8-K	2019-03-11
8-K	2019-02-25
8-K	2019-02-06
8-K	2019-02-01
8-K	2018-11-16
8-K	2018-11-05
8-K	2018-10-25
8-K	2018-10-15
8-K	2018-10-12
8-K	2018-10-11
8-K	2018-09-04
8-K	2018-08-20
8-K	2018-08-10
8-K	2018-07-26
8-K	2018-05-05
8-K	2018-05-03
8-K	2018-04-25
8-K	2018-03-05
8-K	2018-02-07
8-K	2018-01-26

CINF 10K Annual Report

Cincinnati Financial Earnings 2020-12-31