þ
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
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Ohio
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31-0746871
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(State of incorporation)
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(I.R.S. Employer Identification No.)
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6200 S. Gilmore Road
Fairfield, Ohio 45014-5141
(Address of principal executive offices) (Zip Code)
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(513) 870-2000
(Registrant’s telephone number, including area code)
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Part I
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Item 1.
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Business
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Cincinnati Financial Corporation – Introduction
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Our Business and Our Strategy
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Our Segments
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Other
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Regulation
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Item 1A.
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Risk Factors
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Item 1B.
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Unresolved Staff Comments
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Item 2.
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Properties
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Item 3.
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Legal Proceedings
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Item 4.
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Mine Safety Disclosures
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Part II
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Item 5.
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Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
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Item 6
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Selected Financial Data
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Item 7.
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Management's Discussion and Analysis of Financial Condition and Results of Operations
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Introduction
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Executive Summary
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Critical Accounting Estimates
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Recent Accounting Pronouncements
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Financial Results
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Liquidity and Capital Resources
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Safe Harbor Statement
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Item 7A.
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Quantitative and Qualitative Disclosures About Market Risk
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Item 8.
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Financial Statements and Supplementary Data
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Responsibility for Financial Statements
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Management’s Annual Report on Internal Control Over Financial Reporting
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Report of Independent Registered Public Accounting Firm
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Consolidated Balance Sheets
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Consolidated Statements of Income
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Consolidated Statements of Comprehensive Income
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Consolidated Statements of Shareholders’ Equity
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Consolidated Statements of Cash Flows
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Notes to Consolidated Financial Statements
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Item 9.
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Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
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Item 9A.
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Controls and Procedures
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Item 9B.
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Other Information
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Part III
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Item 10.
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Directors, Executive Officers and Corporate Governance
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Item 11.
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Executive Compensation
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Item 12.
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
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Item 13.
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Certain Relationships and Related Transactions, and Director Independence
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Item 14.
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Principal Accounting Fees and Services
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Part IV
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Item 15.
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Exhibits, Financial Statement Schedules
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•
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providing insurance market stability through financial strength
|
•
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producing competitive, up-to-date products and services
|
•
|
developing associates committed to superior service
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•
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Commitment to our professional independent insurance agencies and to their continued success
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•
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Financial strength to fulfill our promises and be a consistent market for our agents’ business, supporting stability and confidence
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•
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Operating structure that supports local decision making, showcasing our claims excellence and allowing us to balance growth with underwriting discipline
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•
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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.
|
•
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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.
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•
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Realized investment gains (losses) – Occur from appreciation or depreciation of invested assets over time. Gains or losses are generally recognized when invested assets are sold or become impaired.
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•
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choose to sell a limited product line or only one type of insurance (monoline carrier)
|
•
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target a certain segment of the market (for example, personal insurance)
|
•
|
focus on one or more states or regions (regional carrier)
|
•
|
independent agents, who represent multiple carriers
|
•
|
captive agents, who represent one carrier exclusively
|
•
|
direct marketing to consumers
|
Agency Data
|
|
Years ended December 31,
|
||
|
|
2017
|
|
2016
|
Property casualty agency relationships, January 1
|
|
1,614
|
|
1,526
|
New appointments that market all or most of The Cincinnati Insurance Companies' products
|
|
107
|
|
81
|
New appointments that market only personal lines insurance products for Cincinnati Insurance
|
|
104
|
|
116
|
Changes due to consolidation and other
|
|
(123)
|
|
(109)
|
Property casualty agency relationships, December 31
|
|
1,702
|
|
1,614
|
|
|
|
|
|
Property casualty reporting locations
|
|
2,256
|
|
2,090
|
|
|
|
|
|
New relationship appointments
|
|
138
|
|
156
|
|
|
|
|
|
Active states
|
|
42
|
|
41
|
|
|
|
|
|
•
|
Our $10.699 billion fixed-maturity portfolio is diversified and exceeds total insurance reserves. The portfolio had an average rating of A2/A, and its fair value exceeded total insurance reserve liabilities by approximately 34 percent at December 31, 2017. No corporate bond exposure accounted for more than 0.7 percent of our fixed-maturity portfolio, and no municipal exposure accounted for more than 0.3 percent.
|
•
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The strength of our fixed-maturity portfolio provides an opportunity to invest for potential capital appreciation by purchasing equity securities. Our $6.249 billion equity portfolio minimizes concentrations in single stocks or industries. At December 31, 2017, no single security accounted for more than 4.0 percent of our portfolio of publicly traded common stocks, and no single sector accounted for more than 20 percent.
|
•
|
We ended 2017 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 0.8-to-1 at year-end 2017.
|
•
|
We ended 2017 with a 6.7 percent ratio of life statutory adjusted risk-based surplus to liabilities, a key measure of life insurance company capital strength. The estimated industry average ratio was 10.8 percent at year-end 2017. A higher ratio indicates an insurer’s stronger security for policyholders and capacity to support business growth.
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(Dollars in millions)
Statutory Information
|
|
At December 31,
|
||||||
|
|
2017
|
|
2016
|
||||
Standard market property casualty insurance subsidiary
|
|
|
|
|
|
|
||
Statutory capital and surplus
|
|
$
|
5,094
|
|
|
$
|
4,686
|
|
Risk-based capital
|
|
5,127
|
|
|
4,715
|
|
||
Authorized control level risk-based capital
|
|
686
|
|
|
645
|
|
||
|
|
|
|
|
||||
Risk-based capital to authorized control level risk-based capital ratio
|
|
7.5
|
|
|
7.3
|
|
||
Written premium to surplus ratio
|
|
1.0
|
|
|
1.0
|
|
||
Excess and surplus lines insurance subsidiary
|
|
|
|
|
|
|
||
Statutory capital and surplus
|
|
$
|
436
|
|
|
$
|
372
|
|
Risk-based capital
|
|
436
|
|
|
372
|
|
||
Authorized control level risk-based capital
|
|
35
|
|
|
36
|
|
||
|
|
|
|
|
||||
Risk-based capital to authorized control level risk-based capital ratio
|
|
12.3
|
|
|
10.4
|
|
||
Written premium to surplus ratio
|
|
0.5
|
|
|
0.5
|
|
||
Life insurance subsidiary
|
|
|
|
|
|
|
||
Statutory capital and surplus
|
|
$
|
195
|
|
|
$
|
200
|
|
Risk-based capital
|
|
229
|
|
|
229
|
|
||
Authorized control level risk-based capital
|
|
45
|
|
|
40
|
|
||
Total liabilities excluding separate account business
|
|
3,436
|
|
|
3,317
|
|
||
|
|
|
|
|
||||
Risk-based capital to authorized control level risk-based capital ratio
|
|
5.1
|
|
|
5.8
|
|
||
Life statutory risk-based adjusted surplus to liabilities ratio
|
|
6.7
|
|
|
7.0
|
|
||
|
|
|
|
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Insurer Financial Strength Ratings
|
|
||||||||
Rating
agency
|
Standard market property
casualty insurance subsidiary
|
Life insurance
subsidiary
|
Excess and surplus lines
insurance subsidiary
|
Outlook
|
||||||
|
|
|
Rating
Tier
|
|
|
Rating
Tier
|
|
|
Rating
Tier
|
|
A. M. Best Co.
ambest.com
|
A+
|
Superior
|
2 of 16
|
A
|
Excellent
|
3 of 16
|
A+
|
Superior
|
2 of 16
|
Stable/ Positive/ Stable
|
Fitch Ratings
fitchratings.com
|
A+
|
Strong
|
5 of 21
|
A+
|
Strong
|
5 of 21
|
-
|
-
|
-
|
Stable
|
Moody's Investors
Service
moodys.com
|
A1
|
Good
|
5 of 21
|
-
|
-
|
-
|
-
|
-
|
-
|
Stable
|
S&P Global Ratings
spratings.com
|
A+
|
Strong
|
5 of 21
|
A+
|
Strong
|
5 of 21
|
-
|
-
|
-
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Stable
|
(Dollars in millions)
|
Earned
premiums
|
% of total
earned
|
Agency
locations
|
Average
premium per
location
|
||||||
Year ended December 31, 2017
|
|
|
|
|
|
|
|
|
||
Ohio
|
$
|
765
|
|
16.2
|
%
|
247
|
|
$
|
3.1
|
|
Illinois
|
296
|
|
6.3
|
|
146
|
|
2.0
|
|
||
Georgia
|
270
|
|
5.7
|
|
105
|
|
2.6
|
|
||
Indiana
|
265
|
|
5.6
|
|
115
|
|
2.3
|
|
||
North Carolina
|
250
|
|
5.3
|
|
107
|
|
2.3
|
|
||
Pennsylvania
|
238
|
|
5.0
|
|
129
|
|
1.8
|
|
||
Michigan
|
237
|
|
5.0
|
|
140
|
|
1.7
|
|
||
Tennessee
|
184
|
|
3.9
|
|
66
|
|
2.8
|
|
||
Virginia
|
161
|
|
3.4
|
|
66
|
|
2.4
|
|
||
Kentucky
|
155
|
|
3.3
|
|
49
|
|
3.2
|
|
||
|
|
|
|
|
(Dollars in millions)
|
|
2017
|
|
2016
|
|
2015
|
|
Percent of
total 2017 |
|||||||
Segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Commercial lines insurance
|
|
$
|
3,202
|
|
|
$
|
3,122
|
|
|
$
|
3,025
|
|
|
62.6
|
%
|
Personal lines insurance
|
|
1,294
|
|
|
1,198
|
|
|
1,128
|
|
|
25.3
|
|
|||
Excess and surplus lines insurance
|
|
219
|
|
|
189
|
|
|
175
|
|
|
4.3
|
|
|||
Life insurance
|
|
278
|
|
|
281
|
|
|
256
|
|
|
5.4
|
|
|||
Other
|
|
125
|
|
|
71
|
|
|
33
|
|
|
2.4
|
|
|||
Total
|
|
$
|
5,118
|
|
|
$
|
4,861
|
|
|
$
|
4,617
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Business line:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Commercial lines insurance:
|
|
|
|
|
|
|
|
|
|||||||
Commercial casualty
|
|
$
|
1,082
|
|
|
$
|
1,061
|
|
|
$
|
1,025
|
|
|
21.1
|
%
|
Commercial property
|
|
919
|
|
|
880
|
|
|
845
|
|
|
18.0
|
|
|||
Commercial auto
|
|
651
|
|
|
611
|
|
|
575
|
|
|
12.7
|
|
|||
Workers' compensation
|
|
326
|
|
|
352
|
|
|
357
|
|
|
6.4
|
|
|||
Other commercial
|
|
224
|
|
|
218
|
|
|
223
|
|
|
4.4
|
|
|||
Total commercial lines insurance
|
|
3,202
|
|
|
3,122
|
|
|
3,025
|
|
|
62.6
|
|
|||
|
|
|
|
|
|
|
|
|
|||||||
Personal lines insurance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Personal auto
|
|
603
|
|
|
563
|
|
|
524
|
|
|
11.8
|
|
|||
Homeowner
|
|
542
|
|
|
500
|
|
|
474
|
|
|
10.6
|
|
|||
Other personal
|
|
149
|
|
|
135
|
|
|
130
|
|
|
2.9
|
|
|||
Total personal lines insurance
|
|
1,294
|
|
|
1,198
|
|
|
1,128
|
|
|
25.3
|
|
|||
|
|
|
|
|
|
|
|
|
|||||||
Excess and surplus lines insurance
|
|
219
|
|
|
189
|
|
|
175
|
|
|
4.3
|
|
|||
|
|
|
|
|
|
|
|
|
|||||||
Life insurance:
|
|
|
|
|
|
|
|
|
|||||||
Term life insurance
|
|
167
|
|
|
156
|
|
|
145
|
|
|
3.2
|
|
|||
Universal life insurance
|
|
41
|
|
|
36
|
|
|
41
|
|
|
0.8
|
|
|||
Other life insurance, annuity and disability income products
|
|
70
|
|
|
89
|
|
|
70
|
|
|
1.4
|
|
|||
Subtotal
|
|
278
|
|
|
281
|
|
|
256
|
|
|
5.4
|
|
|||
|
|
|
|
|
|
|
|
|
|||||||
Cincinnati Re
|
|
125
|
|
|
71
|
|
|
33
|
|
|
2.4
|
|
|||
Total
|
|
$
|
5,118
|
|
|
$
|
4,861
|
|
|
$
|
4,617
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
•
|
Commercial lines insurance
|
•
|
Personal lines insurance
|
•
|
Excess and surplus lines insurance
|
•
|
Life insurance
|
•
|
Investments
|
•
|
Commercial casualty – Provides coverage to businesses against third-party liability from accidents occurring on their premises or arising out of their operations, including injuries sustained from products or liability related to professional services. Specialized casualty policies may include similar coverage such as umbrella liability or employment practices. The commercial casualty business line includes liability coverage written as part of commercial package policies.
|
•
|
Commercial property – Provides coverage for loss or damage to buildings, inventory and equipment caused by covered causes of loss such as fire, wind, hail, water, theft and vandalism, as well as business interruption resulting from a covered loss. Commercial property also includes other coverages such as inland marine, which covers losses related to builder’s risk, cargo or equipment. Various property coverages can be written as stand-alone policies or can be added to a commercial package policy.
|
•
|
Commercial auto – Protects businesses against liability to others for both bodily injury and property damage, medical payments to insureds and occupants of their vehicles, physical damage to an insured’s own vehicle from collision and various other perils, and damages caused by uninsured motorists.
|
•
|
Workers’ compensation – Covers employers for government-specified benefits from work-related injuries to employees.
|
•
|
Other commercial lines – This includes several other types of insurance products for businesses, including:
|
◦
|
Management liability and surety – Includes director and officer (D&O) liability insurance, which covers liability for actual or alleged errors in judgment, breaches of duty or other wrongful acts related to activities of organizations and can optionally include other liability coverages. We market primarily to nonprofit organizations, privately held businesses, healthcare organizations, financial institutions and educational institutions. The for-profit portion includes approximately 205 bank or savings and loan financial institutions, with only five having assets of $1 billion or more. The surety portion includes contract and commercial surety bonds for losses resulting from dishonesty, failure to perform and other acts and also includes fidelity bonds for fraudulent acts by specified individuals or dishonest acts by employees.
|
◦
|
Specialty packages – Includes coverages for property, liability and business interruption tailored to meet the needs of specific industry classes such as artisan contractors, dentists or smaller main street businesses.
|
◦
|
Machinery and equipment – Specialized coverage provides protection for loss or damage to boilers and machinery, including production and computer equipment and business interruption, due to sudden and accidental mechanical breakdown, steam explosion or artificially generated electrical current.
|
(Dollars in millions)
|
Earned
premiums
|
% of total
earned
|
Agency
locations
|
Average
premium per
location
|
||||||
Year ended December 31, 2017
|
|
|
|
|
|
|
|
|
||
Ohio
|
$
|
455
|
|
14.4
|
%
|
243
|
|
$
|
1.9
|
|
Illinois
|
214
|
|
6.8
|
|
138
|
|
1.6
|
|
||
Pennsylvania
|
199
|
|
6.3
|
|
118
|
|
1.7
|
|
||
Indiana
|
180
|
|
5.7
|
|
115
|
|
1.6
|
|
||
North Carolina
|
165
|
|
5.2
|
|
104
|
|
1.6
|
|
||
Georgia
|
150
|
|
4.7
|
|
94
|
|
1.6
|
|
||
Michigan
|
138
|
|
4.4
|
|
131
|
|
1.1
|
|
||
Tennessee
|
131
|
|
4.1
|
|
64
|
|
2.0
|
|
||
Virginia
|
126
|
|
4.0
|
|
61
|
|
2.1
|
|
||
Texas
|
112
|
|
3.5
|
|
66
|
|
1.7
|
|
||
|
|
|
|
|
•
|
Personal auto – Protects against liability to others for both bodily injury and property damage, medical payments to insureds and occupants of their vehicle, physical damage to an insured’s own vehicle from collision and various other perils, and damages caused by uninsured motorists. In addition, many states require policies to provide first-party personal injury protection, frequently referred to as no-fault coverage.
|
•
|
Homeowner – Protects against losses to dwellings and contents from a wide variety of perils, as well as liability arising out of personal activities both on and off the covered premises. We also offer coverage for condominium unit owners and renters.
|
•
|
Other personal lines – This includes the other types of insurance products we offer to individuals, including dwelling fire, inland marine, personal umbrella liability and watercraft coverages.
|
(Dollars in millions)
|
Earned
premiums
|
% of total
earned
|
Agency
locations
|
Average
premium per
location
|
||||||
Year ended December 31, 2017
|
|
|
|
|
|
|
|
|
||
Ohio
|
$
|
293
|
|
23.6
|
%
|
222
|
|
$
|
1.3
|
|
Georgia
|
105
|
|
8.5
|
|
90
|
|
1.2
|
|
||
Michigan
|
92
|
|
7.4
|
|
104
|
|
0.9
|
|
||
North Carolina
|
76
|
|
6.1
|
|
88
|
|
0.9
|
|
||
Indiana
|
73
|
|
5.9
|
|
83
|
|
0.9
|
|
||
Illinois
|
65
|
|
5.2
|
|
92
|
|
0.7
|
|
||
Alabama
|
63
|
|
5.0
|
|
48
|
|
1.3
|
|
||
Kentucky
|
57
|
|
4.6
|
|
44
|
|
1.3
|
|
||
Tennessee
|
48
|
|
3.9
|
|
52
|
|
0.9
|
|
||
Minnesota
|
48
|
|
3.8
|
|
58
|
|
0.8
|
|
||
|
|
|
|
|
•
|
Commercial casualty – Covers businesses for third-party liability from accidents occurring on their premises or arising out of their operations, including injuries sustained from products. Other coverages available include miscellaneous errors and omissions, professional liability and excess liability. Typical businesses covered include contractors, manufacturers, real estate owners and managers, retail, consultants, and bars or taverns. Policies covering liability at special events are also available.
|
•
|
Commercial property – Insures buildings, inventory, equipment and business income from loss or damage due to causes such as fire, wind, hail, water, theft and vandalism. Examples of property we commonly insure with excess and surplus lines policies include temporarily vacant buildings, habitational, restaurants and relatively higher-hazard manufacturing classes.
|
(Dollars in millions)
|
Earned
premiums
|
% of total
earned
|
|||
Year ended December 31, 2017
|
|
|
|
|
|
Texas
|
$
|
17
|
|
8.2
|
%
|
Ohio
|
17
|
|
8.2
|
|
|
Illinois
|
17
|
|
8.1
|
|
|
Georgia
|
14
|
|
6.7
|
|
|
Indiana
|
12
|
|
5.8
|
|
|
North Carolina
|
10
|
|
4.6
|
|
|
Pennsylvania
|
9
|
|
4.4
|
|
|
Alabama
|
9
|
|
4.3
|
|
|
Missouri
|
8
|
|
4.0
|
|
|
Minnesota
|
8
|
|
3.8
|
|
|
|
|
|
•
|
Term life insurance – Policies under which a death benefit is payable only if the insured dies during a specific period of time. Policy options include a return of premium provision, a benefit equal to the sum of all paid base premiums that is payable if the insured person survives to the end of the term. The policies are fully underwritten using traditional and accelerated methods.
|
•
|
Universal life insurance – Long-duration life insurance policies that are fully underwritten. Contract premiums are neither fixed nor guaranteed; however, the contract does specify a minimum interest crediting rate and a maximum cost of insurance charge and expense charge. The cash values, available as a loan collateralized by the cash surrender value, are not guaranteed and depend on the amount and timing of actual premium payments and the amount of actual contract assessments.
|
•
|
Worksite products – Term life insurance, return of premium term life insurance, whole life insurance and disability insurance offered to employees through their employer. Premiums are collected by the employer using payroll deduction. Policies are issued using a simplified underwriting approach and on a guaranteed issue basis. Worksite insurance products provide our property casualty agency force with excellent cross-serving opportunities for both commercial and personal accounts.
|
•
|
Whole life insurance – Policies that provide life insurance for the entire lifetime of the insured. The death benefit is guaranteed never to decrease and premiums are guaranteed never to increase. While premiums are fixed, they must be paid as scheduled. These policies provide guaranteed cash values that are available as loans collateralized by the cash surrender value. The policies are fully underwritten.
|
•
|
Disability income insurance that provides monthly benefits to offset the loss of income when the insured person is unable to work due to accident or illness.
|
•
|
Deferred annuities that provide regular income payments that commence after the end of a specified period or when the annuitant attains a specified age. During the deferral period, any payments made under the contract accumulate at the crediting rate declared by the company but not less than a contract-specified guaranteed minimum interest rate. A deferred annuity may be surrendered during the deferral period for a cash value equal to the accumulated payments plus interest less the surrender charge, if any.
|
•
|
Immediate annuities that provide some combination of regular income and lump-sum payments in exchange for a single premium.
|
•
|
Because our property casualty operations are held in high regard, property casualty agency management is predisposed to consider selling our life products.
|
•
|
Marketing efforts for both our property casualty and life insurance businesses are directed by our field marketing department, coordinated with our life field marketing representatives, which assures consistency of communication and operations. Life field marketing representatives are available to meet face-to-face with agency personnel and their clients as well. Our life headquarters underwriters and other associates are available to the agents and field team to assist in the placement of business.
|
•
|
Term life insurance is our largest life insurance product line. We continue to develop and offer term products with features our agents indicate are important, such as a return of premium benefit and an option for an accelerated underwriting product for our personal lines agents.
|
•
|
We also offer products addressing the needs of businesses with key person and buy-sell coverages. We offer quality, personal life insurance coverage to personal and commercial clients of our agencies.
|
(Dollars in millions)
|
Premiums
|
% of total
earned
|
|||
Year ended December 31, 2017
|
|
|
|
|
|
Ohio
|
$
|
52
|
|
17.5
|
%
|
Pennsylvania
|
21
|
|
7.2
|
|
|
Indiana
|
18
|
|
6.1
|
|
|
Illinois
|
18
|
|
6.0
|
|
|
Michigan
|
15
|
|
5.0
|
|
|
|
|
|
(Dollars in millions)
|
At December 31, 2017
|
|
At December 31, 2016
|
||||||||||||||||||||
|
Cost or amortized cost
|
Percent of total
|
|
|
Percent of total
|
|
Cost or amortized cost
|
Percent of total
|
|
|
Percent of total
|
||||||||||||
|
|
Fair value
|
|
|
Fair value
|
||||||||||||||||||
Taxable fixed maturities
|
$
|
6,383
|
|
47.6
|
%
|
|
$
|
6,637
|
|
39.2
|
%
|
|
$
|
6,381
|
|
49.9
|
%
|
|
$
|
6,630
|
|
43.0
|
%
|
Tax-exempt fixed maturities
|
3,931
|
|
29.3
|
|
|
4,062
|
|
24.0
|
|
|
3,418
|
|
26.7
|
|
|
3,455
|
|
22.4
|
|
||||
Common equity securities
|
2,918
|
|
21.8
|
|
|
6,039
|
|
35.6
|
|
|
2,812
|
|
22.0
|
|
|
5,123
|
|
33.2
|
|
||||
Nonredeemable preferred
equity securities
|
176
|
|
1.3
|
|
|
210
|
|
1.2
|
|
|
183
|
|
1.4
|
|
|
211
|
|
1.4
|
|
||||
Total
|
$
|
13,408
|
|
100.0
|
%
|
|
$
|
16,948
|
|
100.0
|
%
|
|
$
|
12,794
|
|
100.0
|
%
|
|
$
|
15,419
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
•
|
Fixed-maturity investments – Includes taxable and tax-exempt bonds and redeemable preferred stocks. During 2017, the combined effect of purchases and a net increase in unrealized gains offset sales and calls of fixed-maturity securities in our portfolio. During 2016, purchases offset the combined effect of a net decrease in unrealized gains, sales and calls.
|
•
|
Equity investments – Includes common and nonredeemable preferred stocks. During 2017, purchases and a net increase in unrealized gains offset sales of equity securities in our portfolio. Likewise during 2016, the combined effect of a net increase in unrealized gains and purchases offset sales of equity securities.
|
|
At December 31,
|
|||||
|
2017
|
|
2016
|
|
||
Weighted average yield-to-amortized cost
|
4.40
|
|
%
|
4.54
|
|
%
|
Weighted average maturity
|
7.7
|
|
yrs
|
7.1
|
|
yrs
|
Effective duration
|
5.2
|
|
yrs
|
5.0
|
|
yrs
|
|
|
|
|
|
(Dollars in millions)
|
At December 31,
|
||||||
|
2017
|
|
2016
|
||||
Investment-grade corporate
|
$
|
5,252
|
|
|
$
|
5,336
|
|
States, municipalities and political subdivisions
|
403
|
|
|
373
|
|
||
Noninvestment-grade corporate
|
401
|
|
|
445
|
|
||
Commercial mortgage-backed
|
286
|
|
|
287
|
|
||
Government-sponsored enterprises
|
254
|
|
|
164
|
|
||
United States government
|
31
|
|
|
10
|
|
||
Foreign government
|
10
|
|
|
10
|
|
||
Convertibles and bonds with warrants attached
|
—
|
|
|
5
|
|
||
Total
|
$
|
6,637
|
|
|
$
|
6,630
|
|
|
|
|
|
|
Percent of common stock portfolio
|
||||||||||
|
At December 31, 2017
|
|
At December 31, 2016
|
||||||||
|
Cincinnati
Financial |
|
S&P 500 Industry
Weightings |
|
Cincinnati
Financial |
|
S&P 500 Industry
Weightings |
||||
Sector:
|
|
|
|
|
|
|
|
|
|
|
|
Information technology
|
19.5
|
%
|
|
23.7
|
%
|
|
17.6
|
%
|
|
20.8
|
%
|
Financial
|
16.2
|
|
|
14.8
|
|
|
15.6
|
|
|
14.8
|
|
Industrials
|
14.3
|
|
|
10.3
|
|
|
14.9
|
|
|
10.3
|
|
Consumer discretionary
|
13.6
|
|
|
12.2
|
|
|
10.4
|
|
|
12.0
|
|
Healthcare
|
13.2
|
|
|
13.8
|
|
|
12.6
|
|
|
13.6
|
|
Energy
|
7.3
|
|
|
6.1
|
|
|
8.5
|
|
|
7.5
|
|
Consumer staples
|
6.2
|
|
|
8.2
|
|
|
10.3
|
|
|
9.4
|
|
Materials
|
5.6
|
|
|
3.0
|
|
|
5.8
|
|
|
2.8
|
|
Utilities
|
2.1
|
|
|
2.9
|
|
|
2.2
|
|
|
3.2
|
|
Telecomm services
|
1.7
|
|
|
2.1
|
|
|
2.1
|
|
|
2.7
|
|
Real estate
|
0.3
|
|
|
2.9
|
|
|
—
|
|
|
2.9
|
|
Total
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
•
|
Insurance Holding Company Regulation – We are regulated as an insurance holding company system in the respective states of domicile of our primary standard market property casualty company subsidiary and its surplus lines and life insurance subsidiaries. These regulations require that we annually furnish financial and other information about the operations of the individual companies within the holding company system. Information about the risks posed by any noninsurance company subsidiaries must also be disclosed. All transactions within a holding company system affecting insurers must be fair and equitable. Notice to the state insurance commissioner is required prior to the consummation of transactions affecting the ownership or control of an insurer and prior to certain material transactions between an insurer and any person or entity in its holding company group. In addition, some of those transactions cannot be consummated without the commissioner’s prior approval.
|
•
|
Subsidiary Dividends – The Cincinnati Insurance Company is fully owned by Cincinnati Financial Corporation. The dividend-paying capacity of The Cincinnati Insurance Company and its fully owned subsidiaries is regulated by the laws of the applicable state of domicile. Under these laws, our insurance subsidiaries must provide a 10-day advance informational notice to the insurance commissioner for the domiciliary state prior to payment of any dividend or distribution to its shareholders. Generally, the most our insurance subsidiary can pay without prior regulatory approval is the greater of 10 percent of statutory capital and surplus or 100 percent of statutory net income for the prior calendar year.
|
•
|
Insurance Operations – All of our insurance subsidiaries are subject to licensing and supervision by departments of insurance in the states in which they do business. The nature and extent of such regulations vary, but generally are rooted in statutes that delegate regulatory, supervisory and administrative powers to state insurance departments. Such regulations, supervision and administration of the insurance subsidiaries include: the standards of solvency that must be met and maintained; the licensing of insurers and their agents and brokers; the nature and limitations on investments; deposits of securities for the benefit of policyholders; regulation of standard market policy forms and premium rates; policy cancellations and nonrenewals; test audit programs; periodic examination of the affairs of insurance companies; annual and other reports required to be filed on the financial condition of insurers or for other purposes; requirements regarding reserves for unearned premiums, losses and other matters; the nature of and limitations on dividends to policyholders and shareholders; the nature and extent of required participation in insurance guaranty funds; the involuntary assumption of hard-to-place or high-risk insurance business, primarily workers’ compensation insurance; and the collection, remittance and reporting of certain taxes and fees. Our primary insurance regulators have adopted the Model Audit Rule for annual statutory financial reporting. This regulation closely mirrors the Sarbanes-Oxley Act on matters such as auditor independence, corporate governance and internal controls over financial reporting. The regulation permits the audit committee of Cincinnati Financial Corporation’s board of directors to also serve as the audit committee of each of our insurance subsidiaries for purposes of this regulation.
|
•
|
Insurance Guaranty Associations – For certain obligations of insolvent insurance companies to policyholders and claimants, states assess each member insurer in an amount relative to the insurer’s proportionate share of business written by all member insurers in the state. While the amount of such assessments has not been material in recent years, we cannot predict the amount and timing of any future assessments or refunds on our insurance subsidiaries under these laws.
|
•
|
Shared Market and Joint Underwriting Plans – Assigned risk plans, reinsurance facilities and joint underwriting associations are mechanisms that generally provide applicants with various basic insurance coverages when they are not available in voluntary markets. States can require participation based upon the amount of an insurance company’s voluntary market share, and underwriting results related to these pools could be adverse to our company.
|
•
|
Statutory Accounting – For public reporting, insurance companies prepare financial statements in accordance with GAAP. However, certain data also must be calculated according to statutory accounting rules as defined in the NAIC’s Accounting Practices and Procedures Manual. While not a substitute for any GAAP measure of performance, statutory data frequently is used by industry analysts and other recognized reporting sources to facilitate comparisons of the performance of insurance companies.
|
•
|
Insurance Reserves – State insurance laws require that property casualty and life insurers annually analyze the adequacy of reserves. Our appointed actuaries must submit an opinion that reserves are adequate for policy claims-paying obligations and related expenses.
|
•
|
Investment Regulation – Insurance company investments must comply with laws and regulations pertaining to the type, quality and concentration of investments. Such laws and regulations permit investments in federal, state and municipal obligations, corporate bonds, preferred and common equity securities, mortgage loans, real estate and certain other investments, subject to specified limits and other qualifications.
|
•
|
Risk-Based Capital Requirements – The NAIC’s risk-based capital (RBC) requirements for property casualty and life insurers serve as an early warning tool for the NAIC and state regulators to identify companies that may be undercapitalized and may merit further regulatory action. The NAIC has a standard formula for annually assessing RBC. The formula for calculating RBC for property casualty companies takes into account asset and credit risks but places more emphasis on underwriting factors for reserving and pricing. The formula for calculating RBC for life insurance companies takes into account factors relating to insurance, business, asset and interest-rate risks.
|
•
|
Downgrade of the financial strength ratings of our insurance subsidiaries. We believe our strong insurer financial strength ratings, in particular, the A+ (Superior) ratings from A.M. Best for our standard market property casualty insurance group and each subsidiary in that group, are an important competitive advantage. See Item 1, Our Business and Our Strategy, Financial Strength, for additional discussion of our financial strength ratings.
|
•
|
Concerns that doing business with us is difficult or not profitable, perceptions that our level of service is no longer a distinguishing characteristic in the marketplace, perceptions that our products do not meet the needs of our agents’ clients or perceptions that our business practices are not compatible with agents’ business models.
|
•
|
Mergers and acquisitions could result in a concentration of a significant amount of premium in one agency.
|
•
|
Delays in the development, implementation, performance and benefits of technology systems and enhancements or independent agent perceptions that our technology solutions do not match their needs.
|
•
|
Hurricanes in the gulf, eastern, southeastern and northeastern coastal regions.
|
•
|
Earthquakes in many regions, most particularly in the New Madrid fault zone, California, the Northwest and Southwest.
|
•
|
Tornado, wind and hail in the Midwest, South, Southeast, Southwest and the mid-Atlantic.
|
•
|
Wildfires.
|
•
|
On a worldwide basis, in the event of a severe catastrophic event or terrorist attack we may be exposed to material losses through our reinsurance assumed operations.
|
•
|
Competitiveness of premiums charged
|
•
|
Relationships among carriers, agents, brokers and policyholders
|
•
|
Underwriting and pricing methodologies that allow insurers to identify and flexibly price risks
|
•
|
Compensation provided to agents
|
•
|
Underwriting discipline
|
•
|
Terms and conditions of insurance coverage
|
•
|
Speed with which products are brought to market
|
•
|
Product and marketing innovations, including advertising
|
•
|
Technological competence and innovation
|
•
|
Ability to control expenses
|
•
|
Adequacy of financial strength ratings by independent ratings agencies such as A.M. Best
|
•
|
Quality of services and tools provided to agents and policyholders
|
•
|
Claims satisfaction and reputation
|
(Source: Nasdaq Global Select Market)
|
|
2017
|
|
2016
|
||||||||||||||||||||||||||||
Quarter:
|
|
1
st
|
|
2
nd
|
|
3
rd
|
|
4
th
|
|
1
st
|
|
2
nd
|
|
3
rd
|
|
4
th
|
||||||||||||||||
High
|
|
$
|
76.71
|
|
|
$
|
73.98
|
|
|
$
|
81.98
|
|
|
$
|
77.76
|
|
|
$
|
65.99
|
|
|
$
|
74.89
|
|
|
$
|
78.09
|
|
|
$
|
79.60
|
|
Low
|
|
68.24
|
|
|
68.49
|
|
|
71.60
|
|
|
70.07
|
|
|
53.64
|
|
|
63.87
|
|
|
73.88
|
|
|
68.11
|
|
||||||||
Period-end close
|
|
72.27
|
|
|
72.45
|
|
|
76.57
|
|
|
74.97
|
|
|
65.36
|
|
|
74.89
|
|
|
75.42
|
|
|
75.75
|
|
||||||||
Cash dividends declared
|
|
0.50
|
|
|
0.50
|
|
|
0.50
|
|
|
1.00
|
|
|
0.48
|
|
|
0.48
|
|
|
0.48
|
|
|
0.48
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan category
|
|
Number of securities to be
issued upon exercise of
outstanding options,
warrants and rights at
December 31, 2017
|
|
Weighted-average exercise
price of outstanding
options, warrants and rights
|
|
Number of securities remaining
available for future issuance under
equity compensation plan (excluding
securities reflected in column (a)) at
December 31, 2017
|
||||
|
|
(a)
|
|
(b)
|
|
(c)
|
||||
Equity compensation plans
approved by security holders
|
|
3,065,909
|
|
|
$
|
49.14
|
|
|
11,307,489
|
|
Equity compensation plans not
approved by security holders
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total
|
|
3,065,909
|
|
|
$
|
49.14
|
|
|
11,307,489
|
|
|
|
|
|
|
|
|
Period
|
|
Total number
of shares
purchased
|
|
Average
price paid
per share
|
|
Total number of shares
purchased as part of
publicly announced
plans or programs
|
|
Maximum number of
shares that may yet be
purchased under the
plans or programs
|
|||||
October 1-31, 2017
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,542,065
|
|
|
November 1-30, 2017
|
|
300,000
|
|
|
$
|
72.45
|
|
|
300,000
|
|
|
2,242,065
|
|
December 1-31, 2017
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,242,065
|
|
|
Totals
|
|
300,000
|
|
|
72.45
|
|
|
300,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions, except per share data and shares outstanding in thousands)
|
Years ended December 31,
|
|||||||||||||||||||
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
||||||||||
Consolidated Income Statement Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Earned premiums
|
|
$
|
4,954
|
|
|
$
|
4,710
|
|
|
$
|
4,480
|
|
|
$
|
4,243
|
|
|
$
|
3,902
|
|
Investment income, net of expenses
|
|
609
|
|
|
595
|
|
|
572
|
|
|
549
|
|
|
529
|
|
|||||
Realized investment gains, net *
|
|
148
|
|
|
124
|
|
|
70
|
|
|
133
|
|
|
83
|
|
|||||
Total revenues
|
|
5,732
|
|
|
5,449
|
|
|
5,142
|
|
|
4,945
|
|
|
4,531
|
|
|||||
Net income
|
|
1,045
|
|
|
591
|
|
|
634
|
|
|
525
|
|
|
517
|
|
|||||
Net income per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Basic
|
|
$
|
6.36
|
|
|
$
|
3.59
|
|
|
$
|
3.87
|
|
|
$
|
3.21
|
|
|
$
|
3.16
|
|
Diluted
|
|
6.29
|
|
|
3.55
|
|
|
3.83
|
|
|
3.18
|
|
|
3.12
|
|
|||||
Cash dividends per common share:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Ordinary declared
|
|
2.00
|
|
|
1.92
|
|
|
1.84
|
|
|
1.76
|
|
|
1.655
|
|
|||||
Ordinary paid
|
|
1.98
|
|
|
1.90
|
|
|
1.82
|
|
|
1.74
|
|
|
1.6425
|
|
|||||
Special declared and paid
|
|
0.50
|
|
|
—
|
|
|
0.46
|
|
|
—
|
|
|
—
|
|
|||||
Diluted weighted average shares outstanding
|
|
166.0
|
|
|
166.5
|
|
|
165.6
|
|
|
165.1
|
|
|
165.4
|
|
|||||
Consolidated Balance Sheet Data
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Total investments
|
|
$
|
17,051
|
|
|
$
|
15,500
|
|
|
$
|
14,423
|
|
|
$
|
14,386
|
|
|
$
|
13,564
|
|
Net unrealized investment portfolio gains
|
|
3,540
|
|
|
2,625
|
|
|
2,094
|
|
|
2,719
|
|
|
2,335
|
|
|||||
Deferred policy acquisition costs
|
|
670
|
|
|
637
|
|
|
616
|
|
|
578
|
|
|
565
|
|
|||||
Total assets
|
|
21,843
|
|
|
20,386
|
|
|
18,888
|
|
|
18,748
|
|
|
17,657
|
|
|||||
Gross loss and loss expense reserves
|
|
5,273
|
|
|
5,085
|
|
|
4,718
|
|
|
4,485
|
|
|
4,311
|
|
|||||
Life policy and investment contract reserves
|
|
2,729
|
|
|
2,671
|
|
|
2,583
|
|
|
2,497
|
|
|
2,390
|
|
|||||
Long-term debt
|
|
787
|
|
|
787
|
|
|
786
|
|
|
786
|
|
|
785
|
|
|||||
Shareholders' equity
|
|
8,243
|
|
|
7,060
|
|
|
6,427
|
|
|
6,573
|
|
|
6,070
|
|
|||||
Book value per share
|
|
50.29
|
|
|
42.95
|
|
|
39.20
|
|
|
40.14
|
|
|
37.21
|
|
|||||
Shares outstanding
|
|
163,899
|
|
|
164,387
|
|
|
163,944
|
|
|
163,747
|
|
|
163,109
|
|
|||||
Value creation ratio
|
|
22.9
|
%
|
|
14.5
|
%
|
|
3.4
|
%
|
|
12.6
|
%
|
|
16.1
|
%
|
|||||
Consolidated Property Casualty Operations Data
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Earned premiums
|
|
$
|
4,722
|
|
|
$
|
4,482
|
|
|
$
|
4,271
|
|
|
$
|
4,045
|
|
|
$
|
3,713
|
|
Unearned premiums
|
|
2,403
|
|
|
2,306
|
|
|
2,200
|
|
|
2,081
|
|
|
1,970
|
|
|||||
Gross loss and loss expense reserves
|
|
5,219
|
|
|
5,035
|
|
|
4,660
|
|
|
4,438
|
|
|
4,241
|
|
|||||
Investment income, net of expenses
|
|
392
|
|
|
384
|
|
|
368
|
|
|
358
|
|
|
348
|
|
|||||
Loss and loss expense ratio
|
|
66.4
|
%
|
|
63.8
|
%
|
|
60.2
|
%
|
|
65.0
|
%
|
|
61.9
|
%
|
|||||
Underwriting expense ratio
|
|
31.1
|
|
|
31.0
|
|
|
30.9
|
|
|
30.6
|
|
|
31.9
|
|
|||||
Combined ratio
|
|
97.5
|
%
|
|
94.8
|
%
|
|
91.1
|
%
|
|
95.6
|
%
|
|
93.8
|
%
|
|||||
|
|
|
|
|
|
|
|
|
|
|
*
|
Realized investment gains and losses are integral to our financial results over the long term, but our substantial discretion in the timing of investment sales may cause this value to fluctuate substantially. Also, applicable accounting standards require us to recognize gains and losses from certain changes in fair values of securities and embedded derivatives without actual realization of those gains and losses. We discuss realized investment gains for the past three years in Item 7, Investments Results.
|
|
|
One
year
|
|
Three-year
% average
|
|
Five-year
% average
|
|||
Value creation ratio:
|
|
|
|
|
|
|
|
|
|
As of December 31, 2017
|
|
22.9
|
%
|
|
13.6
|
%
|
|
13.9
|
%
|
As of December 31, 2016
|
|
14.5
|
|
|
10.2
|
|
|
11.8
|
|
As of December 31, 2015
|
|
3.4
|
|
|
10.7
|
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|||||||
|
|
2017
|
|
2016
|
|
2015
|
|||
Value creation ratio major components:
|
|
|
|
|
|
|
|||
Net income before net realized gains
|
|
13.5
|
%
|
|
7.9
|
%
|
|
8.9
|
%
|
Change in fixed-maturity securities, realized and unrealized gains
|
|
1.1
|
|
|
(0.2
|
)
|
|
(2.6
|
)
|
Change in equity securities, realized and unrealized gains
|
|
8.6
|
|
|
6.8
|
|
|
(2.9
|
)
|
Other
|
|
(0.3
|
)
|
|
0.0
|
|
|
0.0
|
|
Value creation ratio
|
|
22.9
|
%
|
|
14.5
|
%
|
|
3.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars are per share)
|
|
Years ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Value creation ratio:
|
|
|
|
|
|
|
|
|
|
|||
End of period book value*
|
|
$
|
50.29
|
|
|
$
|
42.95
|
|
|
$
|
39.20
|
|
Less beginning of period book value
|
|
42.95
|
|
|
39.20
|
|
|
40.14
|
|
|||
Change in book value
|
|
7.34
|
|
|
3.75
|
|
|
(0.94
|
)
|
|||
Dividend declared to shareholders
|
|
2.50
|
|
|
1.92
|
|
|
2.30
|
|
|||
Total value creation
|
|
$
|
9.84
|
|
|
$
|
5.67
|
|
|
$
|
1.36
|
|
|
|
|
|
|
|
|
||||||
Value creation ratio from change in book value**
|
|
17.1
|
%
|
|
9.6
|
%
|
|
(2.3
|
)%
|
|||
Value creation ratio from dividends declared to shareholders***
|
|
5.8
|
|
|
4.9
|
|
|
5.7
|
|
|||
Value creation ratio
|
|
22.9
|
%
|
|
14.5
|
%
|
|
3.4
|
%
|
|||
|
|
|
|
|
|
|
•
|
Premium growth – We believe over any five-year period our agency relationships and initiatives can lead to a property casualty written premium growth rate that exceeds the industry average. The compound annual growth rate of our net written premiums was 6.8 percent over the five-year period 2013 through 2017, nearly double the 3.8 percent estimated growth rate for the property casualty insurance industry. The industry’s growth rate excludes its mortgage and financial guaranty lines of business.
|
•
|
Combined ratio – We believe our underwriting philosophy and initiatives can drive performance to achieve our underwriting profitability target of a GAAP combined ratio over any five-year period that consistently averages within the range of 95 percent to 100 percent. Our GAAP combined ratio averaged 94.6 percent over the five-year period 2013 through 2017, better than the performance target range. Performance as measured by the combined ratio is discussed in Consolidated Property Casualty Insurance Results. Our statutory combined ratio averaged 94.0 percent over the five-year period 2013 through 2017, compared with an estimated 99.6 percent for the property casualty industry. The industry’s ratio again excludes its mortgage and financial guaranty lines of business.
|
•
|
Investment contribution – We believe our investment philosophy and initiatives can drive investment income growth and lead to a total return on our equity investment portfolio over a five-year period that exceeds the five-year total return of the Standard & Poor’s 500 Index.
|
◦
|
Investment income growth, on a pretax basis, had a compound annual growth rate of 2.8 percent over the five-year period 2013 through 2017. It has grown every year since 2009, except for 2013 with its slight decrease of less than 1 percent.
|
◦
|
Over the five years ended December 31, 2017, our equity portfolio compound annual total return was 15.3 percent compared with a compound annual total return of 15.8 percent for the Index. Our equity portfolio favors larger-capitalization, high-quality, dividend growing stocks with a slight value orientation. In recent years, returns for this type of stocks have generally lagged the broader market. For the year 2017, our annual equity portfolio total return was 21.0 percent, compared with 21.8 percent for the Index.
|
(Dollars in millions, except share data)
|
|
At December 31,
|
|
At December 31,
|
||||
|
|
2017
|
|
2016
|
||||
Total investments
|
|
$
|
17,051
|
|
|
$
|
15,500
|
|
Total assets
|
|
21,843
|
|
|
20,386
|
|
||
Short-term debt
|
|
24
|
|
|
20
|
|
||
Long-term debt
|
|
787
|
|
|
787
|
|
||
Shareholders' equity
|
|
8,243
|
|
|
7,060
|
|
||
Book value per share
|
|
50.29
|
|
|
42.95
|
|
||
Debt-to-total-capital ratio
|
|
9.0
|
%
|
|
10.3
|
%
|
||
|
|
|
|
|
(Dollars in millions, except per share data)
|
|
Years ended December 31,
|
|
2017-2016
|
|
2016-2015
|
||||||||||||
|
|
2017
|
|
2016
|
|
2015
|
|
Change %
|
|
Change %
|
||||||||
Earned premiums
|
|
$
|
4,954
|
|
|
$
|
4,710
|
|
|
$
|
4,480
|
|
|
5
|
|
|
5
|
|
Investment income, net of expenses (pretax)
|
|
609
|
|
|
595
|
|
|
572
|
|
|
2
|
|
|
4
|
|
|||
Realized investment gains, net (pretax)
|
|
148
|
|
|
124
|
|
|
70
|
|
|
19
|
|
|
77
|
|
|||
Total revenues
|
|
5,732
|
|
|
5,449
|
|
|
5,142
|
|
|
5
|
|
|
6
|
|
|||
Net income
|
|
1,045
|
|
|
591
|
|
|
634
|
|
|
77
|
|
|
(7
|
)
|
|||
Comprehensive income
|
|
1,648
|
|
|
940
|
|
|
234
|
|
|
75
|
|
|
302
|
|
|||
Net income per share - diluted
|
|
6.29
|
|
|
3.55
|
|
|
3.83
|
|
|
77
|
|
|
(7
|
)
|
|||
Cash dividends declared per share
|
|
2.50
|
|
|
1.92
|
|
|
2.30
|
|
|
30
|
|
|
(17
|
)
|
|||
Diluted weighted average shares outstanding
|
|
166.0
|
|
|
166.5
|
|
|
165.6
|
|
|
0
|
|
|
1
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
Years ended December 31,
|
|
2017-2016
|
|
2016-2015
|
||||||||||||
|
|
2017
|
|
2016
|
|
2015
|
|
Change %
|
|
Change %
|
||||||||
Consolidated property casualty data:
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net written premiums
|
|
$
|
4,840
|
|
|
$
|
4,580
|
|
|
$
|
4,361
|
|
|
6
|
|
|
5
|
|
Earned premiums
|
|
4,722
|
|
|
4,482
|
|
|
4,271
|
|
|
5
|
|
|
5
|
|
|||
Underwriting profit
|
|
128
|
|
|
242
|
|
|
386
|
|
|
(47
|
)
|
|
(37
|
)
|
|||
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
Pt. Change
|
|
Pt. Change
|
|||||
GAAP combined ratio
|
|
97.5
|
%
|
|
94.8
|
%
|
|
91.1
|
%
|
|
2.7
|
|
|
3.7
|
|
|||
Statutory combined ratio
|
|
97.2
|
|
|
94.5
|
|
|
90.6
|
|
|
2.7
|
|
|
3.9
|
|
|||
Written premium to statutory surplus
|
|
1.0
|
|
|
1.0
|
|
|
1.0
|
|
|
0.0
|
|
|
0.0
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
•
|
Manage insurance profitability – Implementation of these initiatives is intended to enhance underwriting expertise and knowledge, thereby increasing our ability to manage our business while also gaining efficiency. Better profit
|
•
|
Drive premium growth – Implementation of these initiatives is intended to further penetrate each market we serve through our independent agencies. Strategies aimed at specific market opportunities, along with service enhancements, can help our agents grow and increase our share of their business. Premium growth initiatives also include expansion of Cincinnati Re. Diversified growth also may reduce variability of losses from weather-related catastrophes.
|
•
|
We expect the insurance marketplace to remain competitive, which is likely to cause carriers to pursue strategies that they believe could lead to economies of scale, market share gains or the potential for an improved competitive posture.
|
•
|
We expect the independent insurance agency system to remain strong, with continued agency consolidation. If soft insurance market conditions return in the near term, it will create additional risk for agencies.
|
•
|
A return of soft insurance market pricing could significantly affect growth rates and earned premium levels for some time into the future. If the economy falters, we may experience low or no premium growth for our property casualty segments. Premium growth also may lag as some of our growth initiatives require more time to reach their full contribution. In addition, economic factors, including inflation, may increase our claims and settlement expenses related to medical care, litigation and construction.
|
•
|
Financial markets continued to display volatility in recent years, and some predict more turbulence in the future from effects such as changes in government policy, growth challenges for emerging country economies or other geopolitical events that could also affect the U.S. economy and markets. Should financial markets decline temporarily, which could occur as part of typical market volatility patterns, the related book value component of our value creation ratio could also register a weak or negative result.
|
•
|
type of claim involved
|
•
|
circumstances surrounding each claim
|
•
|
policy provisions pertaining to each claim
|
•
|
potential for subrogation or salvage recoverable
|
•
|
general insurance reserving practices
|
•
|
For events designated as natural catastrophes resulting in losses incurred related to direct premiums, we calculate IBNR reserves directly as a result of an estimated IBNR claim count and an estimated average claim amount for each event. Once case reserves are established for a catastrophe event, we reduce the IBNR reserves. Our claims department management coordinates the assessment of these events and prepares the related IBNR reserve estimates. Such an assessment involves a comprehensive analysis of the nature of the event, of policyholder exposures within the affected geographic area and of available claims intelligence.
|
•
|
For events designated as natural catastrophes resulting in losses incurred related to our reinsurance assumed operations, Cincinnati Re, we calculate IBNR reserves for losses incurred separately from losses related to direct premiums. That process begins with a review of our occurrence and aggregate in-force reinsurance limits for our portfolio of ceding companies likely to be affected by such events. Using third party catastrophe models combined with our own proprietary adjustments, we model a range of stochastic and scenario events for each ceding company to make an initial estimate of potential losses. Consideration of industry loss estimates promulgated by a variety of third parties provides a base to perform a market share loss analysis for each ceding company. We obtain loss estimates from ceding companies based on their view of losses, which includes their claim reports, actual claim payments and reserve estimates. Based on these data points, we estimate ultimate losses that we reinsure for each ceding company. We then benchmark individual ceding company reports against what we expected and use this information across our portfolio to refine our ultimate loss estimates. Once known payments and reserves are reported by individual ceding companies, we establish case reserves by reinsurance treaty. IBNR reserves are then calculated as the difference between the estimate of the ultimate loss and loss expenses incurred for each catastrophe event, reduced by the sum of total loss and loss expense payments and total case reserves. Incurred losses from catastrophe events for our reinsurance assumed operations can include non-U.S. experience reported by the ceding companies, in addition to events designated as catastrophes by PCS.
|
•
|
For asbestos and environmental claims, we calculate IBNR reserves by deriving an actuarially-based estimate of total unpaid loss and loss expenses. We then reduce the estimate by total case reserves. We discuss the reserve analysis that applies to asbestos and environmental reserves in Liquidity and Capital Resources, Asbestos and Environmental Reserves.
|
•
|
For loss expenses that pertain primarily to salaries and other costs related to our claims department associates, also referred to as adjusting and other expense or AOE, we calculate reserves based on an analysis of the relationship between paid losses and paid AOE. Reserves for AOE are allocated to company, line of business and accident year based on a claim count algorithm. Claim counts reported and used in the reserving process are primarily measured by insurance coverages that are triggered when a loss occurs and a reserve is established. Coverages are defined as unique combinations of certain attributes such as line of business and cause of loss. Claims that are opened and closed without payment are included in the reported claim counts. Claim counts are presented on a direct basis only and do not reflect any assumed or ceded reinsurance. In 2009, we refined our claim count logic such that the definition of an open claim, a closed claim, and a claim that closes without payment was uniform amongst all of our systems, including legacy systems.
|
•
|
For all other claims and events, including reinsurance assumed or ceded, IBNR reserves are calculated as the difference between an actuarial estimate of the ultimate cost of total loss and loss expenses incurred reduced by the sum of total loss and loss expense payments and total case reserves estimated for individual claims. Reserve amounts for those other claims and events are significant, and represent the majority of amounts shown as IBNR reserves and loss expense reserves in the table included in Liquidity and Capital Resources, Property Casualty Loss and Loss Expense Obligations and Reserves. We discuss below the development of actuarially based estimates of the ultimate cost of total loss and loss expenses incurred.
|
•
|
paid and reported loss development methods
|
•
|
paid and reported loss Bornhuetter-Ferguson methods
|
•
|
individual and multiple probabilistic trend family models
|
•
|
company and industry pricing
|
•
|
company and industry exposure
|
•
|
company and industry loss frequency and severity
|
•
|
past large loss events such as hurricanes
|
•
|
company and industry premium
|
•
|
company in-force policy count
|
•
|
large loss activity and trends in large losses
|
•
|
new business activity
|
•
|
judicial decisions
|
•
|
general economic trends such as inflation
|
•
|
trends in litigiousness and legal expenses
|
•
|
product and underwriting changes
|
•
|
changes in claims practices
|
•
|
Emergence of loss and defense and cost containment expenses, also referred to as DCCE, on an accident year basis. Historical paid loss, reported loss and paid DCCE data for the business lines we analyze contain patterns that reflect how unpaid losses, unreported losses and unpaid DCCE as of a financial statement date will emerge in the future. Unless our actuarial staff or management identifies reasons or factors that invalidate the extension of historical patterns into the future, these patterns can be used to make projections necessary for estimating IBNR reserves. Our actuaries significantly rely on this assumption in the application of all methods and models mentioned above.
|
•
|
Calendar year inflation. For long-tail and mid-tail business lines, calendar year inflation trends for future paid losses and paid DCCE do not vary significantly from a stable, long-term average. Our actuaries base reserve estimates derived from probabilistic trend family models on this assumption.
|
•
|
Exposure levels. Historical earned premiums, when adjusted to reflect common levels of product pricing and loss cost inflation, can serve as a proxy for historical exposures. Our actuaries require this assumption to estimate expected loss ratios and expected DCCE ratios used by the Bornhuetter-Ferguson reserving methods. They may also use this assumption to establish exposure levels for recent accident years, characterized by “green” or immature data, when working with probabilistic trend family models.
|
•
|
Claims having atypical emergence patterns. Characteristics of certain subsets of claims, such as high frequency, high severity, or mass tort claims, have the potential to distort patterns contained in historical paid loss, reported loss and paid DCCE data. When testing indicates this to be the case for a particular subset of claims, our actuaries segregate these claims from the data and analyze them separately. Subsets of claims that could fall into this category include hurricane claims or claims for other weather events where total losses we incurred were very large, individual large claims and asbestos and environmental claims.
|
(Dollars in millions)
|
|
Net loss and loss expense range of reserves
|
|
|
||||||||||||||||
|
|
Carried reserves
|
|
Low point
|
|
High point
|
|
Standard error
|
|
Net income
effect
|
||||||||||
|
|
|
|
|
|
|||||||||||||||
At December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total
|
|
$
|
5,032
|
|
|
$
|
4,709
|
|
|
$
|
5,155
|
|
|
$
|
223
|
|
|
$
|
176
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Commercial casualty
|
|
$
|
2,027
|
|
|
$
|
1,826
|
|
|
$
|
2,215
|
|
|
$
|
195
|
|
|
$
|
154
|
|
Commercial property
|
|
308
|
|
|
279
|
|
|
324
|
|
|
23
|
|
|
18
|
|
|||||
Commercial auto
|
|
642
|
|
|
604
|
|
|
663
|
|
|
29
|
|
|
23
|
|
|||||
Workers' compensation
|
|
958
|
|
|
813
|
|
|
996
|
|
|
92
|
|
|
73
|
|
|||||
Personal auto
|
|
315
|
|
|
292
|
|
|
317
|
|
|
13
|
|
|
10
|
|
|||||
Homeowners
|
|
133
|
|
|
121
|
|
|
137
|
|
|
8
|
|
|
6
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
•
|
Commercial lines insurance
|
•
|
Personal lines insurance
|
•
|
Excess and surplus lines insurance
|
•
|
Life insurance
|
•
|
Investments
|
(Dollars in millions)
|
|
Years ended December 31,
|
|
2017-2016
|
|
2016-2015
|
||||||||||||
|
|
2017
|
|
2016
|
|
2015
|
|
Change %
|
|
Change %
|
||||||||
Earned premiums
|
|
$
|
4,722
|
|
|
$
|
4,482
|
|
|
$
|
4,271
|
|
|
5
|
|
|
5
|
|
Fee revenues
|
|
11
|
|
|
10
|
|
|
8
|
|
|
10
|
|
|
25
|
|
|||
Total revenues
|
|
4,733
|
|
|
4,492
|
|
|
4,279
|
|
|
5
|
|
|
5
|
|
|||
Loss and loss expenses from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Current accident year before catastrophe losses
|
|
2,889
|
|
|
2,684
|
|
|
2,579
|
|
|
8
|
|
|
4
|
|
|||
Current accident year catastrophe losses
|
|
368
|
|
|
345
|
|
|
177
|
|
|
7
|
|
|
95
|
|
|||
Prior accident years before catastrophe losses
|
|
(91
|
)
|
|
(159
|
)
|
|
(168
|
)
|
|
43
|
|
|
5
|
|
|||
Prior accident years catastrophe losses
|
|
(28
|
)
|
|
(9
|
)
|
|
(16
|
)
|
|
(211
|
)
|
|
44
|
|
|||
Loss and loss expenses
|
|
3,138
|
|
|
2,861
|
|
|
2,572
|
|
|
10
|
|
|
11
|
|
|||
Underwriting expenses
|
|
1,467
|
|
|
1,389
|
|
|
1,321
|
|
|
6
|
|
|
5
|
|
|||
Underwriting profit
|
|
$
|
128
|
|
|
$
|
242
|
|
|
$
|
386
|
|
|
(47
|
)
|
|
(37
|
)
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Ratios as a percent of earned premiums:
|
|
|
|
|
|
|
|
Pt. Change
|
|
Pt. Change
|
||||||||
Current accident year before catastrophe losses
|
|
61.1
|
%
|
|
59.8
|
%
|
|
60.4
|
%
|
|
1.3
|
|
|
(0.6
|
)
|
|||
Current accident year catastrophe losses
|
|
7.8
|
|
|
7.7
|
|
|
4.1
|
|
|
0.1
|
|
|
3.6
|
|
|||
Prior accident years before catastrophe losses
|
|
(1.9
|
)
|
|
(3.5
|
)
|
|
(3.9
|
)
|
|
1.6
|
|
|
0.4
|
|
|||
Prior accident years catastrophe losses
|
|
(0.6
|
)
|
|
(0.2
|
)
|
|
(0.4
|
)
|
|
(0.4
|
)
|
|
0.2
|
|
|||
Loss and loss expenses
|
|
66.4
|
|
|
63.8
|
|
|
60.2
|
|
|
2.6
|
|
|
3.6
|
|
|||
Underwriting expenses
|
|
31.1
|
|
|
31.0
|
|
|
30.9
|
|
|
0.1
|
|
|
0.1
|
|
|||
Combined ratio
|
|
97.5
|
%
|
|
94.8
|
%
|
|
91.1
|
%
|
|
2.7
|
|
|
3.7
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
||||||||
Combined ratio:
|
|
97.5
|
%
|
|
94.8
|
%
|
|
91.1
|
%
|
|
2.7
|
|
|
3.7
|
|
|||
Contribution from catastrophe losses and prior years
reserve development
|
|
5.3
|
|
|
4.0
|
|
|
(0.2
|
)
|
|
1.3
|
|
|
4.2
|
|
|||
Combined ratio before catastrophe losses and prior years
reserve development
|
|
92.2
|
%
|
|
90.8
|
%
|
|
91.3
|
%
|
|
1.4
|
|
|
(0.5
|
)
|
|||
|
|
|
|
|
|
|
|
|
|
|
•
|
Premiums – Agency renewal written premiums rose $126 million in 2017 and represented approximately half of the growth in earned premiums and net written premiums that rose in each of our property casualty segments. The renewal premium increase was largely due to average renewal price increases and a higher level of insured exposures. Price increases with enhanced precision continue to benefit operating results.
|
(Dollars in millions)
|
|
Years ended December 31,
|
|
2017-2016
|
|
2016-2015
|
||||||||||||
|
|
2017
|
|
2016
|
|
2015
|
|
Change %
|
|
Change %
|
||||||||
Agency renewal written premiums
|
|
$
|
4,198
|
|
|
$
|
4,072
|
|
|
$
|
3,925
|
|
|
3
|
|
|
4
|
|
Agency new business written premiums
|
|
626
|
|
|
551
|
|
|
532
|
|
|
14
|
|
|
4
|
|
|||
Cincinnati Re net written premiums
|
|
125
|
|
|
71
|
|
|
33
|
|
|
76
|
|
|
115
|
|
|||
Other written premiums
|
|
(109
|
)
|
|
(114
|
)
|
|
(129
|
)
|
|
4
|
|
|
12
|
|
|||
Net written premiums
|
|
4,840
|
|
|
4,580
|
|
|
4,361
|
|
|
6
|
|
|
5
|
|
|||
Unearned premium change
|
|
(118
|
)
|
|
(98
|
)
|
|
(90
|
)
|
|
(20
|
)
|
|
(9
|
)
|
|||
Earned premiums
|
|
$
|
4,722
|
|
|
$
|
4,482
|
|
|
$
|
4,271
|
|
|
5
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
•
|
Combined ratio – The 2017 combined ratio increased 2.7 percentage points compared with 2016, including a 0.3 percentage-point decrease in the ratio for natural catastrophe losses. The 2017 ratio for current accident year losses and loss expenses before catastrophes increased by 1.3 percentage points, in part due to large losses and the corresponding ratios for new losses above $1 million described below, and partially offset what we believe are improvements to some of our loss experience due to recent-year initiatives to improve pricing precision and claims and loss control practices. The remainder of the 2017 combined ratio increase included 1.6 percentage-points less benefit in the ratio for prior accident year losses and loss expenses before catastrophes. We further discuss ratios related to reserve development in the sections that follow the Catastrophe Losses Incurred table below.
|
(Dollars in millions, net of reinsurance)
|
|
|
|
|
|
|
Excess
|
|
|
|
|
|||||||||||
|
|
|
|
Commercial
|
|
Personal
|
|
and surplus
|
|
Cincinnati
|
|
|
||||||||||
Dates
|
Events
|
Regions
|
|
lines
|
|
lines
|
|
lines
|
|
Re
|
|
Total
|
||||||||||
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Feb. 28-Mar. 1
|
Flood, hail, wind
|
Midwest, South
|
|
$
|
20
|
|
|
$
|
23
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
43
|
|
Mar. 6-9
|
Flood, hail, wind
|
Midwest, Northeast, South
|
|
26
|
|
|
11
|
|
|
—
|
|
|
—
|
|
|
37
|
|
|||||
Mar. 21-22
|
Flood, hail, wind
|
South
|
|
19
|
|
|
9
|
|
|
—
|
|
|
—
|
|
|
28
|
|
|||||
Apr. 4-6
|
Flood, hail, wind
|
Midwest, South
|
|
8
|
|
|
15
|
|
|
—
|
|
|
—
|
|
|
23
|
|
|||||
May 8-11
|
Flood, hail, wind
|
Midwest, South, West
|
|
14
|
|
|
1
|
|
|
|
|
|
—
|
|
|
15
|
|
|||||
May 15-18
|
Flood, hail, wind
|
Midwest, Northeast, South
|
|
3
|
|
|
10
|
|
|
—
|
|
|
—
|
|
|
13
|
|
|||||
Jun. 11
|
Flood, hail, wind
|
Midwest
|
|
4
|
|
|
15
|
|
|
—
|
|
|
—
|
|
|
19
|
|
|||||
Jun. 16-19
|
Flood, hail, wind
|
Midwest, Northeast, South
|
|
7
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
10
|
|
|||||
Jun. 27-29
|
Flood, hail, wind
|
Midwest
|
|
18
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
19
|
|
|||||
Aug. 25-Sep. 1
|
Flood, hail, wind
|
South
|
|
5
|
|
|
2
|
|
|
—
|
|
|
10
|
|
|
17
|
|
|||||
Sep. 6-12
|
Flood, hail, wind
|
South
|
|
14
|
|
|
18
|
|
|
1
|
|
|
19
|
|
|
52
|
|
|||||
Nov. 5-6
|
Flood, hail, wind
|
Midwest
|
|
6
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
10
|
|
|||||
All other 2017 catastrophes
|
|
|
38
|
|
|
27
|
|
|
1
|
|
|
16
|
|
|
82
|
|
||||||
Development on 2016 and prior catastrophes
|
|
(23
|
)
|
|
(4
|
)
|
|
—
|
|
|
(1
|
)
|
|
(28
|
)
|
|||||||
Calendar year incurred total
|
|
|
$
|
159
|
|
|
$
|
135
|
|
|
$
|
2
|
|
|
$
|
44
|
|
|
$
|
340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Apr. 2-3
|
Hail, wind
|
Midwest, Northeast, South
|
|
$
|
5
|
|
|
$
|
7
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
12
|
|
Apr. 10-15
|
Flood, hail, wind
|
South
|
|
48
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
49
|
|
|||||
Apr. 25-28
|
Flood, hail, wind
|
Midwest, South
|
|
8
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
12
|
|
|||||
Apr. 29-May 3
|
Flood, hail, wind
|
Midwest, South
|
|
17
|
|
|
8
|
|
|
—
|
|
|
—
|
|
|
25
|
|
|||||
May 7-10
|
Flood, hail, wind
|
Midwest, South, West
|
|
17
|
|
|
11
|
|
|
—
|
|
|
—
|
|
|
28
|
|
|||||
May 11-12
|
Flood, hail, wind
|
Midwest, South
|
|
9
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
11
|
|
|||||
May 21-28
|
Flood, hail, wind
|
Midwest, South, West
|
|
12
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
15
|
|
|||||
Jul. 28-29
|
Flood, hail, wind
|
West
|
|
10
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10
|
|
|||||
Sep. 19-23
|
Flood, hail, wind
|
Midwest
|
|
7
|
|
|
5
|
|
|
—
|
|
|
—
|
|
|
12
|
|
|||||
Oct. 6-9
|
Flood, wind
|
South
|
|
22
|
|
|
23
|
|
|
—
|
|
|
3
|
|
|
48
|
|
|||||
Nov. 28-30
|
Fire
|
South
|
|
25
|
|
|
20
|
|
|
1
|
|
|
—
|
|
|
46
|
|
|||||
Nov. 28-Dec. 1
|
Flood, hail, wind
|
South
|
|
7
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
10
|
|
|||||
All other 2016 catastrophes
|
|
|
39
|
|
|
27
|
|
|
1
|
|
|
—
|
|
|
67
|
|
||||||
Development on 2015 and prior catastrophes
|
|
(5
|
)
|
|
(4
|
)
|
|
—
|
|
|
—
|
|
|
(9
|
)
|
|||||||
Calendar year incurred total
|
|
|
$
|
221
|
|
|
$
|
109
|
|
|
$
|
3
|
|
|
$
|
3
|
|
|
$
|
336
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Feb. 16-27
|
Freezing, ice, snow, wind
|
Midwest, Northeast, South
|
|
$
|
35
|
|
|
$
|
9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
44
|
|
Apr. 7-10
|
Flood, hail, wind
|
Midwest, South
|
|
7
|
|
|
14
|
|
|
—
|
|
|
—
|
|
|
21
|
|
|||||
Apr. 18-20
|
Flood, hail, wind
|
Midwest, South
|
|
4
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
10
|
|
|||||
Jul. 12-14
|
Flood, hail, wind
|
Midwest, South
|
|
5
|
|
|
7
|
|
|
—
|
|
|
—
|
|
|
12
|
|
|||||
All other 2015 catastrophes
|
|
|
54
|
|
|
35
|
|
|
1
|
|
|
—
|
|
|
90
|
|
||||||
Development on 2014 and prior catastrophes
|
|
(12
|
)
|
|
(3
|
)
|
|
(1
|
)
|
|
—
|
|
|
(16
|
)
|
|||||||
Calendar year incurred total
|
|
|
$
|
93
|
|
|
$
|
68
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions, net of reinsurance)
|
|
Years ended December 31,
|
|
2017-2016
|
|
2016-2015
|
||||||||||||
|
|
2017
|
|
2016
|
|
2015
|
|
Change %
|
|
Change %
|
||||||||
Current accident year losses greater than $5,000,000
|
|
$
|
45
|
|
|
$
|
26
|
|
|
$
|
29
|
|
|
73
|
|
|
(10
|
)
|
Current accident year losses $1,000,000-$5,000,000
|
|
212
|
|
|
185
|
|
|
161
|
|
|
15
|
|
|
15
|
|
|||
Large loss prior accident year reserve development
|
|
51
|
|
|
(6
|
)
|
|
27
|
|
|
nm
|
|
|
nm
|
|
|||
Total large losses incurred
|
|
308
|
|
|
205
|
|
|
217
|
|
|
50
|
|
|
(6
|
)
|
|||
Losses incurred but not reported
|
|
54
|
|
|
164
|
|
|
70
|
|
|
(67
|
)
|
|
134
|
|
|||
Other losses excluding catastrophe losses
|
|
1,903
|
|
|
1,699
|
|
|
1,682
|
|
|
12
|
|
|
1
|
|
|||
Catastrophe losses
|
|
327
|
|
|
327
|
|
|
156
|
|
|
0
|
|
|
110
|
|
|||
Total losses incurred
|
|
$
|
2,592
|
|
|
$
|
2,395
|
|
|
$
|
2,125
|
|
|
8
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Ratios as a percent of earned premiums:
|
|
|
|
|
|
|
|
|
|
|
Pt. Change
|
|
Pt. Change
|
|||||
Current accident year losses greater than $5,000,000
|
|
1.0
|
%
|
|
0.6
|
%
|
|
0.7
|
%
|
|
0.4
|
|
|
(0.1
|
)
|
|||
Current accident year losses $1,000,000-$5,000,000
|
|
4.5
|
|
|
4.1
|
|
|
3.8
|
|
|
0.4
|
|
|
0.3
|
|
|||
Large loss prior accident year reserve development
|
|
1.0
|
|
|
(0.1
|
)
|
|
0.6
|
|
|
1.1
|
|
|
(0.7
|
)
|
|||
Total large loss ratio
|
|
6.5
|
|
|
4.6
|
|
|
5.1
|
|
|
1.9
|
|
|
(0.5
|
)
|
|||
Losses incurred but not reported
|
|
1.1
|
|
|
3.7
|
|
|
1.6
|
|
|
(2.6
|
)
|
|
2.1
|
|
|||
Other losses excluding catastrophe losses
|
|
40.3
|
|
|
37.8
|
|
|
39.5
|
|
|
2.5
|
|
|
(1.7
|
)
|
|||
Catastrophe losses
|
|
7.0
|
|
|
7.3
|
|
|
3.6
|
|
|
(0.3
|
)
|
|
3.7
|
|
|||
Total loss ratio
|
|
54.9
|
%
|
|
53.4
|
%
|
|
49.8
|
%
|
|
1.5
|
|
|
3.6
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
Years ended December 31,
|
|
2017-2016
|
|
2016-2015
|
||||||||||||
|
|
2017
|
|
2016
|
|
2015
|
|
Change %
|
|
Change %
|
||||||||
Commission expenses
|
|
$
|
866
|
|
|
$
|
819
|
|
|
$
|
792
|
|
|
6
|
|
|
3
|
|
Other underwriting expenses
|
|
587
|
|
|
555
|
|
|
514
|
|
|
6
|
|
|
8
|
|
|||
Policyholder dividends
|
|
14
|
|
|
15
|
|
|
15
|
|
|
(7
|
)
|
|
0
|
|
|||
Total underwriting expenses
|
|
$
|
1,467
|
|
|
$
|
1,389
|
|
|
$
|
1,321
|
|
|
6
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Ratios as a percent of earned premiums:
|
|
|
|
|
|
|
|
|
|
|
Pt. Change
|
|
Pt. Change
|
|||||
Commission expenses
|
|
18.3
|
%
|
|
18.3
|
%
|
|
18.5
|
%
|
|
0.0
|
|
|
(0.2
|
)
|
|||
Other underwriting expenses
|
|
12.5
|
|
|
12.4
|
|
|
12.1
|
|
|
0.1
|
|
|
0.3
|
|
|||
Policyholder dividends
|
|
0.3
|
|
|
0.3
|
|
|
0.3
|
|
|
0.0
|
|
|
0.0
|
|
|||
Total underwriting expense ratio
|
|
31.1
|
%
|
|
31.0
|
%
|
|
30.9
|
%
|
|
0.1
|
|
|
0.1
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
Years ended December 31,
|
|
2017-2016
|
|
2016-2015
|
||||||||||||
|
|
2017
|
|
2016
|
|
2015
|
|
Change %
|
|
Change %
|
||||||||
Earned premiums
|
|
$
|
3,165
|
|
|
$
|
3,089
|
|
|
$
|
2,996
|
|
|
2
|
|
|
3
|
|
Fee revenues
|
|
5
|
|
|
5
|
|
|
4
|
|
|
0
|
|
|
25
|
|
|||
Total revenues
|
|
3,170
|
|
|
3,094
|
|
|
3,000
|
|
|
2
|
|
|
3
|
|
|||
Loss and loss expenses from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Current accident year before catastrophe losses
|
|
1,933
|
|
|
1,831
|
|
|
1,757
|
|
|
6
|
|
|
4
|
|
|||
Current accident year catastrophe losses
|
|
182
|
|
|
226
|
|
|
105
|
|
|
(19
|
)
|
|
115
|
|
|||
Prior accident years before catastrophe losses
|
|
(50
|
)
|
|
(124
|
)
|
|
(142
|
)
|
|
60
|
|
|
13
|
|
|||
Prior accident years catastrophe losses
|
|
(23
|
)
|
|
(5
|
)
|
|
(12
|
)
|
|
(360
|
)
|
|
58
|
|
|||
Loss and loss expenses
|
|
2,042
|
|
|
1,928
|
|
|
1,708
|
|
|
6
|
|
|
13
|
|
|||
Underwriting expenses
|
|
1,009
|
|
|
982
|
|
|
947
|
|
|
3
|
|
|
4
|
|
|||
Underwriting profit
|
|
$
|
119
|
|
|
$
|
184
|
|
|
$
|
345
|
|
|
(35
|
)
|
|
(47
|
)
|
Ratios as a percent of earned premiums:
|
|
|
|
|
|
|
|
|
|
|
Pt. Change
|
|
Pt. Change
|
|||||
Current accident year before catastrophe losses
|
|
61.1
|
%
|
|
59.3
|
%
|
|
58.6
|
%
|
|
1.8
|
|
|
0.7
|
|
|||
Current accident year catastrophe losses
|
|
5.7
|
|
|
7.3
|
|
|
3.5
|
|
|
(1.6
|
)
|
|
3.8
|
|
|||
Prior accident years before catastrophe losses
|
|
(1.6
|
)
|
|
(4.0
|
)
|
|
(4.7
|
)
|
|
2.4
|
|
|
0.7
|
|
|||
Prior accident years catastrophe losses
|
|
(0.7
|
)
|
|
(0.2
|
)
|
|
(0.4
|
)
|
|
(0.5
|
)
|
|
0.2
|
|
|||
Loss and loss expenses
|
|
64.5
|
|
|
62.4
|
|
|
57.0
|
|
|
2.1
|
|
|
5.4
|
|
|||
Underwriting expenses
|
|
31.9
|
|
|
31.8
|
|
|
31.6
|
|
|
0.1
|
|
|
0.2
|
|
|||
Combined ratio
|
|
96.4
|
%
|
|
94.2
|
%
|
|
88.6
|
%
|
|
2.2
|
|
|
5.6
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
||||||||
Combined ratio:
|
|
96.4
|
%
|
|
94.2
|
%
|
|
88.6
|
%
|
|
2.2
|
|
|
5.6
|
|
|||
Contribution from catastrophe losses and prior years
reserve development |
|
3.4
|
|
|
3.1
|
|
|
(1.6
|
)
|
|
0.3
|
|
|
4.7
|
|
|||
Combined ratio before catastrophe losses and prior years
reserve development
|
|
93.0
|
%
|
|
91.1
|
%
|
|
90.2
|
%
|
|
1.9
|
|
|
0.9
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
•
|
Premiums – Earned premiums and net written premiums rose in 2017, primarily due to a $48 million increase in renewal written premiums that continued to include a price increase for an average policy. New business written premiums in 2017 increased $25 million, or 7 percent, compared with 2016. The increase was driven by production from agencies appointed since the beginning of 2016.
|
•
|
Combined ratio – The 2017 combined ratio increased 2.2 percentage points compared with 2016, including a 2.1 percentage-point decrease in the ratio for natural catastrophe losses. The 2017 ratio for current accident year losses and loss expenses before catastrophes increased by 1.8 percentage points, including 0.4 points from more current accident year losses of $1 million or more per claim, shown in the table below. Development on prior accident years’ loss and loss expense reserves before catastrophes during 2017 was 2.4 percentage points less favorable than in 2016, including 3.1 points from paid losses and loss expenses.
|
(Dollars in millions)
|
|
Years ended December 31,
|
|
2017-2016
|
|
2016-2015
|
||||||||||||
|
|
2017
|
|
2016
|
|
2015
|
|
Change %
|
|
Change %
|
||||||||
Agency renewal written premiums
|
|
$
|
2,880
|
|
|
$
|
2,832
|
|
|
$
|
2,756
|
|
|
2
|
|
|
3
|
|
Agency new business written premiums
|
|
397
|
|
|
372
|
|
|
365
|
|
|
7
|
|
|
2
|
|
|||
Other written premiums
|
|
(75
|
)
|
|
(82
|
)
|
|
(96
|
)
|
|
9
|
|
|
15
|
|
|||
Net written premiums
|
|
3,202
|
|
|
3,122
|
|
|
3,025
|
|
|
3
|
|
|
3
|
|
|||
Unearned premium change
|
|
(37
|
)
|
|
(33
|
)
|
|
(29
|
)
|
|
(12
|
)
|
|
(14
|
)
|
|||
Earned premiums
|
|
$
|
3,165
|
|
|
$
|
3,089
|
|
|
$
|
2,996
|
|
|
2
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions, net of reinsurance)
|
|
Years ended December 31,
|
|
2017-2016
|
|
2016-2015
|
||||||||||||
|
|
2017
|
|
2016
|
|
2015
|
|
Change %
|
|
Change %
|
||||||||
Current accident year losses greater than $5,000,000
|
|
$
|
39
|
|
|
$
|
26
|
|
|
$
|
29
|
|
|
50
|
|
|
(10
|
)
|
Current accident year losses $1,000,000-$5,000,000
|
|
166
|
|
|
162
|
|
|
112
|
|
|
2
|
|
|
45
|
|
|||
Large loss prior accident year reserve development
|
|
47
|
|
|
2
|
|
|
25
|
|
|
nm
|
|
|
(92
|
)
|
|||
Total large losses incurred
|
|
252
|
|
|
190
|
|
|
166
|
|
|
33
|
|
|
14
|
|
|||
Losses incurred but not reported
|
|
61
|
|
|
125
|
|
|
51
|
|
|
(51
|
)
|
|
145
|
|
|||
Other losses excluding catastrophe losses
|
|
1,184
|
|
|
1,055
|
|
|
1,076
|
|
|
12
|
|
|
(2
|
)
|
|||
Catastrophe losses
|
|
150
|
|
|
214
|
|
|
88
|
|
|
(30
|
)
|
|
143
|
|
|||
Total losses incurred
|
|
$
|
1,647
|
|
|
$
|
1,584
|
|
|
$
|
1,381
|
|
|
4
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Ratios as a percent of earned premiums:
|
|
|
|
|
|
|
|
|
|
|
Pt. Change
|
|
Pt. Change
|
|||||
Current accident year losses greater than $5,000,000
|
|
1.2
|
%
|
|
0.8
|
%
|
|
1.0
|
%
|
|
0.4
|
|
|
(0.2
|
)
|
|||
Current accident year losses $1,000,000-$5,000,000
|
|
5.3
|
|
|
5.3
|
|
|
3.7
|
|
|
0.0
|
|
|
1.6
|
|
|||
Large loss prior accident year reserve development
|
|
1.5
|
|
|
0.1
|
|
|
0.8
|
|
|
1.4
|
|
|
(0.7
|
)
|
|||
Total large loss ratio
|
|
8.0
|
|
|
6.2
|
|
|
5.5
|
|
|
1.8
|
|
|
0.7
|
|
|||
Losses incurred but not reported
|
|
1.9
|
|
|
4.0
|
|
|
1.7
|
|
|
(2.1
|
)
|
|
2.3
|
|
|||
Other losses excluding catastrophe losses
|
|
37.4
|
|
|
34.2
|
|
|
35.9
|
|
|
3.2
|
|
|
(1.7
|
)
|
|||
Catastrophe losses
|
|
4.7
|
|
|
6.9
|
|
|
3.0
|
|
|
(2.2
|
)
|
|
3.9
|
|
|||
Total loss ratio
|
|
52.0
|
%
|
|
51.3
|
%
|
|
46.1
|
%
|
|
0.7
|
|
|
5.2
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
Years ended December 31,
|
|
2017-2016
|
|
2016-2015
|
||||||||||||
|
|
2017
|
|
2016
|
|
2015
|
|
Change %
|
|
Change %
|
||||||||
Commission expenses
|
|
$
|
577
|
|
|
$
|
565
|
|
|
$
|
550
|
|
|
2
|
|
|
3
|
|
Other underwriting expenses
|
|
418
|
|
|
402
|
|
|
382
|
|
|
4
|
|
|
5
|
|
|||
Policyholder dividends
|
|
14
|
|
|
15
|
|
|
15
|
|
|
(7
|
)
|
|
0
|
|
|||
Total underwriting expenses
|
|
$
|
1,009
|
|
|
$
|
982
|
|
|
$
|
947
|
|
|
3
|
|
|
4
|
|
Ratios as a percent of earned premiums:
|
|
|
|
|
|
|
|
|
|
|
Pt. Change
|
|
Pt. Change
|
|||||
Commission expenses
|
|
18.2
|
%
|
|
18.3
|
%
|
|
18.4
|
%
|
|
(0.1
|
)
|
|
(0.1
|
)
|
|||
Other underwriting expenses
|
|
13.3
|
|
|
13.0
|
|
|
12.7
|
|
|
0.3
|
|
|
0.3
|
|
|||
Policyholder dividends
|
|
0.4
|
|
|
0.5
|
|
|
0.5
|
|
|
(0.1
|
)
|
|
0.0
|
|
|||
Total underwriting expense ratio
|
|
31.9
|
%
|
|
31.8
|
%
|
|
31.6
|
%
|
|
0.1
|
|
|
0.2
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
Years ended December 31,
|
|
2017-2016
|
|
2016-2015
|
||||||||||||
|
|
2017
|
|
2016
|
|
2015
|
|
Change %
|
|
Change %
|
||||||||
Earned premiums
|
|
$
|
1,241
|
|
|
$
|
1,161
|
|
|
$
|
1,097
|
|
|
7
|
|
|
6
|
|
Fee revenues
|
|
5
|
|
|
4
|
|
|
3
|
|
|
25
|
|
|
33
|
|
|||
Total revenues
|
|
1,246
|
|
|
1,165
|
|
|
1,100
|
|
|
7
|
|
|
6
|
|
|||
Loss and loss expenses from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Current accident year before catastrophe losses
|
|
793
|
|
|
731
|
|
|
713
|
|
|
8
|
|
|
3
|
|
|||
Current accident year catastrophe losses
|
|
139
|
|
|
113
|
|
|
71
|
|
|
23
|
|
|
59
|
|
|||
Prior accident years before catastrophe losses
|
|
(10
|
)
|
|
—
|
|
|
8
|
|
|
nm
|
|
|
(100
|
)
|
|||
Prior accident years catastrophe losses
|
|
(4
|
)
|
|
(4
|
)
|
|
(3
|
)
|
|
0
|
|
|
(33
|
)
|
|||
Loss and loss expenses
|
|
918
|
|
|
840
|
|
|
789
|
|
|
9
|
|
|
6
|
|
|||
Underwriting expenses
|
|
360
|
|
|
337
|
|
|
323
|
|
|
7
|
|
|
4
|
|
|||
Underwriting loss
|
|
$
|
(32
|
)
|
|
$
|
(12
|
)
|
|
$
|
(12
|
)
|
|
(167
|
)
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Ratios as a percent of earned premiums:
|
|
|
|
|
|
|
|
Pt. Change
|
|
Pt. Change
|
||||||||
Current accident year before catastrophe losses
|
|
64.0
|
%
|
|
63.0
|
%
|
|
64.9
|
%
|
|
1.0
|
|
|
(1.9
|
)
|
|||
Current accident year catastrophe losses
|
|
11.2
|
|
|
9.7
|
|
|
6.5
|
|
|
1.5
|
|
|
3.2
|
|
|||
Prior accident years before catastrophe losses
|
|
(0.9
|
)
|
|
0.0
|
|
|
0.8
|
|
|
(0.9
|
)
|
|
(0.8
|
)
|
|||
Prior accident years catastrophe losses
|
|
(0.3
|
)
|
|
(0.3
|
)
|
|
(0.3
|
)
|
|
0.0
|
|
|
0.0
|
|
|||
Loss and loss expenses
|
|
74.0
|
|
|
72.4
|
|
|
71.9
|
|
|
1.6
|
|
|
0.5
|
|
|||
Underwriting expenses
|
|
29.0
|
|
|
29.0
|
|
|
29.4
|
|
|
0.0
|
|
|
(0.4
|
)
|
|||
Combined ratio
|
|
103.0
|
%
|
|
101.4
|
%
|
|
101.3
|
%
|
|
1.6
|
|
|
0.1
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
||||||||
Combined ratio:
|
|
103.0
|
%
|
|
101.4
|
%
|
|
101.3
|
%
|
|
1.6
|
|
|
0.1
|
|
|||
Contribution from catastrophe losses and prior years
reserve development |
|
10.0
|
|
|
9.4
|
|
|
7.0
|
|
|
0.6
|
|
|
2.4
|
|
|||
Combined ratio before catastrophe losses and prior years
reserve development |
|
93.0
|
%
|
|
92.0
|
%
|
|
94.3
|
%
|
|
1.0
|
|
|
(2.3
|
)
|
|||
|
|
|
|
|
|
|
|
|
|
|
•
|
Premiums – Earned premiums and net written premiums continued to grow in 2017, largely due to higher renewal written premiums that included price increases. Renewal written premiums rose $57 million, or 5 percent, in 2017, compared with 2016.
|
•
|
Combined ratio – The 2017 combined ratio rose 1.6 percentage points, compared with 2016, driven by a 1.5 percentage-point increase in the ratio for 2017 natural catastrophe losses. The total large loss ratio for losses of $1 million or more per claim, shown in the table below, increased by 3.1 percentage points, largely due to higher losses for homeowner claims and personal umbrella claims related to auto accidents.
|
(Dollars in millions)
|
|
Years ended December 31,
|
|
2017-2016
|
|
2016-2015
|
||||||||||||
|
|
2017
|
|
2016
|
|
2015
|
|
Change %
|
|
Change %
|
||||||||
Agency renewal written premiums
|
|
$
|
1,156
|
|
|
$
|
1,099
|
|
|
$
|
1,041
|
|
|
5
|
|
|
6
|
|
Agency new business written premiums
|
|
161
|
|
|
122
|
|
|
111
|
|
|
32
|
|
|
10
|
|
|||
Other written premiums
|
|
(23
|
)
|
|
(23
|
)
|
|
(24
|
)
|
|
0
|
|
|
4
|
|
|||
Net written premiums
|
|
1,294
|
|
|
1,198
|
|
|
1,128
|
|
|
8
|
|
|
6
|
|
|||
Unearned premium change
|
|
(53
|
)
|
|
(37
|
)
|
|
(31
|
)
|
|
(43
|
)
|
|
(19
|
)
|
|||
Earned premiums
|
|
$
|
1,241
|
|
|
$
|
1,161
|
|
|
$
|
1,097
|
|
|
7
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions, net of reinsurance)
|
|
Years ended December 31,
|
|
2017-2016
|
|
2016-2015
|
||||||||||||
|
|
2017
|
|
2016
|
|
2015
|
|
Change %
|
|
Change %
|
||||||||
Current accident year losses greater than $5,000,000
|
|
$
|
6
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
nm
|
|
|
nm
|
|
Current accident year losses $1,000,000-$5,000,000
|
|
43
|
|
|
19
|
|
|
45
|
|
|
126
|
|
|
(58
|
)
|
|||
Large loss prior accident year reserve development
|
|
3
|
|
|
(7
|
)
|
|
—
|
|
|
nm
|
|
|
nm
|
|
|||
Total large losses incurred
|
|
52
|
|
|
12
|
|
|
45
|
|
|
333
|
|
|
(73
|
)
|
|||
Losses incurred but not reported
|
|
(9
|
)
|
|
35
|
|
|
18
|
|
|
nm
|
|
|
94
|
|
|||
Other losses excluding catastrophe losses
|
|
629
|
|
|
592
|
|
|
566
|
|
|
6
|
|
|
5
|
|
|||
Catastrophe losses
|
|
132
|
|
|
107
|
|
|
66
|
|
|
23
|
|
|
62
|
|
|||
Total losses incurred
|
|
$
|
804
|
|
|
$
|
746
|
|
|
$
|
695
|
|
|
8
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Ratios as a percent of earned premiums:
|
|
|
|
|
|
|
|
Pt. Change
|
|
Pt. Change
|
||||||||
Current accident year losses greater than $5,000,000
|
|
0.5
|
%
|
|
0.0
|
%
|
|
0.0
|
%
|
|
0.5
|
|
|
0.0
|
|
|||
Current accident year losses $1,000,000-$5,000,000
|
|
3.4
|
|
|
1.7
|
|
|
4.1
|
|
|
1.7
|
|
|
(2.4
|
)
|
|||
Large loss prior accident year reserve development
|
|
0.3
|
|
|
(0.6
|
)
|
|
0.0
|
|
|
0.9
|
|
|
(0.6
|
)
|
|||
Total large loss ratio
|
|
4.2
|
|
|
1.1
|
|
|
4.1
|
|
|
3.1
|
|
|
(3.0
|
)
|
|||
Losses incurred but not reported
|
|
(0.7
|
)
|
|
3.0
|
|
|
1.6
|
|
|
(3.7
|
)
|
|
1.4
|
|
|||
Other losses excluding catastrophe losses
|
|
50.7
|
|
|
51.0
|
|
|
51.6
|
|
|
(0.3
|
)
|
|
(0.6
|
)
|
|||
Catastrophe losses
|
|
10.6
|
|
|
9.2
|
|
|
6.0
|
|
|
1.4
|
|
|
3.2
|
|
|||
Total loss ratio
|
|
64.8
|
%
|
|
64.3
|
%
|
|
63.3
|
%
|
|
0.5
|
|
|
1.0
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
Years ended December 31,
|
|
2017-2016
|
|
2016-2015
|
|||||||||||
|
|
2017
|
|
2016
|
|
2015
|
|
Change %
|
|
Change %
|
|||||||
Commission expenses
|
|
$
|
223
|
|
|
$
|
209
|
|
|
$
|
206
|
|
|
7
|
|
1
|
|
Other underwriting expenses
|
|
137
|
|
|
128
|
|
|
117
|
|
|
7
|
|
9
|
|
|||
Total underwriting expenses
|
|
$
|
360
|
|
|
$
|
337
|
|
|
$
|
323
|
|
|
7
|
|
4
|
|
Ratios as a percent of earned premiums:
|
|
|
|
|
|
|
|
Pt. Change
|
|
Pt. Change
|
|||||||
Commission expenses
|
|
18.0
|
%
|
|
18.0
|
%
|
|
18.8
|
%
|
|
0.0
|
|
(0.8
|
)
|
|||
Other underwriting expenses
|
|
11.0
|
|
|
11.0
|
|
|
10.6
|
|
|
0.0
|
|
0.4
|
|
|||
Total underwriting expense ratio
|
|
29.0
|
%
|
|
29.0
|
%
|
|
29.4
|
%
|
|
0.0
|
|
(0.4
|
)
|
|||
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
Years ended December 31,
|
|
2017-2016
|
|
2016-2015
|
||||||||||||
|
|
2017
|
|
2016
|
|
2015
|
|
Change %
|
|
Change %
|
||||||||
Earned premiums
|
|
$
|
209
|
|
|
$
|
183
|
|
|
$
|
168
|
|
|
14
|
|
|
9
|
|
Fee revenues
|
|
1
|
|
|
1
|
|
|
1
|
|
|
0
|
|
|
0
|
|
|||
Total revenues
|
|
210
|
|
|
184
|
|
|
169
|
|
|
14
|
|
|
9
|
|
|||
Loss and loss expenses from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Current accident year before catastrophe losses
|
|
113
|
|
|
99
|
|
|
104
|
|
|
14
|
|
|
(5
|
)
|
|||
Current accident year catastrophe losses
|
|
2
|
|
|
3
|
|
|
1
|
|
|
(33
|
)
|
|
200
|
|
|||
Prior accident years before catastrophe losses
|
|
(29
|
)
|
|
(34
|
)
|
|
(34
|
)
|
|
15
|
|
|
0
|
|
|||
Prior accident years catastrophe losses
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
0
|
|
|
nm
|
|
|||
Loss and loss expenses
|
|
86
|
|
|
68
|
|
|
70
|
|
|
26
|
|
|
(3
|
)
|
|||
Underwriting expenses
|
|
63
|
|
|
54
|
|
|
48
|
|
|
17
|
|
|
13
|
|
|||
Underwriting profit
|
|
$
|
61
|
|
|
$
|
62
|
|
|
$
|
51
|
|
|
(2
|
)
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Ratios as a percent of earned premiums:
|
|
|
|
|
|
|
|
Pt. Change
|
|
Pt. Change
|
||||||||
Current accident year before catastrophe losses
|
|
54.0
|
%
|
|
54.4
|
%
|
|
62.1
|
%
|
|
(0.4
|
)
|
|
(7.7
|
)
|
|||
Current accident year catastrophe losses
|
|
1.1
|
|
|
1.6
|
|
|
0.5
|
|
|
(0.5
|
)
|
|
1.1
|
|
|||
Prior accident years before catastrophe losses
|
|
(13.6
|
)
|
|
(18.3
|
)
|
|
(20.6
|
)
|
|
4.7
|
|
|
2.3
|
|
|||
Prior accident years catastrophe losses
|
|
(0.1
|
)
|
|
(0.1
|
)
|
|
(0.1
|
)
|
|
0.0
|
|
|
0.0
|
|
|||
Loss and loss expenses
|
|
41.4
|
|
|
37.6
|
|
|
41.9
|
|
|
3.8
|
|
|
(4.3
|
)
|
|||
Underwriting expenses
|
|
29.7
|
|
|
29.4
|
|
|
28.1
|
|
|
0.3
|
|
|
1.3
|
|
|||
Combined ratio
|
|
71.1
|
%
|
|
67.0
|
%
|
|
70.0
|
%
|
|
4.1
|
|
|
(3.0
|
)
|
|||
|
|
|
|
|
|
|
|
|
|
|
||||||||
Combined ratio:
|
|
71.1
|
%
|
|
67.0
|
%
|
|
70.0
|
%
|
|
4.1
|
|
|
(3.0
|
)
|
|||
Contribution from catastrophe losses and prior years
reserve development
|
|
(12.6
|
)
|
|
(16.8
|
)
|
|
(20.2
|
)
|
|
4.2
|
|
|
3.4
|
|
|||
Combined ratio before catastrophe losses and prior years
reserve development
|
|
83.7
|
%
|
|
83.8
|
%
|
|
90.2
|
%
|
|
(0.1
|
)
|
|
(6.4
|
)
|
|||
|
|
|
|
|
|
|
|
|
|
|
•
|
Premiums – Earned premiums and net written premiums continued to grow during 2017. Growth was driven by higher renewal written premiums that included average renewal estimated price increases in the low-single-digit range. New business written premiums grew 19 percent in 2017, reflecting an increase in our marketing efforts as we continued to carefully underwrite each policy in a highly competitive market.
|
•
|
Combined ratio – The combined ratio rose 4.1 percentage points in 2017, primarily due to less favorable reserve development on prior accident years.
|
(Dollars in millions)
|
|
Years ended December 31,
|
|
2017-2016
|
|
2016-2015
|
|||||||||||
|
|
2017
|
|
2016
|
|
2015
|
|
Change %
|
|
Change %
|
|||||||
Agency renewal written premiums
|
|
$
|
162
|
|
|
$
|
141
|
|
|
$
|
128
|
|
|
15
|
|
|
10
|
Agency new business written premiums
|
|
68
|
|
|
57
|
|
|
56
|
|
|
19
|
|
|
2
|
|||
Other written premiums
|
|
(11
|
)
|
|
(9
|
)
|
|
(9
|
)
|
|
(22
|
)
|
|
0
|
|||
Net written premiums
|
|
219
|
|
|
189
|
|
|
175
|
|
|
16
|
|
|
9
|
|||
Unearned premium change
|
|
(10
|
)
|
|
(6
|
)
|
|
(7
|
)
|
|
(67
|
)
|
|
14
|
|||
Earned premiums
|
|
$
|
209
|
|
|
$
|
183
|
|
|
$
|
168
|
|
|
14
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions, net of reinsurance)
|
|
Years ended December 31,
|
|
2017-2016
|
|
2016-2015
|
||||||||||||
|
|
2017
|
|
2016
|
|
2015
|
|
Change %
|
|
Change %
|
||||||||
Current accident year losses greater than $5,000,000
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
nm
|
|
|
nm
|
|
Current accident year losses $1,000,000-$5,000,000
|
|
3
|
|
|
3
|
|
|
4
|
|
|
0
|
|
|
(25
|
)
|
|||
Large loss prior accident year reserve development
|
|
1
|
|
|
—
|
|
|
3
|
|
|
nm
|
|
|
nm
|
|
|||
Total large losses incurred
|
|
4
|
|
|
3
|
|
|
7
|
|
|
33
|
|
|
(57
|
)
|
|||
Losses incurred but not reported
|
|
2
|
|
|
5
|
|
|
2
|
|
|
(60
|
)
|
|
150
|
|
|||
Other losses excluding catastrophe losses
|
|
44
|
|
|
31
|
|
|
35
|
|
|
42
|
|
|
(11
|
)
|
|||
Catastrophe losses
|
|
2
|
|
|
3
|
|
|
1
|
|
|
(33
|
)
|
|
200
|
|
|||
Total losses incurred
|
|
$
|
52
|
|
|
$
|
42
|
|
|
$
|
45
|
|
|
24
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Ratios as a percent of earned premiums:
|
|
|
|
|
|
|
|
Pt. Change
|
|
Pt. Change
|
||||||||
Current accident year losses greater than $5,000,000
|
|
0.0
|
%
|
|
0.0
|
%
|
|
0.0
|
%
|
|
0.0
|
|
|
0.0
|
|
|||
Current accident year losses $1,000,000-$5,000,000
|
|
1.5
|
|
|
1.7
|
|
|
2.4
|
|
|
(0.2
|
)
|
|
(0.7
|
)
|
|||
Large loss prior accident year reserve development
|
|
0.4
|
|
|
(0.3
|
)
|
|
1.7
|
|
|
0.7
|
|
|
(2.0
|
)
|
|||
Total large loss ratio
|
|
1.9
|
|
|
1.4
|
|
|
4.1
|
|
|
0.5
|
|
|
(2.7
|
)
|
|||
Losses incurred but not reported
|
|
0.8
|
|
|
2.9
|
|
|
1.0
|
|
|
(2.1
|
)
|
|
1.9
|
|
|||
Other losses excluding catastrophe losses
|
|
21.6
|
|
|
16.8
|
|
|
21.2
|
|
|
4.8
|
|
|
(4.4
|
)
|
|||
Catastrophe losses
|
|
0.8
|
|
|
1.5
|
|
|
0.4
|
|
|
(0.7
|
)
|
|
1.1
|
|
|||
Total loss ratio
|
|
25.1
|
%
|
|
22.6
|
%
|
|
26.7
|
%
|
|
2.5
|
|
|
(4.1
|
)
|
|||
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
Years ended December 31,
|
|
2017-2016
|
|
2016-2015
|
|||||||||||
|
|
2017
|
|
2016
|
|
2015
|
|
Change %
|
|
Change %
|
|||||||
Commission expenses
|
|
$
|
41
|
|
|
$
|
36
|
|
|
$
|
33
|
|
|
14
|
|
|
9
|
Other underwriting expenses
|
|
22
|
|
|
18
|
|
|
15
|
|
|
22
|
|
|
20
|
|||
Total underwriting expenses
|
|
$
|
63
|
|
|
$
|
54
|
|
|
$
|
48
|
|
|
17
|
|
|
13
|
Ratios as a percent of earned premiums:
|
|
|
|
|
|
|
|
Pt. Change
|
|
Pt. Change
|
|||||||
Commission expenses
|
|
19.2
|
%
|
|
19.4
|
%
|
|
19.2
|
%
|
|
(0.2
|
)
|
|
0.2
|
|||
Other underwriting expenses
|
|
10.5
|
|
|
10.0
|
|
|
8.9
|
|
|
0.5
|
|
|
1.1
|
|||
Total underwriting expenses ratio
|
|
29.7
|
%
|
|
29.4
|
%
|
|
28.1
|
%
|
|
0.3
|
|
|
1.3
|
|||
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
Years ended December 31,
|
|
2017-2016
|
|
2016-2015
|
||||||||||||
|
|
2017
|
|
2016
|
|
2015
|
|
Change %
|
|
Change %
|
||||||||
Earned premiums
|
|
$
|
232
|
|
|
$
|
228
|
|
|
$
|
209
|
|
|
2
|
|
|
9
|
|
Fee revenues
|
|
5
|
|
|
5
|
|
|
5
|
|
|
0
|
|
|
0
|
|
|||
Total revenues
|
|
237
|
|
|
233
|
|
|
214
|
|
|
2
|
|
|
9
|
|
|||
Contract holders' benefits incurred
|
|
252
|
|
|
246
|
|
|
236
|
|
|
2
|
|
|
4
|
|
|||
Investment interest credited to contract holders'
|
|
(93
|
)
|
|
(90
|
)
|
|
(86
|
)
|
|
(3
|
)
|
|
(5
|
)
|
|||
Underwriting expenses incurred
|
|
79
|
|
|
76
|
|
|
66
|
|
|
4
|
|
|
15
|
|
|||
Total benefits and expenses
|
|
238
|
|
|
232
|
|
|
216
|
|
|
3
|
|
|
7
|
|
|||
Life insurance segment (loss) profit
|
|
$
|
(1
|
)
|
|
$
|
1
|
|
|
$
|
(2
|
)
|
|
nm
|
|
|
nm
|
|
|
|
|
|
|
|
|
|
|
|
|
•
|
Revenues – Earned premiums rose 2 percent for the year 2017, as shown in the table below that includes details by major line of business. Our largest life insurance product line, term life insurance, rose 6 percent. Net in-force policy face amounts rose 8 percent to $61.177 billion at year-end 2017 from $56.808 billion at year-end 2016 and $52.735 billion at year-end 2015.
|
•
|
Profitability – The life insurance segment frequently reports only a small profit or loss because most of its investment income is included in the investments segment results. We include only investment income credited to contract holders (interest assumed in life insurance policy reserve calculations) in life insurance segment results. The segment reported a $1 million loss in 2017, following a profit of $1 million in 2016 and a loss of $2 million in 2015. It has averaged a profit of less than $1 million over the past five years.
|
(Dollars in millions)
|
|
Years ended December 31,
|
|
2017-2016
|
|
2016-2015
|
||||||||||||
|
|
2017
|
|
2016
|
|
2015
|
|
Change %
|
|
Change %
|
||||||||
Term life insurance
|
|
$
|
158
|
|
|
$
|
149
|
|
|
$
|
136
|
|
|
6
|
|
|
10
|
|
Universal life insurance
|
|
38
|
|
|
37
|
|
|
39
|
|
|
3
|
|
|
(5
|
)
|
|||
Other life insurance, annuity and disability
income products
|
|
36
|
|
|
42
|
|
|
34
|
|
|
(14
|
)
|
|
24
|
|
|||
Net earned premiums
|
|
$
|
232
|
|
|
$
|
228
|
|
|
$
|
209
|
|
|
2
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
•
|
Contract holders’ benefits incurred, related to traditional life and interest-sensitive products, accounted for 76.1 percent of 2017 total benefits and expenses compared with 76.4 percent in 2016 and 78.1 percent in 2015. Total contract holders’ benefits increased as net death claims were higher in 2017, compared with 2016.
|
•
|
Underwriting expenses incurred, net of deferred acquisition costs, accounted for 23.9 percent of 2017 total benefits and expenses compared with 23.6 percent in 2016 and 21.9 percent in 2015. Expenses in 2017 increased 4 percent, 2 percentage points more than the 2 percent growth in earned premiums, primarily due to increased operating expenses related to premium growth. In 2016, the percentage increase for expenses was 6 percentage points more than growth in earned premiums.
|
(Dollars in millions)
|
|
Years ended December 31,
|
|
2017-2016
|
|
2016-2015
|
||||||||||||
|
|
2017
|
|
2016
|
|
2015
|
|
Change %
|
|
Change %
|
||||||||
Total investment income, net of expenses
|
|
$
|
609
|
|
|
$
|
595
|
|
|
$
|
572
|
|
|
2
|
|
|
4
|
|
Investment interest credited to contract holders'
|
|
(93
|
)
|
|
(90
|
)
|
|
(86
|
)
|
|
(3
|
)
|
|
(5
|
)
|
|||
Realized investment gains, net
|
|
148
|
|
|
124
|
|
|
70
|
|
|
19
|
|
|
77
|
|
|||
Investments profit, pretax
|
|
$
|
664
|
|
|
$
|
629
|
|
|
$
|
556
|
|
|
6
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
•
|
Investment income – Pretax investment income grew $14 million, or 2 percent, in 2017, including increases from both interest and dividends. Dividend income reflected rising dividend rates that offset a small amount of net sales of equity securities. Interest income also rose, as net purchases of fixed-maturity securities offset the continuing effects on bond yields of the low interest rate environment. Pretax investment income rose 4 percent in 2016, reflecting increases in both dividend income and interest income. Average yields in the investment income table below are based on the average invested asset and cash amounts indicated in the table using fixed-maturity securities valued at amortized cost and all other securities at fair value.
|
•
|
Realized investment gains and losses – We reported realized investment gains in all three years, largely due to investment sales that were discretionary in timing and amount. Those gains were reduced by OTTI charges.
|
(Dollars in millions)
|
|
Years ended December 31,
|
|
2017-2016
|
|
2016-2015
|
|||||||||||
|
|
2017
|
|
2016
|
|
2015
|
|
Change %
|
|
Change %
|
|||||||
Invested assets beginning balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Fixed maturities
|
|
$
|
10,085
|
|
|
$
|
9,650
|
|
|
$
|
9,460
|
|
|
5
|
|
2
|
|
Equity securities
|
|
5,334
|
|
|
4,706
|
|
|
4,858
|
|
|
13
|
|
(3
|
)
|
|||
Other invested assets
|
|
81
|
|
|
67
|
|
|
68
|
|
|
21
|
|
(1
|
)
|
|||
Invested assets beginning balance
|
|
15,500
|
|
|
14,423
|
|
|
14,386
|
|
|
7
|
|
—
|
|
|||
Average acquisitions (dispositions), net
|
|
341
|
|
|
291
|
|
|
350
|
|
|
17
|
|
(17
|
)
|
|||
Annual average invested assets
|
|
$
|
15,841
|
|
|
$
|
14,714
|
|
|
$
|
14,736
|
|
|
8
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Total investment return:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Total investment income, net of expenses
|
|
$
|
609
|
|
|
$
|
595
|
|
|
$
|
572
|
|
|
2
|
|
4
|
|
Total realized investment gains
|
|
148
|
|
|
124
|
|
|
70
|
|
|
19
|
|
77
|
|
|||
Total invested assets change in unrealized gains and losses
|
|
913
|
|
|
525
|
|
|
(625
|
)
|
|
74
|
|
(184
|
)
|
|||
Total
|
|
$
|
1,670
|
|
|
$
|
1,244
|
|
|
$
|
17
|
|
|
34
|
|
nm
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Total return on invested assets before tax
|
|
10.5
|
%
|
|
8.5
|
%
|
|
0.1
|
%
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
•
|
Interest income rose $5 million, or 1 percent, in 2017. The average fixed-maturity pretax yield declined by approximately 18 basis points but was offset by a larger average fixed-maturity portfolio that rose 5 percent on an amortized cost basis. Interest income increased 3 percent in 2016 when that yield declined by approximately 10 basis points while the portfolio rose 5 percent on an amortized cost basis.
|
•
|
Dividend income rose $9 million, or 6 percent, in 2017, after rising 7 percent in 2016. Increases in dividend payment rates for most of the holdings in our common stock portfolio during both 2017 and 2016 drove the increases in dividend income. A small net decrease in funds invested in that portfolio, during both 2017 and 2016, also affected dividend income.
|
(Dollars in millions)
|
|
Years ended December 31,
|
|
2017-2016
|
|
2016-2015
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
|
Change %
|
|
Change %
|
||||||
Investment income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Interest
|
|
$
|
445
|
|
|
$
|
440
|
|
|
$
|
428
|
|
|
1
|
|
3
|
Dividends
|
|
170
|
|
|
161
|
|
|
150
|
|
|
6
|
|
7
|
|||
Other
|
|
4
|
|
|
3
|
|
|
3
|
|
|
33
|
|
0
|
|||
Less investment expenses
|
|
10
|
|
|
9
|
|
|
9
|
|
|
11
|
|
0
|
|||
Investment income, pretax
|
|
609
|
|
|
595
|
|
|
572
|
|
|
2
|
|
4
|
|||
Less income taxes
|
|
142
|
|
|
141
|
|
|
135
|
|
|
1
|
|
4
|
|||
Total investment income, after-tax
|
|
$
|
467
|
|
|
$
|
454
|
|
|
$
|
437
|
|
|
3
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Investment returns:
|
|
|
|
|
|
|
|
|
|
|
||||||
Average invested assets plus cash and cash equivalents
|
|
$
|
16,657
|
|
|
$
|
15,316
|
|
|
$
|
14,515
|
|
|
|
|
|
Average yield pretax
|
|
3.66
|
%
|
|
3.88
|
%
|
|
3.94
|
%
|
|
|
|
|
|||
Average yield after-tax
|
|
2.80
|
|
|
2.96
|
|
|
3.01
|
|
|
|
|
|
|||
Effective tax rate
|
|
23.4
|
|
|
23.8
|
|
|
23.6
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
||||||
Fixed-maturity returns:
|
|
|
|
|
|
|
|
|
|
|
||||||
Average amortized cost
|
|
$
|
10,057
|
|
|
$
|
9,562
|
|
|
$
|
9,098
|
|
|
|
|
|
Average yield pretax
|
|
4.42
|
%
|
|
4.60
|
%
|
|
4.70
|
%
|
|
|
|
|
|||
Average yield after-tax
|
|
3.24
|
|
|
3.35
|
|
|
3.43
|
|
|
|
|
|
|||
Effective tax rate
|
|
26.7
|
|
|
27.3
|
|
|
27.1
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2017
|
% Yield
|
|
Principal redemptions
|
|||
Fixed-maturity yield profile:
|
|
|
|
|||
Expected to mature during 2018
|
5.56
|
%
|
|
$
|
834
|
|
Expected to mature during 2019
|
6.09
|
|
|
702
|
|
|
Expected to mature during 2020
|
4.75
|
|
|
680
|
|
|
Average yield and total expected redemptions from 2018 through 2020
|
5.48
|
|
|
$
|
2,216
|
|
|
|
|
|
|
|
Years ended December 31,
|
||||
|
|
2017
|
|
2016
|
||
Average pretax yield-to-amortized cost on new fixed-maturities:
|
|
|
|
|
||
Acquired taxable fixed-maturities
|
|
3.88
|
%
|
|
4.11
|
%
|
Acquired tax-exempt fixed-maturities
|
|
3.29
|
|
|
3.04
|
|
Average total fixed-maturities acquired
|
|
3.61
|
|
|
3.75
|
|
|
|
|
|
|
(Dollars in millions)
|
|
Years ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Realized investment gains and losses:
|
|
|
|
|
|
|
|
|
|
|||
Fixed maturities:
|
|
|
|
|
|
|
||||||
Realized gains, net
|
|
$
|
25
|
|
|
$
|
25
|
|
|
$
|
18
|
|
Other-than-temporary impairments
|
|
(6
|
)
|
|
(2
|
)
|
|
(18
|
)
|
|||
Equity securities:
|
|
|
|
|
|
|
||||||
Realized gains, net
|
|
123
|
|
|
99
|
|
|
103
|
|
|||
Other-than-temporary impairments
|
|
(3
|
)
|
|
—
|
|
|
(34
|
)
|
|||
Other
|
|
9
|
|
|
2
|
|
|
1
|
|
|||
Total
|
|
$
|
148
|
|
|
$
|
124
|
|
|
$
|
70
|
|
|
|
|
|
|
|
|
||||||
Change in unrealized investment gains and losses:
|
|
|
|
|
|
|
||||||
Fixed maturities
|
|
$
|
99
|
|
|
$
|
(40
|
)
|
|
$
|
(263
|
)
|
Equity securities
|
|
816
|
|
|
571
|
|
|
(362
|
)
|
|||
Total
|
|
$
|
915
|
|
|
$
|
531
|
|
|
$
|
(625
|
)
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
Years ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Taxable fixed maturities:
|
|
|
|
|
|
|
|
|
|
|||
Impairment amount
|
|
$
|
6
|
|
|
$
|
2
|
|
|
$
|
18
|
|
New amortized cost
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
9
|
|
Percent to total amortized cost owned
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|||
Number of securities other-than-temporarily impaired
|
|
1
|
|
|
2
|
|
|
2
|
|
|||
Percent to number of securities owned
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|||
|
|
|
|
|
|
|
||||||
Tax-exempt fixed maturities:
|
|
|
|
|
|
|
|
|
|
|||
Impairment amount
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
New amortized cost
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
—
|
|
Percent to total amortized cost owned
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|||
Number of securities other-than-temporarily impaired
|
|
—
|
|
|
2
|
|
|
1
|
|
|||
Percent to number of securities owned
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|||
|
|
|
|
|
|
|
||||||
Common equities:
|
|
|
|
|
|
|
|
|
|
|||
Impairment amount
|
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
33
|
|
New cost
|
|
$
|
19
|
|
|
$
|
—
|
|
|
$
|
43
|
|
Percent to total cost owned
|
|
1
|
%
|
|
—
|
%
|
|
2
|
%
|
|||
Number of securities other-than-temporarily impaired
|
|
5
|
|
|
—
|
|
|
14
|
|
|||
Percent to number of securities owned
|
|
7
|
%
|
|
—
|
%
|
|
21
|
%
|
|||
|
|
|
|
|
|
|
||||||
Nonredeemable preferred equities:
|
|
|
|
|
|
|
|
|
|
|||
Impairment amount
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1
|
|
New cost
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
19
|
|
Percent to total cost owned
|
|
—
|
%
|
|
—
|
%
|
|
10
|
%
|
|||
Number of securities other-than-temporarily impaired
|
|
—
|
|
|
—
|
|
|
3
|
|
|||
Percent to number of securities owned
|
|
—
|
%
|
|
—
|
%
|
|
8
|
%
|
|||
|
|
|
|
|
|
|
||||||
Totals:
|
|
|
|
|
|
|
|
|
|
|||
Impairment amount
|
|
$
|
9
|
|
|
$
|
2
|
|
|
$
|
52
|
|
New cost or amortized cost
|
|
$
|
19
|
|
|
$
|
2
|
|
|
$
|
71
|
|
Percent to total cost or amortized cost owned
|
|
—
|
%
|
|
—
|
%
|
|
1
|
%
|
|||
Number of securities other-than-temporarily impaired
|
|
6
|
|
|
4
|
|
|
20
|
|
|||
Percent to number of securities owned
|
|
—
|
%
|
|
—
|
%
|
|
1
|
%
|
|||
|
|
|
|
|
|
|
(Dollars in millions)
|
|
Years ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Fixed maturities:
|
|
|
|
|
|
|
|
|
|
|||
Basic industry
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
18
|
|
Banks
|
|
6
|
|
|
—
|
|
|
—
|
|
|||
Utilities
|
|
—
|
|
|
2
|
|
|
—
|
|
|||
Total fixed maturities
|
|
6
|
|
|
2
|
|
|
18
|
|
|||
|
|
|
|
|
|
|
||||||
Common equities:
|
|
|
|
|
|
|
|
|
|
|||
Energy
|
|
3
|
|
|
—
|
|
|
33
|
|
|||
Total common equities
|
|
3
|
|
|
—
|
|
|
33
|
|
|||
|
|
|
|
|
|
|
||||||
Nonredeemable preferred equities:
|
|
|
|
|
|
|
|
|
|
|||
Financials
|
|
—
|
|
|
—
|
|
|
1
|
|
|||
Total nonredeemable preferred equities
|
|
—
|
|
|
—
|
|
|
1
|
|
|||
|
|
|
|
|
|
|
||||||
Total
|
|
$
|
9
|
|
|
$
|
2
|
|
|
$
|
52
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
Years ended December 31,
|
|
2017-2016
|
|
2016-2015
|
||||||||||||
|
|
2017
|
|
2016
|
|
2015
|
|
Change %
|
|
Change %
|
||||||||
Interest and fees on loans and leases
|
|
$
|
4
|
|
|
$
|
4
|
|
|
$
|
5
|
|
|
0
|
|
|
(20
|
)
|
Earned premiums
|
|
107
|
|
|
49
|
|
|
10
|
|
|
118
|
|
|
390
|
|
|||
Other revenues
|
|
1
|
|
|
1
|
|
|
2
|
|
|
0
|
|
|
(50
|
)
|
|||
Total revenues
|
|
112
|
|
|
54
|
|
|
17
|
|
|
107
|
|
|
218
|
|
|||
Interest expense
|
|
53
|
|
|
53
|
|
|
53
|
|
|
0
|
|
|
0
|
|
|||
Loss and loss expenses
|
|
92
|
|
|
25
|
|
|
5
|
|
|
268
|
|
|
400
|
|
|||
Underwriting expenses
|
|
35
|
|
|
16
|
|
|
3
|
|
|
119
|
|
|
433
|
|
|||
Operating expenses
|
|
13
|
|
|
12
|
|
|
13
|
|
|
8
|
|
|
(8
|
)
|
|||
Total expenses
|
|
193
|
|
|
106
|
|
|
74
|
|
|
82
|
|
|
43
|
|
|||
Other loss
|
|
$
|
(81
|
)
|
|
$
|
(52
|
)
|
|
$
|
(57
|
)
|
|
(56
|
)
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
Years ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Sources of liquidity:
|
|
|
|
|
|
|
||||||
Insurance subsidiary dividends received
|
|
$
|
465
|
|
|
$
|
475
|
|
|
$
|
447
|
|
Investment income received
|
|
62
|
|
|
56
|
|
|
53
|
|
|||
Proceeds from stock options exercised
|
|
13
|
|
|
21
|
|
|
24
|
|
|||
Uses of liquidity:
|
|
|
|
|
|
|
|
|
|
|||
Shareholders' dividend payments
|
|
$
|
400
|
|
|
$
|
306
|
|
|
$
|
366
|
|
Debt interest payments
|
|
52
|
|
|
52
|
|
|
52
|
|
|||
Share repurchases
|
|
92
|
|
|
39
|
|
|
53
|
|
|||
Pension contribution
|
|
12
|
|
|
13
|
|
|
5
|
|
|||
|
|
|
|
|
|
|
(Dollars in millions)
|
|
Years ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Premiums collected
|
|
$
|
4,846
|
|
|
$
|
4,466
|
|
|
$
|
4,379
|
|
Loss and loss expenses paid
|
|
(2,843
|
)
|
|
(2,503
|
)
|
|
(2,349
|
)
|
|||
Commissions and other underwriting expenses paid
|
|
(1,471
|
)
|
|
(1,375
|
)
|
|
(1,306
|
)
|
|||
Cash flow from underwriting
|
|
532
|
|
|
588
|
|
|
724
|
|
|||
Investment income received
|
|
411
|
|
|
397
|
|
|
379
|
|
|||
Cash flow from operations
|
|
$
|
943
|
|
|
$
|
985
|
|
|
$
|
1,103
|
|
|
|
|
|
|
|
|
•
|
$28 million aggregate principal amount of 6.900% senior debentures due 2028.
|
•
|
$391 million aggregate principal amount of 6.920% senior debentures due 2028.
|
•
|
$374 million aggregate principal amount of 6.125% senior debentures due 2034.
|
•
|
Dividends to shareholders –The ability of our company to continue paying cash dividends is subject to factors the board of directors deem relevant. While the board and management believe there is merit to sustaining the company’s long record of dividend increases, our first priority is the company’s financial strength. Over the past 10 years, the company has paid an average of 67 percent of net income as dividends. Through 2017, the board had increased our cash dividend for 57 consecutive years. The board decision in January 2018 to increase the dividend demonstrated confidence in the company’s strong capital, liquidity, financial flexibility and initiatives to grow earnings.
|
•
|
Common stock repurchase – Generally, our board believes that share repurchases can help fulfill our commitment to enhancing shareholder value. Consequently, the board has authorized the repurchase of outstanding shares, giving management discretion to purchase shares at reasonable prices in light of circumstances at the time of purchase. Our approach has been to hold capital adequate to support future growth of our insurance operations and repurchase shares at management's discretion. Repurchases are intended to offset the issuance of shares through equity compensation plans, primarily due to vesting of service-based restricted stock units of equity awards granted in the past. The amount of future repurchases may be more, or less, than the past, depending on circumstances and discretion exercised by management. Our corporate Code of Conduct restricts repurchases during certain time periods. The details of the repurchase authorizations and activity are described in Item 5, Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
|
(Dollars in millions)
|
|
Year
|
|
Years
|
|
Years
|
|
There-
|
|
|
||||||||||
Payment due by period
|
|
2018
|
|
2019-2020
|
|
2021-2022
|
|
after
|
|
Total
|
||||||||||
Gross property casualty loss and loss expense payments
|
|
$
|
1,714
|
|
|
$
|
1,843
|
|
|
$
|
741
|
|
|
$
|
921
|
|
|
$
|
5,219
|
|
Gross life policyholder obligations
|
|
94
|
|
|
122
|
|
|
193
|
|
|
4,946
|
|
|
5,355
|
|
|||||
Interest on long-term debt
|
|
52
|
|
|
104
|
|
|
104
|
|
|
423
|
|
|
683
|
|
|||||
Long-term debt
|
|
—
|
|
|
—
|
|
|
—
|
|
|
793
|
|
|
793
|
|
|||||
Short-term debt
|
|
24
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
24
|
|
|||||
Profit-sharing commissions
|
|
134
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
134
|
|
|||||
Capital lease obligations
|
|
12
|
|
|
17
|
|
|
9
|
|
|
2
|
|
|
40
|
|
|||||
Other liabilities
|
|
74
|
|
|
21
|
|
|
6
|
|
|
12
|
|
|
113
|
|
|||||
Total
|
|
$
|
2,104
|
|
|
$
|
2,107
|
|
|
$
|
1,053
|
|
|
$
|
7,097
|
|
|
$
|
12,361
|
|
|
|
|
|
|
|
|
|
|
|
|
•
|
Commissions – We expect commission payments to generally track with written premiums.
|
•
|
Other operating expenses – Many of our operating expenses are not contractual obligations but reflect the ongoing expenses of our business. For example, we anticipate capitalizing development costs for approximately $6 million in spending for key technology initiatives in 2018, compared with actual capitalization totaling $7 million in 2017 and $8 million in 2016. These activities are conducted at our discretion, and we have no material contractual obligations for activities planned as part of these projects.
|
•
|
Other invested assets – We expect to fund approximately $38 million for our private equity investments over the next several years.
|
(Dollars in millions)
|
|
Loss reserves
|
|
Loss expense reserves
|
|
Total gross reserves
|
|
|
|||||||||||
|
|
Case reserves
|
|
IBNR reserves
|
|
|
|
Percent of total
|
|||||||||||
|
|
|
|
|
|
||||||||||||||
At December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Commercial lines insurance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Commercial casualty
|
|
$
|
890
|
|
|
$
|
611
|
|
|
$
|
570
|
|
|
$
|
2,071
|
|
|
39.7
|
%
|
Commercial property
|
|
232
|
|
|
18
|
|
|
65
|
|
|
315
|
|
|
6.0
|
|
||||
Commercial auto
|
|
401
|
|
|
119
|
|
|
125
|
|
|
645
|
|
|
12.4
|
|
||||
Workers' compensation
|
|
393
|
|
|
533
|
|
|
96
|
|
|
1,022
|
|
|
19.6
|
|
||||
Other commercial
|
|
108
|
|
|
14
|
|
|
61
|
|
|
183
|
|
|
3.5
|
|
||||
Subtotal
|
|
2,024
|
|
|
1,295
|
|
|
917
|
|
|
4,236
|
|
|
81.2
|
|
||||
Personal lines insurance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Personal auto
|
|
240
|
|
|
35
|
|
|
70
|
|
|
345
|
|
|
6.6
|
|
||||
Homeowner
|
|
101
|
|
|
2
|
|
|
33
|
|
|
136
|
|
|
2.6
|
|
||||
Other personal
|
|
55
|
|
|
46
|
|
|
5
|
|
|
106
|
|
|
2.0
|
|
||||
Subtotal
|
|
396
|
|
|
83
|
|
|
108
|
|
|
587
|
|
|
11.2
|
|
||||
Excess and surplus lines
|
|
104
|
|
|
87
|
|
|
73
|
|
|
264
|
|
|
5.1
|
|
||||
Cincinnati Re
|
|
20
|
|
|
110
|
|
|
2
|
|
|
132
|
|
|
2.5
|
|
||||
Total
|
|
$
|
2,544
|
|
|
$
|
1,575
|
|
|
$
|
1,100
|
|
|
$
|
5,219
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
At December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Commercial lines insurance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Commercial casualty
|
|
$
|
928
|
|
|
$
|
553
|
|
|
$
|
556
|
|
|
$
|
2,037
|
|
|
40.5
|
%
|
Commercial property
|
|
253
|
|
|
28
|
|
|
58
|
|
|
339
|
|
|
6.7
|
|
||||
Commercial auto
|
|
374
|
|
|
86
|
|
|
103
|
|
|
563
|
|
|
11.2
|
|
||||
Workers' compensation
|
|
382
|
|
|
553
|
|
|
95
|
|
|
1,030
|
|
|
20.4
|
|
||||
Other commercial
|
|
116
|
|
|
19
|
|
|
75
|
|
|
210
|
|
|
4.2
|
|
||||
Subtotal
|
|
2,053
|
|
|
1,239
|
|
|
887
|
|
|
4,179
|
|
|
83.0
|
|
||||
Personal lines insurance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Personal auto
|
|
228
|
|
|
24
|
|
|
66
|
|
|
318
|
|
|
6.3
|
|
||||
Homeowner
|
|
102
|
|
|
22
|
|
|
29
|
|
|
153
|
|
|
3.0
|
|
||||
Other personal
|
|
46
|
|
|
47
|
|
|
5
|
|
|
98
|
|
|
2.0
|
|
||||
Subtotal
|
|
376
|
|
|
93
|
|
|
100
|
|
|
569
|
|
|
11.3
|
|
||||
Excess and surplus lines
|
|
94
|
|
|
86
|
|
|
61
|
|
|
241
|
|
|
4.8
|
|
||||
Cincinnati Re
|
|
8
|
|
|
37
|
|
|
1
|
|
|
46
|
|
|
0.9
|
|
||||
Total
|
|
$
|
2,531
|
|
|
$
|
1,455
|
|
|
$
|
1,049
|
|
|
$
|
5,035
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
Commercial
|
|
Personal
|
|
E&S
|
|
Cincinnati
|
|
|
||||||||||
|
|
lines
|
|
lines
|
|
lines
|
|
Re
|
|
Totals
|
||||||||||
As of December 31, 2017
|
||||||||||||||||||||
2016 accident year
|
|
$
|
(35
|
)
|
|
$
|
(8
|
)
|
|
$
|
(5
|
)
|
|
$
|
(3
|
)
|
|
$
|
(51
|
)
|
2015 accident year
|
|
(4
|
)
|
|
2
|
|
|
(8
|
)
|
|
—
|
|
|
(10
|
)
|
|||||
2014 accident year
|
|
(10
|
)
|
|
(2
|
)
|
|
(11
|
)
|
|
—
|
|
|
(23
|
)
|
|||||
2013 accident year
|
|
(12
|
)
|
|
(5
|
)
|
|
(4
|
)
|
|
—
|
|
|
(21
|
)
|
|||||
2012 accident year
|
|
11
|
|
|
1
|
|
|
(1
|
)
|
|
—
|
|
|
11
|
|
|||||
2011 accident year
|
|
(20
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(20
|
)
|
|||||
2010 and prior accident years
|
|
(3
|
)
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
(5
|
)
|
|||||
(Favorable)/unfavorable
|
|
$
|
(73
|
)
|
|
$
|
(14
|
)
|
|
$
|
(29
|
)
|
|
$
|
(3
|
)
|
|
$
|
(119
|
)
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
As of December 31, 2016
|
||||||||||||||||||||
2015 accident year
|
|
$
|
(64
|
)
|
|
$
|
(12
|
)
|
|
$
|
(15
|
)
|
|
$
|
(1
|
)
|
|
$
|
(92
|
)
|
2014 accident year
|
|
(41
|
)
|
|
7
|
|
|
(7
|
)
|
|
—
|
|
|
(41
|
)
|
|||||
2013 accident year
|
|
(21
|
)
|
|
2
|
|
|
(9
|
)
|
|
—
|
|
|
(28
|
)
|
|||||
2012 accident year
|
|
(2
|
)
|
|
(1
|
)
|
|
(2
|
)
|
|
—
|
|
|
(5
|
)
|
|||||
2011 accident year
|
|
(4
|
)
|
|
1
|
|
|
(1
|
)
|
|
—
|
|
|
(4
|
)
|
|||||
2010 accident year
|
|
(2
|
)
|
|
1
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|||||
2009 and prior accident years
|
|
5
|
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
3
|
|
|||||
(Favorable)/unfavorable
|
|
$
|
(129
|
)
|
|
$
|
(4
|
)
|
|
$
|
(34
|
)
|
|
$
|
(1
|
)
|
|
$
|
(168
|
)
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
As of December 31, 2015
|
||||||||||||||||||||
2014 accident year
|
|
$
|
(27
|
)
|
|
$
|
(20
|
)
|
|
$
|
(14
|
)
|
|
$
|
—
|
|
|
$
|
(61
|
)
|
2013 accident year
|
|
(41
|
)
|
|
11
|
|
|
(10
|
)
|
|
—
|
|
|
(40
|
)
|
|||||
2012 accident year
|
|
(42
|
)
|
|
4
|
|
|
(10
|
)
|
|
—
|
|
|
(48
|
)
|
|||||
2011 accident year
|
|
(7
|
)
|
|
4
|
|
|
(2
|
)
|
|
—
|
|
|
(5
|
)
|
|||||
2010 accident year
|
|
3
|
|
|
3
|
|
|
1
|
|
|
—
|
|
|
7
|
|
|||||
2009 accident year
|
|
(11
|
)
|
|
1
|
|
|
—
|
|
|
—
|
|
|
(10
|
)
|
|||||
2008 and prior accident years
|
|
(29
|
)
|
|
2
|
|
|
—
|
|
|
—
|
|
|
(27
|
)
|
|||||
(Favorable)/unfavorable
|
|
$
|
(154
|
)
|
|
$
|
5
|
|
|
$
|
(35
|
)
|
|
$
|
—
|
|
|
$
|
(184
|
)
|
|
|
|
|
|
|
|
|
|
|
|
•
|
Commercial casualty – During 2017, we experienced unfavorable development on prior accident years in total for this line of business. However, results varied between component coverages and by accident year within coverage. For example, our umbrella liability coverage within commercial casualty experienced favorable results for some prior accident years and adverse development on other accident years to end the calendar year favorably on all prior years combined. Commercial multi-peril coverage developed adversely for many prior accident years, but products liability developed favorably.
|
•
|
Workers’ compensation – We continue to see favorable reserve development, for all prior accident years in aggregate. During 2017, the trend for estimated payments to be made in future calendar years was stable compared to 2016. However, we continue to monitor this line closely, as a sudden increase in trend for future payments has a highly leveraged effect.
|
•
|
Commercial auto – Loss emergence continued to develop unfavorably during calendar year 2017. This line of business has been troublesome for the industry as a whole in recent years. As part of the U.S. economic recession of a few years ago, slowing business activity influenced our estimates of reserves for ultimate losses and loss expenses during that period. As the economy slowly recovered, we believe we have been slow to recognize some of the higher loss cost effects in current accident year reserve estimates for at least part of that period. As claims that occurred during that period have become more mature, paid and reported loss cost trends resulted in us increasing our estimated ultimate losses. Initiatives to improve profitability of our commercial auto line of business are discussed in Commercial Lines Insurance Results.
|
•
|
Personal auto – Loss emergence continued to develop unfavorably during calendar year 2017. This line of business is subject to many of the same cost pressures related to the economic slowdown as commercial auto. Initiatives to improve profitability of our personal auto line of business are discussed in Personal Lines Insurance Results.
|
(Dollars in millions)
|
RMS Model
|
AIR Model
|
||||||||||||||
|
|
|
Percent
|
|
|
Percent
|
||||||||||
|
Gross
|
Net
|
of total
|
Gross
|
Net
|
of total
|
||||||||||
Probability at December 31, 2017
|
losses
|
losses
|
equity
|
losses
|
losses
|
equity
|
||||||||||
2.0% (1 in 50 year event)
|
$
|
337
|
|
$
|
88
|
|
1.1
|
%
|
$
|
339
|
|
$
|
88
|
|
1.1
|
%
|
1.0% (1 in 100 year event)
|
539
|
|
96
|
|
1.2
|
|
493
|
|
94
|
|
1.1
|
|
||||
0.4% (1 in 250 year event)
|
906
|
|
333
|
|
4.0
|
|
755
|
|
205
|
|
2.5
|
|
||||
0.2% (1 in 500 year event)
|
1,259
|
|
610
|
|
7.4
|
|
983
|
|
379
|
|
4.6
|
|
||||
|
|
|
|
|
|
|
(Dollars in millions)
|
|
2017
|
|
2016
|
||||||||
Name of reinsurer
|
|
Total
receivable |
|
A.M. Best
Rating |
|
Total
receivable |
|
A.M. Best
Rating |
||||
Michigan Catastrophic Claims Association
|
|
$
|
40
|
|
|
NA
|
|
$
|
38
|
|
|
NA
|
Swiss Reinsurance America Corporation
|
|
36
|
|
|
A+
|
|
46
|
|
|
A+
|
||
Third Point Reinsurance
|
|
34
|
|
|
A-
|
|
48
|
|
|
A-
|
||
General Reinsurance Corporation
|
|
30
|
|
|
A++
|
|
36
|
|
|
A++
|
||
Munich Reinsurance America
|
|
21
|
|
|
A+
|
|
30
|
|
|
A+
|
||
|
|
|
|
|
|
|
|
|
•
|
Property per risk treaty – The primary purpose of the property treaty is to provide capacity up to $50 million, adequate for the majority of the risks we write. It also includes protection for extra-contractual liability coverage losses. We retain the first $10 million of each loss. Losses between $10 million and $50 million are reinsured at 100 percent. The 2018 ceded premium estimate was $26 million, compared with $24 million for the 2017 estimate.
|
•
|
Property excess treaty – For 2018, we purchased a new property reinsurance treaty that provide an additional $50 million in protection for property losses. This treaty, along with the property per risk treaty, provides a total of $100 million of protection. The 2018 ceded premium estimate was approximately $2 million.
|
•
|
Casualty per occurrence treaty – The casualty treaty provides capacity up to $25 million. Similar to the property treaty, it provides sufficient capacity to cover the vast majority of casualty accounts we insure and also includes protection for extra-contractual liability coverage losses. We retain the first $10 million of each loss. Losses between $10 million and $25 million are reinsured at 100 percent. The 2018 ceded premium estimate was $12 million, essentially unchanged from the 2017 estimate.
|
•
|
Casualty excess treaty – We purchase a casualty reinsurance treaty that provides an additional $45 million in protection for certain casualty losses. This treaty, along with the casualty per occurrence treaty, provides a total of $70 million of protection for workers’ compensation, extra-contractual liability coverage and clash coverage losses, which would apply when a single occurrence involves multiple policyholders of The Cincinnati Insurance Companies or multiple coverages for one insured. The 2018 ceded premium estimate was approximately $3 million, essentially unchanged from the 2017 estimate.
|
•
|
Property catastrophe treaty – To protect against catastrophic events such as wind and hail, hurricanes or earthquakes, we purchased property catastrophe reinsurance with a limit up to $600 million. Losses from the same occurrence can now be aggregated into one limit over a 120-hour period and applied to the treaty towards recovery. The treaty contains one reinstatement provision. The 2018 ceded premium estimate was $43 million, compared with a $39 million estimate for 2017. We retain the first $100 million of any loss, and a share of losses up to $600 million, as indicated below:
|
◦
|
5.0 percent of losses between $100 million and $200 million
|
◦
|
5.0 percent of losses between $200 million and $300 million
|
◦
|
5.0 percent of losses between $300 million and $400 million
|
◦
|
5.0 percent of losses between $400 million and $600 million
|
•
|
Beginning in 2013 we added an alternative reinsurance structure to protect against certain catastrophic events, and a similar structure is in place for 2017 through 2019. For certain exposures in the United States, we arranged for the purchase of collateralized reinsurance funded through the issuance of collateralized risk-linked securities, known as catastrophe bonds with Skyline Re Ltd ("Skyline"). The catastrophe bond arrangements generally provide reinsurance coverage for specific types of losses in specific geographic locations. They are generally designed to supplement coverage provided under the property catastrophe treaty. Effective January 2017, we have a catastrophe bond arrangement providing up to $200 million in earthquake reinsurance protection or $80 million in severe convective storm coverage or various combinations of those coverages. It expires in January 2019 and meets the requirements to be accounted for as reinsurance in accordance with the guidance for reinsurance contracts. The earthquake coverage is countrywide, excluding California, and the severe convective storm coverage territory is also countrywide, excluding Florida. The storm coverage provides loss recovery when storm losses for all events in aggregate exceed $190 million, after an $8 million deductible per event.
|
•
|
Property per risk treaty – The property treaty provides limits up to $5 million, which is adequate capacity for the risk profile we insure. It also includes protection for extra-contractual liability coverage losses. Cincinnati Specialty Underwriters retains the first $500,000 of any policy loss. Losses between $500,000 and $5 million are reinsured at 100 percent by The Cincinnati Insurance Company.
|
•
|
Casualty treaties – The casualty treaty is written on an excess of loss basis and provide limits up to $6 million, which is adequate capacity for the risk profile we insure. A second treaty layer of $5 million excess of $6 million is written to provide coverage for extra contractual obligations or clash exposures. The maximum retention for any
|
•
|
Basket retention – Cincinnati Specialty Underwriters has purchased this coverage to limit our retention to $1 million in the event that the same occurrence results in both a property and a casualty loss.
|
•
|
Property catastrophe treaty – As a subsidiary of The Cincinnati Insurance Company, Cincinnati Specialty Underwriters is a named insured under our corporate property catastrophe treaty, and for our collateralized reinsurance funded through the issuance of catastrophe bonds. All terms and conditions of this reinsurance coverage apply to policies underwritten by Cincinnati Specialty Underwriters.
|
(Dollars in millions)
|
|
2017
|
|
2016
|
||||||||
Name of reinsurer
|
|
Total
receivable |
|
A.M. Best
Rating |
|
Total
receivable |
|
A.M. Best
Rating |
||||
Swiss Re Life & Health America, Inc.
|
|
$
|
80
|
|
|
A+
|
|
$
|
84
|
|
|
A+
|
Lincoln National Life Insurance Company
|
|
38
|
|
|
A+
|
|
40
|
|
|
A+
|
||
General Re Life Corporation
|
|
35
|
|
|
A++
|
|
33
|
|
|
A++
|
||
Security Life of Denver Insurance Company
|
|
27
|
|
|
A u
|
|
30
|
|
|
A
|
||
Pacific Life Insurance Company
|
|
14
|
|
|
A+
|
|
15
|
|
|
A+
|
||
|
|
|
|
|
|
|
|
|
•
|
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 and our relationships with agents, policyholders and others
|
•
|
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
|
•
|
Political – the potential for a decrease in value due to the real or perceived impact of governmental policies or conditions
|
•
|
Regulatory – the potential for a decrease in value due to the impact of legislative proposals or changes in laws or regulations
|
•
|
Economic – the potential for a decrease in value due to changes in general economic factors (recession, inflation, deflation, etc.)
|
•
|
Revaluation – the potential for a decrease in value due to a change in relative value (change in market multiple) of the market brought on by general economic factors
|
•
|
Interest-rate – the potential for a decrease in value of a security or portfolio due to its sensitivity to changes (increases or decreases) in the general level of interest rates
|
•
|
Fraud – the potential for a negative impact on an issuer’s performance due to actual or alleged illegal or improper activity of individuals it employs
|
•
|
Credit – the potential for deterioration in an issuer’s financial profile due to specific company issues, problems it faces in the course of its operations or industry-related issues
|
•
|
Default – the possibility that an issuer will not make a required payment (interest payment or return of principal) on its debt. Generally this occurs after its financial profile has deteriorated (credit risk) and it no longer has the means to make its payments
|
|
|
Taxable
fixed maturities |
|
Tax-exempt
fixed maturities |
|
Common
equities |
|
Nonredeemable preferred
equities |
Political
|
|
A
|
|
H
|
|
A
|
|
A
|
Regulatory
|
|
A
|
|
A
|
|
A
|
|
A
|
Economic
|
|
A
|
|
A
|
|
H
|
|
A
|
Revaluation
|
|
A
|
|
A
|
|
H
|
|
A
|
Interest rate
|
|
H
|
|
H
|
|
A
|
|
H
|
Fraud
|
|
A
|
|
L
|
|
A
|
|
A
|
Credit
|
|
A
|
|
L
|
|
A
|
|
A
|
Default
|
|
A
|
|
L
|
|
A
|
|
A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
Effect from interest rate change in basis points
|
||||||||||||||||||
|
|
-200
|
|
-100
|
|
—
|
|
100
|
|
200
|
||||||||||
At December 31, 2017
|
|
$
|
11,803
|
|
|
$
|
11,249
|
|
|
$
|
10,699
|
|
|
$
|
10,133
|
|
|
$
|
9,589
|
|
At December 31, 2016
|
|
$
|
11,131
|
|
|
$
|
10,603
|
|
|
$
|
10,085
|
|
|
$
|
9,577
|
|
|
$
|
9,094
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
Effect from market price change in percent
|
|||||||||||||||||||||||||||
|
|
-30%
|
|
-20%
|
|
-10%
|
|
—
|
|
10%
|
|
20%
|
|
30%
|
||||||||||||||
At December 31, 2017
|
|
$
|
4,374
|
|
|
$
|
4,999
|
|
|
$
|
5,624
|
|
|
$
|
6,249
|
|
|
$
|
6,874
|
|
|
$
|
7,499
|
|
|
$
|
8,124
|
|
At December 31, 2016
|
|
$
|
3,734
|
|
|
$
|
4,267
|
|
|
$
|
4,801
|
|
|
$
|
5,334
|
|
|
$
|
5,867
|
|
|
$
|
6,401
|
|
|
$
|
6,934
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
•
|
425 of these holdings were fair valued between 90 percent and 100 percent of cost or amortized cost. The value of these securities fluctuates primarily because of changes in interest rates. The fair value of these 425 securities was $1.450 billion at year-end 2017, and they accounted for $31 million in unrealized losses.
|
•
|
15 of these holdings were fair valued between 70 percent and 90 percent of cost or amortized cost. The fair value of these holdings was $41 million, and they accounted for $7 million in unrealized losses.
|
•
|
No securities had a fair value below 70 percent of cost or amortized cost.
|
(Dollars in millions)
|
|
Less than 12 months
|
|
12 months or more
|
|
Total
|
||||||||||||||||||
At December 31, 2017
|
|
Fair
value |
|
Unrealized
losses |
|
Fair
value |
|
Unrealized
losses |
|
Fair
value |
|
Unrealized
losses |
||||||||||||
Fixed maturity securities:
|
||||||||||||||||||||||||
Corporate
|
|
$
|
330
|
|
|
$
|
4
|
|
|
$
|
252
|
|
|
$
|
9
|
|
|
$
|
582
|
|
|
$
|
13
|
|
States, municipalities and political subdivisions
|
|
88
|
|
|
1
|
|
|
264
|
|
|
5
|
|
|
352
|
|
|
6
|
|
||||||
Commercial mortgage-backed
|
|
33
|
|
|
—
|
|
|
36
|
|
|
1
|
|
|
69
|
|
|
1
|
|
||||||
Government-sponsored enterprises
|
|
96
|
|
|
1
|
|
|
124
|
|
|
3
|
|
|
220
|
|
|
4
|
|
||||||
Foreign government
|
|
10
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10
|
|
|
—
|
|
||||||
United States government
|
|
23
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
29
|
|
|
—
|
|
||||||
Subtotal
|
|
580
|
|
|
6
|
|
|
682
|
|
|
18
|
|
|
1,262
|
|
|
24
|
|
||||||
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Common equities
|
|
229
|
|
|
14
|
|
|
—
|
|
|
—
|
|
|
229
|
|
|
14
|
|
||||||
Subtotal
|
|
229
|
|
|
14
|
|
|
—
|
|
|
—
|
|
|
229
|
|
|
14
|
|
||||||
Total
|
|
$
|
809
|
|
|
$
|
20
|
|
|
$
|
682
|
|
|
$
|
18
|
|
|
$
|
1,491
|
|
|
$
|
38
|
|
At December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Fixed maturity securities:
|
||||||||||||||||||||||||
Corporate
|
|
$
|
733
|
|
|
$
|
15
|
|
|
$
|
189
|
|
|
$
|
11
|
|
|
$
|
922
|
|
|
$
|
26
|
|
States, municipalities and political subdivisions
|
|
989
|
|
|
42
|
|
|
—
|
|
|
—
|
|
|
989
|
|
|
42
|
|
||||||
Commercial mortgage-backed
|
|
89
|
|
|
2
|
|
|
2
|
|
|
—
|
|
|
91
|
|
|
2
|
|
||||||
Government-sponsored enterprises
|
|
155
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
155
|
|
|
3
|
|
||||||
United States government
|
|
6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
—
|
|
||||||
Subtotal
|
|
1,972
|
|
|
62
|
|
|
191
|
|
|
11
|
|
|
2,163
|
|
|
73
|
|
||||||
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Common equities
|
|
103
|
|
|
9
|
|
|
—
|
|
|
—
|
|
|
103
|
|
|
9
|
|
||||||
Nonredeemable preferred equities
|
|
4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
||||||
Subtotal
|
|
107
|
|
|
9
|
|
|
—
|
|
|
—
|
|
|
107
|
|
|
9
|
|
||||||
Total
|
|
$
|
2,079
|
|
|
$
|
71
|
|
|
$
|
191
|
|
|
$
|
11
|
|
|
$
|
2,270
|
|
|
$
|
82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
Number
of issues |
|
Cost or
amortized cost |
|
Fair
value |
|
Gross
unrealized gain (loss) |
|
Gross
investment income |
|||||||||
At December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Taxable fixed maturities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fair valued below 70% of amortized cost
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Fair valued at 70% to less than 100% of amortized cost
|
|
287
|
|
|
1,019
|
|
|
1,000
|
|
|
(19
|
)
|
|
24
|
|
||||
Fair valued at 100% and above of amortized cost
|
|
1,202
|
|
|
5,364
|
|
|
5,637
|
|
|
273
|
|
|
270
|
|
||||
Investment income on securities sold in current year
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
28
|
|
||||
Total
|
|
1,489
|
|
|
6,383
|
|
|
6,637
|
|
|
254
|
|
|
322
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Tax-exempt fixed maturities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fair valued below 70% of amortized cost
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Fair valued at 70% to less than 100% of amortized cost
|
|
138
|
|
|
267
|
|
|
262
|
|
|
(5
|
)
|
|
6
|
|
||||
Fair valued at 100% and above of amortized cost
|
|
1,874
|
|
|
3,664
|
|
|
3,800
|
|
|
136
|
|
|
112
|
|
||||
Investment income on securities sold in current year
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
||||
Total
|
|
2,012
|
|
|
3,931
|
|
|
4,062
|
|
|
131
|
|
|
123
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Common equities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fair valued below 70% of cost
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Fair valued at 70% to less than 100% of cost
|
|
15
|
|
|
243
|
|
|
229
|
|
|
(14
|
)
|
|
7
|
|
||||
Fair valued at 100% and above of cost
|
|
53
|
|
|
2,675
|
|
|
5,810
|
|
|
3,135
|
|
|
140
|
|
||||
Investment income on securities sold in current year
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
||||
Total
|
|
68
|
|
|
2,918
|
|
|
6,039
|
|
|
3,121
|
|
|
158
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Nonredeemable preferred equities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fair valued below 70% of cost
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Fair valued at 70% to less than 100% of cost
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Fair valued at 100% and above of cost
|
|
29
|
|
|
176
|
|
|
210
|
|
|
34
|
|
|
11
|
|
||||
Investment income on securities sold in current year
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
||||
Total
|
|
29
|
|
|
176
|
|
|
210
|
|
|
34
|
|
|
12
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Portfolio summary:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fair valued below 70% of cost or amortized cost
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Fair valued at 70% to less than 100% of cost or amortized cost
|
|
440
|
|
|
1,529
|
|
|
1,491
|
|
|
(38
|
)
|
|
37
|
|
||||
Fair valued at 100% and above of cost or amortized cost
|
|
3,158
|
|
|
11,879
|
|
|
15,457
|
|
|
3,578
|
|
|
533
|
|
||||
Investment income on securities sold in current year
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
45
|
|
||||
Total
|
|
3,598
|
|
|
$
|
13,408
|
|
|
$
|
16,948
|
|
|
$
|
3,540
|
|
|
$
|
615
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
At December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Portfolio summary:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fair valued below 70% of cost or amortized cost
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Fair valued at 70% to less than 100% of cost or amortized cost
|
|
784
|
|
|
2,352
|
|
|
2,270
|
|
|
(82
|
)
|
|
62
|
|
||||
Fair valued at 100% and above of cost or amortized cost
|
|
2,531
|
|
|
10,442
|
|
|
13,149
|
|
|
2,707
|
|
|
501
|
|
||||
Investment income on securities sold in current year
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
38
|
|
||||
Total
|
|
3,315
|
|
|
$
|
12,794
|
|
|
$
|
15,419
|
|
|
$
|
2,625
|
|
|
$
|
601
|
|
|
|
|
|
|
|
|
|
|
|
|
•
|
Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
|
•
|
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP and that receipts and expenditures of the company are being made only in accordance with authorizations of management and the directors of the company; and
|
•
|
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.
|
(Dollars in millions, except per share data)
|
|
December 31,
|
|
December 31,
|
||||
|
|
2017
|
|
2016
|
||||
Assets
|
|
|
|
|
|
|
||
Investments
|
|
|
|
|
|
|
||
Fixed maturities, at fair value (amortized cost: 2017—$10,314; 2016—$9,799)
|
|
$
|
10,699
|
|
|
$
|
10,085
|
|
Equity securities, at fair value (cost: 2017—$3,094; 2016—$2,995)
|
|
6,249
|
|
|
5,334
|
|
||
Other invested assets
|
|
103
|
|
|
81
|
|
||
Total investments
|
|
17,051
|
|
|
15,500
|
|
||
Cash and cash equivalents
|
|
657
|
|
|
777
|
|
||
Investment income receivable
|
|
134
|
|
|
134
|
|
||
Finance receivable
|
|
61
|
|
|
51
|
|
||
Premiums receivable
|
|
1,589
|
|
|
1,533
|
|
||
Reinsurance recoverable
|
|
432
|
|
|
545
|
|
||
Prepaid reinsurance premiums
|
|
42
|
|
|
62
|
|
||
Deferred policy acquisition costs
|
|
670
|
|
|
637
|
|
||
Land, building and equipment, net, for company use (accumulated depreciation:
2017—$253; 2016—$237)
|
|
185
|
|
|
183
|
|
||
Other assets
|
|
216
|
|
|
198
|
|
||
Separate accounts
|
|
806
|
|
|
766
|
|
||
Total assets
|
|
$
|
21,843
|
|
|
$
|
20,386
|
|
|
|
|
|
|
||||
Liabilities
|
|
|
|
|
|
|
||
Insurance reserves
|
|
|
|
|
|
|
||
Loss and loss expense reserves
|
|
$
|
5,273
|
|
|
$
|
5,085
|
|
Life policy and investment contract reserves
|
|
2,729
|
|
|
2,671
|
|
||
Unearned premiums
|
|
2,404
|
|
|
2,307
|
|
||
Other liabilities
|
|
792
|
|
|
786
|
|
||
Deferred income tax
|
|
745
|
|
|
865
|
|
||
Note payable
|
|
24
|
|
|
20
|
|
||
Long-term debt and capital lease obligations
|
|
827
|
|
|
826
|
|
||
Separate accounts
|
|
806
|
|
|
766
|
|
||
Total liabilities
|
|
13,600
|
|
|
13,326
|
|
||
|
|
|
|
|
||||
Commitments and contingent liabilities (Note 16)
|
|
—
|
|
|
—
|
|
||
|
|
|
|
|
||||
Shareholders' Equity
|
|
|
|
|
|
|
||
Common stock, par value—$2 per share; (authorized: 2017 and 2016—500 million shares;
issued: 2017 and 2016—198.3 million shares)
|
|
397
|
|
|
397
|
|
||
Paid-in capital
|
|
1,265
|
|
|
1,252
|
|
||
Retained earnings
|
|
5,180
|
|
|
5,037
|
|
||
Accumulated other comprehensive income
|
|
2,788
|
|
|
1,693
|
|
||
Treasury stock at cost (2017—34.4 million shares and 2016—33.9 million shares)
|
|
(1,387
|
)
|
|
(1,319
|
)
|
||
Total shareholders' equity
|
|
8,243
|
|
|
7,060
|
|
||
Total liabilities and shareholders' equity
|
|
$
|
21,843
|
|
|
$
|
20,386
|
|
|
|
|
|
|
(Dollars in millions, except per share data)
|
|
Years ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Revenues
|
|
|
|
|
|
|
|
|
|
|||
Earned premiums
|
|
$
|
4,954
|
|
|
$
|
4,710
|
|
|
$
|
4,480
|
|
Investment income, net of expenses
|
|
609
|
|
|
595
|
|
|
572
|
|
|||
Realized investment gains, net
|
|
148
|
|
|
124
|
|
|
70
|
|
|||
Fee revenues
|
|
16
|
|
|
15
|
|
|
13
|
|
|||
Other revenues
|
|
5
|
|
|
5
|
|
|
7
|
|
|||
Total revenues
|
|
5,732
|
|
|
5,449
|
|
|
5,142
|
|
|||
Benefits and Expenses
|
|
|
|
|
|
|
|
|
|
|||
Insurance losses and contract holders' benefits
|
|
3,390
|
|
|
3,107
|
|
|
2,808
|
|
|||
Underwriting, acquisition and insurance expenses
|
|
1,546
|
|
|
1,465
|
|
|
1,387
|
|
|||
Interest expense
|
|
53
|
|
|
53
|
|
|
53
|
|
|||
Other operating expenses
|
|
13
|
|
|
12
|
|
|
13
|
|
|||
Total benefits and expenses
|
|
5,002
|
|
|
4,637
|
|
|
4,261
|
|
|||
Income Before Income Taxes
|
|
730
|
|
|
812
|
|
|
881
|
|
|||
Provision (Benefit) for Income Taxes
|
|
|
|
|
|
|
|
|
|
|||
Current
|
|
129
|
|
|
183
|
|
|
231
|
|
|||
Deferred
|
|
(444
|
)
|
|
38
|
|
|
16
|
|
|||
Total provision (benefit) for income taxes
|
|
(315
|
)
|
|
221
|
|
|
247
|
|
|||
Net Income
|
|
$
|
1,045
|
|
|
$
|
591
|
|
|
$
|
634
|
|
Per Common Share
|
|
|
|
|
|
|
|
|
|
|||
Net income—basic
|
|
$
|
6.36
|
|
|
$
|
3.59
|
|
|
$
|
3.87
|
|
Net income—diluted
|
|
6.29
|
|
|
3.55
|
|
|
3.83
|
|
|||
|
|
|
|
|
|
|
(Dollars in millions)
|
|
Years ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Net Income
|
|
$
|
1,045
|
|
|
$
|
591
|
|
|
$
|
634
|
|
Other Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|||
Change in unrealized gains and losses on investments, net of tax of $317, $186 and $(220), respectively
|
|
598
|
|
|
345
|
|
|
(405
|
)
|
|||
Amortization of pension actuarial gains and losses and prior service cost, net of tax of $7, $6 and $(2), respectively
|
|
7
|
|
|
10
|
|
|
(4
|
)
|
|||
Change in life deferred acquisition costs, life policy reserves and other, net of tax of $1, $(4) and $4, respectively
|
|
(2
|
)
|
|
(6
|
)
|
|
9
|
|
|||
Other comprehensive income (loss)
|
|
603
|
|
|
349
|
|
|
(400
|
)
|
|||
Comprehensive Income
|
|
$
|
1,648
|
|
|
$
|
940
|
|
|
$
|
234
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
Years ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Common Stock
|
|
|
|
|
|
||||||
Beginning of year
|
$
|
397
|
|
|
$
|
397
|
|
|
$
|
397
|
|
Share-based awards
|
—
|
|
|
—
|
|
|
—
|
|
|||
End of year
|
397
|
|
|
397
|
|
|
397
|
|
|||
|
|
|
|
|
|
||||||
Paid-In Capital
|
|
|
|
|
|
||||||
Beginning of year
|
1,252
|
|
|
1,232
|
|
|
1,214
|
|
|||
Share-based awards
|
(18
|
)
|
|
(8
|
)
|
|
(7
|
)
|
|||
Share-based compensation
|
26
|
|
|
23
|
|
|
20
|
|
|||
Other
|
5
|
|
|
5
|
|
|
5
|
|
|||
End of year
|
1,265
|
|
|
1,252
|
|
|
1,232
|
|
|||
|
|
|
|
|
|
||||||
Retained Earnings
|
|
|
|
|
|
||||||
Beginning of year
|
5,037
|
|
|
4,762
|
|
|
4,505
|
|
|||
Net income
|
1,045
|
|
|
591
|
|
|
634
|
|
|||
Dividends declared
|
(410
|
)
|
|
(316
|
)
|
|
(377
|
)
|
|||
Reclassification of certain tax effects from accumulated other comprehensive income
|
(492
|
)
|
|
—
|
|
|
—
|
|
|||
End of year
|
5,180
|
|
|
5,037
|
|
|
4,762
|
|
|||
|
|
|
|
|
|
||||||
Accumulated Other Comprehensive Income
|
|
|
|
|
|
||||||
Beginning of year
|
1,693
|
|
|
1,344
|
|
|
1,744
|
|
|||
Other comprehensive income (loss)
|
603
|
|
|
349
|
|
|
(400
|
)
|
|||
Reclassification of certain tax effects to retained earnings
|
492
|
|
|
—
|
|
|
—
|
|
|||
End of year
|
2,788
|
|
|
1,693
|
|
|
1,344
|
|
|||
|
|
|
|
|
|
||||||
Treasury Stock
|
|
|
|
|
|
||||||
Beginning of year
|
(1,319
|
)
|
|
(1,308
|
)
|
|
(1,287
|
)
|
|||
Share-based awards
|
26
|
|
|
36
|
|
|
41
|
|
|||
Shares acquired - share repurchase authorization
|
(92
|
)
|
|
(39
|
)
|
|
(53
|
)
|
|||
Shares acquired - share-based compensation plans
|
(7
|
)
|
|
(13
|
)
|
|
(16
|
)
|
|||
Other
|
5
|
|
|
5
|
|
|
7
|
|
|||
End of year
|
(1,387
|
)
|
|
(1,319
|
)
|
|
(1,308
|
)
|
|||
|
|
|
|
|
|
||||||
Total Shareholders' Equity
|
$
|
8,243
|
|
|
$
|
7,060
|
|
|
$
|
6,427
|
|
|
|
|
|
|
|
||||||
(In millions)
|
|
|
|
|
|
||||||
Common Stock - Shares Outstanding
|
|
|
|
|
|
||||||
Beginning of year
|
164.4
|
|
|
163.9
|
|
|
163.7
|
|
|||
Share-based awards
|
0.8
|
|
|
1.0
|
|
|
1.3
|
|
|||
Shares acquired - share repurchase authorization
|
(1.3
|
)
|
|
(0.5
|
)
|
|
(1.0
|
)
|
|||
Shares acquired - share-based compensation plans
|
(0.1
|
)
|
|
(0.2
|
)
|
|
(0.3
|
)
|
|||
Other
|
0.1
|
|
|
0.2
|
|
|
0.2
|
|
|||
End of year
|
163.9
|
|
|
164.4
|
|
|
163.9
|
|
|||
|
|
|
|
|
|
(Dollars in millions)
|
Years ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Cash Flows From Operating Activities
|
|
|
|
|
|
|
|
|
|||
Net income
|
$
|
1,045
|
|
|
$
|
591
|
|
|
$
|
634
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|||
Depreciation and amortization
|
55
|
|
|
48
|
|
|
52
|
|
|||
Realized investment gains, net
|
(148
|
)
|
|
(124
|
)
|
|
(70
|
)
|
|||
Share-based compensation
|
26
|
|
|
23
|
|
|
20
|
|
|||
Interest credited to contract holders'
|
48
|
|
|
48
|
|
|
44
|
|
|||
Deferred income tax expense
|
(444
|
)
|
|
38
|
|
|
16
|
|
|||
Changes in:
|
|
|
|
|
|
|
|
||||
Investment income receivable
|
—
|
|
|
(5
|
)
|
|
(6
|
)
|
|||
Premiums and reinsurance receivable
|
77
|
|
|
(113
|
)
|
|
(48
|
)
|
|||
Deferred policy acquisition costs
|
(36
|
)
|
|
(26
|
)
|
|
(18
|
)
|
|||
Other assets
|
(43
|
)
|
|
34
|
|
|
(39
|
)
|
|||
Loss and loss expense reserves
|
188
|
|
|
367
|
|
|
233
|
|
|||
Life policy and investment contract reserves
|
96
|
|
|
102
|
|
|
101
|
|
|||
Unearned premiums
|
97
|
|
|
106
|
|
|
119
|
|
|||
Other liabilities
|
24
|
|
|
61
|
|
|
55
|
|
|||
Current income tax receivable/payable
|
67
|
|
|
(35
|
)
|
|
(18
|
)
|
|||
Net cash provided by operating activities
|
1,052
|
|
|
1,115
|
|
|
1,075
|
|
|||
Cash Flows From Investing Activities
|
|
|
|
|
|
|
|
|
|||
Sale of fixed maturities
|
23
|
|
|
15
|
|
|
43
|
|
|||
Call or maturity of fixed maturities
|
1,172
|
|
|
1,511
|
|
|
1,199
|
|
|||
Sale of equity securities
|
523
|
|
|
465
|
|
|
342
|
|
|||
Purchase of fixed maturities
|
(1,723
|
)
|
|
(1,994
|
)
|
|
(1,722
|
)
|
|||
Purchase of equity securities
|
(513
|
)
|
|
(439
|
)
|
|
(493
|
)
|
|||
Investment in finance receivables
|
(32
|
)
|
|
(17
|
)
|
|
(14
|
)
|
|||
Collection of finance receivables
|
23
|
|
|
30
|
|
|
30
|
|
|||
Investment in buildings and equipment
|
(16
|
)
|
|
(13
|
)
|
|
(10
|
)
|
|||
Change in other invested assets, net
|
(15
|
)
|
|
(14
|
)
|
|
1
|
|
|||
Net cash used in investing activities
|
(558
|
)
|
|
(456
|
)
|
|
(624
|
)
|
|||
Cash Flows From Financing Activities
|
|
|
|
|
|
|
|
|
|||
Payment of cash dividends to shareholders
|
(400
|
)
|
|
(306
|
)
|
|
(366
|
)
|
|||
Shares acquired - share repurchase authorization
|
(92
|
)
|
|
(39
|
)
|
|
(53
|
)
|
|||
Changes in note payable
|
4
|
|
|
(15
|
)
|
|
(14
|
)
|
|||
Proceeds from stock options exercised
|
13
|
|
|
21
|
|
|
24
|
|
|||
Contract holders' funds deposited
|
79
|
|
|
95
|
|
|
83
|
|
|||
Contract holders' funds withdrawn
|
(164
|
)
|
|
(155
|
)
|
|
(148
|
)
|
|||
Excess tax benefits on share-based compensation
|
—
|
|
|
5
|
|
|
4
|
|
|||
Other
|
(54
|
)
|
|
(32
|
)
|
|
(28
|
)
|
|||
Net cash used in financing activities
|
(614
|
)
|
|
(426
|
)
|
|
(498
|
)
|
|||
Net change in cash and cash equivalents
|
(120
|
)
|
|
233
|
|
|
(47
|
)
|
|||
Cash and cash equivalents at beginning of year
|
777
|
|
|
544
|
|
|
591
|
|
|||
Cash and cash equivalents at end of year
|
$
|
657
|
|
|
$
|
777
|
|
|
$
|
544
|
|
Supplemental Disclosures of Cash Flow Information
|
|
|
|
|
|
|
|
|
|||
Interest paid
|
$
|
52
|
|
|
$
|
52
|
|
|
$
|
52
|
|
Income taxes paid
|
60
|
|
|
213
|
|
|
245
|
|
|||
Noncash Activities
|
|
|
|
|
|
|
|
||||
Conversion of securities
|
$
|
5
|
|
|
$
|
4
|
|
|
$
|
3
|
|
Equipment acquired under capital lease obligations
|
14
|
|
|
20
|
|
|
20
|
|
|||
Cashless exercise of stock options
|
7
|
|
|
13
|
|
|
16
|
|
|||
Other assets and other liabilities
|
75
|
|
|
53
|
|
|
27
|
|
|||
|
|
|
|
|
|
(Dollars in millions)
|
|
Cost or
amortized
cost
|
|
Gross unrealized
|
|
Fair
value |
||||||||||
At December 31, 2017
|
|
|
gains
|
|
losses
|
|
||||||||||
Fixed-maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate
|
|
$
|
5,420
|
|
|
$
|
246
|
|
|
$
|
13
|
|
|
$
|
5,653
|
|
States, municipalities and political subdivisions
|
|
4,316
|
|
|
155
|
|
|
6
|
|
|
4,465
|
|
||||
Commercial mortgage-backed
|
|
280
|
|
|
7
|
|
|
1
|
|
|
286
|
|
||||
Government-sponsored enterprises
|
|
257
|
|
|
1
|
|
|
4
|
|
|
254
|
|
||||
United States government
|
|
31
|
|
|
—
|
|
|
—
|
|
|
31
|
|
||||
Foreign government
|
|
10
|
|
|
—
|
|
|
—
|
|
|
10
|
|
||||
Subtotal
|
|
10,314
|
|
|
409
|
|
|
24
|
|
|
10,699
|
|
||||
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Common equities
|
|
2,918
|
|
|
3,135
|
|
|
14
|
|
|
6,039
|
|
||||
Nonredeemable preferred equities
|
|
176
|
|
|
34
|
|
|
—
|
|
|
210
|
|
||||
Subtotal
|
|
3,094
|
|
|
3,169
|
|
|
14
|
|
|
6,249
|
|
||||
Total
|
|
$
|
13,408
|
|
|
$
|
3,578
|
|
|
$
|
38
|
|
|
$
|
16,948
|
|
|
|
|
|
|
|
|
|
|
||||||||
At December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fixed-maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate
|
|
$
|
5,555
|
|
|
$
|
252
|
|
|
$
|
26
|
|
|
$
|
5,781
|
|
States, municipalities and political subdivisions
|
|
3,770
|
|
|
100
|
|
|
42
|
|
|
3,828
|
|
||||
Commercial mortgage-backed
|
|
282
|
|
|
7
|
|
|
2
|
|
|
287
|
|
||||
Government-sponsored enterprises
|
|
167
|
|
|
—
|
|
|
3
|
|
|
164
|
|
||||
United States government
|
|
10
|
|
|
—
|
|
|
—
|
|
|
10
|
|
||||
Foreign government
|
|
10
|
|
|
—
|
|
|
—
|
|
|
10
|
|
||||
Convertibles and bonds with warrants attached
|
|
5
|
|
|
—
|
|
|
—
|
|
|
5
|
|
||||
Subtotal
|
|
9,799
|
|
|
359
|
|
|
73
|
|
|
10,085
|
|
||||
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Common equities
|
|
2,812
|
|
|
2,320
|
|
|
9
|
|
|
5,123
|
|
||||
Nonredeemable preferred equities
|
|
183
|
|
|
28
|
|
|
—
|
|
|
211
|
|
||||
Subtotal
|
|
2,995
|
|
|
2,348
|
|
|
9
|
|
|
5,334
|
|
||||
Total
|
|
$
|
12,794
|
|
|
$
|
2,707
|
|
|
$
|
82
|
|
|
$
|
15,419
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
Less than 12 months
|
|
12 months or more
|
|
Total
|
||||||||||||||||||
At December 31, 2017
|
|
Fair
value
|
|
Unrealized
losses
|
|
Fair
value
|
|
Unrealized
losses
|
|
Fair
value
|
|
Unrealized
losses
|
||||||||||||
Fixed-maturity securities:
|
||||||||||||||||||||||||
Corporate
|
|
$
|
330
|
|
|
$
|
4
|
|
|
$
|
252
|
|
|
$
|
9
|
|
|
$
|
582
|
|
|
$
|
13
|
|
States, municipalities and political subdivisions
|
|
88
|
|
|
1
|
|
|
264
|
|
|
5
|
|
|
352
|
|
|
6
|
|
||||||
Commercial mortgage-backed
|
|
33
|
|
|
—
|
|
|
36
|
|
|
1
|
|
|
69
|
|
|
1
|
|
||||||
Government-sponsored enterprises
|
|
96
|
|
|
1
|
|
|
124
|
|
|
3
|
|
|
220
|
|
|
4
|
|
||||||
Foreign government
|
|
10
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10
|
|
|
—
|
|
||||||
United States government
|
|
23
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
29
|
|
|
—
|
|
||||||
Subtotal
|
|
580
|
|
|
6
|
|
|
682
|
|
|
18
|
|
|
1,262
|
|
|
24
|
|
||||||
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Common equities
|
|
229
|
|
|
14
|
|
|
—
|
|
|
—
|
|
|
229
|
|
|
14
|
|
||||||
Subtotal
|
|
229
|
|
|
14
|
|
|
—
|
|
|
—
|
|
|
229
|
|
|
14
|
|
||||||
Total
|
|
$
|
809
|
|
|
$
|
20
|
|
|
$
|
682
|
|
|
$
|
18
|
|
|
$
|
1,491
|
|
|
$
|
38
|
|
At December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Fixed-maturity securities:
|
||||||||||||||||||||||||
Corporate
|
|
$
|
733
|
|
|
$
|
15
|
|
|
$
|
189
|
|
|
$
|
11
|
|
|
$
|
922
|
|
|
$
|
26
|
|
States, municipalities and political subdivisions
|
|
989
|
|
|
42
|
|
|
—
|
|
|
—
|
|
|
989
|
|
|
42
|
|
||||||
Commercial mortgage-backed
|
|
89
|
|
|
2
|
|
|
2
|
|
|
—
|
|
|
91
|
|
|
2
|
|
||||||
Government-sponsored enterprises
|
|
155
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
155
|
|
|
3
|
|
||||||
United States government
|
|
6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
—
|
|
||||||
Subtotal
|
|
1,972
|
|
|
62
|
|
|
191
|
|
|
11
|
|
|
2,163
|
|
|
73
|
|
||||||
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Common equities
|
|
103
|
|
|
9
|
|
|
—
|
|
|
—
|
|
|
103
|
|
|
9
|
|
||||||
Nonredeemable preferred equities
|
|
4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
||||||
Subtotal
|
|
107
|
|
|
9
|
|
|
—
|
|
|
—
|
|
|
107
|
|
|
9
|
|
||||||
Total
|
|
$
|
2,079
|
|
|
$
|
71
|
|
|
$
|
191
|
|
|
$
|
11
|
|
|
$
|
2,270
|
|
|
$
|
82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
Amortized cost
|
|
Fair
value
|
|
% of fair value
|
|||||
At December 31, 2017
|
|
|
|
||||||||
Maturity dates:
|
|
|
|
|
|
|
|
|
|
||
Due in one year or less
|
|
$
|
511
|
|
|
$
|
519
|
|
|
4.9
|
%
|
Due after one year through five years
|
|
2,736
|
|
|
2,839
|
|
|
26.5
|
|
||
Due after five years through ten years
|
|
3,921
|
|
|
4,058
|
|
|
37.9
|
|
||
Due after ten years
|
|
3,146
|
|
|
3,283
|
|
|
30.7
|
|
||
Total
|
|
$
|
10,314
|
|
|
$
|
10,699
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
Years ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Investment income:
|
|
|
|
|
|
|
|
|
|
|||
Interest
|
|
$
|
445
|
|
|
$
|
440
|
|
|
$
|
428
|
|
Dividends
|
|
170
|
|
|
161
|
|
|
150
|
|
|||
Other
|
|
4
|
|
|
3
|
|
|
3
|
|
|||
Total
|
|
619
|
|
|
604
|
|
|
581
|
|
|||
Less investment expenses
|
|
10
|
|
|
9
|
|
|
9
|
|
|||
Total
|
|
$
|
609
|
|
|
$
|
595
|
|
|
$
|
572
|
|
|
|
|
|
|
|
|
||||||
Realized investment gains and losses:
|
|
|
|
|
|
|
|
|
|
|||
Fixed maturities:
|
|
|
|
|
|
|
|
|
|
|||
Gross realized gains
|
|
$
|
25
|
|
|
$
|
26
|
|
|
$
|
18
|
|
Gross realized losses
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|||
Other-than-temporary impairments
|
|
(6
|
)
|
|
(2
|
)
|
|
(18
|
)
|
|||
Equity securities:
|
|
|
|
|
|
|
|
|||||
Gross realized gains
|
|
195
|
|
|
152
|
|
|
129
|
|
|||
Gross realized losses
|
|
(72
|
)
|
|
(53
|
)
|
|
(26
|
)
|
|||
Other-than-temporary impairments
|
|
(3
|
)
|
|
—
|
|
|
(34
|
)
|
|||
Other
|
|
9
|
|
|
2
|
|
|
1
|
|
|||
Total
|
|
$
|
148
|
|
|
$
|
124
|
|
|
$
|
70
|
|
|
|
|
|
|
|
|
•
|
Level 1 – Financial assets and liabilities for which inputs are observable and are obtained from reliable quoted prices for identical assets or liabilities in active markets. This is the most reliable fair value measurement and includes, for example, active exchange-traded equity securities.
|
•
|
Level 2 – Financial assets and liabilities for which values are based on quoted prices in markets that are not active or for which values are based on similar assets and liabilities that are actively traded. This also includes pricing models for which the inputs are corroborated by market data.
|
•
|
Level 3 – Financial assets and liabilities for which values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. Level 3 inputs include the following:
|
◦
|
Quotes from brokers or other external sources that are not considered binding;
|
◦
|
Quotes from brokers or other external sources where it cannot be determined that market participants would in fact transact for the asset or liability at the quoted price; or
|
◦
|
Quotes from brokers or other external sources where the inputs are not deemed observable.
|
|
||||||||||||||||
(Dollars in millions)
|
|
Quoted prices in
active markets for
identical assets (Level 1) |
|
|
|
Significant
unobservable
inputs (Level 3) |
|
|
||||||||
At December 31, 2017
|
|
|
Significant other
observable inputs
(Level 2)
|
|
|
Total
|
||||||||||
Fixed maturities, available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate
|
|
$
|
—
|
|
|
$
|
5,652
|
|
|
$
|
1
|
|
|
$
|
5,653
|
|
States, municipalities and political subdivisions
|
|
—
|
|
|
4,460
|
|
|
5
|
|
|
4,465
|
|
||||
Commercial mortgage-backed
|
|
—
|
|
|
286
|
|
|
—
|
|
|
286
|
|
||||
Government-sponsored enterprises
|
|
—
|
|
|
254
|
|
|
—
|
|
|
254
|
|
||||
United States Government
|
|
31
|
|
|
—
|
|
|
—
|
|
|
31
|
|
||||
Foreign government
|
|
—
|
|
|
10
|
|
|
—
|
|
|
10
|
|
||||
Subtotal
|
|
31
|
|
|
10,662
|
|
|
6
|
|
|
10,699
|
|
||||
Common equities, available for sale
|
|
6,039
|
|
|
—
|
|
|
—
|
|
|
6,039
|
|
||||
Nonredeemable preferred equities,
available for sale
|
|
—
|
|
|
210
|
|
|
—
|
|
|
210
|
|
||||
Separate accounts taxable fixed maturities
|
|
—
|
|
|
795
|
|
|
—
|
|
|
795
|
|
||||
Top Hat savings plan mutual funds and common
equity (included in Other assets)
|
|
31
|
|
|
—
|
|
|
—
|
|
|
31
|
|
||||
Total
|
|
$
|
6,101
|
|
|
$
|
11,667
|
|
|
$
|
6
|
|
|
$
|
17,774
|
|
|
|
|
|
|
|
|
|
|
||||||||
At December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fixed maturities, available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate
|
|
$
|
—
|
|
|
$
|
5,703
|
|
|
$
|
78
|
|
|
$
|
5,781
|
|
States, municipalities and political subdivisions
|
|
—
|
|
|
3,828
|
|
|
—
|
|
|
3,828
|
|
||||
Commercial mortgage-backed
|
|
—
|
|
|
287
|
|
|
—
|
|
|
287
|
|
||||
Government-sponsored enterprises
|
|
—
|
|
|
164
|
|
|
—
|
|
|
164
|
|
||||
United States Government
|
|
10
|
|
|
—
|
|
|
—
|
|
|
10
|
|
||||
Foreign government
|
|
—
|
|
|
10
|
|
|
—
|
|
|
10
|
|
||||
Convertibles and bonds with warrants attached
|
|
—
|
|
|
5
|
|
|
—
|
|
|
5
|
|
||||
Subtotal
|
|
10
|
|
|
9,997
|
|
|
78
|
|
|
10,085
|
|
||||
Common equities, available for sale
|
|
5,123
|
|
|
—
|
|
|
—
|
|
|
5,123
|
|
||||
Nonredeemable preferred equities,
available for sale
|
|
—
|
|
|
211
|
|
|
—
|
|
|
211
|
|
||||
Separate accounts taxable fixed maturities
|
|
—
|
|
|
750
|
|
|
—
|
|
|
750
|
|
||||
Top Hat savings plan mutual funds and common
equity (included in Other assets)
|
|
24
|
|
|
—
|
|
|
—
|
|
|
24
|
|
||||
Total
|
|
$
|
5,157
|
|
|
$
|
10,958
|
|
|
$
|
78
|
|
|
$
|
16,193
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
Asset fair value measurements using significant unobservable input
|
|||||||||||||||||||
|
|
Corporate
fixed
maturities
|
|
Separate accounts taxable fixed maturities
|
|
States, municipalities and political subdivisions fixed maturities
|
|
Nonredeemable preferred equities
|
|
Total
|
||||||||||
Beginning balance, January 1, 2017
|
|
$
|
78
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
78
|
|
Total gains or losses (realized/unrealized):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Included in net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Included in other comprehensive income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Purchases
|
|
—
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
5
|
|
|||||
Sales
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Transfers into Level 3
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Transfers out of Level 3
|
|
(77
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(77
|
)
|
|||||
Ending balance, December 31, 2017
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
5
|
|
|
$
|
—
|
|
|
$
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Beginning balance, January 1, 2016
|
|
$
|
51
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
3
|
|
|
$
|
55
|
|
Total gains or losses (realized/unrealized):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Included in net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Included in other comprehensive income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
|||||
Purchases
|
|
57
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
57
|
|
|||||
Sales
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
(3
|
)
|
|||||
Transfers into Level 3
|
|
13
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13
|
|
|||||
Transfers out of Level 3
|
|
(42
|
)
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
(43
|
)
|
|||||
Ending balance, December 31, 2016
|
|
$
|
78
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
78
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
Quoted prices in
active markets for
identical assets (Level 1) |
|
Significant other
observable inputs (Level 2) |
|
Significant
unobservable
inputs
(Level 3)
|
|
Total
|
||||||||
At December 31, 2017
|
|
|
|
|
||||||||||||
Note payable
|
|
$
|
—
|
|
|
$
|
24
|
|
|
$
|
—
|
|
|
$
|
24
|
|
6.900% senior debentures, due 2028
|
|
—
|
|
|
34
|
|
|
—
|
|
|
34
|
|
||||
6.920% senior debentures, due 2028
|
|
—
|
|
|
505
|
|
|
—
|
|
|
505
|
|
||||
6.125% senior notes, due 2034
|
|
—
|
|
|
477
|
|
|
—
|
|
|
477
|
|
||||
Total
|
|
$
|
—
|
|
|
$
|
1,040
|
|
|
$
|
—
|
|
|
$
|
1,040
|
|
|
|
|
|
|
|
|
|
|
||||||||
At December 31, 2016
|
|
|
|
|
|
|
|
|
||||||||
Note payable
|
|
$
|
—
|
|
|
$
|
20
|
|
|
$
|
—
|
|
|
$
|
20
|
|
6.900% senior debentures, due 2028
|
|
—
|
|
|
33
|
|
|
—
|
|
|
33
|
|
||||
6.920% senior debentures, due 2028
|
|
—
|
|
|
488
|
|
|
—
|
|
|
488
|
|
||||
6.125% senior notes, due 2034
|
|
—
|
|
|
435
|
|
|
—
|
|
|
435
|
|
||||
Total
|
|
$
|
—
|
|
|
$
|
976
|
|
|
$
|
—
|
|
|
$
|
976
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
Quoted prices in
active markets for
identical assets
(Level 1)
|
|
Significant other
observable inputs
(Level 2)
|
|
Significant
unobservable
inputs
(Level 3)
|
|
Total
|
||||||||
At December 31, 2017
|
|
|
|
|
||||||||||||
Life policy loans
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
41
|
|
|
$
|
41
|
|
|
|
|
|
|
|
|
|
|
||||||||
At December 31, 2016
|
|
|
|
|
|
|
|
|
||||||||
Life policy loans
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
40
|
|
|
$
|
40
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
Quoted prices in
active markets for
identical assets
(Level 1)
|
|
Significant other
observable inputs
(Level 2)
|
|
Significant
unobservable
inputs
(Level 3)
|
|
Total
|
||||||||
At December 31, 2017
|
|
|
|
|
||||||||||||
Deferred annuities
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
834
|
|
|
$
|
834
|
|
Structured settlements
|
|
—
|
|
|
210
|
|
|
—
|
|
|
210
|
|
||||
Total
|
|
$
|
—
|
|
|
$
|
210
|
|
|
$
|
834
|
|
|
$
|
1,044
|
|
|
|
|
|
|
|
|
|
|
||||||||
At December 31, 2016
|
|
|
|
|
|
|
|
|
||||||||
Deferred annuities
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
839
|
|
|
$
|
839
|
|
Structured settlements
|
|
—
|
|
|
206
|
|
|
—
|
|
|
206
|
|
||||
Total
|
|
$
|
—
|
|
|
$
|
206
|
|
|
$
|
839
|
|
|
$
|
1,045
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
Years ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Gross loss and loss expense reserves, January 1
|
|
$
|
5,035
|
|
|
$
|
4,660
|
|
|
$
|
4,438
|
|
Less reinsurance recoverable
|
|
298
|
|
|
281
|
|
|
282
|
|
|||
Net loss and loss expense reserves, January 1
|
|
4,737
|
|
|
4,379
|
|
|
4,156
|
|
|||
Net incurred loss and loss expenses related to:
|
|
|
|
|
|
|
|
|
|
|||
Current accident year
|
|
3,257
|
|
|
3,029
|
|
|
2,756
|
|
|||
Prior accident years
|
|
(119
|
)
|
|
(168
|
)
|
|
(184
|
)
|
|||
Total incurred
|
|
3,138
|
|
|
2,861
|
|
|
2,572
|
|
|||
Net paid loss and loss expenses related to:
|
|
|
|
|
|
|
|
|
|
|||
Current accident year
|
|
1,404
|
|
|
1,260
|
|
|
1,152
|
|
|||
Prior accident years
|
|
1,439
|
|
|
1,243
|
|
|
1,197
|
|
|||
Total paid
|
|
2,843
|
|
|
2,503
|
|
|
2,349
|
|
|||
|
|
|
|
|
|
|
||||||
Net loss and loss expense reserves, December 31
|
|
5,032
|
|
|
4,737
|
|
|
4,379
|
|
|||
Plus reinsurance recoverable
|
|
187
|
|
|
298
|
|
|
281
|
|
|||
Gross loss and loss expense reserves, December 31
|
|
$
|
5,219
|
|
|
$
|
5,035
|
|
|
$
|
4,660
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
Cumulative incurred losses
and ALAE
as reported within the triangles,
net of reinsurance
|
|
Cumulative paid losses and ALAE as reported within the triangles,
net of reinsurance
|
|
Liabilities for loss and ALAE for accident years not presented in the triangles, net of reinsurance
|
|
Total liabilities for loss and ALAE, net of reinsurance
|
|
Reinsurance recoverable on unpaid losses
|
|
Total liabilities for gross loss and loss expense reserves
|
||||||||||||
|
|
|
|
|
|
|
||||||||||||||||||
|
|
|
|
|
|
|
||||||||||||||||||
|
|
|
|
|
|
|
||||||||||||||||||
|
|
|
|
|
|
|
||||||||||||||||||
Commercial casualty
|
|
$
|
4,434
|
|
|
$
|
2,573
|
|
|
$
|
83
|
|
|
$
|
1,944
|
|
|
$
|
43
|
|
|
$
|
1,987
|
|
Workers' compensation
|
|
2,259
|
|
|
1,598
|
|
|
267
|
|
|
928
|
|
|
64
|
|
|
992
|
|
||||||
Commercial auto
|
|
1,955
|
|
|
1,380
|
|
|
16
|
|
|
591
|
|
|
4
|
|
|
595
|
|
||||||
Commercial property
|
|
2,353
|
|
|
2,095
|
|
|
12
|
|
|
270
|
|
|
7
|
|
|
277
|
|
||||||
Personal auto
|
|
1,774
|
|
|
1,503
|
|
|
5
|
|
|
276
|
|
|
31
|
|
|
307
|
|
||||||
Homeowner
|
|
1,466
|
|
|
1,358
|
|
|
3
|
|
|
111
|
|
|
3
|
|
|
114
|
|
||||||
Excess and surplus
|
|
441
|
|
|
195
|
|
|
94
|
|
|
340
|
|
|
3
|
|
|
343
|
|
||||||
Other lines
|
|
315
|
|
|||||||||||||||||||||
Total liabilities for loss and ALAE reserves
|
|
4,930
|
|
|||||||||||||||||||||
Unallocated loss adjustment expense reserves
|
|
289
|
|
|||||||||||||||||||||
Gross loss and loss expense reserves
|
|
$
|
5,219
|
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Average annual percentage payout of incurred losses by age, net of reinsurance (unaudited)
|
||||||||||||||||||||
Years
|
|
1
|
|
2
|
|
3
|
|
4
|
|
5
|
|
6
|
|
7
|
|
8
|
|
9
|
|
10
|
Average annual percentage payout
|
|
7.9%
|
|
14.9%
|
|
18.0%
|
|
17.7%
|
|
13.7%
|
|
8.8%
|
|
4.8%
|
|
3.5%
|
|
1.6%
|
|
1.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average annual percentage payout of incurred losses by age, net of reinsurance (unaudited)
|
||||||||||||||||||||
Years
|
|
1
|
|
2
|
|
3
|
|
4
|
|
5
|
|
6
|
|
7
|
|
8
|
|
9
|
|
10
|
Average annual percentage payout
|
|
25.9%
|
|
26.9%
|
|
12.4%
|
|
7.0%
|
|
4.2%
|
|
2.4%
|
|
1.5%
|
|
1.4%
|
|
0.8%
|
|
0.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions, reported claims in thousands)
|
As of December 31, 2017
|
||||||||||||||||||||||||||
Incurred losses and ALAE, net of reinsurance
|
|
|
Total of incurred
but not reported liabilities plus expected development on reported losses |
|
Cumulative number of reported claims
|
||||||||||||||||||||||
|
Years ended December 31,
|
|
|
||||||||||||||||||||||||
Accident
|
|
2013
|
|
2014
|
|
2015
|
|
2016
|
|
|
|
|
|||||||||||||||
Year
|
|
Unaudited
|
|
2017
|
|
|
|||||||||||||||||||||
2013
|
|
$
|
292
|
|
|
$
|
305
|
|
|
$
|
315
|
|
|
$
|
322
|
|
|
$
|
322
|
|
|
$
|
5
|
|
|
46
|
|
2014
|
|
|
|
333
|
|
|
346
|
|
|
351
|
|
|
358
|
|
|
8
|
|
|
51
|
|
|||||||
2015
|
|
|
|
|
|
374
|
|
|
384
|
|
|
394
|
|
|
15
|
|
|
51
|
|
||||||||
2016
|
|
|
|
|
|
|
|
417
|
|
|
430
|
|
|
36
|
|
|
53
|
|
|||||||||
2017
|
|
|
|
|
|
|
|
|
|
451
|
|
|
127
|
|
|
47
|
|
||||||||||
Total
|
|
|
|
|
|
|
|
|
|
$
|
1,955
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Cumulative paid losses and ALAE, net of reinsurance
|
|
|
|
|
|
|
|||||||||||||||||||||
2013
|
|
$
|
141
|
|
|
$
|
199
|
|
|
$
|
246
|
|
|
$
|
285
|
|
|
$
|
307
|
|
|
|
|
|
|||
2014
|
|
|
|
159
|
|
|
223
|
|
|
273
|
|
|
310
|
|
|
|
|
|
|||||||||
2015
|
|
|
|
|
|
173
|
|
|
244
|
|
|
303
|
|
|
|
|
|
||||||||||
2016
|
|
|
|
|
|
|
|
184
|
|
|
273
|
|
|
|
|
|
|||||||||||
2017
|
|
|
|
|
|
|
|
|
|
187
|
|
|
|
|
|
||||||||||||
Total
|
|
|
|
|
|
|
|
|
|
1,380
|
|
|
|
|
|
||||||||||||
All outstanding liabilities before 2013, net of reinsurance
|
|
16
|
|
|
|
|
|
||||||||||||||||||||
Liabilities for loss and ALAE, net of reinsurance
|
|
$
|
591
|
|
|
|
|
|
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average annual percentage payout of incurred losses by age, net of reinsurance (unaudited)
|
||||||||||
Years
|
|
1
|
|
2
|
|
3
|
|
4
|
|
5
|
Average annual percentage payout
|
|
43.3%
|
|
18.7%
|
|
14.5%
|
|
11.2%
|
|
6.7%
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions, reported claims in thousands)
|
As of December 31, 2017
|
||||||||||||||||||||||||||
Incurred losses and ALAE, net of reinsurance
|
|
|
|
Total of incurred
but not reported liabilities plus expected development on reported losses |
|
Cumulative number of reported claims
|
|||||||||||||||||||||
|
Years ended December 31,
|
|
|
||||||||||||||||||||||||
Accident
|
|
2013
|
|
2014
|
|
2015
|
|
2016
|
|
|
|
|
|||||||||||||||
Year
|
|
Unaudited
|
|
2017
|
|
|
|||||||||||||||||||||
2013
|
|
$
|
389
|
|
|
$
|
359
|
|
|
$
|
352
|
|
|
$
|
356
|
|
|
$
|
357
|
|
|
$
|
1
|
|
|
14
|
|
2014
|
|
|
|
452
|
|
|
444
|
|
|
441
|
|
|
442
|
|
|
2
|
|
|
17
|
|
|||||||
2015
|
|
|
|
|
|
454
|
|
|
414
|
|
|
416
|
|
|
2
|
|
|
17
|
|
||||||||
2016
|
|
|
|
|
|
|
|
590
|
|
|
551
|
|
|
7
|
|
|
17
|
|
|||||||||
2017
|
|
|
|
|
|
|
|
|
|
587
|
|
|
24
|
|
|
16
|
|
||||||||||
Total
|
|
|
|
|
|
|
|
|
|
$
|
2,353
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Cumulative paid losses and ALAE, net of reinsurance
|
|
|
|
|
|
|
|||||||||||||||||||||
2013
|
|
$
|
227
|
|
|
$
|
330
|
|
|
$
|
344
|
|
|
$
|
349
|
|
|
$
|
352
|
|
|
|
|
|
|||
2014
|
|
|
|
297
|
|
|
412
|
|
|
432
|
|
|
437
|
|
|
|
|
|
|||||||||
2015
|
|
|
|
|
|
279
|
|
|
388
|
|
|
407
|
|
|
|
|
|
||||||||||
2016
|
|
|
|
|
|
|
|
358
|
|
|
504
|
|
|
|
|
|
|||||||||||
2017
|
|
|
|
|
|
|
|
|
|
395
|
|
|
|
|
|
||||||||||||
Total
|
|
|
|
|
|
|
|
|
|
2,095
|
|
|
|
|
|
||||||||||||
All outstanding liabilities before 2013, net of reinsurance
|
|
12
|
|
|
|
|
|
||||||||||||||||||||
Liabilities for loss and ALAE, net of reinsurance
|
|
$
|
270
|
|
|
|
|
|
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average annual percentage payout of incurred losses by age, net of reinsurance (unaudited)
|
||||||||||
Years
|
|
1
|
|
2
|
|
3
|
|
4
|
|
5
|
Average annual percentage payout
|
|
66.0%
|
|
26.9%
|
|
4.4%
|
|
1.1%
|
|
0.9%
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions, reported claims in thousands)
|
As of December 31, 2017
|
||||||||||||||||||||||||||
Incurred losses and ALAE, net of reinsurance
|
|
|
Total of incurred
but not reported liabilities plus expected development on reported losses |
|
Cumulative number of reported claims
|
||||||||||||||||||||||
|
Years ended December 31,
|
|
|
||||||||||||||||||||||||
Accident
|
|
2013
|
|
2014
|
|
2015
|
|
2016
|
|
|
|
|
|||||||||||||||
Year
|
|
Unaudited
|
|
2017
|
|
|
|||||||||||||||||||||
2013
|
|
$
|
280
|
|
|
$
|
280
|
|
|
$
|
293
|
|
|
$
|
298
|
|
|
$
|
298
|
|
|
$
|
—
|
|
|
96
|
|
2014
|
|
|
|
317
|
|
|
317
|
|
|
325
|
|
|
324
|
|
|
—
|
|
|
105
|
|
|||||||
2015
|
|
|
|
|
|
343
|
|
|
356
|
|
|
356
|
|
|
—
|
|
|
108
|
|
||||||||
2016
|
|
|
|
|
|
|
|
383
|
|
|
384
|
|
|
8
|
|
|
110
|
|
|||||||||
2017
|
|
|
|
|
|
|
|
|
|
412
|
|
|
55
|
|
|
102
|
|
||||||||||
Total
|
|
|
|
|
|
|
|
|
|
$
|
1,774
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Cumulative paid losses and ALAE, net of reinsurance
|
|
|
|
|
|
|
|||||||||||||||||||||
2013
|
|
$
|
190
|
|
|
$
|
245
|
|
|
$
|
272
|
|
|
$
|
287
|
|
|
$
|
293
|
|
|
|
|
|
|||
2014
|
|
|
|
210
|
|
|
267
|
|
|
298
|
|
|
313
|
|
|
|
|
|
|||||||||
2015
|
|
|
|
|
|
229
|
|
|
292
|
|
|
325
|
|
|
|
|
|
||||||||||
2016
|
|
|
|
|
|
|
|
243
|
|
|
316
|
|
|
|
|
|
|||||||||||
2017
|
|
|
|
|
|
|
|
|
|
256
|
|
|
|
|
|
||||||||||||
Total
|
|
|
|
|
|
|
|
|
|
1,503
|
|
|
|
|
|
||||||||||||
All outstanding liabilities before 2013 net of reinsurance
|
|
5
|
|
|
|
|
|
||||||||||||||||||||
Liabilities for loss and ALAE, net of reinsurance
|
|
$
|
276
|
|
|
|
|
|
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average annual percentage payout of incurred losses by age, net of reinsurance (unaudited)
|
||||||||||
Years
|
|
1
|
|
2
|
|
3
|
|
4
|
|
5
|
Average annual percentage payout
|
|
63.7%
|
|
18.1%
|
|
9.4%
|
|
4.8%
|
|
1.9%
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions, reported claims in thousands)
|
As of December 31, 2017
|
||||||||||||||||||||||||||
Incurred losses and ALAE, net of reinsurance
|
|
|
Total of incurred
but not reported liabilities plus expected development on reported losses |
|
Cumulative number of reported claims
|
||||||||||||||||||||||
|
Years ended December 31,
|
|
|
||||||||||||||||||||||||
Accident
|
|
2013
|
|
2014
|
|
2015
|
|
2016
|
|
|
|
|
|||||||||||||||
Year
|
|
Unaudited
|
|
2017
|
|
|
|||||||||||||||||||||
2013
|
|
$
|
252
|
|
|
$
|
246
|
|
|
$
|
247
|
|
|
$
|
247
|
|
|
$
|
246
|
|
|
$
|
—
|
|
|
25
|
|
2014
|
|
|
|
297
|
|
|
283
|
|
|
286
|
|
|
285
|
|
|
1
|
|
|
26
|
|
|||||||
2015
|
|
|
|
|
|
284
|
|
|
275
|
|
|
275
|
|
|
1
|
|
|
24
|
|
||||||||
2016
|
|
|
|
|
|
|
|
315
|
|
|
304
|
|
|
3
|
|
|
23
|
|
|||||||||
2017
|
|
|
|
|
|
|
|
|
|
356
|
|
|
8
|
|
|
24
|
|
||||||||||
Total
|
|
|
|
|
|
|
|
|
|
$
|
1,466
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Cumulative paid losses and ALAE, net of reinsurance
|
|
|
|
|
|
|
|||||||||||||||||||||
2013
|
|
$
|
180
|
|
|
$
|
236
|
|
|
$
|
242
|
|
|
$
|
244
|
|
|
$
|
246
|
|
|
|
|
|
|||
2014
|
|
|
|
224
|
|
|
273
|
|
|
281
|
|
|
283
|
|
|
|
|
|
|||||||||
2015
|
|
|
|
|
|
203
|
|
|
260
|
|
|
269
|
|
|
|
|
|
||||||||||
2016
|
|
|
|
|
|
|
|
208
|
|
|
283
|
|
|
|
|
|
|||||||||||
2017
|
|
|
|
|
|
|
|
|
|
277
|
|
|
|
|
|
||||||||||||
Total
|
|
1,358
|
|
|
|
|
|
||||||||||||||||||||
All outstanding liabilities before 2013, net of reinsurance
|
|
3
|
|
|
|
|
|
||||||||||||||||||||
Liabilities for loss and ALAE, net of reinsurance
|
|
$
|
111
|
|
|
|
|
|
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average annual percentage payout of incurred losses by age, net of reinsurance (unaudited)
|
||||||||||
Years
|
|
1
|
|
2
|
|
3
|
|
4
|
|
5
|
Average annual percentage payout
|
|
74.4%
|
|
21.3%
|
|
3.0%
|
|
0.7%
|
|
0.4%
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions, reported claims in thousands)
|
As of December 31, 2017
|
||||||||||||||||||||||||||||||||||
Incurred losses and ALAE, net of reinsurance
|
|
|
|
|
|
|
Total of incurred
but not reported liabilities plus expected development on reported losses |
|
Cumulative number of reported claims
|
||||||||||||||||||||||||||
|
Years ended December 31,
|
|
|
||||||||||||||||||||||||||||||||
Accident
|
|
2011
|
|
2012
|
|
2013
|
|
2014
|
|
2015
|
|
2016
|
|
|
|
|
|||||||||||||||||||
Year
|
|
Unaudited
|
|
2017
|
|
|
|||||||||||||||||||||||||||||
2011
|
|
$
|
48
|
|
|
$
|
47
|
|
|
$
|
44
|
|
|
$
|
38
|
|
|
$
|
36
|
|
|
$
|
35
|
|
|
$
|
35
|
|
|
$
|
1
|
|
|
1
|
|
2012
|
|
|
|
67
|
|
|
56
|
|
|
49
|
|
|
40
|
|
|
37
|
|
|
36
|
|
|
1
|
|
|
1
|
|
|||||||||
2013
|
|
|
|
|
|
74
|
|
|
64
|
|
|
54
|
|
|
45
|
|
|
42
|
|
|
4
|
|
|
2
|
|
||||||||||
2014
|
|
|
|
|
|
|
|
95
|
|
|
82
|
|
|
75
|
|
|
64
|
|
|
16
|
|
|
2
|
|
|||||||||||
2015
|
|
|
|
|
|
|
|
|
|
96
|
|
|
81
|
|
|
73
|
|
|
22
|
|
|
2
|
|
||||||||||||
2016
|
|
|
|
|
|
|
|
|
|
|
|
93
|
|
|
87
|
|
|
34
|
|
|
2
|
|
|||||||||||||
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
104
|
|
|
64
|
|
|
2
|
|
||||||||||||||
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
441
|
|
|
|
|
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Cumulative paid losses and ALAE, net of reinsurance
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
2011
|
|
$
|
8
|
|
|
$
|
14
|
|
|
$
|
23
|
|
|
$
|
27
|
|
|
$
|
30
|
|
|
$
|
32
|
|
|
$
|
34
|
|
|
|
|
|
|||
2012
|
|
|
|
9
|
|
|
15
|
|
|
19
|
|
|
25
|
|
|
29
|
|
|
31
|
|
|
|
|
|
|||||||||||
2013
|
|
|
|
|
|
7
|
|
|
12
|
|
|
20
|
|
|
27
|
|
|
32
|
|
|
|
|
|
||||||||||||
2014
|
|
|
|
|
|
|
|
9
|
|
|
17
|
|
|
27
|
|
|
37
|
|
|
|
|
|
|||||||||||||
2015
|
|
|
|
|
|
|
|
|
|
8
|
|
|
19
|
|
|
29
|
|
|
|
|
|
||||||||||||||
2016
|
|
|
|
|
|
|
|
|
|
|
|
10
|
|
|
21
|
|
|
|
|
|
|||||||||||||||
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11
|
|
|
|
|
|
||||||||||||||||
Total
|
|
|
|
|
|
195
|
|
|
|
|
|
||||||||||||||||||||||||
All outstanding liabilities before 2011, net of reinsurance
|
|
|
|
|
|
94
|
|
|
|
|
|
||||||||||||||||||||||||
Liabilities for loss and ALAE, net of reinsurance
|
|
|
|
$
|
340
|
|
|
|
|
|
|||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average annual percentage payout of incurred losses by age, net of reinsurance (unaudited)
|
|
|
||||||||||||
Years
|
|
1
|
|
2
|
|
3
|
|
4
|
|
5
|
|
6
|
|
7
|
Average annual percentage payout
|
|
16.0%
|
|
14.1%
|
|
17.5%
|
|
14.7%
|
|
10.7%
|
|
7.2%
|
|
1.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
At December 31,
|
||||||
|
|
2017
|
|
2016
|
||||
Life policy reserves:
|
|
|
|
|
||||
Ordinary/traditional life
|
|
$
|
1,080
|
|
|
$
|
1,011
|
|
Other
|
|
47
|
|
|
45
|
|
||
Subtotal
|
|
1,127
|
|
|
1,056
|
|
||
Investment contract reserves:
|
|
|
|
|
||||
Deferred annuities
|
|
835
|
|
|
861
|
|
||
Universal life
|
|
601
|
|
|
578
|
|
||
Structured settlements
|
|
160
|
|
|
170
|
|
||
Other
|
|
6
|
|
|
6
|
|
||
Subtotal
|
|
1,602
|
|
|
1,615
|
|
||
Total life policy and investment contract reserves
|
|
$
|
2,729
|
|
|
$
|
2,671
|
|
|
|
|
|
|
(Dollars in millions)
|
|
Years ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Property casualty:
|
|
|
|
|
|
|
||||||
Deferred policy acquisition costs asset, January 1
|
|
$
|
408
|
|
|
$
|
388
|
|
|
$
|
379
|
|
Capitalized deferred policy acquisition costs
|
|
897
|
|
|
840
|
|
|
801
|
|
|||
Amortized deferred policy acquisition costs
|
|
(867
|
)
|
|
(820
|
)
|
|
(792
|
)
|
|||
Deferred policy acquisition costs asset, December 31
|
|
$
|
438
|
|
|
$
|
408
|
|
|
$
|
388
|
|
|
|
|
|
|
|
|
||||||
Life:
|
|
|
|
|
|
|
||||||
Deferred policy acquisition costs asset, January 1
|
|
$
|
229
|
|
|
$
|
228
|
|
|
$
|
199
|
|
Capitalized deferred policy acquisition costs
|
|
51
|
|
|
49
|
|
|
45
|
|
|||
Amortized deferred policy acquisition costs
|
|
(46
|
)
|
|
(43
|
)
|
|
(37
|
)
|
|||
Amortized shadow deferred policy acquisition costs
|
|
(2
|
)
|
|
(5
|
)
|
|
21
|
|
|||
Deferred policy acquisition costs asset, December 31
|
|
$
|
232
|
|
|
$
|
229
|
|
|
$
|
228
|
|
|
|
|
|
|
|
|
||||||
Consolidated:
|
|
|
|
|
|
|
||||||
Deferred policy acquisition costs asset, January 1
|
|
$
|
637
|
|
|
$
|
616
|
|
|
$
|
578
|
|
Capitalized deferred policy acquisition costs
|
|
948
|
|
|
889
|
|
|
846
|
|
|||
Amortized deferred policy acquisition costs
|
|
(913
|
)
|
|
(863
|
)
|
|
(829
|
)
|
|||
Amortized shadow deferred policy acquisition costs
|
|
(2
|
)
|
|
(5
|
)
|
|
21
|
|
|||
Deferred policy acquisition costs asset, December 31
|
|
$
|
670
|
|
|
$
|
637
|
|
|
$
|
616
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
|
|
Book value
|
|
Principal amount
|
||||||||||||||
Interest rate
|
|
Year of
issue
|
|
|
|
At December 31,
|
|
At December 31,
|
||||||||||||
|
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||||
6.900%
|
|
1998
|
|
Senior debentures, due 2028
|
|
$
|
26
|
|
|
$
|
26
|
|
|
$
|
28
|
|
|
$
|
28
|
|
6.920%
|
|
2005
|
|
Senior debentures, due 2028
|
|
391
|
|
|
391
|
|
|
391
|
|
|
391
|
|
||||
6.125%
|
|
2004
|
|
Senior notes, due 2034
|
|
370
|
|
|
370
|
|
|
374
|
|
|
374
|
|
||||
|
|
|
|
Total
|
|
$
|
787
|
|
|
$
|
787
|
|
|
$
|
793
|
|
|
$
|
793
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
Years ended December 31,
|
|
||||||||||||||||||||
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
2023
|
||||||||||||
Capital lease obligations
|
$
|
12
|
|
|
$
|
10
|
|
|
$
|
7
|
|
|
$
|
5
|
|
|
$
|
4
|
|
$
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
2017
|
|
|
2016
|
|
|
2015
|
||||||||||||||||||||||||||||||
|
|
Before
tax
|
|
Income
tax
|
|
Net
|
|
|
Before
tax |
|
Income
tax |
|
Net
|
|
|
Before
tax |
|
Income
tax |
|
Net
|
||||||||||||||||||
Investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
AOCI, January 1
|
|
$
|
2,625
|
|
|
$
|
908
|
|
|
$
|
1,717
|
|
|
|
$
|
2,094
|
|
|
$
|
722
|
|
|
$
|
1,372
|
|
|
|
$
|
2,719
|
|
|
$
|
942
|
|
|
$
|
1,777
|
|
OCI before realized gains recognized in net income
|
|
1,054
|
|
|
366
|
|
|
688
|
|
|
|
653
|
|
|
229
|
|
|
424
|
|
|
|
(556
|
)
|
|
(196
|
)
|
|
(360
|
)
|
|||||||||
Realized gains recognized in net income
|
|
(139
|
)
|
|
(49
|
)
|
|
(90
|
)
|
|
|
(122
|
)
|
|
(43
|
)
|
|
(79
|
)
|
|
|
(69
|
)
|
|
(24
|
)
|
|
(45
|
)
|
|||||||||
OCI
|
|
915
|
|
|
317
|
|
|
598
|
|
|
|
531
|
|
|
186
|
|
|
345
|
|
|
|
(625
|
)
|
|
(220
|
)
|
|
(405
|
)
|
|||||||||
Adjustment to reclassify certain tax effects from AOCI
|
|
—
|
|
|
(492
|
)
|
|
492
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||||
AOCI, December 31
|
|
$
|
3,540
|
|
|
$
|
733
|
|
|
$
|
2,807
|
|
|
|
$
|
2,625
|
|
|
$
|
908
|
|
|
$
|
1,717
|
|
|
|
$
|
2,094
|
|
|
$
|
722
|
|
|
$
|
1,372
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Pension obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
AOCI, January 1
|
|
$
|
(26
|
)
|
|
$
|
(8
|
)
|
|
$
|
(18
|
)
|
|
|
$
|
(42
|
)
|
|
$
|
(14
|
)
|
|
$
|
(28
|
)
|
|
|
$
|
(36
|
)
|
|
$
|
(12
|
)
|
|
$
|
(24
|
)
|
OCI excluding amortization recognized in net income
|
|
12
|
|
|
6
|
|
|
6
|
|
|
|
13
|
|
|
5
|
|
|
8
|
|
|
|
(12
|
)
|
|
(5
|
)
|
|
(7
|
)
|
|||||||||
Amortization recognized in net income
|
|
2
|
|
|
1
|
|
|
1
|
|
|
|
3
|
|
|
1
|
|
|
2
|
|
|
|
6
|
|
|
3
|
|
|
3
|
|
|||||||||
OCI
|
|
14
|
|
|
7
|
|
|
7
|
|
|
|
16
|
|
|
6
|
|
|
10
|
|
|
|
(6
|
)
|
|
(2
|
)
|
|
(4
|
)
|
|||||||||
AOCI, December 31
|
|
$
|
(12
|
)
|
|
$
|
(1
|
)
|
|
$
|
(11
|
)
|
|
|
$
|
(26
|
)
|
|
$
|
(8
|
)
|
|
$
|
(18
|
)
|
|
|
$
|
(42
|
)
|
|
$
|
(14
|
)
|
|
$
|
(28
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Life deferred acquisition costs, life policy reserves and other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
AOCI, January 1
|
|
$
|
(9
|
)
|
|
$
|
(3
|
)
|
|
$
|
(6
|
)
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
|
$
|
(12
|
)
|
|
$
|
(3
|
)
|
|
$
|
(9
|
)
|
OCI before realized gains recognized in net income
|
|
8
|
|
|
5
|
|
|
3
|
|
|
|
(8
|
)
|
|
(3
|
)
|
|
(5
|
)
|
|
|
14
|
|
|
5
|
|
|
9
|
|
|||||||||
Realized gains recognized in net income
|
|
(9
|
)
|
|
(4
|
)
|
|
(5
|
)
|
|
|
(2
|
)
|
|
(1
|
)
|
|
(1
|
)
|
|
|
(1
|
)
|
|
(1
|
)
|
|
—
|
|
|||||||||
OCI
|
|
(1
|
)
|
|
1
|
|
|
(2
|
)
|
|
|
(10
|
)
|
|
(4
|
)
|
|
(6
|
)
|
|
|
13
|
|
|
4
|
|
|
9
|
|
|||||||||
AOCI, December 31
|
|
$
|
(10
|
)
|
|
$
|
(2
|
)
|
|
$
|
(8
|
)
|
|
|
$
|
(9
|
)
|
|
$
|
(3
|
)
|
|
$
|
(6
|
)
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Summary of AOCI:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
AOCI, January 1
|
|
$
|
2,590
|
|
|
$
|
897
|
|
|
$
|
1,693
|
|
|
|
$
|
2,053
|
|
|
$
|
709
|
|
|
$
|
1,344
|
|
|
|
$
|
2,671
|
|
|
$
|
927
|
|
|
$
|
1,744
|
|
Investments OCI
|
|
915
|
|
|
317
|
|
|
598
|
|
|
|
531
|
|
|
186
|
|
|
345
|
|
|
|
(625
|
)
|
|
(220
|
)
|
|
(405
|
)
|
|||||||||
Pension obligations OCI
|
|
14
|
|
|
7
|
|
|
7
|
|
|
|
16
|
|
|
6
|
|
|
10
|
|
|
|
(6
|
)
|
|
(2
|
)
|
|
(4
|
)
|
|||||||||
Life deferred acquisition costs, life policy reserves and other OCI
|
|
(1
|
)
|
|
1
|
|
|
(2
|
)
|
|
|
(10
|
)
|
|
(4
|
)
|
|
(6
|
)
|
|
|
13
|
|
|
4
|
|
|
9
|
|
|||||||||
Total OCI
|
|
928
|
|
|
325
|
|
|
603
|
|
|
|
537
|
|
|
188
|
|
|
349
|
|
|
|
(618
|
)
|
|
(218
|
)
|
|
(400
|
)
|
|||||||||
Adjustment to reclassify certain tax effects from AOCI
|
|
—
|
|
|
(492
|
)
|
|
492
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||||
AOCI, December 31
|
|
$
|
3,518
|
|
|
$
|
730
|
|
|
$
|
2,788
|
|
|
|
$
|
2,590
|
|
|
$
|
897
|
|
|
$
|
1,693
|
|
|
|
$
|
2,053
|
|
|
$
|
709
|
|
|
$
|
1,344
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
Years ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Direct written premiums
|
|
$
|
4,854
|
|
|
$
|
4,646
|
|
|
$
|
4,461
|
|
Assumed written premiums
|
|
125
|
|
|
103
|
|
|
77
|
|
|||
Ceded written premiums
|
|
(139
|
)
|
|
(169
|
)
|
|
(177
|
)
|
|||
Net written premiums
|
|
$
|
4,840
|
|
|
$
|
4,580
|
|
|
$
|
4,361
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
Years ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Direct earned premiums
|
|
$
|
4,752
|
|
|
$
|
4,567
|
|
|
$
|
4,396
|
|
Assumed earned premiums
|
|
132
|
|
|
77
|
|
|
29
|
|
|||
Ceded earned premiums
|
|
(162
|
)
|
|
(162
|
)
|
|
(154
|
)
|
|||
Earned premiums
|
|
$
|
4,722
|
|
|
$
|
4,482
|
|
|
$
|
4,271
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
Years ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Direct incurred loss and loss expenses
|
|
$
|
2,961
|
|
|
$
|
2,874
|
|
|
$
|
2,596
|
|
Assumed incurred loss and loss expenses
|
|
113
|
|
|
43
|
|
|
12
|
|
|||
Ceded incurred loss and loss expenses
|
|
64
|
|
|
(56
|
)
|
|
(36
|
)
|
|||
Incurred loss and loss expenses
|
|
$
|
3,138
|
|
|
$
|
2,861
|
|
|
$
|
2,572
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
Years ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Direct earned premiums
|
|
$
|
300
|
|
|
$
|
290
|
|
|
$
|
271
|
|
Ceded earned premiums
|
|
(68
|
)
|
|
(62
|
)
|
|
(62
|
)
|
|||
Earned premiums
|
|
$
|
232
|
|
|
$
|
228
|
|
|
$
|
209
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
Years ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Direct contract holders' benefits incurred
|
|
$
|
319
|
|
|
$
|
303
|
|
|
$
|
292
|
|
Ceded contract holders' benefits incurred
|
|
(67
|
)
|
|
(57
|
)
|
|
(56
|
)
|
|||
Contract holders' benefits incurred
|
|
$
|
252
|
|
|
$
|
246
|
|
|
$
|
236
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
At December 31,
|
||||||
|
|
2017
|
|
2016
|
||||
Deferred tax assets:
|
|
|
|
|
|
|
||
Loss and loss expense reserves
|
|
$
|
123
|
|
|
$
|
199
|
|
Unearned premiums
|
|
100
|
|
|
158
|
|
||
Investments
|
|
—
|
|
|
5
|
|
||
Other
|
|
27
|
|
|
52
|
|
||
Total gross deferred tax assets
|
|
250
|
|
|
414
|
|
||
Deferred tax liabilities:
|
|
|
|
|
|
|
||
Unrealized investment gains and other, net
|
|
740
|
|
|
907
|
|
||
Deferred acquisition costs
|
|
123
|
|
|
195
|
|
||
Life policy reserves
|
|
111
|
|
|
162
|
|
||
Investments
|
|
10
|
|
|
—
|
|
||
Other
|
|
11
|
|
|
15
|
|
||
Total gross deferred tax liabilities
|
|
995
|
|
|
1,279
|
|
||
Net deferred income tax liability
|
|
$
|
745
|
|
|
$
|
865
|
|
|
|
|
|
|
(Dollars in millions)
|
|
Years ended December 31,
|
|||||||||||||||||||
|
|
2017
|
|
2016
|
|
2015
|
|||||||||||||||
Tax at statutory rate:
|
|
$
|
256
|
|
|
35.0
|
%
|
|
$
|
284
|
|
|
35.0
|
%
|
|
$
|
308
|
|
|
35.0
|
%
|
Increase (decrease) resulting from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Tax-exempt income from municipal bonds
|
|
(36
|
)
|
|
(4.9
|
)
|
|
(34
|
)
|
|
(4.2
|
)
|
|
(33
|
)
|
|
(3.7
|
)
|
|||
Dividend received exclusion
|
|
(34
|
)
|
|
(4.7
|
)
|
|
(33
|
)
|
|
(4.1
|
)
|
|
(32
|
)
|
|
(3.6
|
)
|
|||
Deferred tax benefit due to tax rate change
|
|
(495
|
)
|
|
(67.8
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Other
|
|
(6
|
)
|
|
(0.8
|
)
|
|
4
|
|
|
0.5
|
|
|
4
|
|
|
0.3
|
|
|||
Provision for income taxes
|
|
$
|
(315
|
)
|
|
(43.2
|
)%
|
|
$
|
221
|
|
|
27.2
|
%
|
|
$
|
247
|
|
|
28.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions, except per share data)
|
|
Years ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
|||||||
Numerator:
|
|
|
|
|
|
|
|
|
|
|||
Net income—basic and diluted
|
|
$
|
1,045
|
|
|
$
|
591
|
|
|
$
|
634
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|||
Basic weighted-average common shares outstanding
|
|
164.2
|
|
|
164.5
|
|
|
164.0
|
|
|||
Effect of share-based awards:
|
|
|
|
|
|
|
|
|
|
|||
Stock options
|
|
1.1
|
|
|
1.1
|
|
|
1.0
|
|
|||
Nonvested shares
|
|
0.7
|
|
|
0.9
|
|
|
0.6
|
|
|||
Diluted weighted-average shares
|
|
166.0
|
|
|
166.5
|
|
|
165.6
|
|
|||
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|||
Basic
|
|
$
|
6.36
|
|
|
$
|
3.59
|
|
|
$
|
3.87
|
|
Diluted
|
|
6.29
|
|
|
3.55
|
|
|
3.83
|
|
|||
Number of anti-dilutive share-based awards
|
|
0.7
|
|
|
0.3
|
|
|
0.4
|
|
|||
|
|
|
|
|
|
|
|
|
Qualified Pension Plan
|
|
SERP
|
||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||
Discount rate
|
|
3.73
|
%
|
|
4.30
|
%
|
|
3.61
|
%
|
|
4.10
|
%
|
Rate of compensation increase
|
|
2.75-3.25
|
|
|
2.75-3.25
|
|
|
2.75-3.25
|
|
|
2.75-3.25
|
|
|
|
|
|
|
|
|
|
|
|
|
Qualified Pension Plan
|
|
SERP
|
||||||||||||||
|
|
2017
|
|
2016
|
|
2015
|
|
2017
|
|
2016
|
|
2015
|
||||||
Discount rate
|
|
4.30
|
%
|
|
4.55
|
%
|
|
4.25
|
%
|
|
4.10
|
%
|
|
4.30
|
%
|
|
4.05
|
%
|
Expected return on plan assets
|
|
7.25
|
|
|
7.25
|
|
|
7.25
|
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
Rate of compensation increase
|
|
2.75-3.25
|
|
|
2.75-3.25
|
|
|
2.75-3.25
|
|
|
2.75-3.25
|
|
|
2.75-3.25
|
|
|
2.75-3.25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
At December 31,
|
||||||
|
|
2017
|
|
2016
|
||||
Change in projected benefit obligation:
|
|
|
|
|
|
|
||
Benefit obligation, January 1
|
|
$
|
340
|
|
|
$
|
323
|
|
Service cost
|
|
11
|
|
|
11
|
|
||
Interest cost
|
|
14
|
|
|
14
|
|
||
Actuarial loss
|
|
20
|
|
|
13
|
|
||
Benefits paid
|
|
(34
|
)
|
|
(21
|
)
|
||
Projected benefit obligation, December 31
|
|
$
|
351
|
|
|
$
|
340
|
|
|
|
|
|
|
||||
Change in plan assets:
|
|
|
|
|
|
|
||
Fair value of plan assets, January 1
|
|
$
|
315
|
|
|
$
|
278
|
|
Actual return on plan assets
|
|
52
|
|
|
45
|
|
||
Employer contribution
|
|
12
|
|
|
13
|
|
||
Benefits paid
|
|
(34
|
)
|
|
(21
|
)
|
||
Fair value of plan assets, December 31
|
|
$
|
345
|
|
|
$
|
315
|
|
|
|
|
|
|
||||
Funded status, December 31
|
|
$
|
(6
|
)
|
|
$
|
(25
|
)
|
|
|
|
|
|
||||
Accumulated benefit obligation
|
|
$
|
322
|
|
|
$
|
309
|
|
|
|
|
|
|
(Dollars in millions)
|
|
At December 31,
|
||||||
|
|
2017
|
|
2016
|
||||
Pension amounts recognized in the consolidated balance sheets:
|
|
|
|
|
||||
Other liabilities
|
|
$
|
(6
|
)
|
|
$
|
(25
|
)
|
Total
|
|
$
|
(6
|
)
|
|
$
|
(25
|
)
|
|
|
|
|
|
||||
Pension amounts recognized in accumulated other comprehensive income:
|
|
|
|
|
|
|
||
Net actuarial loss
|
|
$
|
12
|
|
|
$
|
26
|
|
Prior service cost
|
|
—
|
|
|
—
|
|
||
Total
|
|
$
|
12
|
|
|
$
|
26
|
|
|
|
|
|
|
(Dollars in millions)
|
|
Years ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Net periodic benefit cost:
|
|
|
|
|
|
|
||||||
Service cost
|
|
$
|
11
|
|
|
$
|
11
|
|
|
$
|
12
|
|
Interest cost
|
|
14
|
|
|
14
|
|
|
14
|
|
|||
Expected return on plan assets
|
|
(21
|
)
|
|
(19
|
)
|
|
(18
|
)
|
|||
Amortization of actuarial loss and prior service cost
|
|
2
|
|
|
3
|
|
|
6
|
|
|||
Other
|
|
1
|
|
|
—
|
|
|
1
|
|
|||
Net periodic benefit cost
|
|
$
|
7
|
|
|
$
|
9
|
|
|
$
|
15
|
|
|
|
|
|
|
|
|
||||||
Other changes in plan assets and benefit obligations recognized in other
comprehensive income:
|
|
|
|
|
|
|
||||||
Current year actuarial (gain) loss
|
|
$
|
(11
|
)
|
|
$
|
(13
|
)
|
|
$
|
13
|
|
Amortization of actuarial loss
|
|
(3
|
)
|
|
(2
|
)
|
|
(6
|
)
|
|||
Amortization of prior service cost
|
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
|||
Total recognized in other comprehensive (income) loss
|
|
$
|
(14
|
)
|
|
$
|
(16
|
)
|
|
$
|
6
|
|
Total recognized in net periodic benefit cost and other comprehensive
(income) loss
|
|
$
|
(7
|
)
|
|
$
|
(7
|
)
|
|
$
|
21
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
Quoted prices in
active markets for identical assets (Level 1) |
|
Significant other
observable inputs (Level 2) |
|
Significant
unobservable inputs
(Level 3)
|
|
Total
|
||||||||
At December 31, 2017
|
|
|
|
|
||||||||||||
Fixed maturities, available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
States, municipalities and political subdivisions
|
|
$
|
—
|
|
|
$
|
31
|
|
|
$
|
—
|
|
|
$
|
31
|
|
Corporate
|
|
—
|
|
|
34
|
|
|
—
|
|
|
34
|
|
||||
Total fixed maturities, available for sale
|
|
—
|
|
|
65
|
|
|
—
|
|
|
65
|
|
||||
Common equities, available for sale
|
|
262
|
|
|
—
|
|
|
—
|
|
|
262
|
|
||||
Total
|
|
$
|
262
|
|
|
$
|
65
|
|
|
$
|
—
|
|
|
$
|
327
|
|
|
|
|
|
|
|
|
|
|
||||||||
At December 31, 2016
|
|
|
|
|
|
|
|
|
||||||||
Fixed maturities, available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
States, municipalities and political subdivisions
|
|
$
|
—
|
|
|
$
|
31
|
|
|
$
|
—
|
|
|
$
|
31
|
|
Corporate
|
|
—
|
|
|
20
|
|
|
—
|
|
|
20
|
|
||||
Total fixed maturities, available for sale
|
|
—
|
|
|
51
|
|
|
—
|
|
|
51
|
|
||||
Common equities, available for sale
|
|
253
|
|
|
—
|
|
|
—
|
|
|
253
|
|
||||
Total
|
|
$
|
253
|
|
|
$
|
51
|
|
|
$
|
—
|
|
|
$
|
304
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
Years ended December 31,
|
||||||||||||||||||||||
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
2023 - 2027
|
||||||||||||
Expected future benefit payments
|
|
$
|
26
|
|
|
$
|
24
|
|
|
$
|
25
|
|
|
$
|
29
|
|
|
$
|
26
|
|
|
$
|
146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
Net income (loss)
|
|
Capital and surplus
|
||||||||||||||||
|
|
Years ended December 31,
|
|
At December 31,
|
||||||||||||||||
|
|
2017
|
|
2016
|
|
2015
|
|
2017
|
|
2016
|
||||||||||
The Cincinnati Insurance Company
|
|
$
|
401
|
|
|
$
|
434
|
|
|
$
|
534
|
|
|
$
|
5,094
|
|
|
$
|
4,686
|
|
The Cincinnati Casualty Company
|
|
21
|
|
|
11
|
|
|
12
|
|
|
392
|
|
|
360
|
|
|||||
The Cincinnati Indemnity Company
|
|
4
|
|
|
4
|
|
|
3
|
|
|
100
|
|
|
93
|
|
|||||
The Cincinnati Specialty Underwriters Insurance Company
|
|
58
|
|
|
57
|
|
|
49
|
|
|
436
|
|
|
372
|
|
|||||
The Cincinnati Life Insurance Company
|
|
12
|
|
|
2
|
|
|
(11
|
)
|
|
195
|
|
|
200
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
•
|
Weighted-average expected term is based on historical experience of similar awards with consideration for current exercise trends.
|
•
|
Expected volatility is based on our stock price over a historical period that approximates the expected term.
|
•
|
Dividend yield is determined by dividing the annualized per share dividend by the stock price on the date of grant.
|
•
|
Risk-free rates are the implied yield currently available on zero-coupon U.S. Treasury issues with a remaining term approximating the expected term.
|
|
|
2017
|
|
2016
|
|
2015
|
Weighted-average expected term
|
|
8 years
|
|
8 years
|
|
8-9 years
|
Expected volatility
|
|
16.95%
|
|
24.88-25.75%
|
|
25.04-26.15%
|
Dividend yield
|
|
2.83%
|
|
2.58-3.12%
|
|
3.52%
|
Risk-free rates
|
|
2.33%
|
|
1.44-1.60%
|
|
1.94-2.01%
|
Weighted-average fair value of options granted during the period
|
|
$10.79
|
|
$13.21
|
|
$11.15
|
|
|
|
|
|
|
|
(Dollars in millions, except exercise price. Shares in thousands)
|
|
Shares
|
|
Weighted-
average
exercise price
|
|
Aggregate
intrinsic value |
|
Weighted-average
remaining contractual life |
|||||
Outstanding option shares at January 1, 2017
|
|
3,012
|
|
|
$
|
42.12
|
|
|
|
|
|
|
|
Granted
|
|
706
|
|
|
70.70
|
|
|
|
|
|
|
||
Exercised
|
|
(527
|
)
|
|
38.33
|
|
|
|
|
|
|
||
Forfeited or expired
|
|
(125
|
)
|
|
47.07
|
|
|
|
|
|
|
||
Outstanding option shares at December 31, 2017
|
|
3,066
|
|
|
49.14
|
|
|
$
|
79
|
|
|
5.61 years
|
|
|
|
|
|
|
|
|
|
|
|||||
Options exercisable at end of period
|
|
2,072
|
|
|
$
|
40.69
|
|
|
$
|
71
|
|
|
4.13 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
•
|
Correlation coefficients are based upon the stock price data used to calculate the historical volatilities. The correlation coefficients are used to model the way the price of each entity's stock tends to move in relation to each other.
|
•
|
Expected volatility is based on each company's historical volatility using daily stock price observations with the period commensurate with the performance measurement period.
|
•
|
Dividend yield has been modeled assuming dividends are reinvested in additional shares of the issuing entity on the ex-dividend date during the performance period.
|
•
|
Risk-free rates are equal to the yield, as of the measurement date, of the zero-coupon U.S. Treasury bill that is commensurate with the performance measurement period.
|
|
|
2017
|
|
2016
|
|
2015
|
Expected term
|
|
2.89 years
|
|
2.44-2.88 years
|
|
2.88 years
|
Expected volatility
|
|
15.75-28.35%
|
|
15.42-33.64%
|
|
13.78-34.69%
|
Dividend yield
|
|
2.83%
|
|
2.58-3.12%
|
|
3.52%
|
Risk-free rates
|
|
1.44%
|
|
0.77-0.87%
|
|
0.99%
|
|
|
|
|
|
|
|
(Shares in thousands)
|
|
Service-based
shares |
|
Weighted-
average grant date fair value |
|
Performance-based
shares |
|
Weighted-
average grant date fair value |
||||||
Nonvested at January 1, 2017
|
|
888
|
|
|
$
|
48.59
|
|
|
236
|
|
|
$
|
49.64
|
|
Granted
|
|
292
|
|
|
65.16
|
|
|
57
|
|
|
43.26
|
|
||
Vested
|
|
(311
|
)
|
|
43.05
|
|
|
(87
|
)
|
|
36.73
|
|
||
Forfeited or canceled
|
|
(26
|
)
|
|
55.59
|
|
|
—
|
|
|
—
|
|
||
Nonvested at December 31, 2017
|
|
843
|
|
|
56.16
|
|
|
206
|
|
|
53.35
|
|
||
|
|
|
|
|
|
|
|
|
•
|
Commercial lines insurance
|
•
|
Personal lines insurance
|
•
|
Excess and surplus lines insurance
|
•
|
Life insurance
|
•
|
Investments
|
•
|
All
four
insurance segments record revenues from insurance premiums earned.
|
•
|
Fee revenues for the commercial, personal and excess and surplus insurance segments primarily represent installment fees. Fee revenues for the life insurance segment represent separate account investment management fees.
|
•
|
Our investments’ revenues consist of pretax net investment income and realized investment gains and losses.
|
•
|
Other revenues are primarily finance income and earned premiums of Cincinnati Re.
|
•
|
Income before income taxes for the insurance segments is defined as underwriting profit or loss.
|
◦
|
For commercial lines, personal lines and excess and surplus lines insurance segments, we calculate underwriting profit or loss as premiums earned and fee revenue minus loss and loss expenses and underwriting expenses incurred.
|
◦
|
For the life insurance segment, we calculate underwriting profit or loss as premiums earned and fee revenue, minus contract holders’ benefits and expenses incurred, plus investment interest credited to contract holders.
|
•
|
Income before income taxes for the investments segment is net investment income plus realized investment gains and losses for investments of the entire company, minus investment interest credited to contract holders of the life insurance segment.
|
•
|
Loss before income taxes for the Other category is primarily due to interest expense from debt of the parent company, operating expenses of our headquarters and premiums earned minus loss and loss expenses and underwriting expenses of Cincinnati Re.
|
(Dollars in millions)
|
|
Years ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|||
Commercial lines insurance
|
|
|
|
|
|
|
|
|
|
|||
Commercial casualty
|
|
$
|
1,072
|
|
|
$
|
1,050
|
|
|
$
|
1,010
|
|
Commercial property
|
|
903
|
|
|
867
|
|
|
815
|
|
|||
Commercial auto
|
|
634
|
|
|
594
|
|
|
561
|
|
|||
Workers' compensation
|
|
335
|
|
|
354
|
|
|
367
|
|
|||
Other commercial
|
|
221
|
|
|
224
|
|
|
243
|
|
|||
Commercial lines insurance premiums
|
|
3,165
|
|
|
3,089
|
|
|
2,996
|
|
|||
Fee revenues
|
|
5
|
|
|
5
|
|
|
4
|
|
|||
Total commercial lines insurance
|
|
3,170
|
|
|
3,094
|
|
|
3,000
|
|
|||
|
|
|
|
|
|
|
||||||
Personal lines insurance
|
|
|
|
|
|
|
|
|
|
|||
Personal auto
|
|
582
|
|
|
543
|
|
|
506
|
|
|||
Homeowner
|
|
518
|
|
|
486
|
|
|
463
|
|
|||
Other personal
|
|
141
|
|
|
132
|
|
|
128
|
|
|||
Personal lines insurance premiums
|
|
1,241
|
|
|
1,161
|
|
|
1,097
|
|
|||
Fee revenues
|
|
5
|
|
|
4
|
|
|
3
|
|
|||
Total personal lines insurance
|
|
1,246
|
|
|
1,165
|
|
|
1,100
|
|
|||
|
|
|
|
|
|
|
||||||
Excess and surplus lines insurance
|
|
209
|
|
|
183
|
|
|
168
|
|
|||
Fee revenues
|
|
1
|
|
|
1
|
|
|
1
|
|
|||
Total excess and surplus lines insurance
|
|
210
|
|
|
184
|
|
|
169
|
|
|||
|
|
|
|
|
|
|
||||||
Life insurance premiums
|
|
232
|
|
|
228
|
|
|
209
|
|
|||
Fee revenues
|
|
5
|
|
|
5
|
|
|
5
|
|
|||
Total life insurance
|
|
237
|
|
|
233
|
|
|
214
|
|
|||
|
|
|
|
|
|
|
||||||
Investments
|
|
|
|
|
|
|
|
|
|
|||
Investment income, net of expenses
|
|
609
|
|
|
595
|
|
|
572
|
|
|||
Realized investment gains, net
|
|
148
|
|
|
124
|
|
|
70
|
|
|||
Total investment revenue
|
|
757
|
|
|
719
|
|
|
642
|
|
|||
|
|
|
|
|
|
|
||||||
Other
|
|
|
|
|
|
|
||||||
Cincinnati Re insurance premiums
|
|
107
|
|
|
49
|
|
|
10
|
|
|||
Other
|
|
5
|
|
|
5
|
|
|
7
|
|
|||
Total other revenue
|
|
112
|
|
|
54
|
|
|
17
|
|
|||
Total revenues
|
|
$
|
5,732
|
|
|
$
|
5,449
|
|
|
$
|
5,142
|
|
|
|
|
|
|
|
|
||||||
Income (loss) before income taxes:
|
|
|
|
|
|
|
|
|
|
|||
Insurance underwriting results
|
|
|
|
|
|
|
|
|
|
|||
Commercial lines insurance
|
|
$
|
119
|
|
|
$
|
184
|
|
|
$
|
345
|
|
Personal lines insurance
|
|
(32
|
)
|
|
(12
|
)
|
|
(12
|
)
|
|||
Excess and surplus lines insurance
|
|
61
|
|
|
62
|
|
|
51
|
|
|||
Life insurance
|
|
(1
|
)
|
|
1
|
|
|
(2
|
)
|
|||
Investments
|
|
664
|
|
|
629
|
|
|
556
|
|
|||
Other
|
|
(81
|
)
|
|
(52
|
)
|
|
(57
|
)
|
|||
Total income before income taxes
|
|
$
|
730
|
|
|
$
|
812
|
|
|
$
|
881
|
|
|
|
|
|
|
|
|
||||||
|
|
December 31,
|
|
December 31,
|
|
|
||||||
Identifiable assets:
|
|
2017
|
|
2016
|
|
|
||||||
Property casualty insurance
|
|
$
|
2,863
|
|
|
$
|
2,967
|
|
|
|
|
|
Life insurance
|
|
1,409
|
|
|
1,366
|
|
|
|
||||
Investments
|
|
17,112
|
|
|
15,569
|
|
|
|
|
|||
Other
|
|
459
|
|
|
484
|
|
|
|
|
|||
Total
|
|
$
|
21,843
|
|
|
$
|
20,386
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions, except per share data)
|
|
Quarter
|
|
|
||||||||||||||||
|
|
1st
|
|
2nd
|
|
3rd
|
|
4th
|
|
Full year
|
||||||||||
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Revenues
|
|
$
|
1,523
|
|
|
$
|
1,386
|
|
|
$
|
1,412
|
|
|
$
|
1,411
|
|
|
$
|
5,732
|
|
Income before income taxes
|
|
276
|
|
|
128
|
|
|
129
|
|
|
197
|
|
|
730
|
|
|||||
Net income
|
|
201
|
|
|
100
|
|
|
102
|
|
|
642
|
|
|
1,045
|
|
|||||
Net income per common share—basic
|
|
1.22
|
|
|
0.61
|
|
|
0.62
|
|
|
3.92
|
|
|
6.36
|
|
|||||
Net income per common share—diluted
|
|
1.21
|
|
|
0.60
|
|
|
0.61
|
|
|
3.88
|
|
|
6.29
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Revenues
|
|
$
|
1,364
|
|
|
$
|
1,371
|
|
|
$
|
1,402
|
|
|
$
|
1,312
|
|
|
$
|
5,449
|
|
Income before income taxes
|
|
265
|
|
|
166
|
|
|
253
|
|
|
128
|
|
|
812
|
|
|||||
Net income
|
|
188
|
|
|
123
|
|
|
180
|
|
|
100
|
|
|
591
|
|
|||||
Net income per common share—basic
|
|
1.14
|
|
|
0.75
|
|
|
1.09
|
|
|
0.61
|
|
|
3.59
|
|
|||||
Net income per common share—diluted
|
|
1.13
|
|
|
0.74
|
|
|
1.08
|
|
|
0.60
|
|
|
3.55
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
•
|
information required to be disclosed in the company’s reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and
|
•
|
such information is accumulated and communicated to the company’s management, including its chief executive officer and chief financial officer, as appropriate, to allow for timely decisions regarding required disclosures.
|
Name and Age as of
|
|
Primary Title(s) and Business Responsibilities
|
|
Executive
|
February 23, 2018
|
|
Since February 2013
|
|
Officer Since
|
Roger A. Brown, FSA, MAAA, CLU (46)
|
|
Senior vice president and chief operating officer of The Cincinnati Life Insurance Company. Responsible for life insurance underwriting and operations.
|
|
2016
|
Teresa C. Cracas, Esq. (52)
|
|
Chief risk officer and senior vice president of The Cincinnati Insurance Company. Responsible for strategic planning and risk management, including oversight of modeling for financial analysis, property casualty reserving, pricing and insurance regulatory filings, as well as reinsurance assumed operations
.
|
|
2011
|
Donald J. Doyle, Jr., CPCU, AIM (51)
|
|
Senior vice president of The Cincinnati Insurance Company. Responsible for excess and surplus lines underwriting and operations.
|
|
2008
|
Sean M. Givler, CIC, CRM (42)
|
|
Senior vice president of The Cincinnati Insurance Company. Responsible for property casualty insurance sales and marketing operations since 2016, including management of field underwriters and independent agency relationships. Field sales manager for Alabama, Montana, Pennsylvania, Tennessee and Texas from 2012 to 2016.
|
|
2017
|
Theresa A. Hoffer (56)
|
|
Senior vice president and treasurer of The Cincinnati Insurance Company since 2016. Responsible for corporate accounting and SEC reporting operations. Vice president and treasurer in corporate accounting until 2016.
|
|
2017
|
Martin F. Hollenbeck, CFA, CPCU (58)
|
|
President and chief operating officer of CFC Investment Company, a commercial lease and finance subsidiary. Chief investment officer and senior vice president, assistant secretary and assistant treasurer of Cincinnati Financial Corporation. Chief investment officer and senior vice president of The Cincinnati Insurance Company. Responsible for all investment operations.
|
|
2008
|
John S. Kellington (56)
|
|
Chief information officer and senior vice president of The Cincinnati Insurance Company. Responsible for enterprise strategic technology and oversight of all technology activities.
|
|
2010
|
Lisa A. Love, Esq. (58)
|
|
Senior vice president, general counsel and corporate secretary of Cincinnati Financial Corporation and The Cincinnati Insurance Company. Responsible for corporate legal, governance and compliance activities, including oversight of regulatory and compliance, shareholder services, corporate communications, government relations, litigation and contract administration.
|
|
2011
|
Name and Age as of
|
|
Primary Title(s) and Business Responsibilities
|
|
Executive
|
February 23, 2018
|
|
Since February 2013
|
|
Officer Since
|
Martin J. Mullen, CPCU (62)
|
|
Chief claims officer and senior vice president of The Cincinnati Insurance Company. Responsible for oversight of all headquarters and field claims operations, including special investigations and claims administration.
|
|
2008
|
Jacob F. Scherer, Jr. (65)
|
|
Chief insurance officer and executive vice president of The Cincinnati Insurance Company. Responsible for executive oversight of business and personal property casualty insurance sales, marketing, underwriting, related field services, relationships with independent agents and ceded reinsurance programs.
|
|
1995
|
Michael J. Sewell, CPA (54)
|
|
Chief financial officer, principal accounting officer and senior vice president of Cincinnati Financial Corporation and The Cincinnati Insurance Company, and treasurer of Cincinnati Financial Corporation. Responsible for oversight of all accounting, finance, financial reporting, purchasing, investor relations, administrative services and facilities maintenance and security.
|
|
2011
|
Stephen M. Spray (51)
|
|
Senior vice president of The Cincinnati Insurance Company. Responsible for commercial lines underwriting and operations, including oversight of target markets commercial products, management liability and surety insurance, machinery and equipment insurance, loss control and premium audit. Until 2016, responsible for sales and marketing, including management of field underwriters and independent agency relationships.
|
|
2012
|
William H. Van Den Heuvel (51)
|
|
Senior vice president of The Cincinnati Insurance Company. Responsible for all personal lines operations, including underwriting, product management and risk management. Chief operating officer and executive vice president for U.S. and Canada personal lines insurance at AIG until 2014.
|
|
2014
|
Cincinnati Financial Corporation and Subsidiaries
|
||||||||||||
Summary of Investments - Other Than Investments in Related Parties
|
||||||||||||
(Dollars in millions)
|
|
At December 31, 2017
|
||||||||||
Type of investment
|
|
Cost or
amortized cost
|
|
Fair
value
|
|
Balance sheet
|
||||||
Fixed maturities:
|
|
|
|
|
|
|
|
|
|
|||
States, municipalities and political subdivisions:
|
|
|
|
|
|
|
|
|
|
|||
The Cincinnati Insurance Company
|
|
$
|
3,310
|
|
|
$
|
3,421
|
|
|
$
|
3,421
|
|
The Cincinnati Casualty Company
|
|
184
|
|
|
190
|
|
|
190
|
|
|||
The Cincinnati Indemnity Company
|
|
44
|
|
|
46
|
|
|
46
|
|
|||
The Cincinnati Life Insurance Company
|
|
306
|
|
|
320
|
|
|
320
|
|
|||
The Cincinnati Specialty Underwriters Insurance Company
|
|
469
|
|
|
485
|
|
|
485
|
|
|||
CSU Producer Resources Inc.
|
|
1
|
|
|
1
|
|
|
1
|
|
|||
Cincinnati Financial Corporation
|
|
2
|
|
|
2
|
|
|
2
|
|
|||
Total
|
|
4,316
|
|
|
4,465
|
|
|
4,465
|
|
|||
United States government:
|
|
|
|
|
|
|
|
|
|
|||
The Cincinnati Insurance Company
|
|
28
|
|
|
28
|
|
|
28
|
|
|||
The Cincinnati Casualty Company
|
|
2
|
|
|
2
|
|
|
2
|
|
|||
The Cincinnati Indemnity Company
|
|
1
|
|
|
1
|
|
|
1
|
|
|||
Total
|
|
31
|
|
|
31
|
|
|
31
|
|
|||
Government-sponsored enterprises:
|
|
|
|
|
|
|
|
|
|
|||
The Cincinnati Life Insurance Company
|
|
257
|
|
|
254
|
|
|
254
|
|
|||
Total
|
|
257
|
|
|
254
|
|
|
254
|
|
|||
Foreign government:
|
|
|
|
|
|
|
|
|
|
|||
The Cincinnati Insurance Company
|
|
10
|
|
|
10
|
|
|
10
|
|
|||
Total
|
|
10
|
|
|
10
|
|
|
10
|
|
|||
All other corporate bonds:
|
|
|
|
|
|
|
|
|
|
|||
The Cincinnati Insurance Company
|
|
2,644
|
|
|
2,747
|
|
|
2,747
|
|
|||
The Cincinnati Casualty Company
|
|
99
|
|
|
104
|
|
|
104
|
|
|||
The Cincinnati Indemnity Company
|
|
28
|
|
|
29
|
|
|
29
|
|
|||
The Cincinnati Specialty Underwriters Insurance Company
|
|
137
|
|
|
143
|
|
|
143
|
|
|||
The Cincinnati Life Insurance Company
|
|
2,758
|
|
|
2,880
|
|
|
2,880
|
|
|||
CSU Producer Resources Inc.
|
|
1
|
|
|
1
|
|
|
1
|
|
|||
Cincinnati Financial Corporation
|
|
33
|
|
|
35
|
|
|
35
|
|
|||
Total
|
|
5,700
|
|
|
5,939
|
|
|
5,939
|
|
|||
Total fixed maturities
|
|
$
|
10,314
|
|
|
$
|
10,699
|
|
|
$
|
10,699
|
|
|
|
|
|
|
|
|
Cincinnati Financial Corporation and Subsidiaries
|
||||||||||||
Summary of Investments - Other Than Investments in Related Parties
|
||||||||||||
(Dollars in millions)
|
|
At December 31, 2017
|
||||||||||
Type of investment
|
|
Cost or
amortized cost
|
|
Fair
value
|
|
Balance sheet
|
||||||
Equity securities:
|
|
|
|
|
|
|
|
|
|
|||
Common equities:
|
|
|
|
|
|
|
|
|
|
|||
The Cincinnati Insurance Company
|
|
$
|
1,615
|
|
|
$
|
3,479
|
|
|
$
|
3,479
|
|
The Cincinnati Casualty Company
|
|
56
|
|
|
118
|
|
|
118
|
|
|||
The Cincinnati Indemnity Company
|
|
13
|
|
|
25
|
|
|
25
|
|
|||
The Cincinnati Specialty Underwriters Insurance Company
|
|
61
|
|
|
120
|
|
|
120
|
|
|||
CSU Producer Resources Inc.
|
|
15
|
|
|
23
|
|
|
23
|
|
|||
Cincinnati Financial Corporation
|
|
1,158
|
|
|
2,274
|
|
|
2,274
|
|
|||
Total
|
|
2,918
|
|
|
6,039
|
|
|
6,039
|
|
|||
Nonredeemable preferred equities:
|
|
|
|
|
|
|
|
|
|
|||
The Cincinnati Insurance Company
|
|
170
|
|
|
200
|
|
|
200
|
|
|||
The Cincinnati Life Insurance Company
|
|
5
|
|
|
9
|
|
|
9
|
|
|||
Cincinnati Financial Corporation
|
|
1
|
|
|
1
|
|
|
1
|
|
|||
Total
|
|
176
|
|
|
210
|
|
|
210
|
|
|||
Total equity securities
|
|
$
|
3,094
|
|
|
$
|
6,249
|
|
|
$
|
6,249
|
|
Other invested assets:
|
|
|
|
|
|
|
|
|
|
|||
Policy loans:
|
|
|
|
|
|
|
|
|
|
|||
The Cincinnati Life Insurance Company
|
|
$
|
31
|
|
|
—
|
|
|
$
|
31
|
|
|
Private equity:
|
|
|
|
|
|
|
|
|
|
|||
Cincinnati Financial Corporation (1)
|
|
29
|
|
|
—
|
|
|
29
|
|
|||
The Cincinnati Life Insurance Company (1)
|
|
6
|
|
|
—
|
|
|
6
|
|
|||
Real estate:
|
|
|
|
|
|
|
||||||
The Cincinnati Life Insurance Company (1)
|
|
31
|
|
|
—
|
|
|
31
|
|
|||
Cincinnati Financial Corporation (1)
|
|
6
|
|
|
—
|
|
|
6
|
|
|||
Total other invested assets
|
|
$
|
103
|
|
|
—
|
|
|
$
|
103
|
|
|
Total investments
|
|
$
|
13,511
|
|
|
—
|
|
|
$
|
17,051
|
|
|
|
|
|
|
|
|
|
Cincinnati Financial Corporation (parent company only)
|
||||||||
Condensed Balance Sheets
|
||||||||
(Dollars in millions)
|
|
At December 31,
|
||||||
|
|
2017
|
|
2016
|
||||
Assets
|
|
|
|
|
|
|
||
Investments
|
|
|
|
|
|
|
||
Fixed maturities, at fair value (amortized cost: 2017—$35; 2016—$46)
|
|
$
|
37
|
|
|
$
|
52
|
|
Equity securities, at fair value (cost: 2017—$1,159; 2016—$1,084)
|
|
2,275
|
|
|
1,833
|
|
||
Other invested assets
|
|
35
|
|
|
29
|
|
||
Total investments
|
|
2,347
|
|
|
1,914
|
|
||
Cash and cash equivalents
|
|
199
|
|
|
248
|
|
||
Equity in net assets of subsidiaries
|
|
6,542
|
|
|
5,790
|
|
||
Investment income receivable
|
|
8
|
|
|
8
|
|
||
Land, building and equipment, net, for company use (accumulated depreciation:
2017—$115; 2016—$111) |
|
130
|
|
|
132
|
|
||
Income tax receivable
|
|
15
|
|
|
10
|
|
||
Other assets
|
|
52
|
|
|
35
|
|
||
Due from subsidiaries
|
|
107
|
|
|
106
|
|
||
Total assets
|
|
$
|
9,400
|
|
|
$
|
8,243
|
|
Liabilities
|
|
|
|
|
|
|
||
Dividends declared but unpaid
|
|
$
|
82
|
|
|
$
|
79
|
|
Deferred federal income tax
|
|
234
|
|
|
252
|
|
||
Long-term debt
|
|
787
|
|
|
787
|
|
||
Other liabilities
|
|
54
|
|
|
65
|
|
||
Total liabilities
|
|
1,157
|
|
|
1,183
|
|
||
Shareholders' Equity
|
|
|
|
|
|
|
||
Common stock
|
|
397
|
|
|
397
|
|
||
Paid-in capital
|
|
1,265
|
|
|
1,252
|
|
||
Retained earnings
|
|
5,180
|
|
|
5,037
|
|
||
Accumulated other comprehensive income
|
|
2,788
|
|
|
1,693
|
|
||
Treasury stock at cost
|
|
(1,387
|
)
|
|
(1,319
|
)
|
||
Total shareholders' equity
|
|
8,243
|
|
|
7,060
|
|
||
Total liabilities and shareholders' equity
|
|
$
|
9,400
|
|
|
$
|
8,243
|
|
|
|
|
|
|
Cincinnati Financial Corporation (parent company only)
|
||||||||||||
Condensed Statements of Income
|
||||||||||||
(Dollars in millions)
|
|
Years ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Revenues
|
|
|
|
|
|
|
|
|
|
|||
Investment income, net of expenses
|
|
$
|
62
|
|
|
$
|
56
|
|
|
$
|
53
|
|
Realized investment gains and (losses), net
|
|
28
|
|
|
27
|
|
|
(19
|
)
|
|||
Other revenue
|
|
15
|
|
|
15
|
|
|
15
|
|
|||
Total revenues
|
|
105
|
|
|
98
|
|
|
49
|
|
|||
Expenses
|
|
|
|
|
|
|
|
|
|
|||
Interest expense
|
|
52
|
|
|
52
|
|
|
52
|
|
|||
Other expenses
|
|
28
|
|
|
27
|
|
|
28
|
|
|||
Total expenses
|
|
80
|
|
|
79
|
|
|
80
|
|
|||
Income (Loss) Before Income Taxes and Earnings of Subsidiaries
|
|
25
|
|
|
19
|
|
|
(31
|
)
|
|||
Benefit for income taxes
|
|
(161
|
)
|
|
(6
|
)
|
|
(23
|
)
|
|||
Net Income (Loss) Before Earnings of Subsidiaries
|
|
186
|
|
|
25
|
|
|
(8
|
)
|
|||
Increase in equity of subsidiaries
|
|
859
|
|
|
566
|
|
|
642
|
|
|||
Net Income
|
|
$
|
1,045
|
|
|
$
|
591
|
|
|
$
|
634
|
|
|
|
|
|
|
|
|
Cincinnati Financial Corporation (parent company only)
|
||||||||||||
Condensed Statements of Comprehensive Income
|
||||||||||||
(Dollars in millions)
|
|
Years ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Net Income
|
|
$
|
1,045
|
|
|
$
|
591
|
|
|
$
|
634
|
|
Other Comprehensive Income, Before Tax
|
|
|
|
|
|
|
|
|
|
|||
Unrealized gains and (losses) on investments available for sale
|
|
391
|
|
|
221
|
|
|
(111
|
)
|
|||
Unrealized gains and (losses) on investments held by subsidiaries
|
|
672
|
|
|
434
|
|
|
(444
|
)
|
|||
Reclassification adjustment for (gains) and losses included in net income
|
|
(28
|
)
|
|
(27
|
)
|
|
19
|
|
|||
Reclassification adjustment for (gains) included in net income on subsidiaries
|
|
(120
|
)
|
|
(97
|
)
|
|
(89
|
)
|
|||
Unrealized (losses) and gains on other
|
|
(2
|
)
|
|
(6
|
)
|
|
—
|
|
|||
Unrealized gains and (losses) on other subsidiaries
|
|
1
|
|
|
(4
|
)
|
|
13
|
|
|||
Unrealized gains and (losses) on investments available for sale, investments held by subsidiaries and other
|
|
914
|
|
|
521
|
|
|
(612
|
)
|
|||
Amortization of pension actuarial gains (losses) and prior service cost
|
|
14
|
|
|
16
|
|
|
(6
|
)
|
|||
Other comprehensive income (loss) before tax
|
|
928
|
|
|
537
|
|
|
(618
|
)
|
|||
Income taxes on above of other comprehensive income (loss)
|
|
325
|
|
|
188
|
|
|
(218
|
)
|
|||
Other comprehensive income (loss), net of tax
|
|
603
|
|
|
349
|
|
|
(400
|
)
|
|||
Comprehensive Income
|
|
$
|
1,648
|
|
|
$
|
940
|
|
|
$
|
234
|
|
|
|
|
|
|
|
|
Cincinnati Financial Corporation (parent company only)
|
||||||||||||
Condensed Statements of Cash Flows
|
||||||||||||
(Dollars in millions)
|
|
Years ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Cash Flows From Operating Activities
|
|
|
|
|
|
|
|
|
|
|||
Net income
|
|
$
|
1,045
|
|
|
$
|
591
|
|
|
$
|
634
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|||
Depreciation and amortization
|
|
7
|
|
|
6
|
|
|
7
|
|
|||
Realized investment (gains) and losses, net
|
|
(28
|
)
|
|
(27
|
)
|
|
19
|
|
|||
Dividends from subsidiaries
|
|
465
|
|
|
475
|
|
|
447
|
|
|||
Changes in:
|
|
|
|
|
|
|
|
|
|
|||
Increase in equity of subsidiaries
|
|
(859
|
)
|
|
(566
|
)
|
|
(642
|
)
|
|||
Investment income receivable
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|||
Current federal income taxes
|
|
(5
|
)
|
|
(4
|
)
|
|
(7
|
)
|
|||
Deferred income tax
|
|
(150
|
)
|
|
8
|
|
|
(10
|
)
|
|||
Other assets
|
|
(20
|
)
|
|
(4
|
)
|
|
(3
|
)
|
|||
Other liabilities
|
|
15
|
|
|
(1
|
)
|
|
13
|
|
|||
Intercompany receivable for operations
|
|
13
|
|
|
20
|
|
|
16
|
|
|||
Net cash provided by operating activities
|
|
483
|
|
|
496
|
|
|
474
|
|
|||
|
|
|
|
|
|
|
||||||
Cash Flows From Investing Activities
|
|
|
|
|
|
|
|
|
|
|||
Call or maturity of fixed maturities
|
|
14
|
|
|
5
|
|
|
8
|
|
|||
Sale of equity securities
|
|
230
|
|
|
135
|
|
|
54
|
|
|||
Purchase of fixed maturities
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|||
Purchase of equity securities
|
|
(293
|
)
|
|
(175
|
)
|
|
(110
|
)
|
|||
Investment in buildings and equipment
|
|
(3
|
)
|
|
(2
|
)
|
|
—
|
|
|||
Change in other invested assets, net
|
|
—
|
|
|
6
|
|
|
1
|
|
|||
Net cash used in investing activities
|
|
(54
|
)
|
|
(31
|
)
|
|
(47
|
)
|
|||
|
|
|
|
|
|
|
||||||
Cash Flows From Financing Activities
|
|
|
|
|
|
|
|
|
|
|||
Payment of cash dividends to shareholders
|
|
(400
|
)
|
|
(306
|
)
|
|
(366
|
)
|
|||
Shares acquired - share repurchase authorization
|
|
(92
|
)
|
|
(39
|
)
|
|
(53
|
)
|
|||
Proceeds from stock options exercised
|
|
13
|
|
|
21
|
|
|
24
|
|
|||
Other
|
|
1
|
|
|
1
|
|
|
2
|
|
|||
Net cash used in financing activities
|
|
(478
|
)
|
|
(323
|
)
|
|
(393
|
)
|
|||
Net change in cash and cash equivalents
|
|
(49
|
)
|
|
142
|
|
|
34
|
|
|||
Cash and cash equivalents at beginning of year
|
|
248
|
|
|
106
|
|
|
72
|
|
|||
Cash and cash equivalents at end of year
|
|
$
|
199
|
|
|
$
|
248
|
|
|
$
|
106
|
|
|
|
|
|
|
|
|
Cincinnati Financial Corporation and Subsidiaries
|
||||||||||||
Supplementary Insurance Information
|
||||||||||||
(Dollars in millions)
|
|
Years ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Deferred policy acquisition costs:
|
|
|
|
|
|
|
|
|
|
|||
Commercial lines insurance
|
|
$
|
284
|
|
|
$
|
271
|
|
|
$
|
264
|
|
Personal lines insurance
|
|
121
|
|
|
110
|
|
|
103
|
|
|||
Excess and surplus lines insurance
|
|
17
|
|
|
16
|
|
|
15
|
|
|||
Cincinnati Re
|
|
16
|
|
|
11
|
|
|
6
|
|
|||
Total property casualty insurance
|
|
438
|
|
|
408
|
|
|
388
|
|
|||
Life insurance
|
|
232
|
|
|
229
|
|
|
228
|
|
|||
Total
|
|
$
|
670
|
|
|
$
|
637
|
|
|
$
|
616
|
|
|
|
|
|
|
|
|
||||||
Gross future policy benefits, losses, claims and expense losses:
|
|
|
|
|
|
|
|
|
|
|||
Commercial lines insurance
|
|
$
|
4,236
|
|
|
$
|
4,179
|
|
|
$
|
3,925
|
|
Personal lines insurance
|
|
587
|
|
|
569
|
|
|
498
|
|
|||
Excess and surplus lines insurance
|
|
264
|
|
|
241
|
|
|
227
|
|
|||
Cincinnati Re
|
|
132
|
|
|
46
|
|
|
10
|
|
|||
Total property casualty insurance
|
|
5,219
|
|
|
5,035
|
|
|
4,660
|
|
|||
Life insurance
|
|
2,753
|
|
|
2,693
|
|
|
2,605
|
|
|||
Total (1)
|
|
$
|
7,972
|
|
|
$
|
7,728
|
|
|
$
|
7,265
|
|
|
|
|
|
|
|
|
||||||
Gross unearned premiums:
|
|
|
|
|
|
|
|
|
|
|||
Commercial lines insurance
|
|
$
|
1,548
|
|
|
$
|
1,510
|
|
|
$
|
1,472
|
|
Personal lines insurance
|
|
683
|
|
|
629
|
|
|
593
|
|
|||
Excess and surplus lines insurance
|
|
105
|
|
|
93
|
|
|
87
|
|
|||
Cincinnati Re
|
|
67
|
|
|
74
|
|
|
48
|
|
|||
Total property casualty insurance
|
|
2,403
|
|
|
2,306
|
|
|
2,200
|
|
|||
Life insurance
|
|
1
|
|
|
1
|
|
|
1
|
|
|||
Total (1)
|
|
$
|
2,404
|
|
|
$
|
2,307
|
|
|
$
|
2,201
|
|
|
|
|
|
|
|
|
||||||
Other policy claims and benefits payable:
|
|
|
|
|
|
|
|
|
|
|||
Commercial lines insurance
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Personal lines insurance
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Excess and surplus lines insurance
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Cincinnati Re
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Total property casualty insurance
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Life insurance
|
|
30
|
|
|
28
|
|
|
36
|
|
|||
Total (1)
|
|
$
|
30
|
|
|
$
|
28
|
|
|
$
|
36
|
|
|
|
|
|
|
|
|
||||||
Earned premiums:
|
|
|
|
|
|
|
|
|
|
|||
Commercial lines insurance
|
|
$
|
3,165
|
|
|
$
|
3,089
|
|
|
$
|
2,996
|
|
Personal lines insurance
|
|
1,241
|
|
|
1,161
|
|
|
1,097
|
|
|||
Excess and surplus lines insurance
|
|
209
|
|
|
183
|
|
|
168
|
|
|||
Cincinnati Re
|
|
107
|
|
|
49
|
|
|
10
|
|
|||
Total property casualty insurance
|
|
4,722
|
|
|
4,482
|
|
|
4,271
|
|
|||
Life insurance
|
|
232
|
|
|
228
|
|
|
209
|
|
|||
Total
|
|
$
|
4,954
|
|
|
$
|
4,710
|
|
|
$
|
4,480
|
|
|
|
|
|
|
|
|
Cincinnati Financial Corporation and Subsidiaries
|
||||||||||||
Supplementary Insurance Information
|
||||||||||||
(Dollars in millions)
|
|
Years ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Investment income, net of expenses:
|
|
|
|
|
|
|
||||||
Commercial lines insurance
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Personal lines insurance
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Excess and surplus lines insurance
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Cincinnati Re
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Total property casualty insurance (2)
|
|
392
|
|
|
384
|
|
|
368
|
|
|||
Life insurance
|
|
155
|
|
|
155
|
|
|
150
|
|
|||
Total
|
|
$
|
547
|
|
|
$
|
539
|
|
|
$
|
518
|
|
|
|
|
|
|
|
|
||||||
Benefits, claims losses and settlement expenses:
|
|
|
|
|
|
|
|
|
|
|||
Commercial lines insurance
|
|
$
|
2,042
|
|
|
$
|
1,928
|
|
|
$
|
1,708
|
|
Personal lines insurance
|
|
918
|
|
|
840
|
|
|
789
|
|
|||
Excess and surplus lines insurance
|
|
86
|
|
|
68
|
|
|
70
|
|
|||
Cincinnati Re
|
|
92
|
|
|
25
|
|
|
5
|
|
|||
Total property casualty insurance
|
|
3,138
|
|
|
2,861
|
|
|
2,572
|
|
|||
Life insurance
|
|
252
|
|
|
246
|
|
|
236
|
|
|||
Total
|
|
$
|
3,390
|
|
|
$
|
3,107
|
|
|
$
|
2,808
|
|
|
|
|
|
|
|
|
||||||
Amortization of deferred policy acquisition costs:
|
|
|
|
|
|
|
|
|
|
|||
Commercial lines insurance
|
|
$
|
590
|
|
|
$
|
570
|
|
|
$
|
552
|
|
Personal lines insurance
|
|
225
|
|
|
209
|
|
|
210
|
|
|||
Excess and surplus lines insurance
|
|
35
|
|
|
31
|
|
|
28
|
|
|||
Cincinnati Re
|
|
17
|
|
|
10
|
|
|
2
|
|
|||
Total property casualty insurance
|
|
867
|
|
|
820
|
|
|
792
|
|
|||
Life insurance
|
|
46
|
|
|
43
|
|
|
37
|
|
|||
Total (3)
|
|
$
|
913
|
|
|
$
|
863
|
|
|
$
|
829
|
|
|
|
|
|
|
|
|
||||||
Underwriting, acquisition and insurance expenses:
|
|
|
|
|
|
|
|
|
|
|||
Commercial lines insurance
|
|
$
|
419
|
|
|
$
|
412
|
|
|
$
|
395
|
|
Personal lines insurance
|
|
135
|
|
|
128
|
|
|
113
|
|
|||
Excess and surplus lines insurance
|
|
28
|
|
|
23
|
|
|
20
|
|
|||
Cincinnati Re
|
|
18
|
|
|
6
|
|
|
1
|
|
|||
Total property casualty insurance
|
|
600
|
|
|
569
|
|
|
529
|
|
|||
Life insurance
|
|
33
|
|
|
33
|
|
|
29
|
|
|||
Total (3)
|
|
$
|
633
|
|
|
$
|
602
|
|
|
$
|
558
|
|
|
|
|
|
|
|
|
||||||
Net written premiums:
|
|
|
|
|
|
|
|
|
|
|||
Commercial lines insurance
|
|
$
|
3,202
|
|
|
$
|
3,122
|
|
|
$
|
3,025
|
|
Personal lines insurance
|
|
1,294
|
|
|
1,198
|
|
|
1,128
|
|
|||
Excess and surplus lines insurance
|
|
219
|
|
|
189
|
|
|
175
|
|
|||
Cincinnati Re
|
|
125
|
|
|
71
|
|
|
33
|
|
|||
Total property casualty insurance
|
|
4,840
|
|
|
4,580
|
|
|
4,361
|
|
|||
Accident health insurance
|
|
3
|
|
|
2
|
|
|
2
|
|
|||
Total
|
|
$
|
4,843
|
|
|
$
|
4,582
|
|
|
$
|
4,363
|
|
|
|
|
|
|
|
|
Cincinnati Financial Corporation and Subsidiaries
|
||||||||||||
Reinsurance
|
||||||||||||
(Dollars in millions)
|
|
Years ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Gross amounts:
|
|
|
|
|
|
|
|
|
|
|||
Life insurance in force
|
|
$
|
99,888
|
|
|
$
|
95,533
|
|
|
$
|
91,451
|
|
Earned premiums
|
|
|
|
|
|
|
|
|
|
|||
Commercial lines insurance
|
|
$
|
3,258
|
|
|
$
|
3,180
|
|
|
$
|
3,088
|
|
Personal lines insurance
|
|
1,275
|
|
|
1,195
|
|
|
1,131
|
|
|||
Excess and surplus lines insurance
|
|
219
|
|
|
192
|
|
|
177
|
|
|||
Cincinnati Re
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Total property casualty insurance
|
|
4,752
|
|
|
4,567
|
|
|
4,396
|
|
|||
Life insurance
|
|
300
|
|
|
290
|
|
|
271
|
|
|||
Total
|
|
$
|
5,052
|
|
|
$
|
4,857
|
|
|
$
|
4,667
|
|
|
|
|
|
|
|
|
||||||
Ceded amounts to other companies:
|
|
|
|
|
|
|
|
|
|
|||
Life insurance in force
|
|
$
|
38,711
|
|
|
$
|
38,724
|
|
|
$
|
38,716
|
|
Earned premiums
|
|
|
|
|
|
|
|
|
|
|||
Commercial lines insurance
|
|
$
|
99
|
|
|
$
|
98
|
|
|
$
|
102
|
|
Personal lines insurance
|
|
35
|
|
|
35
|
|
|
35
|
|
|||
Excess and surplus lines insurance
|
|
10
|
|
|
9
|
|
|
9
|
|
|||
Cincinnati Re
|
|
18
|
|
|
20
|
|
|
8
|
|
|||
Total property casualty insurance
|
|
162
|
|
|
162
|
|
|
154
|
|
|||
Life insurance
|
|
68
|
|
|
62
|
|
|
62
|
|
|||
Total
|
|
$
|
230
|
|
|
$
|
224
|
|
|
$
|
216
|
|
|
|
|
|
|
|
|
||||||
Assumed amounts from other companies:
|
|
|
|
|
|
|
|
|
|
|||
Life insurance in force
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Earned premiums
|
|
|
|
|
|
|
|
|
|
|||
Commercial lines insurance
|
|
$
|
6
|
|
|
$
|
7
|
|
|
$
|
10
|
|
Personal lines insurance
|
|
1
|
|
|
1
|
|
|
1
|
|
|||
Excess and surplus lines insurance
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Cincinnati Re
|
|
125
|
|
|
69
|
|
|
18
|
|
|||
Total property casualty insurance
|
|
132
|
|
|
77
|
|
|
29
|
|
|||
Life insurance
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Total
|
|
$
|
132
|
|
|
$
|
77
|
|
|
$
|
29
|
|
|
|
|
|
|
|
|
||||||
Net amounts:
|
|
|
|
|
|
|
|
|
|
|||
Life insurance in force
|
|
$
|
61,177
|
|
|
$
|
56,808
|
|
|
$
|
52,735
|
|
Earned premiums
|
|
|
|
|
|
|
|
|
|
|||
Commercial lines insurance
|
|
$
|
3,165
|
|
|
$
|
3,089
|
|
|
$
|
2,996
|
|
Personal lines insurance
|
|
1,241
|
|
|
1,161
|
|
|
1,097
|
|
|||
Excess and surplus lines insurance
|
|
209
|
|
|
183
|
|
|
168
|
|
|||
Cincinnati Re
|
|
107
|
|
|
49
|
|
|
10
|
|
|||
Total property casualty insurance
|
|
4,722
|
|
|
4,482
|
|
|
4,271
|
|
|||
Life insurance
|
|
232
|
|
|
228
|
|
|
209
|
|
|||
Total
|
|
$
|
4,954
|
|
|
$
|
4,710
|
|
|
$
|
4,480
|
|
|
|
|
|
|
|
|
||||||
Percentage of amounts assumed to net:
|
|
|
|
|
|
|
|
|
|
|||
Life insurance in force
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|||
Earned premiums
|
|
|
|
|
|
|
|
|
|
|||
Commercial lines insurance
|
|
0.2
|
%
|
|
0.2
|
%
|
|
0.3
|
%
|
|||
Personal lines insurance
|
|
0.1
|
|
|
0.1
|
|
|
0.1
|
|
|||
Excess and surplus lines insurance
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Cincinnati Re
|
|
116.1
|
|
|
140.8
|
|
|
188.0
|
|
|||
Total property casualty insurance
|
|
2.8
|
|
|
1.7
|
|
|
0.7
|
|
|||
Life insurance
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Total
|
|
2.7
|
|
|
1.6
|
|
|
0.7
|
|
|||
|
|
|
|
|
|
|
Cincinnati Financial Corporation and Subsidiaries
|
||||||||||||
Valuation and Qualifying Accounts
|
||||||||||||
(Dollars in millions)
|
|
At December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Allowance for doubtful receivables:
|
|
|
|
|
|
|
|
|
|
|||
Beginning balance, January 1
|
|
$
|
5
|
|
|
$
|
4
|
|
|
$
|
3
|
|
Additions charged to costs and expenses
|
|
6
|
|
|
5
|
|
|
3
|
|
|||
Deductions
|
|
(5
|
)
|
|
(4
|
)
|
|
(2
|
)
|
|||
Ending balance, December 31
|
|
$
|
6
|
|
|
$
|
5
|
|
|
$
|
4
|
|
|
|
|
|
|
|
|
Cincinnati Financial Corporation and Subsidiaries
|
||||||||||||
Supplementary Information Concerning Property Casualty Insurance Operations
|
||||||||||||
(Dollars in millions)
|
|
Years ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Deferred policy acquisition costs:
|
|
|
|
|
|
|
|
|
|
|||
Commercial lines insurance
|
|
$
|
284
|
|
|
$
|
271
|
|
|
$
|
264
|
|
Personal lines insurance
|
|
121
|
|
|
110
|
|
|
103
|
|
|||
Excess and surplus lines insurance
|
|
17
|
|
|
16
|
|
|
15
|
|
|||
Cincinnati Re
|
|
16
|
|
|
11
|
|
|
6
|
|
|||
Total
|
|
$
|
438
|
|
|
$
|
408
|
|
|
$
|
388
|
|
|
|
|
|
|
|
|
||||||
Reserves for unpaid claims and claim adjustment expenses:
|
|
|
|
|
|
|
|
|
|
|||
Commercial lines insurance
|
|
$
|
4,236
|
|
|
$
|
4,179
|
|
|
$
|
3,925
|
|
Personal lines insurance
|
|
587
|
|
|
569
|
|
|
498
|
|
|||
Excess and surplus lines insurance
|
|
264
|
|
|
241
|
|
|
227
|
|
|||
Cincinnati Re
|
|
132
|
|
|
46
|
|
|
10
|
|
|||
Total
|
|
$
|
5,219
|
|
|
$
|
5,035
|
|
|
$
|
4,660
|
|
|
|
|
|
|
|
|
||||||
Reserve discount deducted
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
||||||
Gross unearned premiums:
|
|
|
|
|
|
|
|
|
|
|||
Commercial lines insurance
|
|
$
|
1,548
|
|
|
$
|
1,510
|
|
|
$
|
1,472
|
|
Personal lines insurance
|
|
683
|
|
|
629
|
|
|
593
|
|
|||
Excess and surplus lines insurance
|
|
105
|
|
|
93
|
|
|
87
|
|
|||
Cincinnati Re
|
|
67
|
|
|
74
|
|
|
48
|
|
|||
Total
|
|
$
|
2,403
|
|
|
$
|
2,306
|
|
|
$
|
2,200
|
|
|
|
|
|
|
|
|
||||||
Earned premiums:
|
|
|
|
|
|
|
|
|
|
|||
Commercial lines insurance
|
|
$
|
3,165
|
|
|
$
|
3,089
|
|
|
$
|
2,996
|
|
Personal lines insurance
|
|
1,241
|
|
|
1,161
|
|
|
1,097
|
|
|||
Excess and surplus lines insurance
|
|
209
|
|
|
183
|
|
|
168
|
|
|||
Cincinnati Re
|
|
107
|
|
|
49
|
|
|
10
|
|
|||
Total
|
|
$
|
4,722
|
|
|
$
|
4,482
|
|
|
$
|
4,271
|
|
|
|
|
|
|
|
|
||||||
Investment income, net of expenses:
|
|
|
|
|
|
|
|
|
|
|||
Commercial lines insurance
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Personal lines insurance
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Excess and surplus lines insurance
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Cincinnati Re
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Total (1)
|
|
$
|
392
|
|
|
$
|
384
|
|
|
$
|
368
|
|
|
|
|
|
|
|
|
Cincinnati Financial Corporation and Subsidiaries
|
||||||||||||
Supplementary Information Concerning Property Casualty Insurance Operations
|
||||||||||||
(Dollars in millions)
|
|
Years ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Loss and loss expenses incurred related to current accident year:
|
|
|
|
|
|
|
|
|
|
|||
Commercial lines insurance
|
|
$
|
2,115
|
|
|
$
|
2,057
|
|
|
$
|
1,862
|
|
Personal lines insurance
|
|
932
|
|
|
844
|
|
|
784
|
|
|||
Excess and surplus lines insurance
|
|
115
|
|
|
102
|
|
|
105
|
|
|||
Cincinnati Re
|
|
95
|
|
|
26
|
|
|
5
|
|
|||
Total
|
|
$
|
3,257
|
|
|
$
|
3,029
|
|
|
$
|
2,756
|
|
|
|
|
|
|
|
|
||||||
Loss and loss expenses incurred related to prior accident years:
|
|
|
|
|
|
|
|
|
|
|||
Commercial lines insurance
|
|
$
|
(73
|
)
|
|
$
|
(129
|
)
|
|
$
|
(154
|
)
|
Personal lines insurance
|
|
(14
|
)
|
|
(4
|
)
|
|
5
|
|
|||
Excess and surplus lines insurance
|
|
(29
|
)
|
|
(34
|
)
|
|
(35
|
)
|
|||
Cincinnati Re
|
|
(3
|
)
|
|
(1
|
)
|
|
—
|
|
|||
Total
|
|
$
|
(119
|
)
|
|
$
|
(168
|
)
|
|
$
|
(184
|
)
|
|
|
|
|
|
|
|
||||||
Amortization of deferred policy acquisition costs:
|
|
|
|
|
|
|
|
|
|
|||
Commercial lines insurance
|
|
$
|
590
|
|
|
$
|
570
|
|
|
$
|
552
|
|
Personal lines insurance
|
|
225
|
|
|
209
|
|
|
210
|
|
|||
Excess and surplus lines insurance
|
|
35
|
|
|
31
|
|
|
28
|
|
|||
Cincinnati Re
|
|
17
|
|
|
10
|
|
|
2
|
|
|||
Total
|
|
$
|
867
|
|
|
$
|
820
|
|
|
$
|
792
|
|
|
|
|
|
|
|
|
||||||
Paid loss and loss expenses:
|
|
|
|
|
|
|
|
|
|
|||
Commercial lines insurance
|
|
$
|
1,866
|
|
|
$
|
1,675
|
|
|
$
|
1,575
|
|
Personal lines insurance
|
|
898
|
|
|
771
|
|
|
731
|
|
|||
Excess and surplus lines insurance
|
|
61
|
|
|
55
|
|
|
43
|
|
|||
Cincinnati Re
|
|
18
|
|
|
2
|
|
|
—
|
|
|||
Total
|
|
$
|
2,843
|
|
|
$
|
2,503
|
|
|
$
|
2,349
|
|
|
|
|
|
|
|
|
||||||
Net written premiums:
|
|
|
|
|
|
|
|
|
|
|||
Commercial lines insurance
|
|
$
|
3,202
|
|
|
$
|
3,122
|
|
|
$
|
3,025
|
|
Personal lines insurance
|
|
1,294
|
|
|
1,198
|
|
|
1,128
|
|
|||
Excess and surplus lines insurance
|
|
219
|
|
|
189
|
|
|
175
|
|
|||
Cincinnati Re
|
|
125
|
|
|
71
|
|
|
33
|
|
|||
Total
|
|
$
|
4,840
|
|
|
$
|
4,580
|
|
|
$
|
4,361
|
|
|
|
|
|
|
|
|
Exhibit No.
|
Exhibit Description
|
3.1
|
|
3.2
|
|
4.1
|
|
4.2
|
|
4.3
|
|
4.4
|
|
4.5
|
|
4.6
|
|
4.7
|
|
10.1
|
|
10.2
|
|
10.3
|
|
10.4
|
|
10.5
|
|
10.6
|
|
10.7
|
|
10.8
|
|
10.9
|
|
10.10
|
|
10.11
|
|
10.12
|
|
10.13
|
Exhibit No.
|
Exhibit Description
|
10.14
|
|
10.15
|
|
10.16
|
|
10.17
|
|
10.18
|
|
10.19
|
|
10.20
|
|
10.21
|
|
10.22
|
|
10.23
|
|
10.24
|
|
10.25
|
|
10.26
|
|
10.27
|
|
10.28
|
|
10.29
|
|
10.30
|
|
10.31
|
|
10.32
|
Exhibit No.
|
Exhibit Description
|
10.33
|
|
10.34
|
|
10.35
|
|
10.36
|
|
11
|
|
14
|
|
21
|
|
23
|
|
31A
|
|
31B
|
|
32
|
|
101.INS
|
XBRL Instance Document
|
101.SCH
|
XBRL Taxonomy Extension Schema Document
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
Signature
|
Title
|
Date
|
/S/ Kenneth W. Stecher
|
Chairman of the Board
|
February 23, 2018
|
Kenneth W. Stecher
|
||
/S/ Steven J. Johnston
|
President, Chief Executive Officer and Director
|
February 23, 2018
|
Steven J. Johnston
|
||
/S/ Michael J. Sewell
|
Chief Financial Officer, Senior Vice President and Treasurer
|
February 23, 2018
|
Michael J. Sewell
|
||
/S/ William F. Bahl
|
Director
|
February 23, 2018
|
William F. Bahl
|
||
/S/ Gregory T. Bier
|
Director
|
February 23, 2018
|
Gregory T. Bier
|
||
/S/ Dirk J. Debbink
|
Director
|
February 23, 2018
|
Dirk J. Debbink
|
||
/S/ Linda W. Clement-Holmes
|
Director
|
February 23, 2018
|
Linda W. Clement-Holmes
|
||
/S/ Kenneth C. Lichtendahl
|
Director
|
February 23, 2018
|
Kenneth C. Lichtendahl
|
||
/S/ W. Rodney McMullen
|
Director
|
February 23, 2018
|
W. Rodney McMullen
|
||
/S/ David P. Osborn
|
Director
|
February 23, 2018
|
David P. Osborn
|
||
/S/ Gretchen W. Price
|
Director
|
February 23, 2018
|
Gretchen W. Price
|
||
/S/ Thomas R. Schiff
|
Director
|
February 23, 2018
|
Thomas R. Schiff
|
||
/S/ Douglas S. Skidmore
|
Director
|
February 23, 2018
|
Douglas S. Skidmore
|
||
/S/ John F. Steele, Jr.
|
Director
|
February 23, 2018
|
John F. Steele, Jr.
|
||
/S/ Larry R. Webb
|
Director
|
February 23, 2018
|
Larry R. Webb
|
ARTICLE I
|
DEFINITIONS 2
|
ARTICLE II
|
DEFERRALS, MATCHING ALLOCATIONS AND SUPPLEMENTAL
|
ARTICLE III
|
INVESTMENTS 7
|
ARTICLE IV
|
PLAN BENEFITS 8
|
ARTICLE V
|
CLAIMS 12
|
ARTICLE VI
|
PLAN ADMINISTRATION 15
|
ARTICLE VII
|
MISCELLANEOUS PROVISIONS 16
|
Years of Service
|
Vested Percentage
|
Less than 3 Years of Service
|
0%
|
3 or more Years of Service
|
100%
|
1.
|
I have reviewed this Annual Report on Form 10-K of Cincinnati Financial Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
1.
|
I have reviewed this Annual Report on Form 10-K of Cincinnati Financial Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
1.
|
the report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and
|
2.
|
the information contained in the report fairly presents, in all material respects, the financial condition and results of operations of Cincinnati Financial Corporation.
|