<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant. (x)
Filed by a Party other than the Registrant. ( )
Check the appropriate box:
( ) Preliminary Proxy Statement
(x) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to S240.14a-11(c) or S240.14a-12
CINCINNATI FINANCIAL CORPORATION
- ---------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
ROBERT J. DRIEHAUS
- ---------------------------------------------------------------------------
[Name of Person(s) Filing Proxy Statement]
Payment of Filing Fee (Check the appropriate box):
(x) $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j)(2).
( ) $500 per each party to the controversy pursuant to
Exchange Act Rule 14-a-6(i)(3).
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
______________________________________________________________________
2) Aggregate number of securities to which transaction applies:
______________________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
______________________________________________________________________
4) Proposed maximum aggregate value of transaction:
______________________________________________________________________
(1)Set forth the amount on which the filing fee is calculated and state
how it was determined.
( ) Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
______________________________________________________________________
2) Form, Schedule or Registration Statement No.:
______________________________________________________________________
3) Filing Party:
______________________________________________________________________
4) Date Filed:
______________________________________________________________________
<PAGE> 2
CINCINNATI FINANCIAL CORPORATION
P.O. BOX 145496
CINCINNATI, OHIO 45250-5496
(513) 870-2000
February 26, 1994
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of Cincinnati Financial Corporation:
You are hereby notified that the Annual Meeting of Shareholders of
Cincinnati Financial Corporation will be held at 9:30 a.m. on
Saturday, April 2, 1994, at the Cincinnati Art Museum, located in
Eden Park, Cincinnati, Ohio, for the purpose of:
1. Electing five directors for terms of three years; and
2. Transacting such other business as may properly come before the
meeting or any adjournment thereof.
Shareholders of record at the close of business on February 8,
1994, will be entitled to vote at the meeting and at any
adjournment thereof.
Whether or not you plan to attend the meeting, you can ensure that
your shares will be voted as you want by completing, signing and
mailing the enclosed form of proxy. Your interest and participation
in the affairs of the Corporation are appreciated.
/s/ Vincent H. Beckman
-------------------------
Vincent H. Beckman
Secretary
<PAGE> 3
CINCINNATI FINANCIAL CORPORATION
P.O. BOX 145496, CINCINNATI, OHIO 45250-5496
PROXY STATEMENT
Annual Meeting of Shareholders
to be held April 2, 1994
February 26, 1994
The enclosed proxy (which will be found in the pocket of the mailing envelope)
is solicited by the Board of Directors of Cincinnati Financial Corporation for
use at the Annual Meeting of Shareholders to be held at 9:30 a.m., Saturday,
April 2, 1994, at the Cincinnati Art Museum, located in Eden Park, Cincinnati,
Ohio. The proxy and this statement are being distributed to shareholders on
February 26, 1994. Any shareholder giving a proxy may revoke it at any time
before it is voted by a later proxy received by the Corporation or by giving
notice of revocation to the Corporation in writing or in open meeting or by
voting the shares personally.
The cost of soliciting proxies will be borne by the Corporation. The
Corporation has requested banks, brokerage houses, other custodians, nominees
and fiduciaries to forward copies of the proxy material to beneficial owners of
shares or to request authority for the execution of proxies; and the
Corporation has agreed to reimburse such banks, brokerage houses and other
custodians, nominees and fiduciaries for their reasonable out-of-pocket
expenses incurred in connection therewith. In addition to solicitations by
mail, regular employees of the Corporation may, without extra remuneration,
solicit proxies personally or by telephone, telegram or cable.
The Board of Directors has fixed the close of business on February 8, 1994 as
the record date for the determination of voting rights. Only holders of record
of common stock on the record date will be entitled to vote at the meeting. A
majority of such holders, present in person or represented by proxy,
constitutes a quorum.
As stated in the notice of meeting, an election will be held to fill the five
vacancies which occur on the Board of Directors of the Corporation. The five
candidates receiving the greatest number of votes will be elected as directors.
Under Ohio law, an abstention or broker non-vote in the election of directors
will not be the equivalent of a negative vote, although the failure by a broker
to return a proxy card will result in the shares covered by the proxy not being
counted towards a quorum.
Votes cast by proxy will be tabulated prior to the meeting by the holders of
the proxies. Inspectors of election, duly appointed by the presiding officer of
the meeting in accordance with the provisions of Ohio law, will definitively
count and tabulate the votes and determine and announce the results at the
meeting.
The Annual Report for the fiscal year ended December 31, 1993, is enclosed.
OUTSTANDING SECURITIES AND PRINCIPAL SHAREHOLDERS
Only the holders of common stock of the Corporation of record at the close of
business on February 8, 1994, are entitled to vote at the meeting. Each share
of common stock entitles the holder thereof to one vote. As of February 1,
1994, there were 50,316,375 shares outstanding. The Proxy Committee reserves
the right not to vote any proxies which are altered in a manner not intended by
the instructions contained in the proxy.
The following table lists the persons who, to the best of the Corporation's
knowledge, are "beneficial owners" (as defined in Regulations of the SEC) of
more than 5% of the outstanding shares of the Corporation's common stock at
February 1, 1994.
<TABLE>
<CAPTION>
Name and Address Of Shares Bene- Percent of
Beneficial Owner ficially Owned Common Stock
_____________________ ______________ ____________
<S> <C> <C>
The Capital Group, Inc.
333 South Hope Street
Los Angeles, California 90071 3,352,790 6.66
Robert C. Schiff
Central Trust Building
Cincinnati, Ohio 45202 2,839,099 5.63
</TABLE>
NOMINEES FOR ELECTION OF DIRECTORS
The Board of Directors of the Corporation is divided into three classes and
consists of 17 persons. Each year, the directors in one class are elected to
serve terms of three years. The term of office for five of the directors
expires as of the time of the Annual Meeting. In order to fill the resulting
vacancies, it is intended that votes will be cast to elect as directors the
following nominees: Robert J. Driehaus, Kenneth C. Lichtendahl, Jackson H.
Randolph, John J. Schiff, Jr. and William H. Zimmer (to serve for terms of
three years or until their respective successors shall be elected). Each of
these nominees is presently serving as a director of the Corporation. The Board
of Directors has no reason to believe that any of the above-mentioned nominees
will
(1)
<PAGE> 4
refuse or be unable to accept the nomination. In the event, however,
that any of the above nominees should refuse or for any reason be unable to
accept the nomination, it is intended that the persons acting under the proxies
will vote for the election of such person or persons as the Board of Directors
may recommend.
INFORMATION REGARDING NOMINEES, DIRECTORS AND EXECUTIVE OFFICERS
The following table provides information with respect to each nominee for
election to the office of director, each of the current directors whose term
does not expire at this time and each of the executive officers of the
Corporation.
Nominees For Director At This Time
- ------------------------------------
<TABLE>
<CAPTION>
Office, Principal Shares Percent
Occupation During Past Beneficially Of
Five Years & Other Owned As Of Common Term Director
Name and Age Directorships February 1, 1994 Stock Ending Since
____________ _________________________ _________________ ________ ______ _______
<S> <C> <C> <C> <C> <C>
Robert J. Driehaus (65) Financial Vice Pres. & Treas.,
Cincinnati Financial Corp.; Sec'y-
Treas. of Cincinnati Ins. Co., a
subsidiary of the Corporation 338,933 (9)(10) 0.67 1997 1982
Kenneth C. Lichtendahl (45) Pres., Chief Exec. Officer & Director,
Hudepohl-Schoenling Brewing Co., Inc. 3,000 0.01 1997 1988
Jackson H. Randolph (63) Chairman, Pres., Chief Exec. Officer &
Director, The Cinti. Gas & Elec. Co.;
Director, The Union Light, Heat &
Power Co. and PNC Financial Corp. 10,000 0.02 1997 1986
John J. Schiff, Jr. (50) Chmn. of the Board, Cincinnati
Financial Corp., Cincinnati Insurance
Co., and John J. & Thomas R. Schiff
& Co., Inc. (ins. agency); Director, Fifth
Third Bancorp, Standard Register
Co., The Cinti. Gas & Elec. Co. (1) 1,862,536 (2)(3)(4)(5)(10) 3.69 1997 1968
William H. Zimmer (63) Vice Chmn. of the Board, Cincinnati
Financial Corp.; Director, ALLTEL
Corp. (1) 271,967 (10) 0.54 1997 1968
Directors Who Are Not Nominees At This Time
- -------------------------------------------
Vincent H. Beckman (78) Sec'y, Cincinnati Financial Corp.;
Partner, Beckman, Weil, Shepardson &
Faller, Attorneys (1) 195,786 (10) 0.39 1995 1968
Michael Brown (58) Gen'l Mgr. & Treas., Cincinnati
Bengals, Inc. (professional football
team) 37,947 0.08 1995 1980
Richard M. Burridge (64) Pres., The Burridge Group, Inc.
(investment advisors); Director,
Lincoln National Income Fund, Advisory
and Convertible Securities Funds,
St. Joseph Light & Power Co. and
Chairman, Ft. Dearborn Income Fund 8,448 0.02 1996 1987
David R. Huhn (56) Pres., McAlpin Co., A subsidiary of
Mercantile Stores Co., Inc.; Chrmn. &
Chief Exec. Officer, Mercantile Stores
Co., Inc. 1988-1991; Exec. V.P.,
Mercantile Stores Co., Inc. (until
1989) 5,435 0.01 1996 1990
</TABLE>
(2)
<PAGE> 5
<TABLE>
<CAPTION>
Office, Principal Shares Percent
Occupation During Past Beneficially Of
Five Years & Other Owned As Of Common Term Director
Name and Age Directorships February 1, 1994 Stock Ending Since
____________ _________________________ _________________ ________ ______ ________
<S> <C> <C> <C> <C> <C>
Robert B. Morgan (59) Pres. & Chief Exec. Officer,
Cincinnati Financial Corp.; Pres. &
Chief Exec. Officer, Cincinnati Ins.
Co., a subsidiary of the Corporation;
Director, Fifth Third Bancorp (1) 420,069 (10) 0.83 1996 1978
John Sawyer (68) Pres. & Owner, J. Sawyer Co.
(agricultural co.) 43,058 0.09 1996 1982
John J. Schiff (77) Chmn. of the Exec. Committee,
Cincinnati Financial Corp.; Chmn. of
the Exec. Committee, Cincinnati Ins.
Co., a subsidiary of the Corporation;
Chief Exec. Officer, Cincinnati
Financial Corp. (until 1991) (1) 1,752,889 (10) 3.48 1995 1968
Robert C. Schiff (70) Chmn. & Chief Exec. Officer, Schiff,
Kreidler-Shell, Inc. (ins. agency) 2,839,099 (6)(7)(8) 5.63 1995 1968
Thomas R. Schiff (46) Pres., John J. & Thomas R. Schiff &
Co., Inc. (ins. agency) 1,401,123 (2)(3)(4)(5) 2.78 1996 1975
Harry M. Turner (90) Partner, Wallace & Turner Agency
(ins. agency)(1) 1,673,322 3.32 1995 1968
Larry R. Webb (38) Director, Treasurer & Agent, Webb
Ins. Agency, Inc. 30,509 0.06 1996 1979
Alan R. Weiler (60) Pres., Chief Exec. Officer, Archer-
Meek-Weiler Agency, Inc. (ins. agency);
Director, Glimcher Realty Trust 8,241 0.02 1995 1992
All Nominees, Directors and Executive Officers As A Group
(18 Persons), Including Shares Listed Above 10,477,886 20.77
- --------------------
<FN>
(1) Also a member of the Executive Committee of the Corporation.
(2) Includes 374,718 shares owned of record by a trust, the trustees of
which are John J. Schiff, Jr., Thomas R. Schiff and Suzanne S. Reid,
who share voting and investment power equally.
(3) Includes 122,329 shares owned of record by a trust, the beneficiaries
of which include John J. Schiff, Jr. and Thomas R. Schiff.
(4) Includes 31,659 shares owned of record by the John J. & Thomas R.
Schiff & Co., Inc. pension plan, the trustees of which are John J.
Schiff, Jr. and Thomas R. Schiff, who share voting and investment
power.
(5) Includes 27,661 shares owned by John J. & Thomas R. Schiff & Co., Inc.
of which John J. Schiff, Jr. and Thomas R. Schiff are principal
owners.
(6) Includes 31,263 shares owned of record by the Schiff, Kreidler-Shell,
Inc. pension plan, of which Robert C. Schiff is a trustee.
(7) Includes 69,033 shares owned of record by Schiff, Kreidler-Shell,
Inc., which is owned by Robert C. Schiff.
(8) Includes 142,910 shares owned of record by a trust, the trustees of
which are Robert C. Schiff and Adele R. Schiff who share voting and
investment power.
(9) Includes 8,264 shares owned of record by a trust, the trustees of
which are Robert J. Driehaus and Rita E. Driehaus who share voting and
investment power.
(10) Includes shares available within 60 days from exercise of stock
options or convertible debentures in the amount of 1,406 shares for
Mr. Beckman; 9,320 shares for Mr. Driehaus; 130,454 shares for Mr.
Morgan; 72,686 shares for Mr. J. Schiff; 70,765 shares for Mr. J.
Schiff, Jr.; 13,210 shares for Mr. T. Schiff; 2,032 shares for Mr.
Weiler; 19,416 shares for Mr. Zimmer; and 6,865 shares for other
executive officers.
</TABLE>
James G. Miller, age 56, Senior Vice President of the Corporation, has been
designated as an executive officer of the Corporation for successive terms of
one year by action of the Board of Directors since 1991.
Each of the executive officers and nominees and each of the directors whose
term does not expire has served as an officer or director continuously since
first elected to that position. John J. Schiff is the brother of Robert C.
Schiff and the father of John J. Schiff, Jr. and Thomas R. Schiff.
(3)
<PAGE> 6
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Corporation met five times and the Executive
Committee of the Board met four times during the previous fiscal year. In
addition, the Board of Directors has standing Audit, Compensation and
Nominating Committees.
The Nominating Committee is composed of John J. Schiff, Jr., Michael Brown,
Jackson H. Randolph and William H. Zimmer, and the members of that committee
met one time during the last year. The Nominating Committee recommends
qualified candidates for election as officers and directors of the Corporation,
including the slate of directors which the Board proposes for election by the
shareholders at the Annual Meeting. Shareholders wishing to nominate directors
for consideration by the Nominating Committee may do so by writing to the
Secretary of the Corporation, giving the candidate's name, biographical data
and qualifications. Such information must be received by November 30 of each
year to be considered for the Annual Meeting held in the following year.
The Audit Committee is composed of John Sawyer, David R. Huhn and Kenneth C.
Lichtendahl, and the members of that committee met two times during the last
year. The functions of the committee include but are not limited to the
following: recommendation to the full Board as to engagement or discharge of
independent auditors, reviewing with independent auditors the plan and results
of the audit engagement, reviewing the scope and results of the Corporation's
internal auditing procedures and reviewing the adequacy of the Corporation's
system of internal accounting controls.
The Compensation Committee is composed of Michael Brown, Lawrence H. Rogers,
II, John Sawyer and Thomas R. Schiff, and the members of that committee met six
times during the last fiscal year. The function of the committee is to
recommend remuneration arrangements to the Board for the members of senior
management and the internal auditor of the Corporation.
All directors attended at least 75% of the Board and committee meetings they
were required to attend. During 1993, there were no late filings of a Form 3 or
Form 4 by a director, executive officer or principal shareholder.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Nonemployee directors of the Corporation were reimbursed for actual travel
expenses and were paid a fee of $4,000 per meeting for attendance at directors'
meetings and $1,000 per meeting for attendance at committee meetings of the
Board, fees for all meetings in any one day not to exceed $5,000.
EXECUTIVE COMPENSATION SUMMARY
The following table summarizes the compensation of the Chief Executive Officer
and each of the four most highly compensated executive officers of the
Corporation other than the Chief Executive Officer for each of the
Corporation's last three years.
<TABLE>
<CAPTION>
Summary Compensation Table (1)
- ------------------------------------------------------------------------------------------------------------------
Annual Long-Term
Compensation Compensation
(a) ---------------------------------------------------------
Name and (b) (c) (d) (g)
Principal Year Salary Bonus Options
Position ($) ($) (# Awarded Shares)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert B. Morgan 1993 524,633 347,030 20,000
President & Chief 1992 503,833 331,078 45,000
Executive Officer 1991 383,005 310,556
John J. Schiff, Jr. 1993 309,391 157,871 20,000
Chairman, 1992 297,242 150,334 45,000
Board of Directors 1991 257,085 150,539
William H. Zimmer 1993 289,267 168,530
Vice Chairman, 1992 278,988 160,556 15,000
Board of Directors 1991 241,305 161,078
John J. Schiff 1993 253,698 87,155
Chairman, Executive Committee 1992 253,480 83,056 15,000
Board of Directors 1991 314,187 83,578
Robert J. Driehaus 1993 259,017 70,530 2,000
Financial Vice President 1992 179,336 140,556 3,000
1991 134,266 141,078
- ------------------------------------------------------------------------------------------------------------------
<FN>
(1) Pursuant to Securities and Exchange Commission rules, column (e) was
omitted because "Other Annual Compensation" was, in all cases, less
than the minimum required to be reported.
</TABLE>
(4)
<PAGE> 7
STOCK OPTION PLANS
The following table contains information concerning grants of options to
purchase the Corporation s common stock which were made to each of the named
executive officers in 1993.
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year
- -----------------------------------------------------------------------------------------------------------------
Potential Realizable
Value at Assumed
(c) Annual Rates of
% of Total Stock Price
(b) Options (d) Appreciation for
Options Granted to Exercise (e) Option Term(3)
(a) Granted Employees Price Expiration (f) (g)
Name (# Shares) (1) in 1993 $/Sh. (2) Date 5% ($) 10% ($)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Robert B. Morgan 5,000 3.98% 62.25 02/06/2003 195,743 496,052
15,000 11.93% 52.75 11/19/2003 497,613 1,261,049
John J. Schiff, Jr. 5,000 3.98% 62.25 02/06/2003 195,743 496,052
15,000 11.93% 52.75 11/19/2003 497,613 1,261,049
William H. Zimmer -0- -- -- -- -- --
John J. Schiff -0- -- -- -- -- --
Robert J. Driehaus 1,000 0.80% 62.25 02/06/2003 39,149 99,210
1,000 0.80% 52.75 11/19/2003 33,174 84,070
- ------------------------------------------------------------------------------------------------------------------
<FN>
(1) All options were granted February 6 and November 19, 1993. One-third
of each option becomes exercisable on the first anniversary of grant
in 1994, an additional one-third on the second anniversary in 1995,
and the remainder on the third aniversary in 1996, so long as
employment with the Corporation or its subsidiaries continues. There
are no stock appreciation rights, performance units or other
instruments granted in tandem with these options, nor are there any
re-load provisions, tax reimbursement features or performance-based
conditions to exercisability.
(2) The option exercise price is 100% of the NASDAQ National Market's
closing price on the day prior to date of grant.
(3) The assumed annual rates of stock price appreciation are prescribed in
the proxy rules of the Securities Exchange Commission and should not
be construed as a forecast of future appreciation in the market price
for the Corporation's common stock.
</TABLE>
The following table contains information for each of the named executive
officers concerning the exercise of options during 1993 and the value of
unexercised options at year-end for the Corporation's common stock.
<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Fiscal Year and FY-End Option Values
- -------------------------------------------------------------------------------------------------------------------
(e)
(a) Value of
Number of Unexercised
Unexercised In-the-Money
(b) Options at Options at
Shares (c) 12/31/93 12/31/93
Acquired on Value Exercisable (E)/ Exercisable (E)/
(a) Exercise Realized Unexercisable (U) Unexercisable (U)
Name (# Shares) ($) (# Shares) ($)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert B. Morgan 49,749 1,881,182 E 113,787 E 3,761,954
U 50,000 U 347,600
John J. Schiff, Jr. 10,944 392,806 E 15,000 E 190,050
U 50,000 U 347,600
William H. Zimmer 7,500 255,425 E 13,400 E 396,333
U 10,000 U 126,700
John J. Schiff -0- -- E 11,894 E 262,104
U 10,000 U 126,700
Robert J. Driehaus 6,999 316,705 E 2,500 E 55,915
U 4,000 U 17,340
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(5)
<PAGE> 8
<TABLE>
PENSION PLAN
The following table sets forth the estimated annual benefits payable from the
Corporation's qualified noncontributory pension plan under various assumptions
as to the employee's compensation level and years of service.
QUALIFIED PENSION PLAN TABLE
YEARS OF SERVICE ON DECEMBER 31, 1993
<CAPTION>
Average
Annual Earnings 15 20 25 30 35 40
--------------- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C>
$350,000 $31,838 $45,989 $60,139 $74,290 $88,440 $102,590
$300,000 $31,838 $45,989 $60,139 $74,290 $88,440 $102,590
$250,000 $31,838 $45,989 $60,139 $74,290 $88,440 $102,590
$200,000 $27,000 $39,000 $51,000 $63,000 $75,000 $ 87,000
$150,000 $20,250 $29,250 $38,250 $47,250 $56,250 $ 65,250
$100,000 $13,500 $19,500 $25,500 $31,500 $37,500 $ 43,500
$ 75,000 $10,125 $14,625 $19,125 $23,625 $28,125 $ 32,625
$ 50,000 $ 6,750 $ 9,750 $12,750 $15,750 $18,750 $ 21,750
</TABLE>
All the persons listed in the Summary Compensation Table, other than John J.
Schiff, are participants in the plan. The accrued retirement benefit for John
J. Schiff has been paid. For purposes of computing retirement benefits under
the Corporation's pension plan for the remaining individuals listed in the
Summary Compensation Table, earnings for any given year as defined by the plan
are the base rate of salary in effect on the last day of the plan year, subject
to maximum recognizable compensation under Sec. 401(a)(17) of the Internal
Revenue Code. This differs from salary as shown in the Summary Compensation
Table. The annual earnings for 1993 qualifying under the plan and the years of
service as of December 31, 1993 under the plan for those individuals are as
follows: Robert J. Driehaus, $235,840 and 40 years; Robert B. Morgan, $235,840
and 28 years; John J. Schiff, Jr., $235,840 and 7 years; and William H. Zimmer,
$235,840 and 12 years.
The normal retirement pension is computed as a single life annuity and is the
sum of .009 per year of the employee's highest five-year average earnings for
the first 15 years of service plus .012 per year of the employee's highest
five-year average earnings for years 16 through 40. Vesting is 100% after five
years of service and there are no deductions for Social Security or other
offset amounts.
SUPPLEMENTAL RETIREMENT PLAN
Effective January 1, 1989, the Corporation adopted a nonqualified,
noncontributory Supplemental Retirement Plan for the benefit of thirty-seven
higher paid employees whose projected retirement pension was reduced as a
result of the amendment to the Corporation's qualified pension plan. The
Supplemental Retirement Plan was designed to replace the pension benefit lost
by those employees. The plan provides a retirement benefit which equals the
retirement benefit under the Corporation's qualified plan prior to amendment,
less the benefit payable after the amendment.
The following table illustrates the retirement income payable through a single
life annuity on retirement at age 65 under various asumptions as to the
employee's highest five-year average annual earnings and years of service.
(6)
<PAGE> 9
<TABLE>
SUPPLEMENTAL RETIREMENT PLAN
YEARS OF SERVICE ON DECEMBER 31, 1993
<CAPTION>
Average
Annual Earnings 15 20 25 30 35 40
--------------- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C>
$350,000 $30,684 $38,101 $45,675 $53,250 $60,825 $68,399
$300,000 $21,309 $25,601 $30,050 $34,500 $38,950 $43,399
$250,000 $11,934 $13,101 $14,425 $15,750 $17,075 $18,399
$200,000 $ 7,397 $ 7,590 $ 7,940 $ 8,290 $ 8,640 $ 8,990
$150,000 $ 4,772 $ 4,840 $ 5,065 $ 5,290 $ 5,515 $ 5,740
$100,000 $ 2,147 $ 2,090 $ 2,190 $ 2,290 $ 2,390 $ 2,490
$ 75,000 $ 835 $ 715 $ 752 $ 790 $ 827 $ 865
$ 50,000 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
</TABLE>
This plan is integrated with Social Security and the normal retirement pension
is the sum of .0075 of the employee's highest five-year average annual earnings
below the integration level plus .0125 of the employee's highest five-year
average annual earnings in excess of the integration level, multiplied by the
number of years of service (not to exceed 40). The integration level is equal
to the average of the integration levels for the period of the employee's
employment, using wages paid, with a maximum of $6,000 for years beginning
prior to 1976 and wages subject to Social Security tax for all years after
1975.
All of the persons listed in the Summary Compensation Table, except for John J.
Schiff, are participants in the plan. For purposes of determining benefits
under the Supplemental Retirement Plan, annual earnings are defined as the base
rate of salary in effect on the last day of the plan year. This differs from
salary under the Summary Compensation Table. The annual earnings for 1993 as
defined in the plan and the years of service as of December 31, 1993, for those
individuals are as follows: Robert J. Driehaus, $271,703 and 40 years; Robert
B. Morgan, $547,581 and 28 years; John J. Schiff, Jr., $323,429 and 7 years;
and William H. Zimmer, $304,096 and 12 years.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Corporation's Compensation Committee for 1993 were Michael
Brown, Lawrence H. Rogers, II, John Sawyer and Thomas R. Schiff.
Thomas R. Schiff is a director of the Corporation, The Cincinnati Insurance
Company, The Cincinnati Casualty Company, The Cincinnati Indemnity Company and
The Cincinnati Life Insurance Company and is the son of John J. Schiff and the
brother of John J. Schiff, Jr. Thomas R. Schiff is the President and one of the
principal owners of John J. & Thomas R. Schiff & Co., Inc., an insurance agency
which represents a number of insurance companies, including the Corporation's
insurance affiliates. During the year ended December 31, 1993, the
Corporation's insurance affiliates paid John J. & Thomas R. Schiff & Co.,
Inc., commissions of $2,136,868. Those commissions were paid at the same
commission rates and pursuant to the same agent's contract with the
Corporation's insurance affiliates as other agents of those companies in the
Cincinnati area.
John J. Schiff, Jr. was Chairman of the Board of Directors of the Corporation
and, during 1993, also was Chairman of the Board and a director of John J. &
Thomas R. Schiff & Co., Inc.
During 1993, John J. Schiff, Jr. was a director of Cincinnati Bengals, Inc.;
John Sawyer was the President of Cincinnati Bengals, Inc.; and Michael Brown
was the General Manager and Treasurer of Cincinnati Bengals, Inc.
(7)
<PAGE> 10
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Corporation's Compensation Committee is charged with the duty of
determining the compensation of the Corporation's internal auditor and members
of senior management. The committee also administers and grants options under
the Corporation's stock option plan.
It is the opinion of the committee that senior management of the Corporation
should receive compensation comparable to that paid by other multiline
insurance companies and that a significant portion of that compensation should
be related to the performance of the Corporation. As a result, a portion of
total compensation is paid in the form of a fixed annual salary in an amount
which the committee feels sufficient to retain top quality executives. In
determining the levels of compensation necessary to be competitive, the
committee reviews compensation paid by other multiline insurance companies
which constitute the Corporation's most direct competitors for executive
talent. The nine insurance companies for which data have been readily available
comprise a part (but not all) of the companies included in the Standard &
Poor's Multiline Insurance Index which is referred to in the performance graph
below. Senior management salaries are reviewed on an annual basis, and
adjustments are made in light of changes in general economic conditions,
including inflation, and in light of changes in compensation paid by the
Corporation's competitors.
A second component of compensation is paid in the form of a bonus, determined
in light of the Corporation's performance during the year. Performance is
measured not only by profit, which is directly affected by the impact of
weather on the profits of the Corporation's property and casualty insurance
subsidiaries, but by a review of such factors as stock price, premium volume,
total expenses, combined ratios of the insurance subsidiaries, and ratings
issued by national rating agencies, including A. M. Best Company. Bonuses are
established at the end of each year but do not reflect the application of any
precise formula to the performance indicators listed. Because of the impact
that uncontrollable factors such as weather have on the financial indicators
reviewed, the committee does not feel that the application of a mechanical
system of determining bonuses is appropriate; therefore, the setting of bonuses
is a subjective process, not totally dependent on the objective criteria
listed.
The third component of compensation is awarded through the grant of stock
options. The Compensation Committee considers the value attributable to the
grant of options to be an integral part of total compensation and as the
primary mechanism for providing long-term rewards to employees for overall
corporate performance. In granting options to senior management, it is the
committee's intent to not only reward senior management for service to the
Corporation but to provide incentive for individual option holders to remain in
the employ of the Corporation and to provide the opportunity for benefit from
the long-term growth in the value of the Corporation's stock, thereby
motivating senior management to improve stock market performance. Members of
senior management are reviewed for stock option grants each year. In
determining the appropriate value of options to be granted to senior
management, the committee reviews grants by the Corporation's competitors with
the objective of providing the opportunity for competitive long-term
compensation.
For the year 1992, the salary of Mr. Morgan, President and Chief Executive
Officer, was significantly below the median for salaries of the Corporation's
competitors. While Mr. Morgan's bonus for 1992 was 50% greater than the median,
his total salary and bonus for 1992 were still 7% below the median of total
salary and bonus for the Corporation's competitors. For the year 1993, Mr.
Morgan's salary was increased by 4% which should result in a base salary
slightly below the median for base salaries paid by the Corporation's
competitors.
In determining the year-end bonus for Mr. Morgan, the Committee reviewed
corporate performance for the first three quarters of 1993 and found that
profits exceeded those reported in the last two years; gross premium volume had
increased 12.6% and total revenue had increased 11%; the Corporation's total
expenses had increased 8% and the combined loss and expense ratio of the
property casualty insurance subsidiaries was 100.4 for 1993; a slight
improvement from last year's ratios. The ratings from A. M. Best Company for
all insurance subsidiaries were renewed at the current or higher rating. The
market price of the Corporation's stock declined approximately 7% through the
first three quarters. In light of all of these indicators, Mr. Morgan's cash
bonus for 1993 was set at $346,500, an increase of 5% over his 1992 bonus.
On February 6 and November 19, 1993, Mr. Morgan received options for 5,000 and
15,000 shares, respectively. The value of the grants, employing Security and
Exchange Commission valuation procedures, was significantly less than the
median value of grants made by the Corporation's competitors to their Chief
Executive Officers during 1992; but in light of the larger option grant in
1992, the smaller grants were deemed to be appropriate.
Submitted by Compensation Committee
Michael Brown, Lawrence H. Rogers, II, John Sawyer, Thomas R. Schiff
(8)
<PAGE> 11
FINANCIAL PERFORMANCE
The graph below summarizes the cumulative total shareholder return on the
Corporation's Common Stock compared to the Standard & Poor's 500 Index
and the Standard & Poor's Multiline Insurance Index.
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TOTAL RETURN ANALYSIS
CFC VS. MARKET INDICES
DECEMBER 31 TOTALS
<S> <C> <C> <C> <C> <C> <C>
1988 1989 1990 1991 1992 1993
-----------------------------------------------------------
CFC Index 100 155 168 220 384 342
S&P Index 100 132 128 166 179 197
S&P ML Index 100 138 113 151 173 193
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OTHER TRANSACTIONS
Harry M. Turner is a director of the Corporation, The Cincinnati Insurance
Company and The Cincinnati Indemnity Company and a partner of Wallace &
Turner Agency which represents a number of insurance companies, including
the Corporation's insurance affiliates. During the year ending December
31, 1993, the Corporation's insurance affiliates paid Wallace & Turner
Agency commissions of $762,971.
Robert C. Schiff is a director of the Corporation, The Cincinnati
Insurance Company, The Cincinnati Life Insurance Company, The Cincinnati
Indemnity Company and The Cincinnati Casualty Company. Mr. Schiff is
President and principal owner of Schiff, Kreidler-Shell, Inc., an insurance
agency which represents a number of insurance companies, including the
Corporation's insurance affiliates. During the year ending December 31,
1993, the Corporation's insurance affiliates paid Schiff, Kreidler-Shell,
Inc., commissions of $1,813,698.
John J. Schiff, Jr. is Chairman of the Board and a director of the
Corporation, The Cincinnati Insurance Company and The Cincinnati Indemnity
Company; and a director of The Cincinnati Casualty Company, The Cincinnati
Life Insurance Company and CFC Investment Company. Thomas R. Schiff is a
director of the Corporation, The Cincinnati Insurance Company, The
Cincinnati Casualty Company, The Cincinnati Indemnity Company and The
Cincinnati Life Insurance Company. John J. Schiff, Jr. and Thomas R.
Schiff are Chairman of the Board and President, respectively, and
principal owners of John J. & Thomas R. Schiff & Co., Inc., an insurance
agency which represents a number of insurance companies, including the
Corporation's insurance affiliates. During the year ended December 31,
1993, the Corporation's insurance affiliates paid John J. & Thomas R.
Schiff & Co., Inc., commissions of $2,136,868.
Larry R. Webb is a director of the Corporation, The Cincinnati Insurance
Company and The Cincinnati Indemnity Company; and Treasurer and a
principal owner of Webb Insurance Agency, Inc., an insurance agency which
represents a number of insurance companies including the Corporation's
insurance affiliates. During the year ended December 31, 1993, the
Corporation's insurance affiliates paid Webb Insurance Agency, Inc.,
commissions of $426,483.
(9)
<PAGE> 12
Alan R. Weiler is a director of the Corporation; and President and a
principal owner of Archer-Meek-Weiler Agency, Inc., an insurance agency
which represents a number of insurance companies, including the
Corporation's insurance affiliates. During the year ended December 31,
1993, the Corporation's insurance affiliates paid Archer-Meek-Weiler
Agency, Inc., commissions of $909,328.
The foregoing agencies are paid at the same commission rates and have the
same agent's contract with the Corporation's insurance affiliates as other
agents of those companies in similar geographic areas. Each of the
aforementioned agencies has employees and solicitors who are not directors
or executive officers of the Corporation's insurance affiliates.
Vincent H. Beckman is a director and Secretary of the Board of the
Corporation and The Cincinnati Insurance Company and a director of The
Cincinnati Indemnity Company and The Cincinnati Life Insurance Company.
Mr. Beckman is a partner in the law firm of Beckman, Weil, Shepardson &
Faller which serves as legal counsel to the Corporation and its
affiliates.
INDEPENDENT PUBLIC ACCOUNTANTS
As has been the Corporation's practice, independent auditors for the
current year will not be selected by the Board of Directors prior to the
Annual Meeting of the Shareholders.
Representatives from Deloitte & Touche, which served as the Corporation's
independent auditors for the last calendar year, will be present at the
meeting and will be afforded the opportunity to make any statements they
wish and to answer appropriate questions.
SHAREHOLDER PROPOSALS
The Corporation has not received any shareholder proposals to be
considered for presentation at the 1994 Annual Meeting of Shareholders.
Any shareholder who wishes a proposal to be considered for presentation at
the 1995 Annual Meeting of Shareholders must submit the proposal to
Cincinnati Financial Corporation, P.O. Box 145496, Cincinnati, Ohio
45250-5496, on or before November 1, 1994.
OTHER BUSINESS
The management does not know of any other matter or business which may be
brought before the meeting; but if any other matter or business comes
before the meeting, it is intended that a vote will be cast pursuant to
the accompanying proxy in accordance with the judgment of the person or
persons voting the same.
/s/ Vincent H. Beckman
----------------------------
Vincent H. Beckman
Secretary
February 26, 1994
(10)
<PAGE> 13
Account #
Number of Shares*
PROXY
CINCINNATI FINANCIAL CORPORATION
P.O. BOX 145496, CINCINNATI, OHIO, 45250-5496
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints John J. Schiff, Vincent H. Beckman, and
Robert J. Driehaus, or any one of them, with power of substitution, as Proxies,
and hereby authorizes them to represent and to vote, as designated below, all
the shares of Cincinnati Financial Corporation held of record on February 8,
1994, at the Annual Meeting of Shareholders to be held on April 2, 1994, or any
adjournment thereof.
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1. ELECTION OF DIRECTORS / / FOR all nominees / / WITHHOLD AUTHORITY
listed (except as to vote for all nominees
specified to the listed below
contrary below)
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Robert J. Driehaus, Kenneth C. Lichtendahl, Jackson H. Randolph, John
J. Schiff, Jr., William H. Zimmer.
Instructions: To withhold authority to vote for any individual nominee,
write that nominee's name on the space provided below.
_______________________________________________________________________
2. In their discretion, the Proxies are authorized to vote upon such
other business as may come before the meeting.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. IF NO DIRECTION IS GIVEN, THIS PROXY
WILL BE VOTED FOR ALL NOMINEES LISTED.
Please sign exactly as name appears. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee, or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Please mark, sign, date, and return this proxy promptly using the
enclosed envelope.
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____________________ _________________________ ____________, 1994
Signature Signature if held jointly DATED
</TABLE>
* Number of shares includes those held in your name directly and those
in your dividend reinvestment account, if applicable.
