<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 10-Q
X Quarterly Report Under Section 13 or 15 (d) of the
--- Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 1999
Transition Report Pursuant to Section 13 or 15 (d)
--- of the Securities Exchange Act of 1934
-----------------------
Commission File Number 0-4604
CINCINNATI FINANCIAL CORPORATION
--------------------------------
(Exact name of registrant as specified in its charter)
An Ohio Corporation 31-0746871
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6200 South Gilmore Road
Fairfield, Ohio 45014-5141
(Address of principal executive offices)
Registrant's telephone number, including area code: 513/870-2000
*Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
YES X . NO .
------ ------
Securities registered pursuant to Section 12(g) of the Act:
$2.00 Par Common--165,112,000 shares outstanding at March 31, 1999
$50,837,000 of 5.5% Convertible Senior Debentures Due 2002
$419,604,000 of 6.9% Senior Debentures Due 2028
<PAGE> 2
PART I
------
ITEM 1. FINANCIAL STATEMENTS
CINCINNATI FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(000's omitted)
(Unaudited)
March 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
- ------
Investments
Fixed Maturities (Cost: 1999--$2,690,314;
1998--$2,682,659) .............................. $ 2,782,252 $ 2,812,231
Equity Securities (Cost: 1999--$1,968,242;
1998--$1,943,206) .............................. 7,224,132 7,454,817
Other Invested Assets ............................. 59,241 57,902
Cash ................................................. 60,187 58,611
Investment Income Receivable ......................... 77,581 76,773
Finance Receivables .................................. 31,798 32,107
Premiums Receivable .................................. 167,003 164,412
Reinsurance Receivable ............................... 139,112 135,991
Prepaid Reinsurance Premiums ......................... 23,711 26,435
Deferred Acquisition Costs Pertaining to Unearned
Premiums and to Life Policies in Force ............ 142,998 142,896
Land, Buildings and Equipment for Company Use (at Cost
Less Accumulated Depreciation) .................... 50,329 53,639
Other Assets ......................................... 96,861 70,689
------------ ------------
Total Assets ................................... $ 10,855,205 $ 11,086,503
============ ============
LIABILITIES
- -----------
Insurance Reserves:
Losses and Loss Expenses .......................... $ 2,093,085 $ 2,054,725
Life Policy Reserves .............................. 543,610 533,730
Unearned Premiums .................................... 455,938 459,695
Notes Payable ........................................ 10,000 -0-
5.5% Convertible Senior Debentures Due 2002 .......... 50,837 51,919
6.9% Senior Debentures Due 2028 ...................... 419,604 419,601
Federal Income Taxes
Current ........................................... 30,579 9,740
Deferred .......................................... 1,703,073 1,809,003
Other Liabilities .................................... 141,518 127,154
------------ ------------
Total Liabilities .............................. 5,448,244 5,465,567
------------ ------------
SHAREHOLDERS' EQUITY
- --------------------
Common Stock, $2 per Share; Authorized 200,000
Shares; Issued 1999--170,608; 1998--170,435
Shares; Outstanding 1999--165,112; 1998--166,681
Shares ............................................ 341,216 340,871
Paid-In Capital ...................................... 220,724 218,328
Retained Earnings .................................... 1,517,269 1,480,914
Accumulated Other Comprehensive Income ............... 3,487,337 3,678,019
------------ ------------
5,566,546 5,718,132
Less Treasury Shares at Cost (1999--5,496 Shares;
1998--3,754 Shares) ............................... (159,585) (97,196)
------------ ------------
Total Shareholders' Equity ..................... 5,406,961 5,620,936
------------ ------------
Total Liabilities and Shareholders' Equity .. $ 10,855,205 $ 11,086,503
============ ============
</TABLE>
Accompanying notes are an integral part of these financial statements.
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<PAGE> 3
CINCINNATI FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS FOR INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
(000's omitted except per share data)
Three Months Ended March 31,
Revenues: 1999 1998
-------- --------
<S> <C> <C>
Premiums Earned:
Property and Casualty ................... $ 396,097 $ 378,400
Life .................................... 15,532 14,128
Accident and Health ..................... 2,171 2,064
--------------- ---------------
Net Premiums Earned .................. 413,800 394,592
Investment Income, Less Expenses .......... 95,816 90,300
Realized Gain on Investments .............. 24,746 25,642
Other Income .............................. 2,297 2,020
--------------- ---------------
Total Revenues .......................... 536,659 512,554
--------------- ---------------
Benefits & Expenses:
Insurance Losses and Policyholder Benefits 324,466 270,131
Commissions .............................. 72,915 70,211
Other Operating Expenses ................. 37,807 36,121
Taxes, Licenses & Fees ................... 10,208 12,821
Increase in Deferred Acquisition Costs
Pertaining to Unearned Premiums
and to Life Policies in Force ........ (102) 9
Interest Expense ......................... 7,785 5,338
Other Expenses ........................... 1,519 1,590
--------------- ---------------
Total Benefits & Expenses ............... 454,598 396,221
--------------- ---------------
Income Before Income Taxes ................. 82,061 116,333
--------------- ---------------
Provision for Income Taxes:
Current ................................... 20,839 31,927
Deferred .................................. (3,255) 228
--------------- ---------------
Total Provision for Income Taxes ........ 17,584 32,155
--------------- ---------------
Net Income ................................. $ 64,477 $ 84,178
=============== ===============
Average Shares Outstanding ................. 166,102 166,601
=============== ===============
Average Shares Outstanding (diluted) ....... 171,116 172,538
=============== ===============
Per Common Share:
Net Income ............................ $ .39 $ .51
=============== ===============
Net Income (diluted) .................. $ .38 $ .49
=============== ===============
Cash Dividends Declared ............... $ .1700 $ .1533
=============== ===============
</TABLE>
Accompanying notes are an integral part of these financial statements.
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<PAGE> 4
CINCINNATI FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)
(000's omitted)
THREE MONTHS ENDED MARCH 31, 1998 AND 1999
------------------------------------------
<TABLE>
<CAPTION>
Accumulated
Other Total
Common Stock Treasury Paid-In Retained Comprehensive Shareholders'
Shares Amount Stock Capital Earnings Income Equity
-------- ------ -------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Bal. Dec. 31,
1997 169,391 $338,782 $ (72,585) $ 203,282 $1,341,730 $ 2,905,756 $4,716,965
----------
Net Income 84,178 84,178
Change in Unreal.
Gains Net of
Inc. Taxes of
$152,599 283,397 283,397
--------
Comprehensive
Income 367,575
Div. Declared (25,567) (25,567)
Purchase/Issuance of
Treasury Shares 16 14 30
Stock Options
Exercised 281 562 4,142 4,704
Conversion of
Debentures 115 230 1,478 1,708
-------- --------- ---------- --------- ----------- ----------- ----------
Bal. March 31,
1998 169,787 $339,574 $ (72,569) $ 208,916 $ 1,400,341 $ 3,189,153 $5,065,415
======= ======== ========= ========= =========== =========== ==========
Bal. Dec. 31,
1998 170,435 $340,871 $ (97,196) $ 218,328 $ 1,480,914 $ 3,678,019 $5,620,936
----------
Net Income 64,477 64,477
Change in Unreal.
Gains Net of
Inc. Taxes of
$102,675 (190,682) (190,682)
-----------
Comprehensive
Income (126,205)
Div. Declared (28,122) (28,122)
Purchase/Issuance of
Treasury Shares (62,389) 7 (62,382)
Stock Options
Exercised 100 200 1,453 1,653
Conversion of
Debentures 73 145 936 1,081
-------- --------- ---------- --------- ----------- ----------- ----------
Bal. March 31,
1999 170,608 $ 341,216 $ (159,585) $ 220,724 $ 1,517,269 $ 3,487,337 $5,406,961
======== ========= ========== ========= =========== =========== ==========
</TABLE>
Accompanying notes are an integral part of these financial statements.
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<PAGE> 5
CINCINNATI FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
(000's omitted )
Three Months Ended March 31,
----------------------------
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income ........................................... $ 64,477 $ 84,178
Adjustments to reconcile operating income to net cash
provided by operating activities:
Depreciation and amortization ..................... 3,345 2,626
Increase in investment income receivable .......... (808) (352)
Increase in premiums receivable ................... (2,591) (1,987)
Increase in reinsurance receivable ................ (3,121) (898)
Decrease (increase) in prepaid reinsurance premiums 2,724 (368)
(Increase) decrease in deferred acquisition costs . (102) 9
Decrease in accounts receivable ................... 15,896 3,811
(Increase) decrease in other assets ............... (10,063) 3,663
Increase in loss and loss expense reserves ........ 38,360 31,557
Increase in life policy reserves .................. 9,880 11,814
Decrease in unearned premiums ..................... (3,757) (2,357)
Increase (decrease) in other liabilities .......... 11,805 (4,327)
(Decrease) increase in deferred income taxes ...... (3,255) 228
Realized gains on investments ..................... (24,746) (25,642)
Increase in current income taxes .................. 20,839 27,394
Other ............................................. 13,280 (5,645)
------------ ------------
Net cash provided by operating activities ...... 132,163 123,704
------------ ------------
Cash flows from investing activities:
Sale of fixed maturities .......................... 13,416 3,034
Call or maturity of fixed maturities investments .. 88,301 79,408
Sale of equity securities investments ............. 65,565 80,437
Collection of finance receivables ................. 3,718 3,426
Purchase of fixed maturities investments .......... (106,877) (123,074)
Purchase of equity securities investments ......... (67,859) (142,547)
Investment in land, buildings and equipment ....... (45,721) (5,946)
Investment in finance receivables ................. (3,409) (3,928)
Investment in other invested assets ............... (1,428) (1,359)
------------ ------------
Net cash used in investing activities .......... (54,294) (110,549)
------------ ------------
Cash flows from financing activities:
Proceeds from stock options exercised ............. 1,653 4,704
Purchase/Issuance of treasury shares .............. (62,382) 30
Increase in notes payable ......................... 10,000 542
Payment of cash dividends to shareholders ......... (25,564) (22,704)
------------ ------------
Net cash used in financial activities .......... (76,293) (17,428)
------------ ------------
Net increase (decrease) in cash ......................... 1,576 (4,273)
Cash at beginning of period ............................. 58,611 80,168
------------ ------------
Cash at end of period ................................... $ 60,187 $ 75,895
============ ============
Supplemental disclosures of cash flow information
Interest paid ........................................ $ 0 $ 4,248
Income taxes paid .................................... $ 0 $ 0
</TABLE>
Accompanying notes are an integral part of these financial statements.
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<PAGE> 6
CINCINNATI FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE I - ACCOUNTING POLICIES
The consolidated financial statements include the accounts of the Company and
all of its subsidiaries, each of which is wholly owned, and are presented in
conformity with generally accepted accounting principles. All significant
inter-company investments and transactions have been eliminated in
consolidation. The December 31, 1998 consolidated balance sheet amounts are
derived from the audited financial statements but do not include all disclosures
required by generally accepted accounting principles.
INVESTMENTS--Fixed maturities and equity securities have been classified as
available for sale and are carried at fair values at March 31, 1999 and December
31, 1998.
UNREALIZED GAINS AND LOSSES (000's omitted)--The increases (decreases) in
unrealized gains for fixed maturities and equity securities (net of income tax
effect) for the three-month periods ended March 31 are as follows:
<TABLE>
<CAPTION>
Fixed Equity
Maturities Securities Total
---------- ---------- -----
<S> <C> <C> <C>
1999 $ (24,463) $ (166,219) $ (190,682)
----
1998 $ (1,126) $ 284,523 $ 283,397
----
</TABLE>
Such amounts are included as additions to and deductions from shareholders'
equity.
REINSURANCE (000's omitted)--Premiums earned are net of $26,565 and $24,054 of
premium on ceded business for March 31, 1999 and 1998, respectively. Insurance
losses and policyholder benefits in the accompanying consolidated statements of
income are net of $11,289 and $11,954 reinsurance recoveries for March 31, 1999
and 1998, respectively.
NOTE II - STOCK OPTIONS
The Company has primarily qualified stock option plans under which options are
granted to employees of the Company at prices which are not less than market
price at the date of grant and which are exercisable over ten-year periods. On
March 31, 1999, outstanding options for Stock Option Plan No. III totalled
49,614 shares with a purchase price of $7.34, outstanding options for Stock Plan
No. IV totalled 2,621,591 shares with purchase prices ranging from a low of
$7.46 to a high of $42.88, outstanding options for Stock Plan V totalled
1,444,405 shares with purchase prices ranging from a low of $20.48 to a high of
$45.38 and outstanding options for Stock Plan VI totalled 1,393,500 shares with
purchase prices ranging from a low of $33.75 to a high of $37.88.
NOTE III - INTERIM ADJUSTMENTS
The preceding summary of financial information for Cincinnati Financial
Corporation and consolidated subsidiaries is unaudited, but the Company believes
that all adjustments (consisting only of normal recurring accruals) necessary
for fair presentation have been made. The results of operations for this interim
period is not necessarily an indication of results to be expected for the
remaining nine months of the year.
<PAGE> 7
NOTE IV - SEGMENT INFORMATION
The Company is organized and operates principally in two industries and has four
reportable segments--commercial lines property and casualty insurance, personal
lines property and casualty insurance, life insurance and investment operations.
The accounting policies of the segments are the same as those described in Note
I - Accounting Policies. Revenue is primarily from unaffiliated customers.
Identifiable assets by segment are those assets, including investment
securities, used in the Company's operations in each industry. Corporate and
other identifiable assets are principally cash and marketable securities.
Segment information, for which results are regularly reviewed by Company
management in making decisions about resources to be allocated to the segments
and assess their performance, is summarized as follows (000's omitted):
<TABLE>
<CAPTION>
Quarter Ended March 31,
1999 1998
---------------------
<S> <C> <C>
REVENUES
Commercial lines insurance ......... $ 258,455 $ 251,563
Personal lines insurance ........... 137,642 126,837
Life insurance ..................... 17,703 16,192
Investment operations .............. 120,562 115,942
Corporate and other ................ 2,297 2,020
------------ ------------
Total revenues ................. $ 536,659 $ 512,554
============ ============
INCOME BEFORE INCOME TAXES
Property and casualty insurance .... $ (20,836) $ 15,295
Life insurance ..................... 138 355
Investment operations .............. 112,883 108,691
Corporate and other ................ (10,124) (8,008)
------------ ------------
Total income before income taxes $ 82,061 $ 116,333
============ ============
IDENTIFIABLE ASSETS
Property and casualty insurance .... $ 5,471,113 $ 5,240,650
Life insurance ..................... 1,193,610 1,149,587
Corporate and other ................ 4,190,482 3,670,486
------------ ------------
Total identifiable assets ...... $ 10,855,205 $ 10,060,723
============ ============
</TABLE>
NOTE V - FINANCIAL ACCOUNTING PRONOUNCEMENTS
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - SFAS No. 133 "Accounting For
Derivative Instruments and Hedging Activities" is effective for the Company in
2000. This Statement establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, (collectively referred to as derivatives) and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the statement of financial position and measure those
instruments at fair value. The effects of the Statement to the Company are not
yet known.
10Q/sa
<PAGE> 8
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (000's omitted)
This Management Discussion is intended to supplement the data contained in the
financial statements and related notes of Cincinnati Financial Corporation and
subsidiaries. The following discussion, related consolidated financial
statements and accompanying notes contain certain forward-looking statements
that involve potential risks and uncertainties. The Company's future results
could differ materially from those discussed. Factors that could cause or
contribute to such differences include, but are not limited to: unusually high
levels of catastrophe losses due to changes in weather patterns or other natural
causes; changes in insurance regulations or legislation that place the Company
at a disadvantage in the marketplace; recession or other economic conditions
resulting in lower demand for insurance products; sustained decline in overall
stock market values negatively impacting the Company's equity portfolio and the
ability to generate investment income; and the potential inability of the
Company and/or the independent agencies with which it works to complete the
necessary information system changes required to handle the Year 2000 issue.
Readers are cautioned that the Company undertakes no obligation to review or
update the forward-looking statements included in this material.
Premiums earned for the three months ended March 31, 1999 have increased $19,208
(5%) over the three months ended March 31, 1998. For our property and casualty
insurance companies, gross written premiums increased $18,426 and gross earned
premiums increased by $19,878. The growth rate of our property and casualty
subsidiaries on a gross written and earned basis is less than last year. The
growth rate is less than last year because the increase in new business and some
rate increases on personal lines business were offset by a continued soft
commercial lines market and lower premiums on workers' compensation coverages.
The premium volume of our life and health company has increased approximately 9%
as the Company had increases in both life and health insurance production. The
premium growth in our life subsidiary is mainly attributable to increased sales
of both traditional and work site marketing products. For the three-month period
ended March 31, 1999, investment income, net of expenses, has increased $5,516
(6%) when compared with the first three months of 1999. This increase is the
result of the growth of the investment portfolio because of investing cash flows
from operations and dividend increases from equity securities.
Realized gains on investments for the three months ended March 31, 1999 amounted
to $24,746 compared to $25,642 for the comparable three-month period ended March
31, 1998. The realized gains are predominantly the result of the sale of equity
securities and management's decision to realize the gains and reinvest the
proceeds at higher yields. Other equity securities are sold at the discretion of
management and reinvested in other equity securities.
Insurance losses and policyholder benefits (net of reinsurance recoveries)
increased $54,335 (20%) for the first three months of 1999 over the same period
in 1998. Property and casualty company losses increased $54,190 in the first
quarter of 1999, compared to the first quarter of 1998. Catastrophic claims were
higher by $20,522 in the same period. Policyholder benefits increased $145 over
the first quarter of 1998 in the life insurance subsidiary.
Commission expenses increased $2,704 for the first quarter of 1999 compared to
the same period of 1998. The increase for the year matches the premium growth.
Other operating expenses increased $1,686 for the three-month period ended March
31, 1999 compared to the same period for 1998. The increase is attributable to
increases in staff and costs associated to our investment in infrastructure to
support future growth. Taxes, licenses, and fees decreased $2,613 for the first
quarter of 1999, compared to the first quarter of 1998. The decrease is
attributable to decreases in tax rates in our domicile state Ohio, and related
lower retaliatory taxes. Interest expense increased $2,447 for the three-month
period ended March 31, 1999 compared to the same period for 1998. The increase
is attributable to increased debt and to the higher interest rate of the 30-year
senior debenture compared to short-term debt previously held.
<PAGE> 9
Provision for income taxes, current and deferred, have decreased by $14,571 for
the first three months of 1999 compared to the first three months of 1998. The
decrease in federal taxes is attributable to lower income before taxes and a
decrease in the effective tax rate from 27.64% to 21.43% at March 31, 1998 and
1999.
In the first quarter of 1999, the Company experienced a decrease in gains
unrealized in investments, compared to an increase in unrealized gains in
investments in the first quarter of 1998, resulting in comprehensive income of
$(126,205) in 1999, compared to $367,575 in 1998.
The Company has been working on the Year 2000 project for several years to
address potential problems within the Company's operations that could result
from the century change. The corporate Information Systems Department is
primarily responsible for this endeavor and has a designated team of Company
associates assigned to this effort. This team has access to key associates in
all areas of the Company's operations as well as to outside consultants and
resources on an as-needed basis.
The Information Systems Department provides a comprehensive report on a
quarterly basis for corporate management and the Audit Committee of the Board of
Directors. This report identifies progress against the plan as well as
projections on specific issues.
<TABLE>
<CAPTION>
% of Hardware/Software Applications Year 2000 Compliant
-------------------------------------------------------
Actual as of Planned as of
March 31, 1999 June 30, 1999
-------------- -------------
<S> <C> <C>
Mission critical systems 95% 100%
All other systems 95% 100%
</TABLE>
We have identified computer systems (both hardware and software), including
equipment with embedded computer chips, that were not Year 2000 compliant;
determined what revisions or replacements would be needed to achieve compliance;
prioritized and proceeded to implement those revisions or replacements;
instituted testing procedures to ensure that the revisions and fixes are
operational; and moved the compliant systems into production. As of March 31,
1999, approximately 95% of the applications have either been modified to be
compliant or have been replaced by purchased compliant systems. Additional
in-depth testing, both internal and third-party related, is planned into 1999.
We believe that all critical systems will be Year 2000 compliant by June 30,
1999.
As part of the overall review of Year 2000, the Company is verifying with
certain key outside vendors, and with others where a significant business
relationship exists to determine their Year 2000 compliance status and plans.
Because the Company markets products through independent agencies, it is of
paramount importance that those approximately 1,000 agencies (1,300 offices)
successfully transition to a Year 2000 compliant processing system. We are
actively working with those agencies. As of March 31, 1999, nearly all of the
agencies' processing systems have either been made compliant or the agencies
have plans to get them compliant by June 30, 1999. Phone and personal interviews
are being used to verify the progress of the agencies.
Contingency planning for the Year 2000 includes standard backup and recovery
procedures to be followed in the event of a critical system failure. While we do
not expect any unusual kinds of failure as a result of specific Year 2000
related changes, by June 30, 1999, we plan to develop specific backup procedures
for the Year 2000 to minimize the effect of any potential problems.
Should the Company or a third party with whom the Company transacts business
have a system failure due to the century change, it is believed it will not
result in more than a delay in processing or reporting, with no material
financial impact.
<PAGE> 10
We have budgeted $9.5 million pretax to resolve the Year 2000 issues. This would
encompass the costs of modifications, the salaries of the associates primarily
assigned to this effort and the fees of outside consultants for this effort. As
of March 31, 1999, the Company has incurred approximately $8.8 million of these
costs. The expenses incurred during the first three months of 1999 were
approximately $.9 million.
Although the Company expects its systems to be Year 2000 compliant on or before
December 31, 1999, it cannot predict the outcome or the success of its Year 2000
project, or that third-party systems are or will be Year 2000 compliant, or that
the costs required to address the Year 2000 issue or the impact of a failure to
achieve substantial Year 2000 compliance will not have a material adverse effect
on the Company's business, financial condition or results of operations.
Market Risk--The Company could incur losses due to adverse changes in market
rates and prices. The Company's primary market risk exposures are to changes in
price for equity securities and changes in interest rates and credit ratings for
fixed maturity securities. The Company could alter the existing investment
portfolios or change the character of future investments to manage exposure to
market risk. CFC, with the Board of Directors, administers and oversees
investment risk through the Investment Committee, which provides executive
oversight of investment activities. The Company has specific investment
guidelines and policies that define the overall framework used daily by
investment portfolio managers to limit the Company's exposure to market risk.
On February 6, 1999, the Board authorized repurchase of up to seventeen million
of the Company's outstanding shares, with the intent to complete the repurchase
by December 31, 2000. This authorization supersedes the previous authorization
of nine million shares. As of March 31, 1999, the Company has repurchased 1,742
shares, leaving 15,258 future repurchased shares authorized.
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<PAGE> 11
PART II
OTHER INFORMATION
ITEM 1. Legal Proceedings
-----------------
The Company is involved in no material litigation other than routine litigation
incident to the nature of the insurance industry.
ITEM 2. Changes in Securities
---------------------
There have been no material changes in securities during the first quarter.
ITEM 3. Defaults Upon Senior Securities
-------------------------------
The Company has not defaulted on any interest or principal payment, and no
arrearage in the payment of dividends has occurred.
ITEM 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
No special matters were voted upon by security holders during the first quarter.
On April 3, 1999, shareholders voted on and approved Stock Option Plan No. VI.
ITEM 5. Other Information
-----------------
No matters to report.
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits included:
Exhibit 11--Statement re Computation of Per Share Earnings.
Exhibit 27--Financial Data Schedule
(b) The Company was not required to file any reports on Form
8-K during the quarter ended March 31, 1999.
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CINCINNATI FINANCIAL CORPORATION
--------------------------------
(Registrant)
Date May 10, 1999
-------------------------
By/s/ T.F. Elchynski
-------------------------------
T.F. Elchynski
Senior Vice President and Chief
Financial Officer
(Principal Financial Officer)
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<PAGE> 1
EXHIBIT 11
CINCINNATI FINANCIAL CORPORATION
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
FOR THE QUARTER ENDED MARCH 31,
(000's omitted except per share data)
<TABLE>
<CAPTION>
Basic Earnings per share: 1999 1998
---- ----
<S> <C> <C>
Net income $ 64,477 $ 84,178
======== ========
Average shares outstanding 166,102 166,601
======== ========
Net income per common share $ .39 $ .51
======== ========
Diluted earnings per share:
Net income $ 64,477 $ 84,178
Interest on convertible debentures--net of tax 450 497
-------- --------
Net income for per share calculation (diluted) $ 64,927 $ 84,675
======== ========
Average shares outstanding 166,102 166,601
Effective of dilutive securities:
5.5% convertible senior debentures 3,417 3,813
Stock options 1,597 2,124
-------- --------
Total dilutive shares 171,116 172,538
======== ========
Net income per common share--diluted $ .38 $ .49
======== ========
</TABLE>
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<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF INCOME AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<DEBT-HELD-FOR-SALE> 2,782,252
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 7,224,132
<MORTGAGE> 15,065
<REAL-ESTATE> 4,404
<TOTAL-INVEST> 10,065,625<F1>
<CASH> 60,187
<RECOVER-REINSURE> 2,048
<DEFERRED-ACQUISITION> 142,998
<TOTAL-ASSETS> 10,855,205
<POLICY-LOSSES> 2,601,355<F2>
<UNEARNED-PREMIUMS> 455,938
<POLICY-OTHER> 31,574<F2>
<POLICY-HOLDER-FUNDS> 17,673
<NOTES-PAYABLE> 480,441<F3>
0
0
<COMMON> 341,216<F4>
<OTHER-SE> 5,065,745<F4>
<TOTAL-LIABILITY-AND-EQUITY> 10,855,205
413,800
<INVESTMENT-INCOME> 95,816
<INVESTMENT-GAINS> 24,746
<OTHER-INCOME> 2,297
<BENEFITS> 324,466
<UNDERWRITING-AMORTIZATION> 86,705<F5>
<UNDERWRITING-OTHER> 43,427<F5>
<INCOME-PRETAX> 82,061
<INCOME-TAX> 17,584
<INCOME-CONTINUING> 64,477
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 64,477
<EPS-PRIMARY> .39
<EPS-DILUTED> .38
<RESERVE-OPEN> 1,840,323<F6>
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 2,044,548<F7>
<CUMULATIVE-DEFICIENCY> 0
<FN>
<F1> Equals the sum of Fixed maturities, Equity securities and other Invested
assets
<F2> Equals the sum of Life policy reserves and Losses and loss expenses less
the Life Company liability for Supplementary contracts without Life
contingencies of $3,766 which is classified as Other Policyholder Funds
<F3> Equals the sum of Notes payable, the 5.5% Convertible Senior Debenture and
the 6.9% Senior Debenture
<F4> Equals the total Shareholders' Equity F5--Equals
the sum of Commissions, Other operating expenses, Taxes and licenses and fees,
Increase in deferred acquisition costs, Interest expense and other expenses
<F5> Equals the sum of Commissions, Other operating expenses, Taxes and licenses
and fees, Increase in deferred acquisition costs, Interest expense and other
expenses
<F6> Equals the net reserve for unpaid claims for the property casualty
subsidiaries less loss checks payable as of December 31, 1998
<F7> Equals the net reserve for unpaid claims for the property casualty
subsidiaries less loss checks payable as of March 31, 1999
</FN>
</TABLE>
