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CFC prevails after natural disasters caused setback for county's 2nd largest employer

Cincinnati Financial Corp. prevailed over weather-related catastrophes to turn a profit.

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By Chelsey Levinsgton, Staff Writer Updated 9:49 PM Saturday, February 11, 2012

FAIRFIELD - Despite the two worst weather-related catastrophes in company history in 2011, Butler County’s second largest employer last week said it turned a profit and increased book value.

Cincinnati Financial Corp. of Fairfield saw in 2011 some rebound in the economy compared to 2010 and 2009, said Chief Executive Officer Stephen Johnston.

Cincinnati Financial posted a net profit of $166 million for all of 2011, according to the company. That’s still less than 2010 total net profit of $377 million, according to the company. The company increased its shareholder’s equity per share of stock to $31.16.

“Our business is insuring American business. If American business is struggling, that impacts us,” Johnston said. “We started to see the economy improving, the outlook for businesses improving, the businesses that we insure were having more optimistic forecasts.”

Storm systems in spring 2011, including tornadoes that swept Tuscaloosa, Ala., and Joplin, Mo., caused Cincinnati Financial to have higher natural catastrophe losses. It had a total $402 million in natural catastrophe losses in 2011 before taxes and after reinsurance compared to $148 million the year before, according to the company.

Cincinnati Financial expanded in 2010 to appoint insurance agencies in two new states for a total representation in 39 U.S. states. That has spread the company’s risk, Johnston said.

Last year the company’s investment portfolio performed well, he said. Most insurance companies don’t invest heavily in stocks, but about 25 percent of Cincinnati Financial’s investments are in high quality dividend paying stocks, he said. Pretax dividend income increased five percent in 2011, according to the company.

Insurance policies for a lot of businesses are priced by an estimate of payroll or sales for the upcoming policy year. At the end of the policy period, Cincinnati Financial agents audit the customer for actual sales and payroll.

In 2009 and 2010, Cincinnati Financial was returning premiums to policy holders because forecasts were too optimistic. Last year, original forecasts of sales or payroll started to match more closely or overestimate actual results, he said.

Currently, the company makes about $3.5 billion in direct written premiums for property casualty and life insurance. Its goal is to reach $5 billion by 2015.

“We’ve very optimistic about 2012. We think a lot of our initiatives to improve profitably are working,” Johnston said.

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