Form 8-K CINCINNATI FINANCIAL For: Feb 08
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E-mailUNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 | |||
FORM 8-K | |||
CURRENT REPORT | |||
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934 | |||
Date of Report: February 8, 2016 (Date of earliest event reported) | |||
CINCINNATI FINANCIAL CORPORATION | |||
(Exact name of registrant as specified in its charter) | |||
Ohio | 0-4604 | 31-0746871 | |
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | |
6200 S. Gilmore Road, Fairfield, Ohio | 45014-5141 | ||
(Address of principal executive offices) | (Zip Code) | ||
Registrant’s telephone number, including area code: (513) 870-2000 | |||
N/A (Former name or former address, if changed since last report.) | |||
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: | |||
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13a-4(c)) |
Items 1.01 Entry into Material Definitive Agreements.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
On February 8, 2016, Cincinnati Financial Corporation and CFC Investment Company, a subsidiary of Cincinnati Financial Corporation (Borrowers) entered into the First Amendment of the Amended and Restated Credit Agreement with the lenders party thereto; PNC Bank, N.A., as Administrative Agent, PNC Capital Markets, LLC, as Sole Bookrunner and Joint Lead Arranger, Fifth Third Bank, N.A. as Joint Lead Arranger and Syndication Agent, The Huntington National Bank and U.S. Bank, N.A. as Documentation Agents (2016 First Amendment). The 2016 First Amendment amends Item 7.2.1(vii) of the Amended and Restated Credit Agreement to expressly permit additional indebtedness of the Company’s insurance company subsidiaries within the $350,000,000 additional indebtedness exception to the agreement’s negative covenant 7.2.1 entitled, “Indebtedness.”
All other terms and conditions of the Amended and Restated Credit Agreement are unchanged and remain in full force and effect. The 2016 First Amendment filed as Exhibit 10.1 hereto and the description set forth above is qualified in its entirety by the full terms of the 2016 First Amendment and the Amended and Restated Credit Agreement dated May 13, 2014.
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Item 9.01 Financial Statements and Exhibits
(c) Exhibits
Exhibit 10.1– First Amendment to Amended and Restated Credit Agreement dated February 8, 2016
Exhibit 10.2 – Amended and Restated Credit Agreement dated May 13, 2014 (incorporated herein by reference to the company’s Current Report on Form 8-K dated May 13, 2014, Exhibit 10.1).
Safe Harbor Statement
This is our “Safe Harbor” statement under the Private Securities Litigation Reform Act of 1995. Our business is subject to certain risks and uncertainties that may cause actual results to differ materially from those suggested by the forward-looking statements in this report. Some of those risks and uncertainties are discussed in our 2014 Annual Report on Form 10-K, Item 1A, Risk Factors, Page 33.
Factors that could cause or contribute to such differences include, but are not limited to:
• | 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 |
• | Domestic and global events resulting in capital market or credit market uncertainty, followed by prolonged periods of economic instability or recession, that lead to: |
o | Significant or prolonged decline in the fair value of a particular security or group of securities and impairment of the asset(s) |
o | Significant decline in investment income due to reduced or eliminated dividend payouts from a particular security or group of securities |
o | Significant rise in losses from surety and director and officer policies written for financial institutions or other insured entities |
• | 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 |
• | 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: |
o | Downgrades of the company’s financial strength ratings |
o | Concerns that doing business with the company is too difficult |
o | Perceptions that the company’s level of service, particularly claims service, is no longer a distinguishing characteristic in the marketplace |
o | 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: |
o | Impose new obligations on us that increase our expenses or change the assumptions underlying our critical accounting estimates |
o | Place the insurance industry under greater regulatory scrutiny or result in new statutes, rules and regulations |
o | Restrict our ability to exit or reduce writings of unprofitable coverages or lines of business |
o | 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 |
o | Increase our provision for federal income taxes due to changes in tax law |
o | Increase our other expenses |
o | Limit our ability to set fair, adequate and reasonable rates |
o | Place us at a disadvantage in the marketplace |
o | 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 |
Further, the company’s insurance businesses are subject to the effects of changing social, global, economic and regulatory environments. Public and regulatory initiatives have included efforts to adversely influence and restrict premium rates, restrict the ability to cancel policies, impose underwriting standards and expand overall regulation. The company also is subject to public and regulatory initiatives that can affect the market value for its common stock, such as measures affecting corporate financial reporting and governance. The ultimate changes and eventual effects, if any, of these initiatives are uncertain.
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 hereunto duly authorized.
CINCINNATI FINANCIAL CORPORATION | |
Date: February 11, 2016 | /S/ Michael J. Sewell |
Michael J. Sewell, CPA | |
Chief Financial Officer, Senior Vice President and Treasurer | |
FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
THIS FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this “Amendment”) is made and entered into effective as of February 8, 2016, by and among CINCINNATI FINANCIAL CORPORATION, an Ohio corporation (the “Company”), CFC INVESTMENT COMPANY, an Ohio corporation (“CFC-I” and together with the Company, each a “Borrower” and together, the “Borrowers”), the Lenders party hereto, and PNC BANK, NATIONAL ASSOCIATION, in its capacity as administrative agent for the Lenders under the Credit Agreement (the “Administrative Agent”).
R E C I T A L S:
A.The Administrative Agent, the Lenders and the Borrowers are parties to that certain Amended and Restated Credit Agreement, dated as of May 13, 2014 (as amended, restated, supplemented or otherwise modified prior to the date hereof, the “Credit Agreement”).
B.The Administrative Agent, the Lenders and the Borrowers desire to make certain changes to the Credit Agreement as set forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual covenants and agreements contained herein, and other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1.Certain Defined Terms. Capitalized terms which are used herein without definition and which are defined in the Credit Agreement shall have the same meanings herein as in the Credit Agreement.
2. Amendment to Credit Agreement. Subject to satisfaction of the conditions set forth in Section 3 of this Amendment, Section 7.2.1(vii) of the Credit Agreement is hereby amended and restated in its entirety to read as follows:
“(vii) Additional Indebtedness of the Company and each Insurance Company in an aggregate amount not to exceed $350,000,000 at any time outstanding.”
3. Conditions Precedent to Amendment. This Amendment shall become effective upon receipt by the Administrative Agent of a fully-executed and delivered copy of this Amendment.
4. Representations and Warranties. In order to induce the Administrative Agent and the Lenders to enter into this Amendment, Borrowers hereby represent and warrant that (a) the representations, warranties and agreements contained in Article 5 of the Credit Agreement, are true and correct in all material respects on and as of the date hereof, after giving effect to this Amendment (it being understood and agreed that any representation or warranty which by its terms is made as of a specified date shall be required to be true and correct in all material respects only as of such specified date); (b) no Event of Default or Potential Default exists on the date hereof, both before and after giving effect to this Amendment; and (c) the execution, delivery and performance by
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Borrowers of this Amendment have been duly authorized by all necessary corporate and other action and do not and will not require any registration with, amendment or approval of, notice to or action by, any Person (including any federal, foreign, state or local governmental authority) in order to be effective and enforceable.
5. Ratification. Except as expressly modified by Section 2 of this Amendment, all of the terms, provisions and conditions of the Credit Agreement and the other Loan Documents to which the Borrowers are a party shall remain unchanged and in full force and effect. The Credit Agreement and each other Loan Document to which the Borrowers are a party are hereby ratified and confirmed and shall remain in full force and effect according to their terms, as expressly modified by Section 2 of this Amendment. The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of Administrative Agent or the Lenders under the Credit Agreement or any of the other Loan Documents, or constitute a waiver of any provision of the Credit Agreement or any of the other Loan Documents. This Amendment shall not constitute a course of dealing with Administrative Agent or the Lenders at variance with the Credit Agreement or the other Loan Documents such as to require further notice by Administrative Agent or the Lenders to require strict compliance with the terms of the Credit Agreement and the other Loan Documents in the future. The Borrowers acknowledge and expressly agree that Administrative Agent or any of the Lenders reserve the right to, and do in fact, require strict compliance with all terms and provisions of the Credit Agreement and the other Loan Documents.
6. Entire Agreement. Borrowers acknowledge that: (a) there are no other agreements or representations, either oral or written, express or implied, relating to the amendments to the Credit Agreement and the Loan Documents set forth herein and other provisions hereof that are not embodied in this Amendment; (b) this Amendment represents a complete integration of all prior and contemporaneous agreements and understandings of the Lenders, the Administrative Agent and the Borrowers relating to the matters set forth herein; and (c) all such agreements, understandings, and documents are hereby superseded by this Amendment.
7. Inconsistency. In the event of an inconsistency between this Amendment and the Credit Agreement and/or the Loan Documents, the terms of this Amendment shall control.
8. Governing Law. THIS AMENDMENT SHALL BE DEEMED TO BE A CONTRACT UNDER THE LAWS OF THE STATE OF OHIO WITHOUT REGARD TO ITS CONFLICT OF LAWS PRINCIPLES.
9. Construction. The words “hereof”, “herein”, and “hereunder”, and other words of a similar import refer to this Amendment as a whole and not to the individual Sections in which such terms are used. References to Sections and other subdivisions of this Amendment are to the designated Sections and other subdivisions of this Amendment as originally executed. The headings of this Amendment are for convenience only and shall not define or limit the provisions hereof. Where the context so requires, words used in singular shall include the plural and vice versa, and words of one gender shall include all other genders.
10. Successors and Assigns. Upon execution and delivery of this Amendment, the provisions hereof shall be binding upon and inure to the benefit of the Lenders, the Administrative
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Agent and the Borrowers and their respective successors and assigns, subject to restrictions on assignment contained in the Credit Agreement and the Loan Documents.
11. References. From and after the date hereof, all references in the Credit Agreement and in each of the Loan Documents shall be deemed to be references to the Credit Agreement as amended hereby.
12. Counterparts; Facsimile Signatures Binding. This Amendment may be executed in counterparts, all of which, when taken together, shall constitute a single instrument. In making proof of this Amendment, it shall not be necessary to produce or account for more than one counterpart signed by each party hereto by and against which enforcement hereof is sought. Delivery of an executed counterpart of this Amendment by email .pdf, telefax or other electronic method of transmission shall be equally as effective as delivery of an original executed counterpart of this Amendment.
13. Recitals. The Recitals to this Amendment are incorporated herein as an integral part hereto.
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed pursuant to authority duly granted as of the date and year first written above.
PNC BANK, NATIONAL ASSOCIATION, individually and as Administrative Agent
By: /s/ Morey Wade
Name: Morey Wade
Title: Vice President
FIFTH THIRD BANK, N.A.
By: /s/ Megan S. Szewc
Name: Megan S. Szewc
Title: Vice President
THE HUNTINGTON NATIONAL BANK
By: /s/ Joshua D. Elsea
Name: Joshua D. Elsea
Title: Vice President
U.S. BANK NATIONAL ASSOCIATION
By: /s/ Bonnie S. Wiskowski
Name: Bonnie S. Wiskowski
Title: Vice President
BRANCH BANKING AND TRUST COMPANY
By: /s/ Greg R. Branstetter
Name: Greg R. Branstetter
Title: Senior Vice President
THE NORTHERN TRUST COMPANY
By: /s/ Joshua Metcalf
Name: Joshua Metcalf
Title: 2VP
CINCINNATI FINANCIAL CORPORATION
By: /s/ Michael J. Sewell
Name: Michael J. Sewell
Title: Chief Financial Officer
CFC INVESTMENT COMPANY
By: /s/ Michael J. Sewell
Name: Michael J. Sewell
Title: Chief Financial Officer
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