Unassociated Document
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
11-K
FOR
ANNUAL REPORTS OF EMPLOYEE STOCK PURCHASE, SAVINGS AND
SIMILAR
PLANS PURSUANT TO SECTION 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
(Mark
One)
[X]
|
ANNUAL REPORT PURSUANT TO
SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For the
fiscal year ended December 31, 2009
OR
[ ]
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TRANSITION REPORT PURSUANT TO
SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For the
transition period from ___________________ to ___________________
Commission file number 000-04604
Cincinnati
Financial Corporation
Tax-Qualified
Savings Plan
(Full
title of the plan and the address of the plan,
if
different from that of the issuer named below)
Cincinnati
Financial Corporation
6200
South Gilmore Road
Fairfield,
OH 45014
(Name of
issuer of the securities held pursuant to the plan
and the
address of its principal executive office)
REQUIRED
INFORMATION
Items
1-3.
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The
information required by Items 1-3 is not required. See Item 4
below.
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Item 4.
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The
Cincinnati Financial Corporation Tax-Qualified Savings Plan is subject to
the requirements of ERISA. In lieu of the requirements of
Items 1-3 above, the Plan Financial Statements and Schedule
prepared in accordance with the Financial Reporting requirements of ERISA
are attached hereto and incorporated herein by
reference.
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Financial
Statements and Exhibits
23.1
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Consent
of Independent Registered Public Accounting
Firm
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Financial
statements as of and for the years ended December 31, 2009 and 2008, and
supplemental schedule as of December 31,
2009.
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SIGNATURES
The Plan. Pursuant
to the requirements of the Securities Exchange Act of 1934, the trustees
(or other persons who administer the employee benefit plan) have duly
caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
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Cincinnati
Financial Corporation
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Tax-Qualified Savings
Plan
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(Name
of Plan)
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DATE: June
29, 2010
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/s/ Gregory J.
Ziegler
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Gregory
J. Ziegler
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Vice
President and Director of Personnel
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and
Community Relations and
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Employee
Benefits Committee
Member
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Corporation
Tax-Qualified
Savings
Plan
Financial
Statements as of and for the
Years
Ended December 31, 2009 and 2008,
Supplemental
Schedule as of December 31, 2009,
and
Report of Independent Registered Public
Accounting
Firm
CINCINNATI
FINANCIAL CORPORATION
TAX-QUALIFIED
SAVINGS PLAN
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Page
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REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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1
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FINANCIAL
STATEMENTS:
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Statements
of Net Assets Available for Benefits as of December 31, 2009 and
2008
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2
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Statements
of Changes in Net Assets Available for Benefits for the
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Years
Ended December 31, 2009 and 2008
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3
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Notes
to Financial Statements as of and for the Years Ended December 31, 2009
and 2008
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4–11
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SUPPLEMENTAL
SCHEDULE —
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12
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Form
5500, Schedule H, Part IV, Line 4i — Schedule of Assets (Held at End of
Year)
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as
of December 31, 2009
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13
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NOTE:
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All
other schedules required by Section 2520.103-10 of the Department of
Labor’s Rules and Regulations for Reporting and Disclosure under the
Employee Retirement Income Security Act of 1974 have been omitted because
they are not applicable.
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REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Audit Committee of the Board of Directors of Cincinnati Financial Corporation,
and to the Participants of the Cincinnati Financial Corporation Tax-Qualified
Savings Plan
We have
audited the accompanying statements of net assets available for benefits of the
Cincinnati Financial Corporation Tax-Qualified Savings Plan (the “Plan”) as of
December 31, 2009 and 2008, and the related statements of changes in net assets
available for benefits for the years then ended. These financial statements are
the responsibility of the Plan's management. Our responsibility is to
express an opinion on these financial statements based on our
audits.
We
conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. The Plan
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Plan's internal control over
financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our
opinion, such financial statements present fairly, in all material respects, the
net assets available for benefits of the Plan as of December 31, 2009 and 2008,
and the changes in net assets available for benefits for the years then ended in
conformity with accounting principles generally accepted in the United States of
America.
Our
audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of
assets (held at end of year) as of December 31, 2009, is presented for the
purpose of additional analysis and is not a required part of the basic financial
statements, but is supplementary information required by the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. This schedule is the
responsibility of the Plan's management. Such schedule has been
subjected to the auditing procedures applied in our audit of the basic 2009
financial statements and, in our opinion, is fairly stated in all material
respects when considered in relation to the basic financial statements taken as
a whole.
/s/
Deloitte & Touche LLP
Cincinnati,
Ohio
June 25,
2010
CINCINNATI
FINANCIAL CORPORATION
TAX-QUALIFIED
SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER
31, 2009 AND 2008
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2009
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2008
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ASSETS:
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Participant-directed
investments (at fair value)
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$ |
127,106,505 |
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$ |
81,523,308 |
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Accrued
interest and dividends receivable
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139,017 |
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117,433 |
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NET
ASSETS AVAILABLE FOR BENEFITS AT FAIR VALUE
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$ |
127,245,522 |
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$ |
81,640,741 |
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Adjustment
from fair value to contract value for fully benefit-responsive investment
contracts
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166,246 |
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310,395 |
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NET
ASSETS AVAILABLE FOR BENEFITS
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$ |
127,411,768 |
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$ |
81,951,136 |
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See notes
to financial statements.
CINCINNATI
FINANCIAL CORPORATION
TAX-QUALIFIED
SAVINGS PLAN
STATEMENTS
OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEARS
ENDED DECEMBER 31, 2009 AND 2008
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2009
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2008
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ADDITIONS:
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Participant
contributions (including rollovers of $246,848
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and
$21,322,201 in 2009 and 2008, respectively)
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$ |
15,967,833 |
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$ |
32,787,080 |
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Employer
contributions
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8,553,138 |
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2,297,997 |
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Total
contributions
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24,520,971 |
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35,085,077 |
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Investment
income (loss):
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Net
appreciation (depreciation) in fair value of investments
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20,732,553 |
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(27,344,117 |
) |
Interest
and dividend income
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2,377,072 |
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3,938,907 |
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Total
investment income (loss)
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23,109,625 |
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(23,405,210 |
) |
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DEDUCTIONS
— Benefits paid to participants
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2,169,964 |
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2,217,232 |
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INCREASE
IN NET ASSETS
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45,460,632 |
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9,462,635 |
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NET
ASSETS AVAILABLE FOR BENEFITS:
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Beginning
of year
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81,951,136 |
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72,488,501 |
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End
of year
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$ |
127,411,768 |
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$ |
81,951,136 |
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See notes
to financial statements.
CINCINNATI
FINANCIAL CORPORATION
TAX-QUALIFIED
SAVINGS PLAN
NOTES
TO FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2009 AND 2008
1.
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DESCRIPTION
OF THE PLAN
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The
following description of the Cincinnati Financial Corporation Tax-Qualified
Savings Plan (the “Plan”) is provided for general information purposes only.
Participants should refer to the Plan Document for more complete
information.
General — The Plan is a
defined contribution plan eligible to substantially all employees of Cincinnati
Financial Corporation (the “Company”) who have attained age 21. Fifth Third
Bank (the “Trustee”) serves as the trustee of the Plan. Effective
December 3, 2004, Fifth Third Bank outsourced the Plan’s recordkeeping
function to FASCore. The Plan commenced January 1, 1996, and is subject to
the provisions of the Employee Retirement Income Security Act of 1974 (ERISA),
as amended.
Contributions —
Participants may contribute up to 25 percent of their pretax annual compensation
each year, as defined in the Plan, subject to certain Internal Revenue Code
limitations. A company match was introduced to the Plan effective
September 1, 2008. The match is 100 percent of the first 6 percent of
eligible compensation. Participants who accrue benefits under the
Cincinnati Financial Corporation Retirement Plan are not eligible for the
company match. The Company match is invested according to the participants’
investment direction. Contributions from participants and the Company are
recorded on each pay period from Plan participants. Also effective
September 1, 2008, eligible participants are automatically enrolled in the Plan
at a three percent contribution rate to encourage associate savings. Effective
January 1, 2009, the Plan was amended to clarify its provisions pertaining to
the automatic increase of a participant’s contribution rate by 1
percent each year to a maximum 6 percent contribution. Each
participant has the opportunity to elect to withdraw prior to automatic
enrollment or at any time once enrolled. Beginning on January 1,
2009, the Company may make a discretionary profit sharing contribution to
eligible participants. A participant who is not enrolled in the
Company’s high deductible group health plan is eligible for the discretionary
profit sharing contribution. The Company’s profit sharing
contribution was $1,034,745 during 2009.
Participants
may also contribute amounts representing distributions from the other qualified
defined benefit or defined contribution plans
(“Rollover”). During 2008, the Company froze entry into the
Company sponsored defined benefit plan for new associates. Participants under 40
years of age who were participating in the defined benefit plan received a
payout of their accrued balances during 2008. Participants over 40 years of
age had the option of receiving a payout of their accrued balances or remaining
in the defined benefit plan. Participants who left the defined benefit plan had
the option of receiving their retirement benefit as a cash payout or
rolling the amount over to the Plan or other tax-qualified retirement
account. The rollover from the defined benefit plan to the Plan was $20,069,418
during 2008. Rollovers from other qualified plans were $246,848
during 2009 and $1,252,783 during 2008.
Participant Accounts —
Individual accounts are maintained for each plan participant. Each participant’s
account is credited with the participant’s contribution and allocations of Plan
earnings
and
charged with withdrawals and allocations of Plan losses. Allocations are based
on participant earnings or account balances, as defined. The benefit to which a
participant is entitled is the benefit that can be provided from the
participant’s vested account.
Investments —
Participants direct the investment of their contributions into various
investment options offered by the Plan which include the Company’s common stock
fund, various mutual funds and a stable value fund.
Vesting — Participants
are vested immediately in their contributions plus actual earnings thereon and
vested in the Company contribution and profit sharing contribution plus actual
earnings thereon after three years of eligible service. Unvested
participants who are employed by the Company will become fully vested in the
Company and profit sharing contribution upon reaching their retirement
age.
Participant Loans —
Participants may borrow from their fund accounts up to a maximum of $50,000 or
50 percent of their account balance, whichever is less. The loans are secured by
the balance in the participant’s account and bear interest rates equal to the
prime rate plus one percent. At December 31, 2009, interest rates on participant
loans ranged from 4.25% to 9.25%, with maturity dates through May 2038.
Principal and interest is paid ratably through payroll deductions over a period
of up to five years, except for loans used to purchase a primary residence which
are repaid via payroll deduction within a reasonable period as defined by the
Plan. Principal and interest paid is credited to applicable funds in the
borrower’s account. Upon participant termination or retirement, the outstanding
loan balance is treated as a distribution to the participant.
Payment of Benefits — The
Plan provides for benefits to be paid upon retirement, disability, death or
separation other than retirement as defined by the Plan document. The Plan also
provides for hardship withdrawals to occur as outlined in the Plan document.
Plan benefits may be made in a lump sum of cash or shares of Company common
stock.
Forfeited Accounts –
Forfeitures of terminated participants’ nonvested accounts may be used to
restore forfeitures, pay plan expenses and/or reduce the Company’s matching and
profit sharing contributions. Forfeitures were $11,067 and $796
during the years ended December 31, 2009 and 2008, respectively. The forfeiture
amounts are reinvested into the Fifth Third Stable Value Fund until it is
determined how such funds should be allocated in accordance with plan
provisions.
2.
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SUMMARY
OF SIGNIFICANT ACCOUNTING
POLICIES
|
Basis of Accounting — The
accompanying financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of
America.
Use of Estimates — The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of net assets
available for benefits and changes therein. Actual results could differ from
those estimates. The Plan utilizes various investment instruments. Investment
securities, in general, are exposed to various risks, such as interest rate,
credit and overall market volatility risks. Due to the level of risk associated
with certain investment securities, it is reasonably possible that changes in
the values of investment securities will occur in the near term and that such
changes could materially affect the amounts reported in the financial
statements.
Investment Valuation and Income
Recognition — The Plan’s investments are stated at fair value,
except as described below. The Plan’s mutual funds are valued based on
observable quoted market
prices.
The Plan’s other investments are valued based upon the fair value of the funds’
underlying investments. Participant loans are valued at the outstanding loan
balances which approximates fair value.
Common
collective trust funds with underlying investments in investment contracts are
valued at the fair value of the underlying investments and then adjusted by the
issuer to contract value. See Note 5 for additional
disclosures.
Purchases
and sales of securities are recorded on a trade-date basis. Interest income is
recorded on the accrual basis. Dividends are recorded on the ex-dividend
date.
Administrative Expenses —
Trustee fees and other expenses of the Plan are paid by the
Company.
Payment of Benefits —
Benefit payments to participants are recorded upon distribution. There were no
amounts allocated to accounts of persons who have elected to withdraw from the
Plan but have not yet been paid at December 31, 2009 and 2008.
Adopted Accounting Standards —
In April 2009, the Financial Accounting Standards Board (FASB) issued Accounting
Standards Codification (ASC) 820-10-65-4, Determining Fair Value When the Volume
and Level of Activity for the Asset or Liability Have Significantly Decreased
and Identifying Transactions That Are Not Orderly. ASC 820-10-65-4 is an
amendment of ASC 820-10, Fair Value Measurements. ASC 820-10-65-4 applies to all
assets and liabilities and provides guidance on measuring fair value when the
volume and level of activity has significantly decreased and guidance on
identifying transactions that are not orderly. ASC 820-10-65-4 requires annual
disclosures of the inputs and valuation techniques used to measure fair value
and a discussion of changes in valuation techniques and related inputs, if any,
that occurred during the period. The Plan has adopted this ASC, which is
effective for annual reporting periods ending after June 15, 2009. It
did not have a material impact on the Plan’s statements of net assets or changes
in net assets available for benefits.
In May
2009, the FASB issued ASC 855, Subsequent Events. ASC 855 provides
guidance on the disclosure of events that occur after the balance sheet date but
before financial statements are issued or are available to be
issued. ASC 855 defines the circumstances under which an entity
should recognize such events or transactions and the related disclosures of such
events or transactions that occur after the balance sheet date. The Plan adopted
this ASC, which is effective for annual reporting periods ending after June 15,
2009. It did not have a material impact on the Plan’s statements of
net assets or changes in net assets available for benefits.
In June
2009, the FASB issued ASC 105, The FASB Accounting Standards Codification™ and
the Hierarchy of Generally Accepted Accounting Principles–a replacement of FASB
Statement No. 162. ASC 105 establishes a single source of authoritative,
nongovernmental U.S. GAAP, except for rules
and
interpretive releases of the Securities and Exchange Commission. The Plan
has adopted this ASC, which is effective for annual reporting periods ending
after September 15, 2009. It did not have an impact on the Plan’s
statements of net assets or changes in net assets available for benefits as it
does not change authoritative guidance.
In
September 2009, the FASB issued Accounting Standards Update (ASU) 2009-12,
Investments in Certain Entities That Calculate Net Asset Value per Share
(or Its Equivalent). ASU 2009-12 provides guidance on estimating fair value of
alternative investments when using the net asset value per share provided by the
investment entity. The Plan has adopted this ASU, which is effective
for annual periods ending after December 15, 2009, with early adoption
permitted. It did not have a material impact on the Plan’s statements of net
assets or changes in net assets available for benefits.
Recent Accounting Updates, ASU
2010-06, Fair Value Measurements and
Disclosures —
In January 2010, the FASB issued ASU 2010-06, Fair Value Measurements and
Disclosures. ASU 2010-06 applies to all entities that are required to make
disclosures about recurring or nonrecurring fair value measurements. ASU 2010-06
provides guidance on additional disclosures on any significant transfers in and
out of Level 1 and Level 2 and a description of the transfer. ASU
2010-6 also requires separate disclosures of the activity in the Level 3
category related to any purchases, sales, issuances, and settlements on a gross
basis. The effective date of the new disclosures regarding Level 1 and Level 2
categories is for annual periods beginning after December 15, 2009. The
effective date of the disclosures regarding Level 3 category purchases, sales,
issuances and settlements is for annual periods beginning after December 15,
2010. We do not anticipate the standard to have a material impact on the Plan as
it focuses on additional disclosures.
Subsequent Events —
There were no subsequent events requiring adjustment to, or disclosure
in, the financial statements.
The
Plan’s investments that represented 5 percent or more of the Plan’s net assets
available for benefits as of December 31, 2009 and 2008 were as
follows:
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2009
|
|
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2008
|
|
|
|
Dodge
& Cox Stock Fund
|
|
$ |
13,821,437 |
|
|
$ |
8,650,550 |
|
|
|
T.
Rowe Price Growth Stock Fund
|
|
|
12,836,875 |
|
|
|
7,784,965 |
|
*
|
|
Cincinnati
Financial Corporation (CINF)
|
|
|
|
|
|
|
|
|
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Common
Stock and Money Market Funds
|
|
|
9,315,601 |
|
|
|
8,790,388 |
|
*
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|
Fifth
Third LifeModel Moderate INSTL
|
|
|
10,050,831 |
|
|
|
6,747,577 |
|
*
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|
Fifth
Third Stable Value Fund (C)**
|
|
|
10,127,985 |
|
|
|
7,289,259 |
|
|
|
Touchstone
Mid Cap Growth Fund -A
|
|
|
9,298,652 |
|
|
|
6,315,361 |
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|
Dodge
& Cox International Stock Fund - A
|
|
|
7,890,849 |
|
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|
*** |
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Royce
Premier Fund
|
|
|
7,266,656 |
|
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|
4,186,661 |
|
*
Party-in interest.
** Fair
value was $9,961,739 and $6,978,864 as of December 31, 2009 and 2008,
respectively.
***The
fund was less than 5 percent of the Plan’s net assets available for benefits for
the year indicated.
During
2009 and 2008, the Plan’s investments (including gains and losses on investments
bought and sold, as well as held during the year) appreciated (depreciated) in
value as follows:
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2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Mutual
funds:
|
|
|
|
|
|
|
|
|
Large
Cap Funds
|
|
$ |
8,171,108
|
|
|
$ |
(10,673,574
|
) |
Mid
Cap Funds
|
|
|
3,670,095
|
|
|
|
(4,726,535
|
) |
Small
Cap Funds
|
|
|
3,232,313
|
|
|
|
(2,857,287
|
) |
Balanced
Funds
|
|
|
1,947,387
|
|
|
|
(1,628,795
|
) |
International
Funds
|
|
|
3,682,177
|
|
|
|
(4,553,449
|
) |
Bond
Funds
|
|
|
644,296
|
|
|
|
(918,825 |
) |
Total
|
|
|
21,347,376
|
|
|
|
(25,358,465 |
) |
|
|
|
|
|
|
|
|
|
Common
stock
|
|
|
(614,823 |
) |
|
|
(1,985,652 |
) |
|
|
|
|
|
|
|
|
|
Net
appreciation (depreciation) of investments
|
|
$ |
20,732,553 |
|
|
$ |
(27,344,117 |
) |
4.
|
FAIR
VALUE MEASUREMENTS
|
In
accordance with fair value measurements and disclosures, the Plan categorized
its financial instruments, based on the priority of the observable and
market-based data for valuation technique, into a three-level fair value
hierarchy. The fair value hierarchy gives the highest priority to quoted prices
with readily available independent data in active markets for identical assets
or liabilities (Level 1) and the lowest priority to unobservable market inputs
(Level 3). When various inputs for measurement fall within different levels of
the fair value hierarchy, the lowest observable input that has a significant
impact on fair value measurement is used.
Financial
instruments are categorized based upon the following characteristics or inputs
to the valuation techniques:
|
·
|
Level
1 – Financial assets and liabilities for which inputs are observable and
are obtained from reliable quoted prices for identical assets or
liabilities in actively traded markets. This is the most reliable fair
value measurement and includes, for example, active exchange-traded equity
securities.
|
|
·
|
Level
2 – Financial assets and liabilities for which values are based on quoted
prices in markets that are not active or for which values are based on
similar assets and liabilities that are actively traded. This also
includes pricing models which the inputs are corroborated by market
data.
|
|
·
|
Level
3 – Financial assets and liabilities for which values are based on prices
or valuation techniques that require inputs that are both unobservable and
significant to the overall fair value
measurement.
|
The
methods described above may produce a fair value calculation that may not be
indicative of net realizable value or reflective of future fair values.
Furthermore, while the Plan believes its valuation methods are appropriate and
consistent with other market participants, the use of different methodologies or
assumptions to determine the fair value of certain financial instruments could
result in a different fair value measurement.
The
following tables illustrate the fair value hierarchy for those assets measured
at fair value on a recurring basis for the period ended December 31, 2009 and
2008. The Plan does not have any liabilities carried at fair value. There
were no transfers between Level 1 and Level 2.
|
|
Asset fair value measurements at December 31, 2009 using:
|
|
|
|
Quoted prices in
active markets for
identical assets
(Level 1)
|
|
|
Significant
other observable
inputs
(Level 2)
|
|
|
Significant
unobservable
inputs
(Level 3)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registered
investment companies:
|
|
|
|
|
|
|
|
|
|
|
|
|
Large
Cap Funds
|
|
$ |
35,744,009 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
35,744,009 |
|
Mid
Cap Funds
|
|
|
14,579,309 |
|
|
|
- |
|
|
|
- |
|
|
|
14,579,309 |
|
Small
Cap Funds
|
|
|
16,364,213 |
|
|
|
- |
|
|
|
- |
|
|
|
16,364,213 |
|
Balanced
Funds
|
|
|
16,652,859 |
|
|
|
- |
|
|
|
- |
|
|
|
16,652,859 |
|
International
Funds
|
|
|
14,077,498 |
|
|
|
- |
|
|
|
- |
|
|
|
14,077,498 |
|
Bond
Funds
|
|
|
8,602,849 |
|
|
|
- |
|
|
|
- |
|
|
|
8,602,849 |
|
Total
|
|
|
106,020,737 |
|
|
|
- |
|
|
|
- |
|
|
|
106,020,737 |
|
CINF
common stock and money market funds
|
|
|
9,315,601 |
|
|
|
- |
|
|
|
- |
|
|
|
9,315,601 |
|
Common
collective trusts
|
|
|
- |
|
|
|
9,961,739 |
|
|
|
- |
|
|
|
9,961,739 |
|
Participant
loans receivable
|
|
|
- |
|
|
|
- |
|
|
|
1,808,428 |
|
|
|
1,808,428 |
|
Total
|
|
$ |
115,336,338 |
|
|
$ |
9,961,739 |
|
|
$ |
1,808,428 |
|
|
$ |
127,106,505 |
|
|
|
Asset fair value measurements at December 31, 2008 using:
|
|
|
|
Quoted prices in
active markets for
identical assets
(Level 1)
|
|
|
Significant
other observable
inputs
(Level 2)
|
|
|
Significant
unobservable
inputs
(Level 3)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registered
investment companies:
|
|
|
|
|
|
|
|
|
|
|
|
|
Large
Cap Funds
|
|
$ |
21,002,215 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
21,002,215 |
|
Mid
Cap Funds
|
|
|
9,456,256 |
|
|
|
- |
|
|
|
- |
|
|
|
9,456,256 |
|
Small
Cap Funds
|
|
|
9,530,212 |
|
|
|
- |
|
|
|
- |
|
|
|
9,530,212 |
|
Balanced
Funds
|
|
|
10,169,553 |
|
|
|
- |
|
|
|
- |
|
|
|
10,169,553 |
|
International
Funds
|
|
|
7,494,485 |
|
|
|
- |
|
|
|
- |
|
|
|
7,494,485 |
|
Bond
Funds
|
|
|
6,636,412 |
|
|
|
- |
|
|
|
- |
|
|
|
6,636,412 |
|
Total
|
|
|
64,289,133 |
|
|
|
- |
|
|
|
- |
|
|
|
64,289,133 |
|
CINF
common stock and money market funds
|
|
|
8,790,388 |
|
|
|
- |
|
|
|
- |
|
|
|
8,790,388 |
|
Common
collective trusts
|
|
|
- |
|
|
|
6,978,864 |
|
|
|
- |
|
|
|
6,978,864 |
|
Participant
loans receivable
|
|
|
- |
|
|
|
- |
|
|
|
1,464,923 |
|
|
|
1,464,923 |
|
Total
|
|
$ |
73,079,521 |
|
|
$ |
6,978,864 |
|
|
$ |
1,464,923 |
|
|
$ |
81,523,308 |
|
Below is
a reconciliation of Level 3 assets measured at fair value for the period ended
December 31, 2009 and December 31, 2008. The fair value of participant loans,
the only Level 3 assets, are measured based on the expected cash flows of the
outstanding loan balances.
|
|
Asset fair value measurements using significant unobservable inputs (Level 3)
|
|
|
|
|
Participant
Loans
|
|
Beginning
balance, January 1, 2009
|
|
|
$ |
1,464,923 |
|
Purchases,
sales, issuances, and settlements, net
|
|
|
|
343,505 |
|
Ending
balance, December 31, 2009
|
|
|
$ |
1,808,428 |
|
|
|
Asset fair value measurements using significant unobservable inputs (Level 3)
|
|
|
|
|
Participant
Loans
|
|
Beginning
balance, January 1, 2008
|
|
|
$ |
1,317,327 |
|
Purchases,
sales, issuances, and settlements, net
|
|
|
|
147,596 |
|
Ending
balance, December 31, 2008
|
|
|
$ |
1,464,923 |
|
The Fifth
Third Stable Value Fund (the Fund) is a stable value fund that is a common
collective trust fund. The Fund invests primarily in a variety of
investment contracts such as guaranteed investment contracts (GICs) issued by
insurance companies and other financial institutions and other investment
products (synthetic GICs) with similar characteristics. The Statements of Net
Assets Available for Benefits present the fair value of the Plan’s investment in
the Fund as well as the adjustment of that investment from fair value to
contract value. The adjustment from fair value to contract value for the Plan’s
investment in the Fund was $166,246 and $310,395 at December 31, 2009 and 2008,
respectively. The Statement of Changes in Net Assets Available for Benefits is
prepared on a contract value basis.
Participants
may direct the withdrawal or transfer of all or a portion of their investment at
contract value. Contract value represents contributions made to the
fund, plus earnings, less participant withdrawals. There are no
unfunded commitments or restrictions on redemption frequency for the
Fund.
Benefit-responsive
investment contracts, including GIC’s and wrap (synthetic) contracts are
agreements with high quality banks and insurance companies, which are designed
to help preserve principal and provide a stable crediting rate. These
contracts are fully benefit-responsive and provide that plan participant
initiated withdrawals permitted under a participating plan will be paid at
contract value. In addition to certain wrap agreement termination
provisions discussed below, the contracts generally provide for withdrawals
associated with certain events which are not in the ordinary course of fund
operations, and that the issuer determines what will have a material adverse
effect on the issuer’s financial interest, and what will be paid with a market
value adjustment to the contract value amount of such withdrawal as defined in
such contracts.
While
each contract issuer specifies the events which may trigger such a market value
adjustment, typically such events include all or a portion of the
following: (i) amendments to the Fund documents or Fund’s
administration; (ii) changes to Fund’s prohibition on competing investment
options by participating plans or deletion of equity wash provisions; (iii)
complete or partial termination of the Fund or its merger with another fund;
(iv) the failure of the Fund or its trust to qualify for exemption from federal
income taxes or any required prohibited transaction exemption under ERISA; (v)
unless made in accordance with the withdrawal provisions of the Fund, the
redemption of all or a portion of the interests in the Fund held by a
participating plan at the direction of the participating plan sponsor, including
withdrawals due to the removal of a specifically identifiable group of employees
from coverage under the participating plan, or the closing or sale of a
subsidiary, employing unit or affiliate, the bankruptcy or insolvency of a plan
sponsor, the merger of the plan with another plan, or the plan sponsor’s
establishment of another tax qualified defined contribution plan; (vi) any
change in law, regulation, ruling, administrative or judicial position or
accounting requirement, in any case applicable to the Fund or participant plans,
and (vii) the delivery of any communication to plan participants designed to
influence a participant not to invest in the Fund.
GIC’s
generally do not permit issuers to terminate the agreement prior to the
scheduled maturity date. Wrap contracts generally are evergreen
contracts that contain termination provisions. Wrap agreements permit
the Fund’s investment manager or issuer to terminate upon notice at any time at
market value and provide for automatic termination of the wrap contract if the
book value or the market value of the contract equals zero. The
issuer is not excused from paying the excess contract value when the market
value equals zero. Wrap contracts that permit the issuer to terminate
at market value generally provide that the Fund may elect to convert such
termination to an Amortization Election as described below. In
addition, if the Fund defaults in its obligations under the agreement (including
the issuer’s determination that the agreement constitutes a non-exempt
prohibited transaction as defined under ERISA) and such default is not cured
within the time permitted by any cure period, then the wrap contract may be
terminated by the issuer and the Fund will receive the market value as of the
date of termination. Also, wrap contracts generally permit the issuer
or investment manager to elect at any time to convert the wrapped portfolio to a
declining duration strategy whereby the contract would terminate at a date which
corresponds to the duration of the underlying fixed income portfolio on the date
of the amortization election (Amortization Election). After the
effective date of an Amortization Election, the fixed income portfolio must
conform to the guidelines agreed upon by the wrap issuer and the investment
manager for the Amortization Election period. Such guidelines are
intended to result in contract value equaling market value of the wrapped
portfolio by such termination date.
For the
years ended December 31, 2009 and 2008, the average yield for the entire
Fund based on actual earnings was 2.74% and 4.61%, respectively.
For the
years ended December 31, 2009 and 2008, the average yield adjusted to
reflect the actual interest rate credited to participants was 2.21% and 3.07%,
respectively.
6.
|
PARTY-IN-INTEREST
TRANSACTIONS
|
Certain
Plan investments are shares of mutual funds managed by the Fifth Third Bank.
Fifth Third Bank is the trustee as defined by the Plan and, therefore, these
transactions qualify as exempt party-in-interest transactions. Fees paid by the
Plan for investment management services were included as a reduction of the
return earned on each fund.
At
December 31, 2009 and 2008, the Plan held 351,960 and 301,109 shares,
respectively, of common stock of Cincinnati Financial Corporation, the
sponsoring employer, with a cost basis of $11,205,933 and $10,117,012,
respectively. During the years ended December 31, 2009 and 2008, the Plan
recorded dividend income from shares of Cincinnati Financial Corporation of
$529,388 and $369,041, respectively.
Although
it has not expressed any intention to do so, the Company has the right under the
Plan to terminate the Plan subject to the provisions set forth in
ERISA.
8.
|
FEDERAL
INCOME TAX STATUS
|
The Plan
uses a prototype plan document sponsored by the Trustee. The Trustee received an
opinion letter from the Internal Revenue Service (the “IRS”), dated
November 19, 2001, which states that the prototype document satisfies the
applicable provisions of the Internal Revenue Code (the “IRC”). The Plan has
subsequently been amended and has applied for a determination
letter. The Plan is awaiting response from the IRS. The Company
believes the Plan is currently designed and operated as a tax-qualified plan in
compliance with the applicable requirements of the IRC. Therefore, no
provision for income taxes has been included in the Plan’s financial
statements.
9.
|
RECONCILIATION
OF FINANCIAL STATEMENTS TO FORM
5500
|
The
following is a reconciliation of net assets available for benefits per the
financial statements to the Form 5500:
|
|
2009
|
|
|
2008
|
|
Net
assets available for benefits per the financial statements
|
|
$ |
127,411,768 |
|
|
$ |
81,951,136 |
|
Adjustment
from contract value to fair value for fully benefit-responsive investment
contracts
|
|
|
(166,246 |
) |
|
|
(310,395 |
) |
Net
assets available for benefits per the Form 5500
|
|
$ |
127,245,522 |
|
|
$ |
81,640,741 |
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
2008
|
|
Net
increase in net assets available for benefits per the financial
statements
|
|
$ |
45,460,632 |
|
|
$ |
9,462,635 |
|
December
31, 2009 adjustment from contract value to fair value for fully
benefit-responsive investment contracts
|
|
|
(166,246 |
) |
|
|
|
|
December
31, 2008 adjustment from contract value to fair value for fully
benefit-responsive investment contracts
|
|
|
310,395 |
|
|
|
(310,395 |
) |
Net
increase in net assets available for benefits per the Form
5500
|
|
$ |
45,604,781 |
|
|
$ |
9,152,240 |
|
SUPPLEMENTAL
SCHEDULE
|
CINCINNATI
FINANCIAL CORPORATION
|
|
|
|
|
TAX-QUALIFIED
SAVINGS PLAN
|
|
|
|
|
|
|
|
|
|
|
|
FORM
5500, SCHEDULE H PART IV, LINE 4i--
|
|
|
|
|
SCHEDULE
OF ASSETS (HELD AT END OF YEAR)
|
|
|
|
|
DECEMBER 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Identity
of Issuer
|
|
Description
of Investment
|
|
Fair
Value***
|
|
|
|
|
|
|
|
|
*
|
Fifth
Third Funds
|
|
Fifth
Third Bond INSTL
|
|
$ |
3,868,206 |
|
*
|
Fifth
Third Funds
|
|
Fifth
Third Stable Value Fund (C)
|
|
|
9,961,739 |
|
*
|
Fifth
Third Funds
|
|
Fifth
Third Equity Index INSTL
|
|
|
2,813,511 |
|
*
|
Fifth
Third Funds
|
|
Fifth
Third LifeModel Aggressive INSTL
|
|
|
588,502 |
|
*
|
Fifth
Third Funds
|
|
Fifth
Third LifeModel Conservative INSTL
|
|
|
355,993 |
|
*
|
Fifth
Third Funds
|
|
Fifth
Third LifeModel Mod Agg INSTL
|
|
|
5,146,384 |
|
*
|
Fifth
Third Funds
|
|
Fifth
Third LifeModel Mod Cons INSTL
|
|
|
1,099,651 |
|
*
|
Fifth
Third Funds
|
|
Fifth
Third LifeModel Moderate INSTL
|
|
|
10,050,831 |
|
|
Artisan
|
|
International
Fund
|
|
|
6,186,649 |
|
|
Dodge
& Cox
|
|
Dodge
& Cox Stock Fund
|
|
|
13,821,437 |
|
|
Dodge
& Cox
|
|
Dodge
& Cox International Stock Fund - A
|
|
|
7,890,849 |
|
|
Dreyfus
|
|
Small
Cap Stock Index Fund
|
|
|
1,786,745 |
|
|
Goldman
Sachs
|
|
Core
Fixed - Inc INSTL
|
|
|
4,734,643 |
|
|
Goldman
Sachs
|
|
Mid
Value Fund - A
|
|
|
2,692,238 |
|
|
Federated
|
|
Mid
Cap Index Fund - A
|
|
|
2,588,419 |
|
|
Royce
|
|
Premier
Fund
|
|
|
7,266,656 |
|
|
Touchstone
|
|
Mid
Cap Growth Fund - A
|
|
|
9,298,652 |
|
|
T.
Rowe Price
|
|
New
Horizon Fund
|
|
|
1,268,610 |
|
|
T.
Rowe Price
|
|
Growth
Stock Fund
|
|
|
12,836,875 |
|
|
T.
Rowe Price
|
|
Equity
Income Fund
|
|
|
2,111,194 |
|
|
Allianz
|
|
Small
Cap Value Fund
|
|
|
6,042,202 |
|
|
American
Funds
|
|
Growth
Fund of America R3
|
|
|
2,526,051 |
|
|
Davis
New York
|
|
Davis
New York Venture Fund - A
|
|
|
1,046,439 |
|
*
|
Cincinnati
Financial Corporation
|
|
Common
stock and money market funds
|
|
|
9,315,601 |
|
*
|
Participant
Loans**
|
|
|
|
|
1,808,428 |
|
|
|
|
|
|
$ |
127,106,505 |
|
|
|
|
|
|
|
|
|
*
|
Party-in-interest
|
|
|
|
|
|
|
**
|
The
interest rates on these loans range from 4.25% to 9.25%, with maturity
dates through May 2038.
|
|
***
|
Cost
information is not required for participant-directed investments and,
therefore, is not included.
|
|