Cincinnati Financial Q2 2010 Income Up from Previous Year

Cincinnati Financial Corp. saw net income for the second quarter of 2010 rise to $27 million compared with a net loss of $19 million for the same period in 2009. Operating income for the quarter was $42 million compared with an operating loss of $5 million in the previous year.

Driving the improved second quarter results were the after-tax net effects of a $7 million rise in investment income and a $44 million decrease in the property/casualty insurance underwriting loss, the company reported.

Underwriting results improved despite high weather-related catastrophe losses that moderated somewhat compared with second quarter 2009 catastrophe losses while exceeding early estimates announced on June 14. Partially offsetting the catastrophe losses were higher contributions from favorable development of reserved loss estimates for insurance claims related to events that occurred prior to 2010.

Cincinnati Financial’s property/casualty combined ratio for the second quarter of 2010 was 107.6, an improvement of 9 percentage points from the year before.

The company saw a 4 percent increase in property casualty net written premiums, including personal lines segment growth of 7 percent.

Property/casualty new business written by agencies was $106 million for the second quarter of 2010; $11 million was contributed in the second quarter by all agencies appointed since the beginning of 2009.

Kenneth W. Stecher, president and chief executive officer, commented, “Cincinnati Financial stayed focused and disciplined in the second quarter, making progress against continuing headwinds of industry, economic and literal storms. The second quarter brought reasonable premium growth, a narrower underwriting loss and solid growth of investment income over last year’s low point. Our position and results as of June 30 showed that we are poised for improved results in our insurance operations, independent of the still-awaited turn in the commercial insurance marketplace. We believe that our strategic initiatives are beginning to produce benefits that will multiply over the coming months and years.”

An expansion in personal lines and the addition of excess and surplus lines accounted for nearly 75 percent of the company’s growth in written premium for the second quarter, Stecher said.

“In commercial lines, our retention rate on renewal policies continues at a very satisfactory level while we are writing less new business, including fewer larger accounts that tend to be underpriced due to competition,” he said. “As planned, agents in our newer commercial states — Texas, Colorado and Wyoming — increased six-month new business premiums by $11 million, partially offsetting declines in established states.

“We are approximately halfway to our 2010 goal of appointing 65 new agencies that in total write more than $1 billion of annual property casualty premium with all carriers.

“Second-half 2010 appointments will include our first agencies in Connecticut and Oregon. As new agency relationships mature, we work to become their No. 1 or No. 2 carrier, typically writing about 10 percent of total agency premium volume within 10 years.

“With expansion to states outside of the Midwest and South, we also expect growth of our market share within these new agencies to support geographical diversification, reducing volatility of financial results from catastrophes.”

Stecher added that the company’s “capital and liquidity continued to be very strong at June 30, 2010. Our more than $1 billion of cash and marketable securities at the parent company level would be sufficient to cover all of our corporate debt while preserving our insurance subsidiaries’ very strong surplus and capacity for growth.”

Source: Cincinnati Financial Corp.

Topics Trends Agencies Profit Loss Property Property Casualty Casualty