Cincinnati Financial Corp. expects its property casualty group to see pre-tax catastrophe losses, net of reinsurance, of $150 million to $200 million due to severe weather during April.
Catastrophe losses affect property casualty insurance underwriting income, one of the sources of consolidated net income along with profits from investment operations and life insurance operations.
Steven J. Johnston, president and chief executive officer, commented, “While spring storms typically raise second-quarter catastrophe losses above the quarterly average, the devastation caused by the late April tornado outbreak in southern states had a more dramatic impact. The cost of this event goes well beyond industry estimates of multi-state property damage ranging from $4 billion to $6 billion.”
He said that during the past 10 years, catastrophes have caused the company’s second-quarter loss ratio to average 8.5 percentage points compared with a full-year average of 4.4 points. The impact of the April 2011 cat losses on Cincinnati Financial’s second-quarter loss ratio is expected to be approximately 21 to 28 percentage points, net of reinsurance and based on estimated earned premiums for the second-quarter, Johnson said.
“The tornado outbreak in late April caused losses exceeding $45 million, which is the amount of loss we retain for a single catastrophic event before our reinsurers cover further losses. We expect recovery from our reinsurers of significant losses incurred above our retention level. To reinstate our reinsurance coverage for further 2011 property catastrophes, we will cede an estimated $26 million of premiums to our reinsurers, reducing second-quarter 2011 earned premiums by that amount,” Johnson added.
Cincinnati Financial special claims representatives are assisting agents and local claims personnel in handling the more than 9,000 claims reported by policyholders due to April storms, the company said.
Source: Cincinnati Financial Corp.
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