Catastrophe Losses Estimated at 7.8 Points of Second-Quarter Combined Ratio
Wind, hailstorms and associated flooding during April, May and June, primarily in Midwest and Mid-Atlantic states, are expected to result in an estimated $45 million in catastrophe losses. While the largest event at $22.8 million was a late April storm affecting policyholders across 13 states, five other storms contributed to the loss total, including three June events with preliminary loss estimates totaling $15.6 million.
Chief Executive Officer John J. Schiff, Jr., commented, "We dispatched storm teams to Kearney, Nebraska, and to Mason City, Iowa, to assist our local field claims representatives. We are in the business to pay claims promptly, fairly and personally, and our claims teams have done a good job of delivering on that promise."
The $45 million in catastrophe losses is expected to contribute approximately 7.8 points to the second-quarter 2002 combined ratio, with an after-tax earnings impact estimated at 18 cents per diluted share. 2001 second-quarter catastrophes added 6.9 points to the combined ratio for that period, impacting after-tax earnings by 14 cents per diluted share.
Large Losses Estimated at 6.1 Points of Second-Quarter Combined Ratio
With a week left in the second-quarter reporting cycle, 23 non-catastrophe losses above $1 million have been recorded for a total of approximately $35 million. At that level, these large losses are expected to contribute approximately 6.1 points to the second-quarter 2002 combined ratio and would affect after-tax earnings for the same period by an estimated 14 cents per diluted share. Second-quarter losses in this category during 2001 added 4.1 points to the ratio and affected after-tax earnings by 8 cents per diluted share.
Schiff commented, "Business growth and rising loss severity continue to lead to higher total large losses. When we also experience higher frequency of these larger losses, the impact on our quarterly combined ratio can move outside the range that we have been experiencing. As we continue our efforts to ensure adequate pricing to compensate us for the risks we accept, we believe that over the longer term we will be able to maintain the ratio of larger losses to the total business in an acceptable range."
2002 Combined Ratio Target Remains at 101.3 Percent
Schiff continued, "On this preliminary basis, catastrophe losses for first six months of 2002 are estimated at $59 million, which would contribute approximately 5.2 points to the year-to-date combined ratio. This compares with $41.7 million and 4.2 points reported for the first six months of 2001. As we continue to pursue initiatives to improve pricing and carefully underwrite new and renewal business, we believe our target of achieving a 101.3 percent combined ratio by year-end 2002 remains within reach, assuming a more normal level of catastrophe losses for the remainder of the year."
Cincinnati Financial plans to report final second-quarter results on Thursday, July 25. A conference call to discuss the results will be held at 2:30 p.m. EDT on that day. Details regarding the Internet broadcast of the conference call can be found at www.cinfin.com on the Investors page.
Cincinnati Financial Corporation offers property and casualty insurance, our main business, through The Cincinnati Insurance Company, The Cincinnati Indemnity Company and The Cincinnati Casualty Company. The Cincinnati Life Insurance Company markets life, disability income and long-term care insurance and annuities. CFC Investment Company supports the insurance subsidiaries and their independent agent representatives through commercial leasing and financing activities. CinFin Capital Management provides asset management services to institutions, corporations and individuals.
This is a "Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995. Certain forward-looking statements contained herein involve potential risks and uncertainties. The Company's future results could differ materially from those discussed. Factors that could cause or contribute to such differences include, but are not limited to: unusually high levels of catastrophe losses due to changes in weather patterns or other causes; the frequency and severity of claims; environmental events or changes; changes in insurance regulations, legislation or court decisions that place the Company at a disadvantage in the marketplace; adverse outcomes from litigation or administrative proceedings; recession or other economic conditions resulting in lower demand for insurance products; sustained decline in overall stock market values negatively affecting the Company's equity portfolio; delays in the development, implementation and benefits of technology enhancements; and decreased ability to generate growth in investment income.
Further, the Company's insurance businesses are subject to the effects of changing social, 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 ultimate changes and eventual effects, if any, of these initiatives are uncertain.
SOURCE Cincinnati Financial Corporation
CONTACT: Kenneth W. Stecher, Chief Financial Officer of Cincinnati
Financial Corporation, +1-513-603-5236
URL: http://www.cinfin.com