Cincinnati Financial Estimates Second-Quarter Cat Losses of $65 Million

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June 15, 2010 Tuesday 12:06 PM EST

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Cincinnati Financial Estimates Second-Quarter Cat Losses of $65 Million

Caroline J Saucer

CINCINNATI

Cincinnati Financial Corp. said it is estimating second-quarter pretax catastrophe losses of about $65 million.

A total of eight events, including a storm in June that mainly affected policyholders in northern Ohio, accounted for about half of the estimated second-quarter catastrophe losses. The other half was largely due to claims in Nashville, Tenn. for water-damaged business equipment and business interruption, Kenneth W. Stecher, Cincinnati Financial president and chief executive officer, said in a statement.

"It's spring weather," said Joan O. Shevchik, a company spokeswoman, noting last year's second quarter saw $118 million in cat losses and 2008 saw $113 million. "They tend to run high in that quarter; we are over the average but you can see it's well below the last two years. It's the wild card quarter. But it's our business, and we are prepared for that."

Stecher noted policyholders can buy all-risk coverage for some types of equipment and expanded coverage for business interruption as options with the company's commercial multiperil policy.

Storm losses in the second quarter have averaged 7.7 percentage points over the past 10 years, compared with a full-year average of 4.2 percentage points, Stecher said. If no additional catastrophe losses are incurred, the 2010 second-quarter estimate would stand at about 9 percentage points, he said.

In 2009, weather-related activity, along with a reduction in favorable development and adverse development in the workers' compensation line, produced a $128 million underwriting loss for Cincinnati Insurance Cos., according to BestLink, BestLink, which provides online access to A.M. Best's Global Insurance & Banking Database. These results were due to poor personal lines underwriting performance that continues to place a drag on overall underwriting profitability. However, management has worked to improve the performance of this segment, with enhanced pricing, improved risk selection and technology, and greater geographic diversification, BestLink said.

Most members of Cincinnati Insurance Cos. have a current Best's Financial Strength Rating of A+ (Superior).

Shares of Cincinnati Financial Corp (NASDAQ: CINF) were trading at $28 a share in the morning of June 15, up 0.11% from the previous close.

(By Caroline Saucer, editor, BestWeek: [email protected])

June 16, 2010

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