Cincinnati Financial: $80 Million In CATs

By Susanne Sclafane

NU Online News Service, July 2, 11:24 a.m.EST?Cincinnati Financial Corporation said today it'sfull-year combined ratio target of 101.3 is on track, but $80million in catastrophe and non-catastrophe losses may add 13.9points to the ratio for the second quarter.

Meeting its combined ratio target for the year would be animprovement of 2.5 points.

Second quarter figures broken down reflect pre-tax catastrophelosses of $45 million that will add 7.8 points and $35 million innon-catastrophe losses greater than $1 million, which will add 6.1points to the second-quarter combined ratio, the company said.

In second-quarter 2001, the company said it had $35 million inpre-tax cat losses and $21 million in large losses.

The catastrophe losses for this year's second quarter resultedfrom wind, hailstorms and associated flooding that occurred duringApril, May and June, primarily in the Midwest and Mid-Atlanticstates.

At $22.8 million, the largest loss event was a late April stormaffecting policyholders across 13 states, the company said, addingthat five other storms contributed to the loss total, includingthree June events with preliminary loss estimates totaling $15.6million.

The company said that the after-tax earnings impact of the catlosses is estimated to be 18 cents per share. In second-quarter2001, when the operating earnings came in at 29 cents per share forthe second quarter, catastrophes had an impact of 14 cents pershare.

The company also said that the non-catastrophe losses in excessof $1 million each, related to 23 occurrences, would affectafter-tax second-quarter 2002 earnings by an estimated 14 cents pershare. Last year's impact of similar large losses was only 8 centsper diluted share.

Chief Executive Officer John Schiff said, "Business growth andrising 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 therange that we have been experiencing."

He added, "As we continue our efforts to ensure adequate pricingto compensate us for the risks we accept, we believe that over thelonger term we will be able to maintain the ratio of larger lossesto the total business in an acceptable range."

Noting that catastrophe losses for the first six months of 2002are estimated at $59 million, contributing roughly 5.2 points tothe first-half combined ratio, Mr. Schiff said the company's targetfull-year 2002 combined ratio of 101.3 "remains within reach,assuming a more normal level of catastrophe losses for theremainder of the year."

For first quarter 2002, the insurer's combined ratio was96.3.

Last year, Cincinnati Financial's second-quarter and first-halfcombined ratios were 106.2 and 101.4, respectively. For the fullyear, the company reported a 103.6 combined ratio in 2001.

Cincinnati Financial plans to report final second-quarterresults on July 25. A conference call to discuss the results willbe held at 2:30 p.m. EDT on that day. Details regarding theInternet broadcast of the conference call can be found atwww.cinfin.com on the Investors page.