Cincinnati Financial Predicts Favorable Impacts to 4Q Results

NU Online News Service, Jan. 20, 1:24 p.m. EST

As many insurers and reinsurers are readying investors for a degree of disappointment in 2011 fourth-quarter earnings, Cincinnati Financial Corp. says it has some good news—favorable impacts.

Due to a reduction in its catastrophe loss estimate, improvements in commercial-lines pricing and better results on securities investment, Cincinnati Financial says it expects a reduction in its fourth-quarter combined ratio.

The business, home and auto insurer says it reduced pre-tax estimates for catastrophes that occurred before the fourth quarter and experienced better weather during the last three months of 2011.

Only two of year’s 30 catastrophic events occurred during the fourth quarter, and the company also benefitted during the fourth quarter from its use of reinsurance to spread risk.

As a result the company says it expects to report a positive contribution to underwriting income of between $20 million and $24 million, which will reduce the fourth-quarter combined ratio by up to 3.1 points based on what the company expects to record as earned premiums during the period.

Additionally, Cincinnati Financial says commercial lines renewal pricing increased in the low- to mid-single-digits during the fourth quarter, with the strongest pricing on December renewals.

“We are especially encouraged to see continued improvement of renewal pricing for commercial business, where pricing adequacy has been hampered by intense competition in recent years,” says Steven J. Johnston, president and chief executive officer, in a statement.

The company’s personal and excess and surplus lines segments also saw rate increases, Johnston adds, and net written and earned premiums grew across all lines by about 5 percent. Cincinnati Financial’s E&S segment grew at a double-digit pace, with net written premiums of about $18 million in the fourth quarter, he says.