CINCINNATI (AP) — Insurer Cincinnati Financial Corp. said Wednesday that its Cincinnati Insurance Cos. expects to post catastrophe losses in the second quarter of $150 million to $200 million.
The amounts are pretax and net of reinsurance, the company said. The losses are due to severe weather in the southern United States in April.
While spring storms typically raise the catastrophe losses above the quarterly average, this year's tornado outbreak had a more dramatic effect, CEO Steven J. Johnston said.
“The cost of this event goes well beyond industry estimates of multistate property damage ranging from $4 billion to $6 billion,” he said. More than 300 lives were lost in the storms.
Hundreds Dead As Tornadoes Raze Tuscaloosa, Sweep Across Southern States
Over the past decade, the impact of catastrophe losses on the company's second-quarter loss ratio has averaged 8.5 percentage points, compared with a full-year average of 4.4 points.
The ratio measures the sum of an insurance company's losses, or money paid out in claims, and expenses.
The impact of April 2011 catastrophe losses on the second-quarter loss ratio would be approximately 21 to 28 percentage points, net of reinsurance.
Reinsurers will cover any losses above the reserve of $45 million, but Cincinnati said it must cede an estimated $26 million of premiums to reinsurers to continue coverage, reducing second-quarter 2011 earned premiums by that amount.
The company has sent claims representatives to several areas in Alabama, Tennessee and North Carolina to help insurance agents process more than 9,000 claims from policyholders who reported losses.
According to Highline Data, Cincinnati Financial is the 42nd largest insurer of personal lines in the U.S., with 2010 direct written premiums at $674,854,110.
Highline Data is a part of Summit Business Media, which also owns PropertyCasualty360.com.
Shares rose 21 cents to close at $31.14 before the loss estimate was issued.
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