Cincinnati Financial Results Impacted by Storms

Cincinnati Financial Corporation announced a preliminary estimate of approximately $48 million for second-quarter pre-tax catastrophe losses resulting from severe weather through May 11.

The storm losses, which affected policyholders of The Cincinnati Insurance Companies, are expected to add a total of approximately 7.5 percentage points to the second-quarter property casualty combined ratio. The expected impact on after-tax earnings per share for the second quarter would be approximately 19 cents.

The preliminary second-quarter estimate includes an updated estimate of approximately $13 million for April storm losses, which were previously estimated at $9 million, and an initial estimate of $35 million, net of reinsurance, for storm damage on May 2-11. Cincinnati’s policyholders across 16 Midwestern and mid-Atlantic states have reported more than 2,800 claims as a result of severe weather over these 10 days.

The $48 million total for storm losses through May 11 compares with reported pre-tax catastrophe losses for the full second quarter of 2002 of $47 million, which added 8.1 percentage points to the combined ratio and reduced after-tax earnings per share by 19 cents. For the comparable 2001 period, catastrophe losses were $35 million, adding 6.9 percentage points to the combined ratio and reducing earnings per share by 14 cents.

Chairman and CEO John Schiff, Jr., noted, “Most regrettably, this year’s storms have taken many lives. All of us at The Cincinnati Insurance Companies extend our deepest sympathy. We assure people in all of the affected communities that we are working hard for your recovery from property losses. We have dispatched teams of experienced Cincinnati claims representatives to assist the local staff in areas with a high concentration of reported claims, notably in Paducah, Kentucky; Nashville- Murfreesboro, Tennessee; and Columbus, Ohio. Our field claims staff and independent agency representatives in each community shine at times like these, demonstrating our person-to-person approach and the true value of Cincinnati’s insurance coverage and service.”

Schiff noted that “heavy property losses due to tornadoes and hailstorms are typical this time of year. Our target for the full-year combined ratio is 99 percent or below on a GAAP basis, or 98.5 percent or below on a statutory basis,” he said. “This target assumes that full-year storm losses will be approximately $75 million or in the range of 3 percentage points, with higher levels in the second and third quarters.

“With more than six months to go, we will re-evaluate this target as further severe weather occurs or as adjustments are needed to these early ‘ballpark’ estimates. Policyholders often require a large window of time to discover and report hail damage. On the positive side, results for the first six months of 2003 will include a very strong first quarter, with a 95.1 percent GAAP combined ratio and only $3 million of catastrophe losses. Moreover, we expect to see continuing improvement in our non-catastrophe underwriting results.”