Cincinnati Financial Corporation has reported a net loss of $273 million for the first quarter of 2022, down from a net income of $620 million for the same period last year.
The loss was mainly due to the recognition of a $540 million after-tax reduction in the fair value of equity securities still held, due to accounting rules adopted effective in 2018 by the Financial Accounting Standards Board.
In total, Cincinnati reported an after-tax investment loss of $526 million, down $924 million from an investment gain of $398 million in Q1 2021.
This was, however, partially offset by a $25 million increase in after-tax property casualty underwriting income, with total underwriting profit coming to $165 million – the firm’s highest Q1 figure in over 16 years.
The P&C business segment also improved its combined ratio by 1.3 percentage points to 89.9% during the period.
And Cincinnati reported a 12% growth in first-quarter net written premiums, largely due to price increases and premium growth initiatives.
This included $244 million first-quarter 2022 property casualty new business written premiums, up 11%, with agencies appointed since the beginning of 2021 contributing $14 million or 6% of total new business written premiums.
Additionally, Cincinnati recorded $10 million first-quarter 2022 life insurance subsidiary net income, matching the first quarter of 2021, and 6% growth in first-quarter 2022 term life insurance earned premiums.
“Non-GAAP operating income started the year strong, increasing 14% compared with last year’s first-quarter result,” said Steven J. Johnston, Chairman, President and CEO of Cincinnati.
Addressing the impact of the new accounting rules on the company’s performance, he continued: “As I’ve mentioned before, this accounting treatment will continue to create a lot of volatility in net income as equity security unrealized investment gains and losses flow through the income statement instead of the balance sheet as they would have prior to 2018.”
“We maintain a long-term perspective with our investment philosophy and aren’t swayed by periodic market volatility. Our insurance business continues to provide cash that we invest in high-quality bonds and dividend-paying stocks. We are poised to further benefit from these purchases when the markets rebound.”
