Steve Johnston, Chairman and CEO of Cincinnati Financial Corporation, has disclosed that the firm increased its cat event retention to $200m at the January reinsurance renewals.
The news comes from the firm’s Q4 earnings call, where Johnston noted that on January 1st, Cincinnati Financial again renewed each of its primary property/casualty treaties that transfer part of its risk to reinsurers.
Johnston commented, “Our strong capital supports retaining additional risk and managing costs of rising reinsurance ceded premiums.
“For our per-risk treaties, terms and conditions for 2023 are fairly similar to 2022 other than premium rate increases that averaged approximately 13%. The primary objective of our property catastrophe treaty is to protect our balance sheet.”
He continued, “The treaty’s main change this year is retaining a greater share of losses for layers of coverage than what was effective for 2022, while adding $92 million of coverage in a new layer between $900 million and $1.1 billion.”
In 2023, the firm will retain all of the first $200 million of losses and a share of the next $900 million for a catastrophe event, compared with 2022 when it retained the first $100 million in a share of the next $800 million.
Should Cincinnati Financial experience a 2023 catastrophe event totalling $1.1 billion in losses, it will retain $542 million, compared with $499 million in 2022 for an event of that magnitude.
Further, the firm anticipates that 2023 ceded premiums for these treaties in total to be approximately $130 million, approximately $16 million, or 14% higher than the actual $114 million of ceded premiums for these treaties in 2022.
In its full-year 2022 results, Cincinnati Financial reported a net loss of $486 million, compared with a net income of $2.946 billion in 2021.
For Q4 alone, the firm posted a net income of $1.013 billion, compared with a net income of $1.470 billion for the same quarter of 2021.
This came after recognising an $806 million Q4 2022 after-tax increase in the fair value of equity securities still held.
Cincinnati Financial suggests that the $457 million decrease in Q4 2022 net income reflected the after-tax net effect of a $339 million decrease in net investment gains and a $129 million decrease in after-tax property casualty underwriting profit.
The firm reported a 94.9% Q4 property casualty combined ratio, up from 84.2% for Q4 of 2021.
Full-year 2022 property casualty combined ratio was 98.1%, with net written premiums up 13%.