Cincinnati Financial Corporation has reported a net loss of $808mn for the second quarter of 2022, down from a net income of $703mn for the same period last year.
The loss was mainly due to the recognition of a $928mn after-tax reduction in the fair value of equity securities still held, the firm highlighted.
The firm also reported a $1.511bn decrease in Q2 2022 net income, compared to the same period last year, primarily due to the after-tax net effect of a $1.323bn decrease in net investment gains and a $216mn decrease in after-tax property casualty underwriting income.
Cincinnati’s property and casualty (P&C) segment saw an underwriting loss of $52mn, compared to a profit in Q2 2021 of $221mn, reporting a weaker combined ratio of 103.2% compared to a stronger 85.5% in the same period last year.
Additionally, the segment’s loss and loss expenses went up 49%, to $1.24bn compared to the $830mn reported in the first quarter of 2021.
Despite this, P&C net written premiums were up 15% from $1.71bn in Q1 2021 to $1.96bn reported in this year’s second quarter.
According to Cincinnati, this growth reflects premium growth initiatives, price increases and a higher level of insured exposures.
Commercial lines also saw an underwriting loss, reporting $62mn in Q2 2022 compared to a profit of $145mn in the same quarter last year.
This led to a significantly weaker combined ratio of 106.3%, compared to the 84.2% reported in the 2021 first quarter.
Yet commercial lines net written premiums went up 10%, to $1.07bn from $977mn in Q2 2021, primarily due to higher agency renewal written premiums, according to the firm.
Cincinnati also recorded $21mn first-quarter 2022 life insurance subsidiary net income, primarily from more favourable impacts from the unlocking of interest rate and other actuarial assumptions, partially offset by lower investment gains.
Steven J. Johnston, chairman and chief executive officer, commented: “Investment income increased nicely producing our main source of profits in the second quarter and bringing our total non-GAAP operating income to $357mn for the first half of the year.
“Our insurance business experienced an underwriting loss for the second quarter with a 103.2% combined ratio, resulting in part from an 8.5-point increase in catastrophe losses compared with second quarter 2021.
“While not the result of any single storm, our field claims teams and headquarters claims associates have been busy, responding to 22 declared catastrophes in the quarter.
“I’m proud of their efforts as they brought compassion and expertise to our agents and policyholders, quickly resolving claims and helping affected communities to move forward.
This quarter, Cincinnati took “prudent reserving action”, Johnston added, which reflected elevated inflation in assorted forms and our belief that various pandemic effects have distorted paid loss cost trends.
According to Johnston, slowed activity for many businesses, reduced driving and closed courts, which delayed progress on some litigated insurance claims, have all increased the uncertainty of ultimate losses.
He said: “As a result, second-quarter 2022 incurred loss ratios for several lines of business are higher than in recent periods. Commercial umbrella coverages – part of our commercial casualty line of business – had a particularly large impact, despite representing only 7% of our full-year 2021 property casualty earned premiums.
“Commercial umbrella paid loss experience is inherently variable. Our commercial umbrella insurance coverages have a strong record of profitability.
“On a six-month basis, our insurance business remains profitable with a 96.7% combined ratio. We are optimistic that continuing to adjust our predictive models and staying focused on pricing segmentation can lead to improved results, allowing us to again produce a full-year combined ratio in the low- to mid-90s.”
