Ohio-based Cincinnati Financial Corp. reported first quarter 2011 net income of $62 million compared with $68 million for the same period in 2010. Operating income came in at $55 million compared with $63 million during the first quarter last year.
The company said the $6 million decrease in first quarter 2011 net income was driven by a $7 million after-tax decrease in the contribution from property/casualty underwriting operations. The after-tax effect of property/casualty catastrophe losses, mostly weather-related, was $17 million higher in the first quarter of 2011 compared with the same period of 2010.
The company’s property/casualty combined ratio for first quarter 2011 was 103.9 percent, up from 102.6 percent for the first quarter of 2010.
On the plus side, Cincinnati Financial saw 3 percent growth in property/casualty net written premiums, which included personal lines segment growth of 12 percent.
First quarter 2011 property casualty new business written by agencies was $102 million, up $10 million from first quarter 2010; $8 million of the increase was standard market business contributed by agencies appointed since the beginning of 2010.
Kenneth W. Stecher, Cincinnati Financial president and chief executive officer, noted that the company’s investment portfolio fared well during the first quarter, helping to boost book value and increase the surplus of the group’s insurance companies.
He acknowledged that growth in property/casualty net written premiums was offset by unprofitable underwriting results.
“Losses from natural catastrophes were at the second highest level for a first quarter in at least a dozen years,” Stecher said in the company’s announcement. “These claims are opportunities to prove the value of our policies and claims service – and to grow our business over time.”
He added that of the seven first quarter storms across Cincinnati Financial’s “operating territory, the largest was a $13 million event in late February that affected our policyholders in several Midwest states. In total, catastrophes accounted for 5.5 percentage points of our 103.9 percent first-quarter combined ratio, including approximately 1 percentage point for catastrophe losses we assumed under a reinsurance agreement for the earthquake in Japan.”
Stecher said personal lines rates are firming but “commercial pricing continues to decline in the low single digits, and we continue to walk away from underpriced business.” However, a modest increase in renewal written premiums in commercial lines reflected an improvement in exposure levels for many of the businesses the company insures, he said.
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