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|Cincinnati Financial Corporation Announces Preliminary Loss Estimate for April Storms|
CINCINNATI, May 18, 2011 /PRNewswire via COMTEX/ -- Cincinnati Financial Corporation (Nasdaq: CINF) today announced that The Cincinnati Insurance Companies' property casualty group expects its second-quarter results to include pre-tax catastrophe losses, net of reinsurance, of approximately $150 million to $200 million incurred due to severe weather during the entire month of April. Catastrophe losses affect property casualty insurance underwriting income, one of the sources of consolidated net income along with profits from investment operations and life insurance operations.
Steven J. Johnston, president and chief executive officer, commented, "While spring storms typically raise second-quarter catastrophe losses above the quarterly average, the devastation caused by the late April tornado outbreak in southern states had a more dramatic impact. The cost of this event goes well beyond industry estimates of multi-state property damage ranging from $4 billion to $6 billion. More than 300 lives were lost, as reported by national weather services, and the recovery process will continue long after policyholders receive payment for property losses. Our representatives working with affected families and businesses respond personally as well as professionally, listening to each person's story as they provide assistance with property claims.
"Over the past 10 years, the impact of catastrophes on our second-quarter loss ratio has averaged 8.5 percentage points compared with a full-year average of 4.4 points. The impact of April 2011 catastrophe losses on our second-quarter loss ratio would be approximately 21 to 28 percentage points, net of reinsurance and based on estimated earned premiums for the full second-quarter.
"The tornado outbreak in late April caused losses exceeding $45 million, which is the amount of loss we retain for a single catastrophic event before our reinsurers cover further losses. We expect recovery from our reinsurers of significant losses incurred above our retention level. To reinstate our reinsurance coverage for further 2011 property catastrophes, we will cede an estimated $26 million of premiums to our reinsurers, reducing second-quarter 2011 earned premiums by that amount.
"Our agents and policyholders know they can depend on Cincinnati Insurance to provide the highest quality service for claims involving storms or other insured loss events. During the second quarter, we've dispatched special teams of experienced claims representatives to several areas from Tuscaloosa northeast through Birmingham, Knoxville and Gastonia, North Carolina. These teams are assisting our independent agents and local claims staff, working under challenging conditions to assure prompt attention to the more than 9,000 claims from policyholders who reported losses due to April catastrophes. They volunteered for this duty, knowing that their best efforts when policyholders are in greatest need will create long-term customer loyalty and appreciation for our agencies, our company and our industry."
Cincinnati Financial Corporation offers business, home and auto insurance, our main business, through The Cincinnati Insurance Company and its two standard market property casualty companies. The same local independent insurance agencies that market those policies may offer products of our other subsidiaries, including life and disability income insurance, annuities and surplus lines property and casualty insurance. For additional information about the company, please visit www.cinfin.com.
Safe Harbor Statement
This is our "Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995. Our business is subject to certain risks and uncertainties that may cause actual results to differ materially from those suggested by the forward-looking statements in this report. Some of those risks and uncertainties are discussed in our 2010 Annual Report on Form 10-K, Item 1A, Risk Factors, Page 24.
Factors that could cause or contribute to such differences include, but are not limited to:
Further, the company's insurance businesses are subject to the effects of changing social, economic and regulatory environments. Public and regulatory initiatives have included efforts to adversely influence and restrict premium rates, restrict the ability to cancel policies, impose underwriting standards and expand overall regulation. The company also is subject to public and regulatory initiatives that can affect the market value for its common stock, such as measures affecting corporate financial reporting and governance. The ultimate changes and eventual effects, if any, of these initiatives are uncertain.
SOURCE Cincinnati Financial Corporation
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