Benzinga | Jul 14, 2020 04:07PM EDT

Cincinnati Financial Sees Q2 Pretax Catastrophe Losses ~$231M Related To Spring Storms, Civil Unrest, Pandemic

Cincinnati Financial Corporation (NASDAQ:CINF) today announced that its consolidated second-quarter results are expected to include pretax catastrophe losses ofapproximately $231million -- adding 16.5 percentage points to the quarterly combined ratio based on estimated property casualty earned premiums.

Two multi-state storms in early April each caused approximately $50 million in losses, in addition to catastrophe losses from several less severe storms. Damaged property due to civil unrest resulted in $29 million in losses, including $8 million for Cincinnati Global Underwriting Ltdsm. The estimate for total second-quarter 2020 catastrophe losses incurred includes approximately: $122million for the commercial lines insurance segment; $91million for the personal lines insurance segment; $3 million for the excess and surplus lines insurance segment; and $15 million for Cincinnati Global.

Steven J. Johnston, chairman, president and CEO, commented: "Cincinnati Insurance was built to withstand challenging quarters thanks to our strong balance sheet and resilient business model. Our field claims associates rose to the occasion this spring, serving policyholders with empathy in the midst of the global pandemic. Theycontinued to thoroughly and quickly review claims to determine the appropriate payment based on the policy contract. Our solid financial position ensures our ability to help the families and businesses in our agents' communities on the road to recovery after a covered loss."

The company also estimates second-quarter 2020 pandemic-related incurred losses and expenses to total approximately $65 million, impacting the quarterly combined ratio by approximately 4.6 percentage points. Thetotal includes:

* $15 million for Cincinnati Re(r) and $9 million for Cincinnati Global losses. Approximately half of the losses for Cincinnati Re represent its estimated share from reinsurance treaties with companies that provided affirmative coverage for pandemic-related business interruption, and most of the remainder is an estimated share of treaties covering professional liability. Most of the losses for Cincinnati Global represent its share of potential losses from business interruption coverage for large risks with customized policy terms and conditions

* $6 million for credit losses related to uncollectible premiums

* $19 million for legal expenses in defense of business interruption claims

* $16 million in underwriting expenses for the previously announced Stay-at-Home policyholder credit on April and May personal auto policies

Estimated losses and expenses from catastrophe-related claims and the pandemic are expected to bring the company's second-quarter 2020 property casualty combined ratio to approximately 102% to 104%. Net written premium growth is estimated to be between 5% and 6% for the quarter.

During the second quarter of 2020 the company's investment portfolio improved. A net investment gain attributable primarily to the equity security portfolio, plus changes in unrealizedgains for the fixed-maturity security portfolio, on a pretax basis totaled approximately $1.6 billion.

There are still significant uncertainties regarding the ultimate effects of the COVID-19 pandemic on future insurance premiums, losses and investment results. The unaudited loss estimates and other data presented in this release is preliminary, based upon management estimates and subject to the completion of our procedures for the preparation of our quarterly financial statements. As a result, we may make further adjustments between now and the time the financial results for the quarter are finalized.

Cincinnati Financial plans to report final results for second-quarter 2020 on Monday, July 27, after the close of regular trading on the Nasdaq Stock Market. A conference call to discuss the results will be held at 11a.m. ET on Tuesday, July28,with a live, audio-only internet broadcast available at cinfin.com/investors.