Cincinnati sees combined ratio increase in Q3 ’24 due to cat losses

Cincinnati Financial Corporation has announced its financial results for the third quarter of 2024, reporting a combined ratio for the Consolidated Property Casualty Insurance segment of 97.4%, an increase from 94.4% in the same period last year driven by a peak in catastrophes.

In the third quarter of 2024, the insurer responded to 20 weather-related catastrophes across the US, including Hurricane Helene.

For Q3 ’24, Cincinnati also reported an improved net income of $820mn, compared to the net loss of $99mn reported in the same period last year, after recognizing a $645mn Q3 ’23 after-tax increase in the fair value of equity securities still held.

Non-GAAP operating income decreased 14%, to $224mn from the $261mn reported in Q3 ’23. According to Cincinnati, this result was primarily due to an $86mn increase in after-tax catastrophe losses.

Net written premiums went up 17%, to $2.3mn from the $1.9mn reported in Q3 ‘23. This growth includes price increases, premium growth initiatives and a higher level of insured exposures.

Cincinnati’s property casualty new business net written premiums were $406mn in this year’s third quarter, up 30%. Agencies appointed since the beginning of 2023 contributed $41mn or 10% of total new business written premiums.

As noted before, Q3 ’24 saw a 3.0 percentage-point increase in combined ratio, which included an increase of 3.9 points from catastrophe losses.

According to the insurer, 3.2 percentage-point third-quarter 2024 benefited from favourable prior accident year reserve development of $71mn, compared with 2.7 points or $53mn for third-quarter 2023.

For Q3 ’24, Cincinnati’s life insurance subsidiary generated a net income of $20mn, reflecting a $5mn decrease compared to the same period in 2023.

Despite this decline, the company experienced a 4% growth in term life insurance earned premiums during the third quarter of 2024.

Stephen M. Spray, president and chief executive officer, commented: “We responded to 20 weather-related catastrophes across the U.S. in the third quarter, including Hurricane Helene, which swept through 11 states at the end of September. Our hearts go out to these communities and their residents who are trying to put lives, homes and businesses back together. Confident in our financial strength, our field claims associates can shine, responding in person, paying claims and delivering fair, fast and empathetic service.

“Those catastrophes added 13 points to our combined ratio for the quarter, just above our 5-year third-quarter average of 12.2%, bringing our combined ratio to 97.4%. As evidence of our ongoing focus on increasing product and geographic diversification, fine-tuning pricing precision and applying our underwriting expertise, our nine-month underwriting profit improved 53%, growing to $228 million compared to $149 million for the first nine months of 2023. Our combined ratio for the year through September 30 is 96.5% – comfortably within our target long-term average range of 92% to 98%.”

He continued: “Investment income for the third quarter also grew, rising 15% to $258 million, driven by a 21% increase in bond interest income. Our investment professionals regularly trim or exit equity positions as they work to keep our investment portfolio optimised to balance near-term income generation with long-term book value growth potential. During the quarter we had $959 million in net sales of equity securities and $672 million in net purchases of fixed-maturity securities. This does not signal a change to our investment strategy. We will continue to hold both significant equity and bond portfolios.”

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