This excerpt taken from the CINF 8-K filed Jun 20, 2008.
Record Second-quarter Catastrophe Losses
Preliminary estimates indicate that through June 12, catastrophe losses for the second quarter are approximately $115 million, accounting for about 15 percentage points on the quarters combined ratio. This compares with 5.6 percentage points of catastrophe losses reported in the first quarter, which also experienced higher than usual storm activity. In comparison, second-quarter 2007 catastrophe losses were atypically low at $11 million and 1.4 percentage points, while second-quarter 2006 catastrophe losses were $64 million and 8.0 percentage points.
Benoski commented, We are tracking claims from nine second-quarter storms classified as catastrophes by Property Claims Services. Remarkably, five of those storms just occurred in the past three weeks, including areas of Midwestern flooding. In total, second-quarter catastrophe-related weather has already produced approximately 2,500 reported claims, affecting our policyholders in 15 states where agents market Cincinnati policies. Almost half of the reported claims are closed, and those policyholders are on the road to recovery. However, some of our policyholders and claims representatives are waiting to be allowed access to homes and businesses, and our preliminary loss estimates anticipate additional claims will be reported to us as that happens.
Storm teams staffed by our own claims representatives from other territories have deployed to assist our local claims associates, assuring prompt, personal service. We now have teams in Minneapolis, Minnesota, following June tornados; in Manhattan, Kansas, following several May and June storms; and in Cedar Rapids, Iowa, in response to June flooding. A team has wrapped up work in Fort Smith and Van Buren, Arkansas, following April hail storms, Benoski added.
Stecher noted, A record level of catastrophe losses now is expected for the first six months of 2008. Making reasonable assumptions about the likelihood of second-half storms, we believe catastrophe losses, net of reinsurance, could contribute as much as 9 percentage points to our full-year 2008 combined ratio, which would be an all-time high and double the level we had originally anticipated for the year. Catastrophe losses contributed an average of 3.7 percentage points to the companys combined ratio in the past 10 years, ranging from 2007s low of 0.8 points to 1998s high of 6.1 points.
Given that expected level of catastrophe losses, we would anticipate a full-year 2008 combined ratio above 100 percent despite the health of our ongoing commercial insurance underwriting. Previously, we had targeted a full-year 2008 combined ratio in the range of 96 percent to 98 percent, using two additional assumptions that remain unchanged: First, well see pressure on the current accident year loss and loss expense ratio excluding
catastrophe losses resulting from the same market trends that contributed to an increase in this ratio in 2007. Second, savings from favorable development on prior period reserves may benefit the full-year 2008 combined ratio by approximately 4 percentage points, based on current trends.