Investment gains drove the headline earnings beat, but catastrophe losses pushed the combined ratio to 100.8% and non-GAAP operating income fell 28%.
Cincinnati Financial Corp. posted net income of $1.26 billion for the second quarter, up 83% from $685 million a year earlier, driven by a surge in the fair value of its equity securities.
The insurer recorded an after-tax increase of $882 million in the fair value of equity securities still held during the quarter. After-tax net investment gains added $657 million to net income, while investment income contributed $28 million. Those gains were partially offset by a $115 million drop in property and casualty underwriting profit, the company said in a statement.
Non-GAAP operating income, which strips out investment gains and losses, fell 28% to $224 million from $311 million. The decline reflected a $61 million after-tax increase in catastrophe losses.
Property and casualty underwriting swung to an $18 million loss from a $128 million profit a year earlier. The combined ratio, a measure of underwriting profitability, rose to 100.8% from 94.9%, pushed higher by catastrophe losses. On a six-month basis, the combined ratio stood at a profitable 98.2%.
Earned premiums climbed 6% to $2.64 billion from $2.48 billion in the year-ago period. Net written premiums rose 3% to $2.83 billion, supported by price increases and a higher level of insured exposures. New business written premiums, however, fell 13% to $353 million.
Total revenues jumped 32% to $4.27 billion from $3.25 billion, helped by the investment gains.
Chief Executive Stephen M. Spray said investment income provided the main source of profits in the quarter. Elevated catastrophe losses pushed the combined ratio just shy of breakeven. "Ohio was particularly impacted by bad weather this Spring with catastrophe losses reaching nearly four times higher than our 5-year second-quarter average for the state," he said. Spray expressed optimism that further product and geographic diversification would help mute the impact of catastrophe losses in any single quarter.
Cincinnati Financial holds a mixed Alpha Score of 50 out of 100 on AlphaScala's proprietary rating system, reflecting its balanced risk-reward profile.
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