Q1 cat losses stacking up: second major profit warning in as many days

Cat losses are stacking up well over budget in the first quarter of 2023, with $235 million at Cincinnati Financial running double the five-year average, the insurer has said in a profit warning to markets.

The Q1 pre-tax cat hit may amount to 12.8 percentage points of the P&C segment combined ratio, more than twice the 6.3% 5Y average.

Cincinnati is lined up for a possible technical loss with a combined ratio estimated in a range of 99 to 103% even after net written premium growth of 6%.

Three storm events in March accounted for $171 million of the total after tornadoes tore across several US states.

Mark roughly $110 million for the commercial lines insurance segment; $115 million for personal lines, $1 million for E&S, $3 million for Cincinnati Re and $6 million to unit Cincinnati Global Underwriting.

“March roared in and left just as loudly with storm systems that impacted at least a dozen states each,” Cincinnati Financial Corporation CEO Steven Johnston commented.

Cincinnati Financial will lay out the final count in a Q1 report currently slated to be published April 27.

Cincinnati’s is not the first profit warning of the season to follow a first quarter rife with storm damage in January and March.

The Hartford said on Friday, April 14, that $185 million in pre-tax catastrophe losses, compounded by continuing inflation, had likely pushed it to a P&C combined ratio north of 106%.

That early announcement had given rise to suspicions that other similar announcements might be in the cards.

“The higher cats imply that primary insurers could potentially see higher cats in the Q1 given the frequency of events in the US,” analysts at Wells Fargo had said in reaction to the profit warning from The Hartford. Wells Fargo hinted at trouble for Allstate and Travelers

Extreme weather in the US in the first quarter may have delivered insurers a bill for $7 to 9.5 billion from hail, tornado, and thunderstorm wind gusts, analysts at re/insurance broker BMS have claimed.

“There is no doubt that the first quarter of the US insurance industry will be a costly one,” BMS SVP and senior meteorologist Andrew Siffert said of claims data and estimates from a series of 12 severe weather events.

Data from the Storm Prediction Center of the US National Weather Service show 34 severe weather events in Q1 2023, tied with 2017 for the highest Q1 count to date this century where the average is just below 20.

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