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Strong retention ratio coupled with modest pricing declines (1% during the first half of 2010) led to a 2% year-over-year increase in net premiums written to $532 million in the Commercial Insurance segment. There was a marked improvement in underwriting loss to $9 million from $61 million in the prior-year quarter. Combined ratio improved 920 basis points year over year to 101.7%, due to favorable prior-year reserve release and fairly stable current accident year results.

Strong new business and pricing increases led to a 7% year-over-year increase in net written premiums to $204 million in the Personal Lines segment. Combined ratio improved 980 basis points to 123.4% from 133.2% in the prior-year quarter, due to low catastrophe losses.

Earned premiums in the Term Life Insurance segment increased 8.0% from the prior-year quarter to $40 million. The growth was mainly derived from higher premiums from Universal Life Insurance products.

Cincinnati Financial remains well capitalized at the insurance company level with reference to the minimum risk-based capital requirement. Its reliance on debt as a source of capital has been low. It targets a debt-to-total-capital ratio of less than 20%. During the quarter, debt-to-capital ratio stood at 15.0%, unchanged from the 2009 year-end levels.

Cincinnati Financialâ??s Commercial Lines’ prime premium contributor has been suffering from soft market conditions. Not much improvement is expected here in 2010. However, its Personal Lines segment is expected to clock a modest positive growth with strong business retention and rate increases evidenced.

We remain cautious on the investment portfolio with an above-average equity concentration. However, new agency appointments and increased footprint will win new business. Low leverage, solid capital and consistent cash flow generation are other positives. Although value creation through business growth will remain subdued, shareholders will benefit by dividend increases and share repurchases over the near term.

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This entry was posted on Monday, August 2nd, 2010 at 11:23 am and is filed under Life Insurance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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