By Mia MacGregor

Feb 11 - (The Insurer) - Cincinnati Financial has estimated first-quarter 2025 pretax catastrophe losses from the California wildfires of $450mn to $525mn, net of reinsurance recoveries.

Speaking on an investor call on Tuesday, Stephen Spray, president and CEO Cincinnati Financial, noted that around 73 percent of the losses are attributable to the personal lines insurance segment, with Cincinnati Re and Cincinnati Global accounting for 24 percent and 3 percent, respectively.

“We reinstated the applicable layers of our primary property catastrophe reinsurance treaty coverage and will cede additional premiums to our reinsurers,” said Spray, adding that Cincinnati Re will receive additional premiums from reinstated treaties.

The estimated net effect on first-quarter premium revenue is a decline of $50mn to $60mn.

“To keep this event in perspective, had the wildfire effect occurred in 2024, we believe we would still have earned a modest underwriting profit,” Spray said.

He highlighted that on 1 January, the company renewed its primary property casualty treaties, transferring part of its risk to reinsurers.

The property treaty retention was increased to $15mn, while the casualty treaty retention remained at $10mn. Other terms and conditions for 2025 are largely consistent with 2024, Spray said.

The key change to the property catastrophe treaty was an additional $300mn of coverage, increasing the program's upper limit from $1.2bn to $1.5bn.

“We again retained all of the first $200mn, then retained 56 percent of the next $100mn, 25 percent of the next $100mn and approximately 14 percent of the next $1.1bn,” Spray explained.

“Right now, we are really focused on paying claims fairly, empathetically face-to-face,” said Spray.

Several other insurers have released wildfire loss estimates this month.

Travelers projected a pre-tax net exposure of $1.7bn from January’s wildfires, while Arch Capital predicted a $450mn to $550mn hit.

CNA estimated up to $70mn in net losses from the wildfires in the first quarter, following $45mn in catastrophe losses in the previous quarter.

Cincinnati Financial on Monday reported a comfortable fourth-quarter earnings beat, with a 2.8-point improvement in the combined ratio to 84.7 percent despite higher catastrophe losses.