Steven J. Johnston
Chairman & Chief Executive Officer at Cincinnati Financial
Good morning, and thank you for joining us today to hear more about our results.
Net income of $534 million for the second quarter of 2023 was quite a change from the net loss of more than $800 million for last year's second quarter. As we've noted in the past, large income swings can occur as gains and losses from securities still held in our equity portfolio run through net income. Last year, we saw a reduction in portfolio fair value. In this year, we've recognized a significant investment gain. We believe the value of our equity portfolio will continue to grow over the long-term. As of June 30th, it had $6.1 billion in appreciated value, increasing 8% since the end of the first quarter.
Non-GAAP operating income of $191 million for the quarter more than doubled the $94 million from a year ago. Despite catastrophe losses that were $11 million higher on an after tax basis. Our 97.6% second quarter 2023 property casualty combined ratio was 5.6 percentage points better than last year's second quarter, including a decrease of 0.4 points for catastrophe losses. The 90.4% ex-CAT accident year combined ratio for the second quarter was 2.4 percentage points better than the same period a year ago. And this is another important indicator of improved performance. Despite the increase in catastrophe losses and ongoing elevated inflation effects, we continue to see reasons for confidence about performance for the second half of the year.
Pricing continued to accelerate during the second quarter of this year and we also worked to address inflation in other ways, such as changing factors that adjust premiums to account for rising property costs. We reported improved underwriting performance ratios in just about every major line of business, compared with the first quarter of this year.
On a current accident year basis measured at June 30th, before catastrophe losses, our 2023 consolidated property casualty loss and loss expense ratio improved from 2022 by 4.5 percentage points on a case-incurred basis, which included 0.6 point improvement on a paid basis. For the same period, we increased the incurred but not reported or IBNR component of the ratio by 4.7 points as we continue to recognize uncertainty regarding ultimate losses remaining prudent in our reserve estimates until longer-term loss cost trends become more clear.
Similar to the first quarter, we earned a small underwriting profit for our commercial umbrella lines in the second quarter. In our commercial casualty line of business, in total, had an estimated combined ratio of approximately 90%. Our underwriters continue to do an excellent job in risk selection and pricing. Importantly, agents appointed by Cincinnati Insurance continued to produce profitable business for us in an outstanding fashion. Underwriters emphasize retention of profitable accounts addressing ones that we determine have inadequate pricing, while also seeking profitable new business.
Estimated average renewal price increases for the second quarter were higher than the first quarter for each of our major lines of business. Our commercial lines insurance segment averaged near the low-end of the high single digit percentage range, while our excess and surplus lines insurance segment moved higher in the high single digit range. Personal lines for the second quarter included auto in the high single digit range and homeowner in the mid single digit range.
In terms of net written premiums, consolidated property casualty growth was 9% for the second quarter of 2023. That included 11% increase in second quarter renewal written premiums with a significant portion from higher levels in insurance exposures as we factor in elevated inflation.
Next, I'll briefly highlight premium growth and profitability by insurance segment. Commercial lines grew second quarter 2023 net written premiums 3%, reflecting disciplined, particularly for commercial umbrella risks. Its combined ratio was 9.4 percentage points better than a year ago, including 1.5 points from lower catastrophe losses. We see the second quarter, a 10% reduction in new business written premiums as an expected result of pricing and underwriting discipline.
Personal lines grew net written premiums 23% with growth in middle-market accounts in addition to Cincinnati Private Client business for the high net worth clients in our agencies. Its combined ratio was 4.5 percentage points better than a year ago, despite an increase of 0.6 points from catastrophe losses. Excess and surplus lines had a combined ratio of 92.2% and net written premiums grew 16%. Its combined ratio was 7.1 percentage points higher than a year ago, including a 9.9 point increase in the IBNR component.
Both Cincinnati Re and Cincinnati Global continued to enhance our profitability. Cincinnati Re had a strong 73.7% combined ratio for the second quarter of 2023. Its net written premiums essentially matched last year's second quarter. While casualty premiums decreased as a result of fewer attractive opportunities in certain segments of the market, property net written premiums increased by 27%, largely due to a combination of higher pricing and market opportunities. Cincinnati Global's combined ratio was 88.3% with net written premiums continuing strong growth at 19%.
Our life insurance subsidiary continued to report excellent results in the second quarter with net income up 91% from last year and term life insurance earned premium growth of 4%.
As I usually do, I'll conclude with the value creation ratio, our primary measure of long-term financial performance. Our second quarter 2023 VCR was 4.0%, another strong result. Net income before investment gains or losses contributed 1.8%, while favorable valuation of our investment portfolio added another 2.2%.
Now, our chief financial officer, Mike Sewell, will highlight other important factors about our financial performance.
