Steven J. Johnston
Chairman and Chief Executive Officer at Cincinnati Financial
Good morning, and thank you for joining us today to hear more about our results. We see positive momentum in several areas and are bullish about our future prospects despite 2022 financial results that were somewhat below our expectations. Challenges during the year included elevated inflation and higher losses from natural catastrophe events for us and the property casualty industry, in addition to the market volatility affecting the valuation of investment portfolios.
Our experience in managing adversity, coupled with the Company's financial strength allows us to maintain a long-term view and supports our confidence as we execute our plans. Net income for the fourth quarter of 2022 was just over $1 billion, that's 31% or $457 million less than last year's outstanding fourth quarter, largely due to $307 million less benefit on an after-tax basis in the fair value of securities held in our equity portfolio.
Non-GAAP operating income of $202 million for the fourth quarter was down $118 million from a year ago, including catastrophe losses that were $66 million higher on an after-tax basis. Our 94.9% fourth quarter property casualty combined ratio was 10.7 percentage points higher than the 84.2% for the fourth quarter of last year, which was amongst the best combined ratios we've ever recorded.
We think longer-term comparisons are also important. On a current accident year basis, excluding catastrophe losses, our 90.2% combined ratio compares favorably with each of the five years prior to 2020 and was 1.5 percentage points better than the average for that period with each accident year measured as of the respective year-end.
On a calendar year basis, our 2022 combined ratio experienced a larger negative impact from catastrophe losses than in 2021 as they increased 4.2 percentage points for the fourth quarter and 1.2 points for the year. Inflation also pressured our combined ratio throughout 2022 contributing to less favorable results for both the current accident year and for reserve development on prior accident years as we have increased reserves for estimated ultimate losses.
We've responded with actions to improve underwriting selection and pricing, including premium rate increases and increased expectations by underwriters as they factor inflationary trends into areas such as risk selection criteria, pricing of policies and adjusting premium factors for changes in exposure.
We believe we can successfully balance prudent underwriting and business growth to improve results next year with a 2023 GAAP combined ratio in the low to mid-90% range. We also believe our 2023 property casualty premium growth rate can be 8% or more. We recognize that weather and significant changes in industry market conditions that influence insurance policy pricing trends are some of the variables that will affect the property casualty results we ultimately report.
In recent quarters, we've noted that commercial umbrella loss experience has been elevated. Although still elevated in the fourth quarter, it was to a less degree than earlier in 2022. While recent profitability for our commercial umbrella business is not as strong as we previously estimated after strengthening reserves during 2022, the average combined ratio for the years 2018 through 2022 were still good below 85% on a calendar year basis and below 90% on an accident year basis with development through year-end 2022.
Overall premium growth was very good and continues to incorporate pricing segmentation. Our underwriters worked to retain and write more profitable accounts while also addressing ones that we determine have inadequate pricing. They do an excellent job, serving Cincinnati Insurance [Phonetic] appointed agencies that are outstanding at producing business for us.
Consolidated property casualty net written premiums rose 10% for the fourth quarter and 13% for the full year 2022. That includes a 13% increase in fourth quarter renewal written premiums with a significant portion from higher levels of insured exposures as we factor in elevated inflation.
In addition to exposures increases, our Commercial Lines Insurance segment continued to experience estimated average renewal price increases in the mid-single-digit percentage range, higher than the third quarter. Our Excess and Surplus Lines Insurance segment continued in the high single-digit range. Personal lines average renewal price increases were at the high-end of the low single-digits with both auto and homeowner higher than in the third quarter.
As we previously disclosed, we expect premium rates for our personal auto line of business will continue to rise. Based on our rate filings that have averaged low double-digit rate increases for policies effective beginning January 1st, 2023, we expect the full year 2023 personal auto written premium effect will be an average premium rate increase of approximately 10%. Policy retention rates improved from year-end 2021 with our Commercial Lines segment moving higher in the upper 80% range and our Personal Lines segment rising to the low to mid-90% range.
Moving on to highlight premium growth and profitability by Insurance segment. The Commercial Lines segment grew both fourth quarter and full year 2022 net written premiums, 9%. Its combined ratio for both the quarter and full year 2022 was approximately 99%. That's above where we aim for and reflects elevated inflation effects and catastrophe losses that were higher than a year ago.
For our personal lines segment, net written premium grew 16% for the quarter and 15% for the full year 2022 as we continued our planned expansion of high net worth business produced by our agencies. Its full year combined ratio was approximately 99% and reflected elevated inflation effects and is likewise above our near-term profit target. We have confidence that our proven long-term strategy and near-term actions we have taken will blend to improve results for both commercial and personal lines.
Our excess and surplus line segment finished the year with a 90.4% combined ratio, a good result, combined with 2022 net written premium growing 18%. Cincinnati Re and Cincinnati Global each had another year of healthy growth. Cincinnati Re grew full year 2022 net written premiums by 27% with a combined ratio of 97.4%.
Cincinnati Global had a 2022 combined ratio of 88.9% with net written premiums growing 23%. Our life insurance subsidiary continued its good performance with full year 2022 net income of $66 million, up 50% from a year ago and term life insurance earned premiums grew by 5%. On January 1st of this year, we again renewed each of our primary property casualty treaties that transfer part of our risk to reinsurers. Our strong capital supports retaining additional risk and managing cost of rising reinsurance ceded premiums.
For our per risk treaties, terms and conditions for 2023 are fairly similar to 2022, other than premium rate increases that averaged approximately 13%. The primary objective of our property casualty treaty -- catastrophe treaty is to protect our balance sheet. The treaty's main change this year is retaining a greater share of losses for layers of coverage than what was effect in -- for 2022, while adding $92 million of coverage in a new layer between $900 million and $1.1 billion.
In 2023, we'll retain all of the first $200 million of losses and the share of the next $900 million for a catastrophe event compared with 2022 when we retained the first $100 million and the share of the next $800 million. Should we experience a 2023 catastrophe event totaling $1.1 billion in losses, we'll retain $542 million compared with $499 million in 2022 for an event of that magnitude.
We expect 2023 ceded premiums for these treaties in total to be approximately $130 million, approximately $16 million or 14% higher than the actual $114 million of ceded premiums for these treaties in 2022. Our investment department continued to perform quite well, and Mike will provide some details. Investments is another area where we like to keep an eye on longer-term trends. For example, for the five years ended with 2022, our equity portfolio, compound annual total shareholder return was 11.1%, 170 basis points better than the S&P 500 Index.
I'll conclude with the value creation ratio, our primary measure of long-term financial performance. Net income before investment gains or losses contributed favorably to VCR, 2.1% for the fourth quarter and 5.2% for the full year of 2022. The contribution from valuation of our investment portfolio was mixed, 10.5% favorable for the quarter, but unfavorable by 19.4% for the year due to challenges for both the stock and bond markets. A positive VCR of 12.8% for the quarter improved our 2022 full year VCR to negative 14.6%. Although that's below our expectations for a typical year, the 11.2% annual average over the past five years is within our annual average target range of 10% to 13%.
Now, our Chief Financial Officer, Mike Sewell will add comments about several other important points for evaluating our financial performance.
