Press Release - JANUARY 30, 2019

AM Best Affirms Credit Ratings of Cincinnati Financial Corporation and Its Subsidiaries


CONTACTS:
 Lewis DeLosa, CFA
Financial Analyst – P/C
+1 908 439 2200, ext. 5529
lewis.delosa@ambest.com

Prafull Jhawar
Senior Financial Analyst – L/H
+1 908 439 2200, ext. 5214
prafull.jhawar@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com

FOR IMMEDIATE RELEASE

OLDWICK - JANUARY 30, 2019
AM Best has affirmed the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aa-” of The Cincinnati Insurance Company (Fairfield, OH), the lead property/casualty (P/C) company and its three subsidiaries, which are collectively referred to as The Cincinnati Insurance Companies (CIC). The outlook of the FSR remains stable, while the outlook of the Long-Term ICRs remains positive. (See below for a detailed listing of the companies.) Concurrently, AM Best has affirmed the FSR of A (Excellent) and the Long-Term ICR of “a+” of The Cincinnati Life Insurance Company (CLIC), the life insurance subsidiary of CIC. Additionally, AM Best has affirmed the Long-Term ICR of “a-” and the Long-Term Issue Credit Ratings (Long-Term IR) of the companies’ publicly traded parent, Cincinnati Financial Corporation (CINF) [NASDAQ:CINF]. The outlook of these Credit Ratings (ratings) is positive. All companies are domiciled in Fairfield, OH.

The ratings reflect CIC’s balance sheet strength, which AM Best categorizes as strongest, as well as its adequate operating performance, favorable business profile and appropriate enterprise risk management (ERM). Balance sheet strength is supported by CIC’s lengthy track record of favorable loss reserve development, strong and positive cash flows, and a comprehensive reinsurance program. Additionally, CIC maintains high common stock leverage relative to its peers. While the stock holdings consist of diversified dividend-paying stocks that enhance investment income, they expose surplus and risk-adjusted capitalization to equity market fluctuations, as evidenced in 2018. Despite the potential for continued equity market volatility, AM Best feels capitalization will remain well-supportive of its ratings given the diversity of holdings within the investment portfolio. CIC also benefits from the financial flexibility afforded by CINF, which maintains modest financial leverage and is a source of additional liquidity through its access to capital markets and lines of credit.

CIC has produced solid operating earnings, which have continued to improve in recent years. CIC continues to address the below-average personal auto line of business. CIC has undertaken many initiatives, including re-underwriting, rate increases and the utilization of predictive analytics. The positive outlook reflects AM Best’s expectation that management’s initiatives will result in sustained improvement in operating results that outperforms peers. In addition, the ratings recognize the strong distribution network within its targeted regional markets that is centered on cultivating strong, long-term relationships with local independent insurance agencies. CIC has developed and implemented a risk management framework that appropriately addresses the risks inherent in its profile, and its risk management capabilities generally meet or exceed its risk profile.

The ratings of CLIC reflect its balance sheet strength, which AM Best categorizes as strong, as well as its adequate operating performance, neutral business profile and appropriate ERM. The ratings also reflect CLIC’s role within the organization as the provider of life and annuity products. These products provide the property/casualty agency force with cross-selling opportunities for personal and commercial accounts. From 2013-2016, the impact of new business strain resulted in large statutory net operating losses, particularly relating to Regulation XXX reserve requirements on its term life products, and resulted in material declines in absolute and risk-adjusted capital. However, the balance sheet strength is enhanced qualitatively by the company’s self-funding of the substantial XXX reserves on its statutory balance sheet. Additionally, the recent implementation of principles-based reserving eliminates the XXX requirements on new business, which AM Best expects to improve profitability going forward.

The FSR of A+ (Superior) and the Long-Term ICRs of “aa-” have been affirmed, with a stable outlook for the FSR and a positive outlook for the Long-Term ICR for The Cincinnati Insurance Company and its following P/C subsidiaries:


  • The Cincinnati Indemnity Company

  • The Cincinnati Casualty Company

  • The Cincinnati Specialty Underwriters Insurance Company

The following Long-Term IRs have been affirmed with a positive outlook:

Cincinnati Financial Corporation—

— “a-” on $28.0 million 6.90% senior unsecured debentures, due 2028

— “a-” on $374 million 6.125% senior unsecured notes, due 2034

— “a-” on $391 million 6.92% senior unsecured debentures, due 2028

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global rating agency and information provider with a unique focus on the insurance industry.


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