Fitch Awards New Rating
NEW YORK--(BUSINESS WIRE)--April 18, 2002--Fitch Ratings has
assigned a 'AA' Insurer Financial Strength Rating to Cincinnati
Financial Corporation's (CFC) three property and casualty insurance
subsidiaries led by The Cincinnati Insurance Company (CIC), as well as
its life insurance subsidiary -- The Cincinnati Life Insurance
Company. Additionally, an 'A+' long-term issuer rating was assigned to
CFC. The Rating Outlook is Stable.
CIC's ratings are based on its strong profitability, combined with above average premium growth relative to its property and casualty peers, excellent financial flexibility and strong capitalization of its operating subsidiaries. These strengths are derived from CIC's focused, single-channel distribution system that emphasizes building strong relationships with select independent agents, competitive non-commission expense ratio, and successful agent compensation structure. The Cincinnati Life Insurance Company's rating reflects its very strong capital position, good earnings and liquidity, and strategic importance to its parent.
CFC maintains excellent financial flexibility that is derived from its modest financial leverage, strongly capitalized operating subsidiaries, substantial non-affiliated equity portfolio at the parent holding company, strong interest coverage and access to the capital markets and bank facilities.
The ratings also consider CIC's significant investment concentration in common stocks, with a non-affiliated equity portfolio that exceeds the property/casualty group's policyholders' surplus, and to a lesser extent, non-investment grade bonds. This largely reflects significant unrealized gains derived from management's longstanding total return, 'buy-and-hold' investment strategy that is focused on owning a small number of dividend-producing common stocks.
Furthermore, CIC's book of business is concentrated in Ohio, which accounts for about a quarter of direct premiums written, and Midwestern states. While this has contributed to CFC's relatively modest exposure to natural catastrophes, regulatory and legislative concentration is a concern.
Fitch expects that CFC will continue to demonstrate operating performance and premium growth in advance of its peers over the near to intermediate-term. Furthermore, capitalization is expected to remain strong, reflecting management's conservative philosophy towards loss reserves and catastrophe exposures, combined with modest operating leverage that mitigates its investment concentration in common stocks, and in particular Fifth-Third Bancorp.
Ohio-based CFC is a publicly traded, financial services company with a sizable property and casualty insurance operation, as well as, a smaller life insurance operation, money management firm and lease/finance company. At year-end 2001 CFC reported assets of $14 billion and shareholders equity of $6 billion.
Entity/Issue/Type/Action/Rating/Outlook
Cincinnati Financial Corporation
--Long-term issuer Assigned 'A+'/Stable;
--Senior Debt Assigned 'A+'/Stable.
The Cincinnati Insurance Company
The Cincinnati Casualty Company
The Cincinnati Indemnity Company
--Insurer Financial Strength Assigned 'AA'/Stable.
The Cincinnati Life Insurance Company
--Insurer Financial Strength Assigned 'AA' / Stable.
CIC's ratings are based on its strong profitability, combined with above average premium growth relative to its property and casualty peers, excellent financial flexibility and strong capitalization of its operating subsidiaries. These strengths are derived from CIC's focused, single-channel distribution system that emphasizes building strong relationships with select independent agents, competitive non-commission expense ratio, and successful agent compensation structure. The Cincinnati Life Insurance Company's rating reflects its very strong capital position, good earnings and liquidity, and strategic importance to its parent.
CFC maintains excellent financial flexibility that is derived from its modest financial leverage, strongly capitalized operating subsidiaries, substantial non-affiliated equity portfolio at the parent holding company, strong interest coverage and access to the capital markets and bank facilities.
The ratings also consider CIC's significant investment concentration in common stocks, with a non-affiliated equity portfolio that exceeds the property/casualty group's policyholders' surplus, and to a lesser extent, non-investment grade bonds. This largely reflects significant unrealized gains derived from management's longstanding total return, 'buy-and-hold' investment strategy that is focused on owning a small number of dividend-producing common stocks.
Furthermore, CIC's book of business is concentrated in Ohio, which accounts for about a quarter of direct premiums written, and Midwestern states. While this has contributed to CFC's relatively modest exposure to natural catastrophes, regulatory and legislative concentration is a concern.
Fitch expects that CFC will continue to demonstrate operating performance and premium growth in advance of its peers over the near to intermediate-term. Furthermore, capitalization is expected to remain strong, reflecting management's conservative philosophy towards loss reserves and catastrophe exposures, combined with modest operating leverage that mitigates its investment concentration in common stocks, and in particular Fifth-Third Bancorp.
Ohio-based CFC is a publicly traded, financial services company with a sizable property and casualty insurance operation, as well as, a smaller life insurance operation, money management firm and lease/finance company. At year-end 2001 CFC reported assets of $14 billion and shareholders equity of $6 billion.
Entity/Issue/Type/Action/Rating/Outlook
Cincinnati Financial Corporation
--Long-term issuer Assigned 'A+'/Stable;
--Senior Debt Assigned 'A+'/Stable.
The Cincinnati Insurance Company
The Cincinnati Casualty Company
The Cincinnati Indemnity Company
--Insurer Financial Strength Assigned 'AA'/Stable.
The Cincinnati Life Insurance Company
--Insurer Financial Strength Assigned 'AA' / Stable.
CONTACT: Fitch Ratings Brett Lawless, 212/908-0220 Glenn E. Schuermann, 212/908-0524 James Jockle, 212/908-0547 (Media Relations)