S&P Affirms Cincinnati Insurance Co ‘AA-‘ Ratings

Standard & Poor’s Ratings Services announced that it has affirmed its double-‘A’-minus counterparty credit and financial strength ratings on The Cincinnati Insurance Co., The Cincinnati Life Insurance Co., The Cincinnati Casualty Co., and The Cincinnati Indemnity Co. (collectively referred to as CIC). S&P also affirmed its single-‘A’-plus counterparty credit and senior debt ratings on Cincinnati Financial Corp., CIC’s parent, and said the outlook for all the companies was “stable.”

The bulletin noted “CIC’s strong competitive position, which stems from its extremely loyal and productive agency force, high business persistency, strong capitalization, and excellent financial flexibility.” It said, however, that “Counteracting these positive factors are CIC’s aggressive investment strategy and relatively slow response to significant market changes.”

“The continued long-term success of CIC’s business model is partially dependent on market conditions remaining relatively steady because management’s approach to the marketplace and CIC’s aggressive position in stocks and catastrophe exposure could affect the quality of its capital,” stated S&P credit analyst Polina Chernyak.

S&P said that CIC’s strong competitive position in the standard lines p/c market is “largely a function of its well-established, long-term agency relationships. An understanding of the needs of independent agents–together with a very favorable contingent commission structure and competitive products and services–has resulted in an extremely loyal and productive distribution channel. This, in turn, has allowed CIC to report strong premium growth and strong historical operating performance relative to its peers.”

The announcement indicated that S&P believes “CIC has adopted a very successful operating strategy, with underwriting and claims representatives working from their homes and living in the local markets they serve, eliminating the need for branch offices. This strategy allows the company to boast extremely low operating expenses relative to competitors and to use this advantage to pay very good commissions to its agents.”