Ratings of Cincinnati Specialty Underwriters Insurance Co. Upgraded

A.M. Besthasupgraded the financial strength rating (FSR) to A+ (Superior) from A (Excellent) and the issuer credit rating (ICR) to “aa-” from “a” of The Cincinnati Specialty Underwriters Insurance Company (CSU). The outlook for the ICR is revised to stable from positive while the outlook for the FSR remains stable.

CSU is a wholly owned, separately rated excess and surplus (E&S) lines subsidiary of The Cincinnati Insurance Co., based in Fairfield, Ohio.

Additionally, A.M. Best affirmed the FSR of A+ (Superior) and the ICR of “aa-” of The Cincinnati Insurance Company, The Cincinnati Indemnity Co. and The Cincinnati Casualty Co., which along with CSU are collectively referred to as The Cincinnati Insurance Cos. (CIC). The Cincinnati Insurance Company is the lead property/casualty company.

Additionally, A.M. Best has affirmed the ICR of “a-” and the issue ratings of CIC’s publicly traded parent, Cincinnati Financial Corp. The outlook for all ratings is stable. All companies are domiciled in Fairfield, OH, except where specified.

The rating upgrades of CSU reflects its increasing importance to CIC in that it provides its excess and surplus lines expertise to the agents already serviced by the company’s affiliates, as well as its full integration into the group’s operations and management.

The affirmation of CIC’s ratings reflect the group’s superior risk-adjusted capitalization and historically conservative loss reserving standards that have resulted in recognition of substantial favorable development of prior accident-year loss reserves. The ratings also reflect the group’s historically strong operating earnings, which have improved in recent years. 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. Lastly, CIC 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.

These positive rating factors are partially offset by historically elevated common stock leverage and the variability in CIC’s earnings in the earliest years of the most recent five-year period, relative to its similarly rated peers, primarily due to the impact of significant natural catastrophe losses on underwriting results.

The group’s market profile remains somewhat geographically concentrated relative to its rating level, as nearly 50 percent of its writings are derived from six states, primarily in the Midwest, as well as the Northeast and Southeast. As a result, the group remains more exposed to potential economic, legislative and judicial changes than its more geographically diversified peers. This geographic concentration leaves the group susceptible to weather-related losses, as evidenced in recent accident years.

The outlook reflects CIC’s ability to withstand variability in the group’s underwriting and operating performance due to its superior level of risk-adjusted capitalization, as well as A.M. Best’s expectation that management’s initiatives will result in sustained improvement in underwriting and operating results.

Source: A.M. Best

Topics Excess Surplus Underwriting AM Best