Fitch Revises Cincinnati Financial’s Outlook to Positive From Stable

Fitch Ratings has affirmed the ‘A+’ (Strong) Insurer Financial Strength (IFS) ratings for Cincinnati Financial Corporation’s (CINF) three property/casualty insurance subsidiaries and its life insurance subsidiary the ‘A+’ (Strong). Fitch has also affirmed CINF’s Long-Term Issuer Default Rating at ‘A’ and their senior unsecured notes at ‘A-‘. The Rating Outlook has been revised to Positive from Stable for all ratings.

CINF’s Outlook was revised to Positive from Stable primarily based on very strong capitalization and secondarily on sustained strong underwriting performance and very strong company profile. The rating actions also considers the higher than industry risky asset ratio, the credit rating agency said.

Fitch said CINF’s balance sheet strengths include conservative operating subsidiary capitalization and modest financial leverage. As of 2Q24, the financial leverage ratio (FLR) was 6%. The holding company held $5.0 billion in investments as of June 30, 2024, with the bulk of these assets in equity securities. With the exception of financial leverage, Fitch scores capitalization on a statutory basis.

CINF has demonstrated strong profitability with a a GAAP combined ratio for the first half 2024 of 96%, 3pp better than prior period and comparable to full year 2023 result of 95%. The geographic distribution of premiums exposes the company to less severe but more frequent severe convective storms which can cause volatility in underwriting results in the near term, Fitch said. However, the company is actively geographically diversifying property risks and is expected to be profitable over a five-year average.

Fitch believes CINF’s reserves are adequate and well managed. The company reported favorable prior-year reserve development in each of the last 34 years. Capital exposure to reserve redundancies or deficiencies are relatively modest.