CONTACTS:
FOR IMMEDIATE RELEASE
OLDWICK, N.J. - APRIL 28, 2006 12:00 AM (EDT)
A.M. Best Co. has affirmed the financial strength rating (FSR) of A++ (Superior) for the members of The Cincinnati Insurance Companies (CIC). A.M. Best has also affirmed the senior debt ratings and issuer credit rating (ICR) of "aa-" of Cincinnati Financial Corporation (CINF) [NASDAQ: CINF]. Additionally, A.M. Best has affirmed the FSR of A+ (Superior) and the ICR of "aa-" of The Cincinnati Life Insurance Company (Cincinnati Life). All companies are domiciled in Fairfield, OH. The outlook for all ratings is stable. (See below for a detailed list of the ratings.)
The FSR of CIC's members reflects the group's superior risk-adjusted capitalization, very strong operating performance and its successful business position developed through building a network of independent agents to market CIC's commercial and personal policies in selected states. Despite challenges to achieve profitability in its personal lines business, CIC has experienced very strong overall underwriting results, driven by favorable commercial lines experience as evidenced by its overall 2005 statutory combined ratio of 89.0% and a five-year averaged combined ratio of 93.4%.
The ratings also recognize the benefit of CINF's very strong financial flexibility, excellent interest coverage measures and modest financial leverage as debt-to-total capital as of December 31, 2005 was 11.5%, and interest coverage was 15.9 times. Furthermore, CINF has significant financial resources to support liquidity throughout its organization.
The affirmation of Cincinnati Life's ratings are based on its integral position within CINF; its continuing focus on life insurance growth with a broad portfolio of life insurance products; an emphasis on further expansion through full-time life insurance specialists embedded within the property/casualty agencies and through appointments of independent life agencies; and consistently positive, but declining, aggregate statutory operating results.
Concurrently, A.M. Best has downgraded the ICRs to "aa+" from "aaa" for the members of CIC. The downgrading of the ICRs reflects CIC's investment and geographic risk concentrations at current rating levels. CIC maintains significant common stock leverage and investment risk within industry sectors and holdings, which exposes the statutory surplus of the group to potential equity market fluctuations. CIC's market profile also is somewhat geographically concentrated, as five states represent nearly half of the group's total writings. However, management has successfully targeted desired regions and largely avoided exposures in undesirable markets. The rating outlook is stable, which recognizes CIC's favorable capitalization and continued demonstration of good underwriting results, despite challenges in certain lines of business.
The FSR of A++ (Superior) has been affirmed and the ICRs have been downgraded to "aa+" from "aaa" for the following members of The Cincinnati Insurance Companies:
- The Cincinnati Insurance Company
- The Cincinnati Indemnity Company
- The Cincinnati Casualty Company
The FSR of A+ (Superior) and ICR of "aa-" have been affirmed for The Cincinnati Life Insurance Company.
The following debt ratings have been affirmed:
Cincinnati Financial Corporation -
-"aa-" on $28 million 6.90% senior unsecured debentures, due 2028
-"aa-" on $375 million 6.125% series B senior unsecured notes, due 2034
-"aa-" on $392.3 million 6.92% senior unsecured debentures, due 2028
A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source.