Cincinnati Financial Corporation, together with its subsidiaries, engages in property casualty insurance business.
The company markets through independent insurance agencies in 46 states. The company owns 100% of four subsidiaries: The Cincinnati Insurance Company (Cincinnati Insurance), Cincinnati Global Underwriting Ltd. (Cincinnati Global), CSU Producer Resources Inc. and CFC Investment Company.
The Cincinnati Insurance Company owns 100% of four additional insurance subsidiaries. The compan...
Cincinnati Financial Corporation, together with its subsidiaries, engages in property casualty insurance business.
The company markets through independent insurance agencies in 46 states. The company owns 100% of four subsidiaries: The Cincinnati Insurance Company (Cincinnati Insurance), Cincinnati Global Underwriting Ltd. (Cincinnati Global), CSU Producer Resources Inc. and CFC Investment Company.
The Cincinnati Insurance Company owns 100% of four additional insurance subsidiaries. The company’s standard market property casualty insurance group includes two of those subsidiaries: The Cincinnati Casualty Company and The Cincinnati Indemnity Company. This group writes a broad range of business, homeowner and auto policies. The Cincinnati Insurance Company also conducts the business of the company’s reinsurance assumed operations, known as Cincinnati Re. Other subsidiaries of The Cincinnati Insurance Company include The Cincinnati Life Insurance Company (Cincinnati Life), which provides life insurance policies and fixed annuities; and The Cincinnati Specialty Underwriters Insurance Company (Cincinnati Specialty Underwriters), which offers excess and surplus lines insurance products.
Cincinnati Global owns 100% of Cincinnati Global Underwriting Agency Ltd., a London-based, global specialty underwriter for Lloyd's Syndicate 318, and Cincinnati Global Dedicated No. 2 Ltd., a Lloyd’s corporate member and vehicle through which capital is provided by Cincinnati Financial Corporation and third-party names at Lloyd’s.
The two noninsurance subsidiaries of Cincinnati Financial Corporation are CSU Producer Resources, which offers insurance brokerage services to the company’s independent agencies so their clients can access its excess and surplus lines insurance products; and CFC Investment Company, which offers commercial leasing and financing services to the company’s agencies, their clients and other customers.
Strategy
The key elements of the company's strategy include providing insurance market stability through financial strength; producing competitive, up-to-date products and services; and developing associates committed to superior service.
Insurance Products
The company provides well-designed property casualty and life insurance products to bring policyholders convenience, discounts and a reduced risk of coverage gaps or disputes. Products for various business lines within its reporting segments include insurance coverages for business property and liability, automobiles and homes.
Segments
The company operates through five segments: Commercial lines insurance; Personal lines insurance; Excess and surplus lines insurance; Life insurance; and Investments.
Commercial Lines Insurance segment
The five commercial business lines are:
Commercial casualty: Provides coverage to businesses against third-party liability from accidents occurring on their premises or arising out of their operations, including injuries sustained from products or liability related to professional services. Specialized casualty policies may include similar coverage such as umbrella liability or employment practices. The commercial casualty business line includes liability coverage written as part of commercial package policies.
Commercial property: Provides coverage for loss or damage to buildings, inventory and equipment caused by covered causes of loss, such as fire, wind, hail, water, theft and vandalism, as well as business interruption resulting from a covered loss. Commercial property also includes other coverages, such as inland marine, which covers losses related to builder’s risk, cargo or equipment. Various property coverages can be written as stand-alone policies or can be added to a commercial package policy.
Commercial auto: Protects businesses against liability to others for both bodily injury and property damage, medical payments to insureds and occupants of their vehicles, physical damage to an insured’s own vehicle from collision and various other perils, and damages caused by uninsured motorists.
Workers’ compensation: Covers employers for government-specified benefits from work-related injuries to employees.
Other commercial lines: This includes several other types of insurance products for businesses, including:
Management liability and surety: Includes director and officer (D&O) liability insurance, which covers liability for actual or alleged errors in judgment, breaches of duty or other wrongful acts related to activities of organizations and can optionally include other liability coverages. The company markets primarily to nonprofit organizations, privately held businesses, healthcare organizations, financial institutions and educational institutions. The surety portion includes contract and commercial surety bonds for losses resulting from dishonesty, failure to perform and other acts and also includes fidelity bonds for fraudulent acts by specified individuals or dishonest acts by employees. Management liability coverage can also include cyber insurance as an affirmative coverage option on various insurance policies.
Machinery and equipment: Specialized coverage provides protection for loss or damage to boilers and machinery, including production and computer equipment and business interruption, due to sudden and accidental mechanical breakdown, steam explosion or artificially generated electrical current.
Commercial lines policy renewals are managed by headquarters underwriters who are assigned to specific agencies and consult with local field associates as needed. As part of its team approach, headquarters underwriters also help oversee agency growth and profitability. They are responsible for formal issuance of all new business and renewal policies as well as policy endorsements. Further, the headquarters underwriters provide day-to-day customer service to agencies and the company’s field marketing representatives by offering technical and industry expertise and product training, helping to determine underwriting eligibility and assisting with the mechanics of premium determination. The company also continues a target markets emphasis to analyze opportunities and to develop new products and services, new coverage options and improvements to existing insurance products.
Understanding evolving market conditions is a critical function for the company’s success, accomplished through both informal commentary and formal reviews. Informally, the company’s field marketing representatives, underwriters and product development associates routinely receive market intelligence from a variety of channels, including from the agencies with which they work.
Personal Lines Insurance segment
This segment prefers to write personal lines coverage in accounts that include both auto and homeowner coverages as well as coverages that are part of its other personal business line. The company provides line of business data to summarize growth and profitability trends separately for three business lines:
Personal Auto: Protects against liability to others for both bodily injury and property damage, medical payments to insureds and occupants of their vehicle, physical damage to an insured’s own vehicle from collision and various other perils, and damages caused by uninsured motorists. In addition, many states require policies to provide first-party personal injury protection, frequently referred to as no-fault coverage.
Homeowner: Protects against losses to dwellings and contents from a wide variety of perils, as well as liability arising out of personal activities both on and off the covered premises. The company also offers coverage for condominium unit owners and renters.
Other personal lines: This includes the other types of insurance products the company offers to individuals, including dwelling fire, inland marine, personal umbrella liability and watercraft coverages.
At year-end 2024, the company marketed personal lines insurance products through 2,455, or approximately 73%, of its 3,355 agency reporting locations. The 2,455 personal lines agency locations were in 45 of the 46 states in which the company offered property casualty insurance. Those agencies produced approximately 1.3 million personal lines policies in force for the company, representing approximately 510,000 policyholders.
The company has personal lines field marketing representatives who have underwriting authority and visit agencies on a regular basis. They focus primarily on key states targeted for growth, reinforcing the advantages of its personal lines products and offering training in the use of the company’s policy processing system. Personal lines activities are further supported by headquarters associates assigned to individual agencies.
Excess and Surplus Lines Insurance segment
The segment excess and surplus lines policies typically cover business risks with unique characteristics, such as the nature of the business or its claim history, that are difficult to profitably insure in the standard commercial lines market. Excess and surplus lines insurers have more flexibility in coverage terms and rates compared with standard lines companies, generally resulting in policies with higher rates and terms and conditions customized for specific risks, including restricted coverage where appropriate. The company targets small to midsized risks, and policyholders in many cases also have standard market insurance with one of its other subsidiaries. The company’s average excess and surplus lines policy size is approximately $10,000 in annual premiums, and the majority have coverage limits of $1 million or less. All of the company’s excess and surplus lines policies are written for a maximum term of one year. Approximately 89% of its 2024 earned premiums for the excess and surplus lines insurance segment provided commercial casualty coverages and about 11% provided commercial property coverages. Those coverages are described below.
Commercial Casualty: Covers businesses for third-party liability from accidents occurring on their premises or arising out of their operations, including injuries sustained from products. Other coverages available include miscellaneous errors and omissions, professional liability and excess liability. Typical businesses covered include contractors, manufacturers, real estate owners and managers, retail, consultants, and bars or taverns. Policies covering liability at special events are also available.
Commercial Property: Insures buildings, inventory, equipment and business income from loss or damage due to causes such as fire, wind, hail, water, theft and vandalism. Examples of property the company commonly insure with excess and surplus lines policies include temporarily vacant buildings, habitational, restaurants and relatively higher-hazard manufacturing classes.
As of December end of 2024, the company marketed excess and surplus lines insurance products in each of the 44 states in which it offers standard market commercial lines insurance. Offering excess and surplus lines helps agencies representing The Cincinnati Insurance Companies meet the insurance needs of their clients when coverage is unavailable in the standard market. By providing outstanding service, the company can help agencies grow and prosper while also profitably growing its property casualty business.
The company estimates that approximately half of that premium volume matches the targeted business types and coverages it offers through its excess and surplus lines insurance segment. The company structured the operations of this segment to meet the needs of these agencies and to market exclusively through them.
Agencies have access to Cincinnati Specialty Underwriters' product line through CSU Producer Resources, the wholly owned insurance brokerage subsidiary of Cincinnati Financial Corporation. CSU Producer Resources has binding authority on all classes of business written through Cincinnati Specialty Underwriters and maintains appropriate agent and surplus lines licenses.
Life Insurance segment
The Cincinnati Life Insurance Company supports the company’s agency-centered business model by deepening the relationships it has with agents while also diversifying revenue and profitability for both the agency and its company. The company primarily focuses on life products that feature a steady stream of premium payments and that have the potential for generating revenue growth through increasing demand.
Life Insurance Business Lines
Four lines of business that account for approximately 99% of the life insurance segment’s revenues are:
Term life insurance: Policies under which a death benefit is payable only if the insured dies during a specific period of time. Policy options include a return of premium provision, a benefit equal to the sum of all paid base premiums that is payable if the insured person survives to the end of the term. The policies are fully underwritten using traditional and accelerated methods.
Worksite products: Individually owned term life insurance, return of premium term life insurance and whole life insurance offered to employees on a voluntary basis through their employer. Premiums are collected by the employer using payroll deduction. Policies are issued using a simplified underwriting approach and on a guaranteed issue basis. Worksite insurance products provide the company’s property casualty agency force with excellent cross-serving opportunities for both commercial and personal accounts.
Whole life insurance: Policies that provide life insurance for the entire lifetime of the insured. The death benefit is guaranteed never to decrease, and premiums are guaranteed never to increase. While premiums are fixed, they must be paid as scheduled. These policies provide guaranteed cash values that are available as loans collateralized by the cash surrender value. The policies are fully underwritten.
Universal life insurance: Long-duration life insurance policies that are fully underwritten.
In addition, Cincinnati Life markets:
Deferred annuities that provide regular income payments that commence after the end of a specified period or when the annuitant attains a specified age. During the deferral period, any payments made under the contract accumulate at the crediting rate declared by the company but not less than a contract-specified guaranteed minimum interest rate.
Immediate annuities that provide some combination of regular income and lump-sum payments in exchange for a single premium.
Life Insurance Distribution
Cincinnati Life is licensed in 49 states and the District of Columbia. At year-end 2024, approximately 82% of its 2,175 property casualty agency relationships offered Cincinnati Life products to their clients. The company also develops life business from approximately 466 other independent life insurance agencies.
When marketing through its property casualty agencies, the company has specific competitive advantages:
Because its property casualty operations are held in high regard, property casualty agency management is predisposed to consider selling the company’s life products.
Marketing efforts for both the company’s property casualty and life insurance businesses are directed by its field marketing department, coordinated with its life field marketing representatives, which assures consistency of communication and operations. Life field marketing representatives are available to meet face-to-face with agency personnel and their clients as well. The company’s life headquarters underwriters and other associates are available to the agents and field team to assist in the placement of business.
The company continues to emphasize the cross-serving opportunities of its life insurance, including term and worksite products, for the property casualty agency's personal and commercial accounts. In both the property casualty and independent life agency distribution systems.
Term life insurance is the company's largest life insurance product line. The company continues to develop and offer term products with features its agents indicate are important, such as a return of premium benefit and an accelerated underwriting option.
The company also offers products addressing the needs of businesses with key person and buy-sell coverages. The company offers quality, personal life insurance coverage to personal and commercial clients of its agencies.
Investments segment
Revenues of the investments segment are primarily from net investment income and from net investment gains and losses from investment portfolios managed for the holding company and each of the operating subsidiaries.
The cash the company generates from insurance operations has been invested in three broad categories of investments:
Fixed-maturity investments: Includes taxable and tax-exempt bonds and redeemable preferred stocks. During 2024, the combined effect of purchases of securities and a net decrease in unrealized losses offset dispositions of fixed-maturity securities in the company’s portfolio.
Equity investments: Includes common and nonredeemable preferred stocks. During 2024, the combined effect of a net increase in fair value and purchases of equity securities in the company’s portfolio offset sales.
Short-term investments: Primarily commercial paper.
Fixed-Maturity Securities and Short-Term Investments
By maintaining a well-diversified fixed-maturity portfolio, the company attempts to manage overall interest rate, reinvestment, credit and liquidity risk. The company pursues a buy-and-hold strategy and do not attempt to make large-scale changes to the portfolio in anticipation of rate movements. By investing new money on a regular basis and analyzing risk-adjusted after-tax yields, the company works to achieve a general laddering effect to its portfolio that may mitigate some of the effects of adverse interest rate movements.
Equity Securities Investments
After covering both the company’s intermediate and long-range insurance obligations with fixed-maturity investments, the company historically have used some available cash flow to invest in equity securities. The company’s equity securities portfolio includes common stocks and nonredeemable preferred stocks, primarily in larger-capitalization companies but sometimes in smaller entities with attractive growth prospects. Investments in equity securities have played an important role in achieving its portfolio objectives and have contributed to both growth of investment income and portfolio appreciation. The company remains committed to its long-term equity focus, which is a key factor to its company’s long-term growth and stability.
Other
What the company reports as Other includes the noninvestment operations of the parent company and its noninsurer subsidiary, CFC Investment Company.
The company also reports as Other the results of Cincinnati Re, which has contracts, also referred to as treaties, with other insurance or reinsurance companies to assume a portion of their insured risk in exchange for a portion of premiums from insurance policies covering those risks.
Regulation
The company’s primary insurance regulators in the U.S. have adopted the Model Audit Rule for annual statutory financial reporting. This regulation closely mirrors the Sarbanes-Oxley Act on matters, such as auditor independence, corporate governance and internal controls over financial reporting.
Privacy laws, such as the Gramm-Leach-Bliley Act, the Fair Credit Reporting Act and the Health Insurance Portability and Accounting Act (HIPAA) are the federal laws that most affect the company’s day-to-day operations. These apply to the company because it gathers and uses personal nonpublic information to underwrite insurance and process claims. The company is also subject to other federal laws, such as the Terrorism Risk Insurance Act (TRIA), anti-money laundering statute (AML), the Nonadmitted and Reinsurance Reform Act (NRRA), the U.S. Foreign Corrupt Practices Act (FCPA), and the rules and regulations of the Office of Foreign Assets Control (OFAC).
The company operates in limited foreign jurisdictions. The company’s foreign insurance subsidiary, Cincinnati Global Underwriting Ltd., based in the United Kingdom (U.K.), holds a group of companies led by its managing agency, Cincinnati Global Underwriting Agency Ltd., of Lloyd’s Syndicate 318, which is regulated by The Prudential Regulation Authority (PRA) and The Financial Conduct Authority (FCA).
History
Cincinnati Financial Corporation, an Ohio corporation, was founded in 1950. The company was incorporated in 1968.
