Stephen Spray
CINCINNATI FINANCIALAbout Stephen Spray
Stephen M. Spray, age 58, is President and Chief Executive Officer of Cincinnati Financial Corporation since May 2024 and a director since 2024, after joining the company in 1991 and rising through underwriting, sales/marketing, and commercial lines leadership roles . Under his leadership and the company’s long-term pay-for-performance framework, Cincinnati delivered 2024 value creation ratio (VCR) of 19.8% and three‑year total shareholder return (TSR) of 36.5% used in incentive determinations . 2024 operating execution included 15% net written premium growth to over $9.2B and a 93.4% combined ratio (13th consecutive underwriting profit), aligning to maximum annual incentive payout outcomes for NEOs . In 3Q25, Cincinnati’s combined ratio improved to 88.2% with non-GAAP operating income more than doubling year-over-year, as Spray highlighted disciplined growth and pricing analytics .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Cincinnati Financial (U.S. subsidiaries) | President | 2022–present | Oversaw enterprise operations and led succession to CEO |
| Cincinnati Financial | Chief Executive Officer | May 2024–present | Separated CEO/Chair roles; sharpened profitable growth strategy |
| Cincinnati Insurance | Chief Insurance Officer (Property Casualty) | 2019–2022 | Led underwriting discipline and long‑term profitability focus |
| Cincinnati Insurance | Commercial Lines Leader | 2016–2019 | Led commercial lines operations and performance |
| Cincinnati Insurance | Sales & Marketing Lead | 2011–2016 | Managed field underwriters and agent relationships |
| Cincinnati Specialty Underwriters Insurance Co. | Founder/Instrumental in formation | 2007 | Expanded E&S capabilities; strategic product diversification |
| Cincinnati Insurance | Various roles (joined 1991) | 1991–present | Progressive responsibility across underwriting and distribution |
External Roles
| Organization | Role | Years |
|---|---|---|
| Bowling Green State University | Insurance & Risk Management Advisory Board member | 2015–present |
Fixed Compensation
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Salary ($) | $784,082 | $893,786 | $1,061,264 |
| Base annual salary actions (context) | CEO tier targets updated beginning 2022 | Committee adjustments in Feb 2023 | Increased to $1,100,000 in May 2024 on CEO transition |
Additional notes:
- Approximately 80% of CEO Total Direct Compensation (TDC) was performance‑based and at risk in 2024 .
Performance Compensation
| Component | Metric | Target/Hurdle | Actual | Payout | Vesting |
|---|---|---|---|---|---|
| Annual Incentive (2024) | 1‑year VCR vs peer group; adjustments for premium growth and combined ratio | Threshold/Target/Max at 30th/50th/75th percentiles; CEO tier target = 200% of salary | VCR exceeded 6/9 peers; net written premium growth 15% (>3% goal); combined ratio 93.4% (≥95.0% level ⇒ +2 placements); final placement exceeded 8/9 peers | 200% of target; $4,195,608 paid to Spray | |
| PSUs (2022–2024 performance period) | 3‑year TSR vs peer group | Threshold/Target/Max at 30th/50th/75th percentiles | 3‑year TSR 36.5%, exceeding 3/9 peers (threshold) | 30% of target: 1,800 PSUs vested; $258,660 value | |
| PSUs (2024 grant) | 3‑year TSR vs peer group | Threshold/Target/Max at 30th/50th/75th percentiles | In progress | Determined at end of 2026; target 14,003 PSUs | Cliff vest 3/1/2027 if hurdles met |
| RSUs (2024 grant) | Service-based | — | 2,334 units granted | — | 1/3 annually; 3/1/2025, 3/1/2026, 3/1/2027 |
| Stock Options (2024 grant) | Share price appreciation | — | 47,505 options @ $112.36 exercise price | — | 1/3 annually; 2/19/2025, 2/19/2026, 2/19/2027; expire 2/19/2034 |
Multi‑Year Compensation (SEC SCT)
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Salary ($) | $784,082 | $893,786 | $1,061,264 |
| Stock Awards ($) | $1,033,715 | $1,372,772 | $1,667,532 |
| Option Awards ($) | $743,498 | $855,096 | $1,573,366 |
| Non‑Equity Incentive ($) | $991,401 | $1,140,111 | $4,195,608 |
| Change in Pension Value ($) | — | $398,237 | $234,019 |
| All Other Compensation ($) | $50,343 | $48,645 | $52,411 |
| Total Compensation ($) | $3,603,039 | $4,708,647 | $8,784,200 |
Perquisites detail (2024): Health premiums $25,257; spouse travel/meals $17,523; umbrella policy; tax services; personal car use; safe driver award; dining discounts; aggregate perqs $50,963 .
2024 Stock‑Based Grants and Vesting
| Grant Type | Shares/Units | Key Terms |
|---|---|---|
| Nonqualified Stock Options | 47,505 | Exercise price $112.36; vest 1/3 annually; expire 2/19/2034 |
| PSUs | 14,003 target | 3‑yr TSR vs peers; threshold/target/max at 30%/100%/200% of target; vest 3/1/2027 if hurdles met |
| RSUs | 2,334 | Vest 1/3 annually on 3/1/2025, 3/1/2026, 3/1/2027 |
| Holiday Stock Plan | 10 shares | Fair value $150.73 per share on 11/15/2024 |
Equity Ownership & Alignment
| Item | Amount |
|---|---|
| Beneficial ownership (shares) | 215,984 |
| Ownership as % of shares outstanding | 0.14% |
| Options exercisable within 60 days | 163,933 shares |
| RSUs unvested at YE2024 | 2,334 units; $335,396 market value |
| PSUs unearned at YE2024 | 6,000 (2022 grant), 6,810 (2023 grant), 14,003 (2024 grant); $862,200, $978,597, $2,012,231 payout value markers |
| Stock ownership guidelines | CEO 5x salary; all officers/directors in compliance |
| Hedging policy | Prohibited for directors/officers/associates |
| Pledging | Permitted with caution; <0.1% of outstanding shares pledged by directors/officers at YE2024; no Spray pledge disclosed |
2024 exercises/vesting (selling pressure indicator): 2,986 options exercised ($236,790 value) and 1,775 shares vested from stock awards ($201,214 value) . Blackout/pre‑clearance trading policy applies to insiders, reducing opportunistic selling risk windows .
Employment Terms
- Employment contracts: None; all executive officers employed at will .
- Change‑of‑control: Double‑trigger acceleration features in annual incentive and stock plans for all associates, not just executives .
- Severance multiples: Not disclosed in proxy; no guaranteed bonuses or salary increases .
- Clawback: SEC Rule 10D‑compliant “Policy For The Recovery of Erroneously Awarded Compensation” adopted in 2023; plus existing plan‑level recoupment .
- Tax gross‑ups: Generally not favored; none for executives except limited circumstances (nominal retirement gifts/relocation) .
Board Governance (Spray as Director)
- Board service: Director since 2024; committees: Executive and Investment .
- Independence: Not independent (CEO); separation of CEO and Chairman roles implemented in 2024; lead independent director in place .
- Attendance: 100% of board and committee meetings attended by all directors in 2024; Board met 4x; committees met 4x (Audit, Compensation), 5x (Executive), 6x (Investment, Nominating) .
- Dual‑role implications: CEO seat on Executive/Investment committees with non‑independent Chairman; mitigated by fully independent Audit/Compensation/Nominating committees and lead independent director oversight .
Compensation Structure Analysis
- Strong pay‑for‑performance: Majority of CEO pay long‑term and at‑risk; no guaranteed bonus or salary increases .
- Annual incentive mechanics: Primary VCR metric relative to peers plus premium growth and combined ratio adjustments; 2024 result at maximum tied to exceeding 8/9 peers and meeting both operating goals .
- Long‑term equity mix: Options (3‑year ratable vest), PSUs (3‑year TSR, cliff vest), RSUs (3‑year ratable vest). No repricing/exchanges; no dividend equivalents on unvested awards .
- Peer framework: Nine independent‑agent carriers (Allstate, CNA, Hanover, Hartford, Markel, Selective, Travelers, United Fire, W.R. Berkley). Hurdles at 30th/50th/75th percentiles .
- Say‑on‑pay: 95% approval at 2024 annual meeting; program maintained .
Performance & Track Record
- 2024 highlights: Net written premium +15% to >$9.2B; combined ratio 93.4%; 13 consecutive underwriting profit years; record $1.541B new business; pretax investment income +15%; VCR 19.8% (above 10–13% target) .
- 3Q25 momentum: Combined ratio 88.2%; non‑GAAP operating income $449M; earned premiums +12%; book value/share $98.76; nine‑month VCR 13.8% .
- CEO pay alignment: SCT total compensation varied in line with VCR/TSR performance; maximum annual incentive in 2024; 3‑yr PSUs at threshold reflecting TSR rank vs peers .
Risk Indicators & Red Flags
- Hedging prohibited; pledging permitted but de‑emphasized; <0.1% pledged by directors/officers; no Spray pledge disclosed .
- No option repricing/exchange; clawback policies in place; independent comp committee oversight and risk assessment annually .
- Related‑party transactions disclosed and audit‑committee‑approved; none noted for Spray .
Equity Ownership & Vesting Schedules (Detail)
| Category | 2022 | 2023 | 2024 |
|---|---|---|---|
| PSUs vested (#) | — | — | 1,800 (from 2022 grant; threshold) |
| Value of PSUs vested ($) | — | — | $258,660 |
| Options exercised (#) | — | — | 2,986 |
| Value realized on option exercise ($) | — | — | $236,790 |
| Stock awards vested (#) | — | — | 1,775 |
| Value realized on stock vesting ($) | — | — | $201,214 |
Outstanding equity at YE2024 (selected):
- Options: multiple tranches with strikes $61.47–$125.57 expiring 2026–2033; 2024 options unexercisable 47,505 @ $112.36 expiring 2034 .
- RSUs: 2022 grant 533 units ($76,592 value); 2023 grant 1,211 units ($174,021); 2024 grant 2,334 units ($335,396) .
- PSUs (unearned): 2022 6,000 ($862,200 payout value marker), 2023 6,810 ($978,597), 2024 14,003 ($2,012,231) .
Employment Terms and Benefits (Retirement/Deferred)
| Plan | Years Credited | Present Value ($) | Notes |
|---|---|---|---|
| Qualified Pension Plan | 34 | $903,233 | Plan closed to new entrants; defined formula; early retirement reductions apply |
| SERP (Supplemental) | 34 | $1,398,168 | Pays difference above qualified plan limits; lump‑sum only |
Top Hat Savings Plan: Spray not a participant; deferred comp balances shown for other NEOs; matching contributions framework detailed; trading in plan restricted; distributions rules summarized .
Board Governance and Director Compensation Context
- Independent committees (Audit, Compensation, Nominating); strong enterprise risk oversight and annual CEO evaluation by non‑employee directors .
- Director pay structure (for non‑employees): cash and stock retainers $75,000 each; chair/lead retainer premiums; meeting fees; Spray receives no additional compensation for director service as CEO .
Investment Implications
- Pay outcomes are tightly coupled to multi‑metric relative performance (VCR, TSR) and core underwriting/profitable growth goals; 2024 maximum annual incentive and threshold PSU vesting signal robust operational execution but continued focus on sustaining 3‑year TSR rank to drive future PSU payouts .
- Upcoming vesting dates (RSUs on 3/1/2026 and 3/1/2027; options vesting annually through 2027; PSUs cliff on 3/1/2027) and policy blackouts suggest defined windows that could create modest supply from vest‑related selling, though hedging is prohibited and Spray has no disclosed pledging, reducing alignment concerns .
- Governance mitigants (separated Chair/CEO, lead independent director, independent committees, clawbacks, no repricing) reduce dual‑role and compensation risk; say‑on‑pay at 95% indicates shareholder support for program design .
- Continued emphasis on disciplined growth and pricing analytics under Spray, plus strong investment income momentum, support value creation targets; monitoring TSR rank vs peer group and catastrophe loss volatility remains critical for forward PSU outcomes and incentive alignment .