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Cincinnati Financial Corp. (CINF - Free Report) reported third-quarter 2016 operating income of 86 cents per share that beat the Zacks Consensus Estimate of 85 cents by 1.2%. However, the bottom line deteriorated 17.3% year over year, mainly due to weak underwriting results and higher expenses.
Including lower net realized investment gains of 22 cents per share, the company’s net income inched up 2.9% year over year to $1.08 per share.
Operational Update
Total operating revenue in the reported quarter was $1.35 billion, up 1.1% year over year. The top-line growth was driven by 5.7% higher premiums earned and 3.5% rise in investment income.
Total benefits and expenses of Cincinnati Financial increased 11% year over year to $1.1 billion, primarily due to higher insurance losses and contract holders’ benefits as well as underwriting, acquisition and insurance expenses.
Combined ratio – a measure of underwriting profitability – deteriorated 460 basis points (bps) year over year to 92.4%.
Cincinnati Financial had 1,592 agency relationships as of Sep 30, 2016 compared with 1,526 as of Dec 31, 2015.
Quarterly Segment Update
Commercial Lines Insurance: Total revenue of $780 million grew 2.9% year over year. The upside was primarily driven by an increase in premiums earned. However, underwriting profit plunged 40.5% year over year to $72 million. Combined ratio also deteriorated 680 bps year over year to 90.8%.
Personal Lines Insurance: Total revenue of $294 million jumped 5.8% year over year owing to an increase in premiums earned. The segment incurred an underwriting loss of $8 million, substantially wider than the year-ago loss of $2 million. Moreover, combined ratio deteriorated 250 bps year over year to 103.4%.
Excess and Surplus Lines Insurance: Total revenue of $49 million climbed 16.7% year over year due to an increase in premiums earned. The segment’s underwriting profit surged 42.9% year over year to $20 million. Also, combined ratio improved 860 bps year over year to 61.3%.
Life Insurance: Total revenue grew 14.4% year over year to $103 million due to an increase in earned premiums. Total benefits and expenses increased 19.2% year over year to $87 million.
Financial Update
As of Sep 30, 2016, Cincinnati Financial had assets worth $20.5 billion, up 8.3% from the 2015-end level.
Cincinnati Financial’s debt-to-capital ratio was 10.2% as of Sep 30, 2016. This reflects an improvement from 11.3% at the end of 2015.
As of Sep 30, 2016, Cincinnati Financial’s book value per share was $43.24, up 10.3% from Dec 31, 2015.
Among the other players from the same space that have reported their third-quarter earnings so far, the bottom line at Progressive Corp.(PGR - Free Report) and The Travelers Companies Inc. (TRV - Free Report) beat their respective Zacks Consensus Estimate, while RLI Corp. (RLI - Free Report) missed the same.
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Cincinnati Financial (CINF) Q3 Earnings Beat, Decrease Y/Y
Cincinnati Financial Corp. (CINF - Free Report) reported third-quarter 2016 operating income of 86 cents per share that beat the Zacks Consensus Estimate of 85 cents by 1.2%. However, the bottom line deteriorated 17.3% year over year, mainly due to weak underwriting results and higher expenses.
Including lower net realized investment gains of 22 cents per share, the company’s net income inched up 2.9% year over year to $1.08 per share.
Operational Update
Total operating revenue in the reported quarter was $1.35 billion, up 1.1% year over year. The top-line growth was driven by 5.7% higher premiums earned and 3.5% rise in investment income.
Total benefits and expenses of Cincinnati Financial increased 11% year over year to $1.1 billion, primarily due to higher insurance losses and contract holders’ benefits as well as underwriting, acquisition and insurance expenses.
Combined ratio – a measure of underwriting profitability – deteriorated 460 basis points (bps) year over year to 92.4%.
Cincinnati Financial had 1,592 agency relationships as of Sep 30, 2016 compared with 1,526 as of Dec 31, 2015.
Quarterly Segment Update
Commercial Lines Insurance: Total revenue of $780 million grew 2.9% year over year. The upside was primarily driven by an increase in premiums earned. However, underwriting profit plunged 40.5% year over year to $72 million. Combined ratio also deteriorated 680 bps year over year to 90.8%.
Personal Lines Insurance: Total revenue of $294 million jumped 5.8% year over year owing to an increase in premiums earned. The segment incurred an underwriting loss of $8 million, substantially wider than the year-ago loss of $2 million. Moreover, combined ratio deteriorated 250 bps year over year to 103.4%.
Excess and Surplus Lines Insurance: Total revenue of $49 million climbed 16.7% year over year due to an increase in premiums earned. The segment’s underwriting profit surged 42.9% year over year to $20 million. Also, combined ratio improved 860 bps year over year to 61.3%.
Life Insurance: Total revenue grew 14.4% year over year to $103 million due to an increase in earned premiums. Total benefits and expenses increased 19.2% year over year to $87 million.
Financial Update
As of Sep 30, 2016, Cincinnati Financial had assets worth $20.5 billion, up 8.3% from the 2015-end level.
Cincinnati Financial’s debt-to-capital ratio was 10.2% as of Sep 30, 2016. This reflects an improvement from 11.3% at the end of 2015.
As of Sep 30, 2016, Cincinnati Financial’s book value per share was $43.24, up 10.3% from Dec 31, 2015.
CINCINNATI FINL Price, Consensus and EPS Surprise
CINCINNATI FINL Price, Consensus and EPS Surprise | CINCINNATI FINL Quote
Zacks Rank
Cincinnati Financial currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Performance of Other P&C Insurers
Among the other players from the same space that have reported their third-quarter earnings so far, the bottom line at Progressive Corp.(PGR - Free Report) and The Travelers Companies Inc. (TRV - Free Report) beat their respective Zacks Consensus Estimate, while RLI Corp. (RLI - Free Report) missed the same.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>