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Cincinnati Financial Corporation (CINF - Free Report) reported third-quarter 2017 operating income of 58 cents per share that beat the Zacks Consensus Estimate of 53 cents by 9.4%. However, the bottom line deteriorated 32.6% year over year, mainly due to the unprecedented hurricane activity during the reported quarter.
Including net realized investment gains of 3 cents per share, the company’s net income plummeted 43.5% year over year to 61 cents per share.
Operational Update
Total operating revenue in the quarter was $1.4 billion, up 4.4% year over year. The top-line growth was driven by 4.7% higher premiums earned and a 3.4% rise in investment income. Revenues beat the Zacks Consensus Estimate by 0.9%.
Total benefits and expenses of Cincinnati Financial increased 11.7% year over year to $1.3 billion, primarily due to higher insurance losses and contract holders’ benefits plus underwriting, acquisition and insurance expenses.
Combined ratio — a measure of underwriting profitability — deteriorated 690 basis points (bps) year over year to 99.3%.
Cincinnati Financial had 1,704 agency relationships as of Sep 30, 2017 compared with 1,614 as of Dec 31, 2016.
Quarterly Segment Update
Commercial Lines Insurance: Total revenue of $793 million grew 1.7% year over year. This upside was primarily driven by an increase in premiums earned. The company delivered an underwriting profit of $39 million, which plunged 45.8% from the year-ago quarter. Combined ratio also deteriorated 440 bps year over year to 95.2%.
Personal Lines Insurance: Total revenue of $315 million rose 7.1% year over year owing to a noticeable increase in premiums earned. The segment incurred an underwriting loss of $9 million, slightly wider than the year-ago loss of $8 million. Nonetheless, combined ratio improved 30 bps year over year to 103.1%.
Excess and Surplus Lines Insurance: Total revenue of $53 million increased 8.2% year over year, driven by higher premiums earned. The segment’s underwriting profit slumped 35% year over year to $13 million. Also, combined ratio deteriorated 1350 bps year over year to 74.8%.
Life Insurance: Total revenue of $97 million declined 5.8% year over year. Total benefits and expenses decreased 2.3% year over year to $85 million.
Financial Update
As of Sep 30, 2017, the property and casualty (P&C) insurer had assets worth $21.6 billion, up 5.9% from the 2016-end level.
Cincinnati Financial’s debt-to-capital ratio was 9.7% as of Sep 30, 2017. This reflects a slight improvement from 10.3% at the end of 2016.
As of Sep 30, 2017, Cincinnati Financial’s book value per share was a record high $45.86, up 6.8% from Dec 31, 2016.
Zacks Rank
Cincinnati Financial currently carries a Zacks Rank #4 (Sell).
Among other players from the same space that have reported third-quarter earnings so far, the bottom line at The Progressive Corporation (PGR - Free Report) , The Travelers Companies, Inc. (TRV - Free Report) and RLI Corp. (RLI - Free Report) surpassed their respective Zacks Consensus Estimate.
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Cincinnati Financial (CINF) Q3 Earnings Beat, Plunges Y/Y
Cincinnati Financial Corporation (CINF - Free Report) reported third-quarter 2017 operating income of 58 cents per share that beat the Zacks Consensus Estimate of 53 cents by 9.4%. However, the bottom line deteriorated 32.6% year over year, mainly due to the unprecedented hurricane activity during the reported quarter.
Including net realized investment gains of 3 cents per share, the company’s net income plummeted 43.5% year over year to 61 cents per share.
Operational Update
Total operating revenue in the quarter was $1.4 billion, up 4.4% year over year. The top-line growth was driven by 4.7% higher premiums earned and a 3.4% rise in investment income. Revenues beat the Zacks Consensus Estimate by 0.9%.
Total benefits and expenses of Cincinnati Financial increased 11.7% year over year to $1.3 billion, primarily due to higher insurance losses and contract holders’ benefits plus underwriting, acquisition and insurance expenses.
Combined ratio — a measure of underwriting profitability — deteriorated 690 basis points (bps) year over year to 99.3%.
Cincinnati Financial had 1,704 agency relationships as of Sep 30, 2017 compared with 1,614 as of Dec 31, 2016.
Quarterly Segment Update
Commercial Lines Insurance: Total revenue of $793 million grew 1.7% year over year. This upside was primarily driven by an increase in premiums earned. The company delivered an underwriting profit of $39 million, which plunged 45.8% from the year-ago quarter. Combined ratio also deteriorated 440 bps year over year to 95.2%.
Personal Lines Insurance: Total revenue of $315 million rose 7.1% year over year owing to a noticeable increase in premiums earned. The segment incurred an underwriting loss of $9 million, slightly wider than the year-ago loss of $8 million. Nonetheless, combined ratio improved 30 bps year over year to 103.1%.
Excess and Surplus Lines Insurance: Total revenue of $53 million increased 8.2% year over year, driven by higher premiums earned. The segment’s underwriting profit slumped 35% year over year to $13 million. Also, combined ratio deteriorated 1350 bps year over year to 74.8%.
Life Insurance: Total revenue of $97 million declined 5.8% year over year. Total benefits and expenses decreased 2.3% year over year to $85 million.
Financial Update
As of Sep 30, 2017, the property and casualty (P&C) insurer had assets worth $21.6 billion, up 5.9% from the 2016-end level.
Cincinnati Financial’s debt-to-capital ratio was 9.7% as of Sep 30, 2017. This reflects a slight improvement from 10.3% at the end of 2016.
As of Sep 30, 2017, Cincinnati Financial’s book value per share was a record high $45.86, up 6.8% from Dec 31, 2016.
Zacks Rank
Cincinnati Financial currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other P&C Insurers
Among other players from the same space that have reported third-quarter earnings so far, the bottom line at The Progressive Corporation (PGR - Free Report) , The Travelers Companies, Inc. (TRV - Free Report) and RLI Corp. (RLI - Free Report) surpassed their respective Zacks Consensus Estimate.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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