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Cincinnati Financial's Exposure to Cat Loss Raises Concern
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As a property and casualty (P&C) insurer, Cincinnati Financial Corporation (CINF - Free Report) is exposed to both natural and man-made catastrophe events. The company, with its concentration in the Midwest region, has been incurring inclement weather-related losses over a considerable period of time. To that end, it has been experiencing a high level of catastrophe loss for a while now and the first nine months of 2017 were no exception, mainly stemming from the unprecedented hurricane activity in the third quarter.
Further, massive catastrophe losses also resulted in deteriorating the company’s combined ratio, a measure of profitability used by an insurance company to denote its daily operational performance.
Notably, the fourth quarter will bear the brunt of Hurricane Nate and the California wildfires and in each case of devastation, the company has projected losses of not less than $1 million. Thus, such cat events will put a dent in the company’s overall performance.
This apart, Cincinnati Financial has been incurring rising expenses over the past few years and the first nine months of 2017 were no exception. Higher insurance losses and contract holders’ benefits besides higher underwriting, acquisition and insurance expenses were primarily responsible for this increase. It is important to note that escalating expenses are likely to restrict operating margin expansion and might hurt the company’s overall growth in turn.
Moreover, the Zacks Rank #4 (Sell) P&C insurer’s cash flow from operations has also been on the wane over the last few years and the same was witnessed in the first nine months of 2017 as well. Dwindling cash flows might also restrain the company’s financial flexibility.
Southbound Estimates: Although the stock has not witnessed any estimate revision for current-year earnings over the last 60 days, the Zacks Consensus Estimate for 2018 has however, moved nearly 1% south over the same time frame. This is reflected in the company’s Zacks Rank as well.
An Underperformer: Shares of Cincinnati Financial have lost 1.6% year to date, underperforming the industry’s 17.1% rally. We also apprehend substantial catastrophe loss as well as mounting expenses to throw tough challenges at the company’s overall functioning.
Growth Score: Cincinnati Financial has a Growth Score of D. The Growth Style Score analyzes the growth prospects of a company and also evaluates its corporate financial statements. Therefore, this P&C insurer’s Growth Score does not raise too much optimism among its investors.
Stretched Valuation: Looking at the company’s price-to-book ratio — the best multiple for valuing insurers because of large variations in their earnings results from one quarter to the next — shares are overpriced at the current level. The company has a trailing 12-month P/B ratio of 1.63, above the industry average of 1.58.
Stocks to Consider
Some better-ranked stocks from the same space are CNA Financial Corporation (CNA - Free Report) , Infinity Property and Casualty Corporation and NMI Holdings, Inc. (NMIH - Free Report) .
CNA Financial provides commercial property and casualty insurance products primarily in the United States. The company came up with positive surprises in three of the last four quarters with an average beat of 39.87%. Shares of the company have gained 28.4% year to date. The stocks sports Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Infinity Property and Casualty Corporation provides personal automobile insurance products in the United States. The company pulled off positive surprises in three of the last four quarters with an average beat of 300.65%. Shares of the company have rallied 20.9% year to date. The stocks sports Zacks Rank #1.
NMI Holdings provides private mortgage guaranty insurance services in the United States. The company came up with a four-quarter average positive surprise of 11.75%. Shares of the company have surged 65.3% year to date. The stock sports a Zacks Rank #2 (Buy).
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
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Cincinnati Financial's Exposure to Cat Loss Raises Concern
As a property and casualty (P&C) insurer, Cincinnati Financial Corporation (CINF - Free Report) is exposed to both natural and man-made catastrophe events. The company, with its concentration in the Midwest region, has been incurring inclement weather-related losses over a considerable period of time. To that end, it has been experiencing a high level of catastrophe loss for a while now and the first nine months of 2017 were no exception, mainly stemming from the unprecedented hurricane activity in the third quarter.
Further, massive catastrophe losses also resulted in deteriorating the company’s combined ratio, a measure of profitability used by an insurance company to denote its daily operational performance.
Notably, the fourth quarter will bear the brunt of Hurricane Nate and the California wildfires and in each case of devastation, the company has projected losses of not less than $1 million. Thus, such cat events will put a dent in the company’s overall performance.
This apart, Cincinnati Financial has been incurring rising expenses over the past few years and the first nine months of 2017 were no exception. Higher insurance losses and contract holders’ benefits besides higher underwriting, acquisition and insurance expenses were primarily responsible for this increase. It is important to note that escalating expenses are likely to restrict operating margin expansion and might hurt the company’s overall growth in turn.
Moreover, the Zacks Rank #4 (Sell) P&C insurer’s cash flow from operations has also been on the wane over the last few years and the same was witnessed in the first nine months of 2017 as well. Dwindling cash flows might also restrain the company’s financial flexibility.
Southbound Estimates: Although the stock has not witnessed any estimate revision for current-year earnings over the last 60 days, the Zacks Consensus Estimate for 2018 has however, moved nearly 1% south over the same time frame. This is reflected in the company’s Zacks Rank as well.
An Underperformer: Shares of Cincinnati Financial have lost 1.6% year to date, underperforming the industry’s 17.1% rally. We also apprehend substantial catastrophe loss as well as mounting expenses to throw tough challenges at the company’s overall functioning.
Growth Score: Cincinnati Financial has a Growth Score of D. The Growth Style Score analyzes the growth prospects of a company and also evaluates its corporate financial statements. Therefore, this P&C insurer’s Growth Score does not raise too much optimism among its investors.
Stretched Valuation: Looking at the company’s price-to-book ratio — the best multiple for valuing insurers because of large variations in their earnings results from one quarter to the next — shares are overpriced at the current level. The company has a trailing 12-month P/B ratio of 1.63, above the industry average of 1.58.
Stocks to Consider
Some better-ranked stocks from the same space are CNA Financial Corporation (CNA - Free Report) , Infinity Property and Casualty Corporation and NMI Holdings, Inc. (NMIH - Free Report) .
CNA Financial provides commercial property and casualty insurance products primarily in the United States. The company came up with positive surprises in three of the last four quarters with an average beat of 39.87%. Shares of the company have gained 28.4% year to date. The stocks sports Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Infinity Property and Casualty Corporation provides personal automobile insurance products in the United States. The company pulled off positive surprises in three of the last four quarters with an average beat of 300.65%. Shares of the company have rallied 20.9% year to date. The stocks sports Zacks Rank #1.
NMI Holdings provides private mortgage guaranty insurance services in the United States. The company came up with a four-quarter average positive surprise of 11.75%. Shares of the company have surged 65.3% year to date. The stock sports a Zacks Rank #2 (Buy).
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>