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Cincinnati Financial Corp. (CINF - Analyst Report) registered first quarter 2011 operating earnings of 33 cents per share, beating the Zacks Consensus Estimate by 3 cents, on the basis of higher earned premiums in its property and casualty business. The earnings, however, remained below 39 cents reported in the comparable quarter last year.

Revenue of $929 million also topped the Zacks Consensus Estimate of $918 million and grew 5% year over year, led by higher earned premiums.

Segment Results

The Commercial Insurance segment recorded premium of $540 million, unchanged relative to the prior-year quarter. Higher loss and loss expenses led to underwriting loss of $21 million, up from $10 million recorded in the year-ago quarter.

The segment incurred an underwriting loss of $21 million, which proved even worse than an underwriting loss of $10 million in the prior-year quarter. Combined ratio deteriorated 190 basis points year over year to 104.0%, owing to higher catastrophe losses.

Net written premiums in the Personal Lines segment hiked 12.0% year over year to $173 million, aided by strong new business, higher renewal and pricing hikes. The segment, however, made an underwriting loss of $3 million versus a loss of $5 million in the year-ago quarter. Combined ratio plunged 110 basis points to 101.4%.

Earned premiums in the Life Insurance segment dropped 5.0% year over year to $37 million. The drop resulted from lower premium from Universal life insurance products.

After-tax investment income experienced a modest increase of 1.0% year over year to $99 million due to higher invested assets, partially offset by lower yields.

As of March 31, 2011, book value per share inched up 1.6% year over year to $31.40. As of December 31, 2010, book value per stood at $30.91 per share.  The value creation ratio, which factors into both book value growth as well as dividend contribution, deteriorated to 2.9% from 3.4% in the prior-year quarter.

The quarter reflects that Cincinnati is gradually overcoming the challenges in both its businesses-insurance and investment. Management’s effort of appointing agencies and expanding product offerings is expected to outweigh pricing decline, which is already moderating. However, we believe the company will face limited investment growth due to continuation of low yields for investment options.

Based in Fairfield, Ohio, Cincinnati competes with other property and casualty insurers like CNA Financial Corp. (CNA - Snapshot Report) and Progressive Corp. (PGR - Analyst Report).

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