CINF EPS Beats, Revs Up Y/Y (revised)

Cincinnati Financial Corp. ( CINF - Analyst Report ) reported third quarter 2012 operating earnings of 64 cents per share, substantially beating the Zacks Consensus Estimate of 41 cents. Earnings compared favorably with 13 cents reported in the year-ago quarter.

Including net realized investment gains and losses, CINF reported a net income of $111 million or 68 cents per share improving significantly from $19 million or 11 cents per share in the year-ago quarter. The quarter benefited from strong property casualty underwriting.

Revenue for the quarter stood at $1.04 billion, up 10.0% year over year. The increase in total revenue was primarily led by higher premiums earned during the quarter.

Investment income came in at $132 million, climbing 2% from the prior-year quarter.

Total benefits and expenses decreased 5.4% year over year to $883 million due to lower insurance loss and benefits.

Segment Results

The Commercial Lines Insurance segment recorded written premium of $619 million, up 13.0% from the prior-year quarter, reflecting growth in renewal written premium. Lower loss and loss expenses led to underwriting profit of $60 million in contrast with an operating loss of $44 million in the year-ago quarter.

Combined ratio, a measure of insurer’s profitability, improved 1770 basis points year over year to 90.2%, owing to lower catastrophe losses.

Premiums written in the Personal Lines Insurance segment increased 14% year over year to $253 million, aided by a rise in renewals as well as growth in new business written premium. Despite a higher top line, the segment posted underwriting loss of $12 million, compared with a loss of 38 million in the prior-year quarter.

Premiums written in the Excess and Surplus Lines Insurance segment amounted to $27 million, surging 23.0% year over year. The elevation was largely driven by persistent increase in average renewal price in the high-digit range.

Earned premiums in the Life Insurance segment fell 12% year over year to $38 million on the back of an 80% decline in Universal life insurance.

In the quarter under review, book value per share – a measure of net worth – was recorded at $32.95, up 6% from December 31, 2011.

Peer Take

Cincinnati Financial closely competes with The Chubb Corp. (CB) and The Travelers Companies Inc. (TRV). Chubb reported third-quarter operating earnings of $1.98 per share, significantly ahead of the Zacks Consensus Estimate of $1.51 per share. Travelers reported earnings of $2.22 per share in the third quarter of 2012, outshining the Zacks Consensus Estimate of $1.61 per share.

Zacks Rank

Cincinnati Financial currently retains a Zacks #1 Rank, which translates into a short-term Buy rating. However, we maintain a long-term ‘Neutral’ recommendation on its shares.

(NOTE: We are reissuing this article to correct a mistake. The original article, issued earlier today, October 26, 2012, is no longer to be relied upon.)