Back to top

Image: Bigstock

What Awaits Cincinnati Financial (CINF) in Q3 Earnings?

Read MoreHide Full Article

Cincinnati Financial Corporation (CINF - Free Report) is slated to report third-quarter 2020 results on Oct 26, after market close. The company delivered an earnings surprise of 7.32% in the last reported quarter.

Factors to Consider    

Premiums in the to-be-reported quarter are likely to have risen on better pricing, renewal price increases, higher level of insured exposure and disciplined expansion of Cincinnati Re. Also, the company’s agent-focused business model is likely to have been a positive. The company estimates third-quarter net written premium to grow 3%.

The Zacks Consensus Estimate for revenues is pegged at $1.7 billion, indicating an upside of 5.5% from the year-ago reported figure.

Cincinnati Financial expects pre-tax catastrophe loss of about $266 million in the to-be-reported quarter, stemming from its exposure to Midwest derecho, Hurricane Laura and several less severe storms. The cat loss consisted Midwest derecho in August, which caused losses of approximately $103 million and Hurricane Laura-induced losses worth $46 million, besides taking into account $30 million for Cincinnati Global Underwriting Ltd and $12 million for Cincinnati Re, which are its subsidiaries.

By segment, catastrophe loss is projected to be nearly $128 million for the Commercial Lines Insurance segment, $83 million for Personal Lines Insurance segment, $1 million for the Excess and Surplus Lines Insurance segment, $10 million for Cincinnati Re and $44 million for Cincinnati Global.

Combined ratio is expected to deteriorate by about 1830 basis points (bps) based on the projected P&C earned premiums. Property-casualty combined ratio is estimated between 102.6%-104.6%.

The Zacks Consensus Estimate for combined ratio of the Commercial Line Insurance segment is 101, indicating a deterioration of 800 basis points from the year-ago quarter while the same for Personal Lines Insurance is pegged at 105, implying a deterioration of 500 basis points from the year-ago quarter.

Total benefits and expenses are likely to have increased mainly due to higher insurance loss and contract holders’ benefits, underwriting, acquisition and insurance expenses. This, in turn, might have weighed on operating margin.

The Zacks Consensus Estimate for third-quarter 2020 earnings per share is pegged at 41 cents, indicating a decline of 62% from the year-ago quarter’s reported figure.

Cincinnati Financial Corporation Price and EPS Surprise

What the Zacks Model Says

Our proven model does not conclusively predict an earnings beat for Cincinnati Financial this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That is not the case as you can see below.

Earnings ESP: Cincinnati Financial has an Earnings ESP of 0.00%. This is because both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at 41 cents. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Zacks Rank: Cincinnati Financial currently carries a Zacks Rank of 3.

Stocks to Consider

Some insurance stocks with the right combination of elements to come up with an earnings beat this time around are:

Arch Capital Group (ACGL - Free Report) has an Earnings ESP of +5.33% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Watford Holdings (WTRE - Free Report) has an Earnings ESP of +70.13% and a Zacks Rank #3.

CNO Financial (CNO - Free Report) has an Earnings ESP of +2.52% and a Zacks Rank of 2.

Breakout Biotech Stocks with Triple-Digit Profit Potential

The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.

Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.

See these 7 breakthrough stocks now>>