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Here's Why Hold Strategy is Apt for Cincinnati Financial (CINF)

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Cincinnati Financial Corporation (CINF - Free Report) is well-poised for growth on the back of higher new business premiums, renewal written premium growth and effective capital deployment.

The Zacks Consensus Estimate for 2021 earnings per share is pegged at $3.78, indicating year-over-year increase of 34.3%.

The stock has seen its estimates for 2021 move up 1.3% in the past 60 days, reflecting investor optimism.

Cincinnati Financial’s Commercial Lines Insurance segment, the major contributor to revenue growth of the company, continues to benefit from appropriate pricing discipline for both new and renewal business, higher new business premiums, increase in renewal written premium and growth in each major line of business.

The property and casualty insurer’s Excess and surplus lines premiums has been witnessing improvement on the back of increase in agency renewal written premiums, reflecting higher renewal pricing.

The pandemic did not have a significant effect on cash flows for the first nine months of 2020. In addition to the historically positive operating cash flow to meet the needs of operations, it has the ability to sell a portion of high-quality, liquid investment portfolio or slow investing activities if such a need arises. Also, it has additional capacity to borrow on revolving short-term line of credit.

Moreover, investors should be impressed by its stellar record of 60 straight years of dividend increases. Its current dividend yield of 2.9% is higher than the industry average of 0.4%, which makes the stock an attractive pick for yield-seeking investors. Currently, it has $13 million remaining under the share repurchase authorization.

However, shares of this Zacks Rank #3 (Hold) property and casualty insurer have lost 18.4% in the past year compared with the industry’s decline of 3.3%. Nevertheless, higher premiums, and continued strong performance at Commercial Lines segment are likely to aid a turnaround in the near term.

Stocks to Consider

Some better-ranked players in the property and casualty industry are Alleghany (Y - Free Report) , Fidelity National Financial (FNF - Free Report) and The Allstate Corporation (ALL - Free Report) . While Alleghany sports a Zacks Rank #1 (Strong Buy) at present, Fidelity National and The Allstate carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Alleghany’s bottom line surpassed estimates in two of the last four quarters and missed the other two, the average beat being 34.08%.

Fidelity National Financial surpassed earnings estimates in each of the last four quarters, the average surprise being 30.48%.

The Allstate surpassed estimates in each of the last four quarters and missed in the other one, the average beat being 38.59%.

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