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Here's Why Cincinnati Financial (CINF) is an Attractive Bet
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Cincinnati Financial Corporation (CINF - Free Report) has been in investors’ good books on the back of higher new business premiums, average renewal price increases and growth in equity portfolio dividends.
Estimate Revision
Estimates for 2022 and 2023 have moved up nearly 3.6% and 1.7%, respectively, in the past 30 days, reflecting investors’ optimism.
Earnings Surprise History
Cincinnati Financial has a solid track record of beating earnings estimates in six of the last seven quarters.
Zacks Rank & Price Performance
Cincinnati Financial currently carries a Zacks Rank #2 (Buy). Year to date, the stock has rallied 7.1%, outperforming the industry’s increase of 1.3%.
Image Source: Zacks Investment Research
Return on Equity (ROE)
Cincinnati Financial’s ROE for the trailing 12 months is 8.8%, up 280 basis points year over year and better than the industry average of 5.7%. This reflects the company’s efficiency in utilizing shareholders’ funds.
Business Tailwinds
Appropriate pricing discipline for both new and renewal business, higher new business premiums, increase in renewal written premium, growth in each major line of business and increase in agency renewal written premiums should contribute to premium growth across its Commercial Lines Insurance and Excess and surplus lines. Premium growth continued to remain above the industry average.
The insurer maintained higher levels of policy retention along with average renewal price increases for each of the property casualty insurance segments.
In the first quarter of 2022, the Commercial lines insurance segment continued to experience estimated average renewal price increases in the mid-single-digit percentage range, while the Excess and surplus lines insurance segment witnessed the same in the high single-digit range.
Riding on growth in equity portfolio dividends and growth in interest income from fixed-maturity securities, investment income should continue to benefit.
CINF targets a 95% to 100% combined ratio over the long term. Lower catastrophe losses and improved property casualty net favorable development on prior accident years should benefit the combined ratio.
Cincinnati Financial has a solid balance sheet with high liquidity and low leverage. Cash flow, a contributor to investment income and interest income, continued to remain strong.
Cincinnati Financial targets an average Value Creation Ratio of 10% to 13% over the next five-year period.
Investors should be impressed by its stellar record of 62 straight years of dividend increases. In January 2022, Cincinnati Financial approved a 10% hike in its quarterly dividend to return more profits to stockholders. Its current dividend yield of 2.3% is higher than the industry average of 0.4%.
The Zacks Consensus Estimate for 2023 earnings per share is pegged at $5.85, indicating a year-over-year increase of 1.7%.
Other Stocks to Consider
Some other top-ranked stocks from the property and casualty insurance sector are RLI Corp. (RLI - Free Report) , W.R. Berkley Corporation (WRB - Free Report) and American Financial Group, Inc. (AFG - Free Report) . While RLI Corp. currently sports a Zacks Rank #1 (Strong Buy), American Financial and W.R. Berkley carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
RLI has a solid track record of beating earnings estimates in each of the last seven quarters. In the past year, RLI stock has increased 10.5%.
The Zacks Consensus Estimate for RLI’s 2022 and 2023 earnings per share is pegged at $4.35 and $4.45, indicating year-over-year increases of 12.4% and 2.3%, respectively.
W.R. Berkley’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 27.08%. In the past year, W.R. Berkley's stock has increased 27.4%.
The Zacks Consensus Estimate for WRB’s 2022 and 2023 earnings has moved 4.9% and 4.1% north, respectively, in the past 30 days.
American Financial’s earnings surpassed estimates in each of the last four quarters, the average beat being 41.72%. In the past year, American Financial has lost 0.3%.
The Zacks Consensus Estimate for AFG’s 2022 and 2023 earnings has moved 9.8% and 6.9% north, respectively, in the past 30 days.
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Here's Why Cincinnati Financial (CINF) is an Attractive Bet
Cincinnati Financial Corporation (CINF - Free Report) has been in investors’ good books on the back of higher new business premiums, average renewal price increases and growth in equity portfolio dividends.
Estimate Revision
Estimates for 2022 and 2023 have moved up nearly 3.6% and 1.7%, respectively, in the past 30 days, reflecting investors’ optimism.
Earnings Surprise History
Cincinnati Financial has a solid track record of beating earnings estimates in six of the last seven quarters.
Zacks Rank & Price Performance
Cincinnati Financial currently carries a Zacks Rank #2 (Buy). Year to date, the stock has rallied 7.1%, outperforming the industry’s increase of 1.3%.
Image Source: Zacks Investment Research
Return on Equity (ROE)
Cincinnati Financial’s ROE for the trailing 12 months is 8.8%, up 280 basis points year over year and better than the industry average of 5.7%. This reflects the company’s efficiency in utilizing shareholders’ funds.
Business Tailwinds
Appropriate pricing discipline for both new and renewal business, higher new business premiums, increase in renewal written premium, growth in each major line of business and increase in agency renewal written premiums should contribute to premium growth across its Commercial Lines Insurance and Excess and surplus lines. Premium growth continued to remain above the industry average.
The insurer maintained higher levels of policy retention along with average renewal price increases for each of the property casualty insurance segments.
In the first quarter of 2022, the Commercial lines insurance segment continued to experience estimated average renewal price increases in the mid-single-digit percentage range, while the Excess and surplus lines insurance segment witnessed the same in the high single-digit range.
Riding on growth in equity portfolio dividends and growth in interest income from fixed-maturity securities, investment income should continue to benefit.
CINF targets a 95% to 100% combined ratio over the long term. Lower catastrophe losses and improved property casualty net favorable development on prior accident years should benefit the combined ratio.
Cincinnati Financial has a solid balance sheet with high liquidity and low leverage. Cash flow, a contributor to investment income and interest income, continued to remain strong.
Cincinnati Financial targets an average Value Creation Ratio of 10% to 13% over the next five-year period.
Investors should be impressed by its stellar record of 62 straight years of dividend increases. In January 2022, Cincinnati Financial approved a 10% hike in its quarterly dividend to return more profits to stockholders. Its current dividend yield of 2.3% is higher than the industry average of 0.4%.
The Zacks Consensus Estimate for 2023 earnings per share is pegged at $5.85, indicating a year-over-year increase of 1.7%.
Other Stocks to Consider
Some other top-ranked stocks from the property and casualty insurance sector are RLI Corp. (RLI - Free Report) , W.R. Berkley Corporation (WRB - Free Report) and American Financial Group, Inc. (AFG - Free Report) . While RLI Corp. currently sports a Zacks Rank #1 (Strong Buy), American Financial and W.R. Berkley carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
RLI has a solid track record of beating earnings estimates in each of the last seven quarters. In the past year, RLI stock has increased 10.5%.
The Zacks Consensus Estimate for RLI’s 2022 and 2023 earnings per share is pegged at $4.35 and $4.45, indicating year-over-year increases of 12.4% and 2.3%, respectively.
W.R. Berkley’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 27.08%. In the past year, W.R. Berkley's stock has increased 27.4%.
The Zacks Consensus Estimate for WRB’s 2022 and 2023 earnings has moved 4.9% and 4.1% north, respectively, in the past 30 days.
American Financial’s earnings surpassed estimates in each of the last four quarters, the average beat being 41.72%. In the past year, American Financial has lost 0.3%.
The Zacks Consensus Estimate for AFG’s 2022 and 2023 earnings has moved 9.8% and 6.9% north, respectively, in the past 30 days.