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Cincinnati Financial Corporation

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Shares of Cincinnati Financial have outperformed the industry in a year. The company’s low leverage, ample capital, consistent cash flow generation, favorable reserve release, share repurchases and steady dividend hikes should drive growth. Management is appointing agencies and expanding product offerings to ramp up its business profile. Net investment income growth is expected in the near term, driven by rising interest rates. The company has replaced its existing catastrophe bond program with a new collateralized reinsurance to mitigate the loss. However, exposure to cat loss and a persistent turmoil in group benefits associated with the ACA are headwinds. Higher expenses might also weigh on the desired margin expansion. A Zacks Rank #2 and Earnings ESP of 0.00% makes surprise prediction inconclusive as it reports fourth quarter results on Feb 6.

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