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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) has been gaining momentum on the back of price increases, higher renewal written premiums, growth initiatives and improvement in equity portfolio dividends and interest income.
Growth Projections
The Zacks Consensus Estimate for Cincinnati Financial’s 2023 earnings is $4.63, indicating a 9.2% increase from the year-ago reported figure on 4.4% higher revenues of $8.38 billion.
The consensus estimate for 2024 earnings is $5.77, indicating a 24.5% increase from the year-ago reported figure on 7.4% higher revenues of $9 billion.
Zacks Rank & Price Performance
Cincinnati Financial currently carries a Zacks Rank #3 (Hold). Year to date, the stock has gained 1.1% compared with the industry’s increase of 1.8%.
Image Source: Zacks Investment Research
Business Tailwinds
Cincinnati Financial is well-poised to grow on the back of solid performance across the Commercial Lines and Personal Lines segments. Performance of the Personal Lines segment is likely to be driven by the planned expansion of high-net-worth business produced by the agencies, higher renewal written premiums and the extended use of pricing precision tools.
The Commercial Lines business is expected to gain from solid premiums earned, reflecting renewal written premium growth that continued to include higher average pricing and improved level of insured exposures. In this segment, average renewal pricing continued to increase near the high end of the mid-single-digit percent range in the first quarter of 2023.
Investment income should continue to rise because of the surge in equity portfolio dividends and interest income. Moreover, cash flow from operating activities consistently helps the company boost investment income. From 2016 to 2022, the P&C insurer saw its net investment income grow 3.96%.
The property and casualty insurer is focused on earning new business through appointment of new agencies from a combination of quality service and expansion of insurance products for clients of those agencies. Agencies, appointed since the beginning of 2022, contributed 5% of total new business written premiums. So far in 2023, the insurer has appointed 66 agencies, including 23 that market only personal lines products.
Cincinnati Financial has a solid balance sheet with high liquidity and low leverage. Cash flow, a contributor to investment income and interest income, remains strong.
Cincinnati Financial has returned capital to shareholders through regular cash dividends as well as special dividends. In January 2023, the board increased quarterly cash dividend by 9% and this action sets the stage for a 63rd consecutive year of rising dividend payments. Its current dividend yield of 2.9% is higher than the industry’s average of 0.3%.
Stocks to Consider
Some better-ranked stocks from the property and casualty insurance industry are Kinsale Capital Group, Inc. (KNSL - Free Report) , RLI Corp. (RLI - Free Report) and Axis Capital Holdings Limited (AXS - Free Report) . While Kinsale Capital and RLI Corp. sport a Zacks Rank #1 (Strong Buy), Axis Capital carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Kinsale Capital has a solid track record of beating earnings estimates in each of the last trailing four quarters, the average being 14.77%. In the past year, KNSL has gained 26%.
The Zacks Consensus Estimate for KNSL’s 2023 and 2024 earnings per share is pegged at $10.32 and $12.41, indicating a year-over-year increase of 32.3% and 20.2%, respectively.
RLI Corp.’s earnings surpassed estimates in each of the last trailing four quarters, the average earnings surprise being 45.50%. In the past year, RLI Corp. has gained 1.9%.
The Zacks Consensus Estimate for RLI’s 2023 earnings has moved 2.9% north in the past seven days.
Axis Capital beat estimates in three of the last trailing four quarters and missed in one, the average being 6.50%. The Zacks Consensus Estimate for 2023 has moved 2.7% north in the past 30 days.
The Zacks Consensus Estimate for AXS’ 2023 and 2024 earnings per share is pegged at $7.70 and $8.60, indicating a year-over-year increase of 32.5% and 11.7%, respectively. In the year-to-date period, AXS has gained 1%.
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Here's Why Hold Strategy is Apt for Cincinnati Financial (CINF)
Cincinnati Financial Corporation (CINF - Free Report) has been gaining momentum on the back of price increases, higher renewal written premiums, growth initiatives and improvement in equity portfolio dividends and interest income.
Growth Projections
The Zacks Consensus Estimate for Cincinnati Financial’s 2023 earnings is $4.63, indicating a 9.2% increase from the year-ago reported figure on 4.4% higher revenues of $8.38 billion.
The consensus estimate for 2024 earnings is $5.77, indicating a 24.5% increase from the year-ago reported figure on 7.4% higher revenues of $9 billion.
Zacks Rank & Price Performance
Cincinnati Financial currently carries a Zacks Rank #3 (Hold). Year to date, the stock has gained 1.1% compared with the industry’s increase of 1.8%.
Image Source: Zacks Investment Research
Business Tailwinds
Cincinnati Financial is well-poised to grow on the back of solid performance across the Commercial Lines and Personal Lines segments. Performance of the Personal Lines segment is likely to be driven by the planned expansion of high-net-worth business produced by the agencies, higher renewal written premiums and the extended use of pricing precision tools.
The Commercial Lines business is expected to gain from solid premiums earned, reflecting renewal written premium growth that continued to include higher average pricing and improved level of insured exposures. In this segment, average renewal pricing continued to increase near the high end of the mid-single-digit percent range in the first quarter of 2023.
Investment income should continue to rise because of the surge in equity portfolio dividends and interest income. Moreover, cash flow from operating activities consistently helps the company boost investment income. From 2016 to 2022, the P&C insurer saw its net investment income grow 3.96%.
The property and casualty insurer is focused on earning new business through appointment of new agencies from a combination of quality service and expansion of insurance products for clients of those agencies. Agencies, appointed since the beginning of 2022, contributed 5% of total new business written premiums. So far in 2023, the insurer has appointed 66 agencies, including 23 that market only personal lines products.
Cincinnati Financial has a solid balance sheet with high liquidity and low leverage. Cash flow, a contributor to investment income and interest income, remains strong.
Cincinnati Financial has returned capital to shareholders through regular cash dividends as well as special dividends. In January 2023, the board increased quarterly cash dividend by 9% and this action sets the stage for a 63rd consecutive year of rising dividend payments. Its current dividend yield of 2.9% is higher than the industry’s average of 0.3%.
Stocks to Consider
Some better-ranked stocks from the property and casualty insurance industry are Kinsale Capital Group, Inc. (KNSL - Free Report) , RLI Corp. (RLI - Free Report) and Axis Capital Holdings Limited (AXS - Free Report) . While Kinsale Capital and RLI Corp. sport a Zacks Rank #1 (Strong Buy), Axis Capital carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Kinsale Capital has a solid track record of beating earnings estimates in each of the last trailing four quarters, the average being 14.77%. In the past year, KNSL has gained 26%.
The Zacks Consensus Estimate for KNSL’s 2023 and 2024 earnings per share is pegged at $10.32 and $12.41, indicating a year-over-year increase of 32.3% and 20.2%, respectively.
RLI Corp.’s earnings surpassed estimates in each of the last trailing four quarters, the average earnings surprise being 45.50%. In the past year, RLI Corp. has gained 1.9%.
The Zacks Consensus Estimate for RLI’s 2023 earnings has moved 2.9% north in the past seven days.
Axis Capital beat estimates in three of the last trailing four quarters and missed in one, the average being 6.50%. The Zacks Consensus Estimate for 2023 has moved 2.7% north in the past 30 days.
The Zacks Consensus Estimate for AXS’ 2023 and 2024 earnings per share is pegged at $7.70 and $8.60, indicating a year-over-year increase of 32.5% and 11.7%, respectively. In the year-to-date period, AXS has gained 1%.