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Cincinnati Financial Poised for Growth Despite Cat Loss
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Cincinnati Financial Corporation (CINF - Free Report) , which deals in property and casualty (P&C) insurance business in the U.S., has been witnessing improvement in results over the past several quarters.
The P&C insurer’s Commercial Lines Property Casualty Insurance segment has been displaying continued increase in revenues over the last few quarters, owing to several growth initiatives and a gradual rise in insurance rates. The company anticipates moderate top-line growth in the future, primarily driven by improved pricing.
Cincinnati Financial has been appointing new agencies and expanding product offerings to ramp up its business. To this end, the company plans to appoint about 100 agencies in 2016. Of these, the company has already appointed 60 in the first nine months of the year. These agencies will continue to deliver opportunities to the company, which in turn, will help expand the insurer’s market share and drive long-term growth.
In addition, agencies focusing on high net worth personal lines clients have been contributing to the company’s high net worth new business written premiums.
Further, a robust liquidity position, backed by consistent cash flow generation, low leverage and prudent capital management, should continue to drive growth for Cincinnati Financial.
Shares of Cincinnati Financial gained 33.2%, outperforming the Zacks categorized Property and Casualty industry’s growth of 21.7%, year to date. Solid improvement in the top line and the bottom line resulted in the outperformance. Robust premium and investment income performance were particularly responsible for the outperformance.
In fact, valuation at the current level is attractive as the stock is currently trading at a forward P/E ratio of 25.4, a 12.7% discount to the industry average of 29.1. Cincinnati Financial also has a trailing 12-month return on equity (ROE) of 8.3%, which is higher than the industry average of 7%.
However, exposure to catastrophe losses will continue to weigh heavily on the Zacks Rank #3 (Hold) P&C insurer’s earnings, which might result in the underperformance of the stock. Notably, the company estimates pretax cat loss from Hurricane Matthew to be between $40 million and $65 million in the fourth quarter, including a net effect of $5 million to $10 million from reassurance assumed operation.
Alleghany Corporation deals with P&C reinsurance and insurance businesses in the U.S. and internationally. The company delivered positive surprises in three of the last four quarters with an average beat of 20.52%.
NMI Holdings offers private mortgage guaranty insurance services in the U.S. The company delivered positive surprises in all of the last four quarters with an average beat of 62.80%.
Arch Capital offers property, casualty, and mortgage insurance and reinsurance products worldwide. It delivered positive surprises in all of the last four quarters with an average beat of 9.27%.
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Cincinnati Financial Poised for Growth Despite Cat Loss
Cincinnati Financial Corporation (CINF - Free Report) , which deals in property and casualty (P&C) insurance business in the U.S., has been witnessing improvement in results over the past several quarters.
The P&C insurer’s Commercial Lines Property Casualty Insurance segment has been displaying continued increase in revenues over the last few quarters, owing to several growth initiatives and a gradual rise in insurance rates. The company anticipates moderate top-line growth in the future, primarily driven by improved pricing.
Cincinnati Financial has been appointing new agencies and expanding product offerings to ramp up its business. To this end, the company plans to appoint about 100 agencies in 2016. Of these, the company has already appointed 60 in the first nine months of the year. These agencies will continue to deliver opportunities to the company, which in turn, will help expand the insurer’s market share and drive long-term growth.
In addition, agencies focusing on high net worth personal lines clients have been contributing to the company’s high net worth new business written premiums.
Further, a robust liquidity position, backed by consistent cash flow generation, low leverage and prudent capital management, should continue to drive growth for Cincinnati Financial.
Shares of Cincinnati Financial gained 33.2%, outperforming the Zacks categorized Property and Casualty industry’s growth of 21.7%, year to date. Solid improvement in the top line and the bottom line resulted in the outperformance. Robust premium and investment income performance were particularly responsible for the outperformance.
In fact, valuation at the current level is attractive as the stock is currently trading at a forward P/E ratio of 25.4, a 12.7% discount to the industry average of 29.1. Cincinnati Financial also has a trailing 12-month return on equity (ROE) of 8.3%, which is higher than the industry average of 7%.
However, exposure to catastrophe losses will continue to weigh heavily on the Zacks Rank #3 (Hold) P&C insurer’s earnings, which might result in the underperformance of the stock. Notably, the company estimates pretax cat loss from Hurricane Matthew to be between $40 million and $65 million in the fourth quarter, including a net effect of $5 million to $10 million from reassurance assumed operation.
Stocks to Consider
Some better-ranked stocks from the same space include Alleghany Corporation , NMI Holdings, Inc. (NMIH - Free Report) and Arch Capital Group Ltd. (ACGL - Free Report) . Each of these stocks sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Alleghany Corporation deals with P&C reinsurance and insurance businesses in the U.S. and internationally. The company delivered positive surprises in three of the last four quarters with an average beat of 20.52%.
NMI Holdings offers private mortgage guaranty insurance services in the U.S. The company delivered positive surprises in all of the last four quarters with an average beat of 62.80%.
Arch Capital offers property, casualty, and mortgage insurance and reinsurance products worldwide. It delivered positive surprises in all of the last four quarters with an average beat of 9.27%.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time? Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>