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Cincinnati Financial (CINF) Q4 Earnings Beat, Plunge Y/Y

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Cincinnati Financial Corporation (CINF - Free Report) reported fourth-quarter 2016 operating income of 75 cents per share that beat the Zacks Consensus Estimate of 68 cents by 10.3%. However, the bottom line deteriorated 31.8% year over year, mainly due to weak underwriting results and higher expenses.

 

Including lower net realized investment loss of 15 cents per share, the company’s net income plunged 36.2% year over year to 60 cents per share.

Full-Year 2016 Highlights

Cincinnati Financial’s full-year operating earnings came in at $3.07 per share, down 13.8% year over year.

Total revenue for 2016 increased about 5% year over year to $5.3 billion.

Operational Update

Total operating revenue in the reported quarter was $1.35 billion, up 3.5% year over year. The top-line growth was driven by 3.8% higher premiums earned and 2% rise in investment income. Moreover, revenues beat the Zacks Consensus Estimate of 1.24 billion by 8.6%.

Total benefits and expenses of Cincinnati Financial increased 13.1% year over year to $1.2 billion, primarily due to higher insurance losses and contract holders’ benefits, underwriting, acquisition and insurance expenses as well as interest expenses.

Combined ratio – a measure of underwriting profitability – deteriorated 920 basis points (bps) year over year to 96.2%.

Cincinnati Financial had 1,614 agency relationships as of Dec 31, 2016 compared with 1,526 as of Dec 31, 2015.

Quarterly Segment Update

Commercial Lines Insurance: Total revenue of $781 million grew 2.5% year over year. The upside was primarily driven by an increase in premiums earned. However, underwriting profit plunged 64.4% year over year to $36 million. Combined ratio also deteriorated 890 bps year over year to 95.7%.

Personal Lines Insurance: Total revenue of $298 million rose 6% year over year owing to an increase in premiums earned. The segment incurred an underwriting loss of $12 million, which compared unfavorably with the year-ago profit of $18 million. Moreover, combined ratio deteriorated 1040 bps year over year to 104.4%.

Excess and Surplus Lines Insurance: Total revenue of $47 million improved 6.8% year over year due to an increase in premiums earned. The segment’s underwriting profit, however, declined 9.1% year over year to $20 million. Also, combined ratio deteriorated 1060 bps year over year to 58.7%.

Life Insurance: Total revenue increased 4.3% year over year to $96 million. Total benefits and expenses decreased 6.5% year over year to $72 million.

Financial Update

As of Dec 31, 2016, Cincinnati Financial had assets worth $20.4 billion, up 7.9% from the 2015-end level.

Cincinnati Financial’s debt-to-capital ratio was 10.3% as of Dec 31, 2016. This reflects an improvement from 11.3% at the end of 2015.

As of Dec 31, 2016, Cincinnati Financial’s book value per share was $42.95, up 9.6% from Dec 31, 2015.

Cincinnati Financial Corporation Price, Consensus and EPS Surprise

 

Cincinnati Financial Corporation Price, Consensus and EPS Surprise | Cincinnati Financial Corporation Quote

Zacks Rank

Cincinnati Financial currently sports a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other P&C Insurers

Among the other players from the same space that have reported their fourth-quarter earnings so far, the bottom line at The Progressive Corporation (PGR - Free Report) , The Travelers Companies, Inc. (TRV - Free Report) and RLI Corp. (RLI - Free Report) beat their respective Zacks Consensus Estimate.

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