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Cincinnati Financial Corporation (CINF - Free Report) reported first-quarter 2017 operating income of 59 cents per share that beat the Zacks Consensus Estimate of 54 cents by 9.3%. However, the bottom line deteriorated 33.7% year over year, mainly due to weak underwriting results and higher expenses.
Including net realized investment gains of 62 cents per share, the company’s net income grew 7.1% year over year to $1.21 per share.
Operational Update
Total operating revenue in the quarter was $1.36 billion, up 4.6% year over year. The top-line growth was driven by 4.7% higher premiums earned and 2.8% rise in investment income. Moreover, revenues narrowly beat the Zacks Consensus Estimate.
Total benefits and expenses of Cincinnati Financial increased 13.5% 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 other operating costs.
Combined ratio – a measure of underwriting profitability – deteriorated 830 basis points (bps) year over year to 99.7%.
Cincinnati Financial had 1,643 agency relationships as of Mar 31, 2017 compared with 1,614 as of Dec 31, 2016.
Quarterly Segment Update
Commercial Lines Insurance: Total revenue of $782 million grew 2.8% year over year. The upside was primarily driven by an increase in premiums earned. However, the company incurred an underwriting loss of $2 million, which compared unfavorably with the underwriting profit of $50 million in the year-ago quarter. Combined ratio also deteriorated 680 bps year over year to 100.4%.
Personal Lines Insurance: Total revenue of $302 million rose 6.3% year over year owing to an increase in premiums earned. The segment incurred an underwriting loss of $15 million, which compared unfavorably with the year-ago profit of $28 million. Moreover, combined ratio deteriorated 1540 bps year over year to 105.5%.
Excess and Surplus Lines Insurance: The company reported earned premiums of $48 million, up 11.6% year over year. The segment’s underwriting profit grew 5.8% year over year to $18 million. Also, combined ratio deteriorated 120 bps year over year to 62.3%.
Life Insurance: Total revenue increased 4.1% year over year to $102 million. Total benefits and expenses remained flat year over year at $82 million.
Financial Update
As of Mar 31, 2017, Cincinnati Financial had assets worth $20.8 billion, up 1.8% from the 2016-end level.
Cincinnati Financial’s debt-to-capital ratio was 10.0% as of Mar 31, 2017. This reflects a slight improvement from 10.3% at the end of 2016.
As of Mar 31, 2017, Cincinnati Financial’s book value per share was a record high $44.07, up 2.6% from Dec 31, 2016.
Cincinnati Financial Corporation Price, Consensus and EPS Surprise
Among other players from the same space that have reported their first-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) missed their respective Zacks Consensus Estimate.
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Cincinnati Financial (CINF) Q1 Earnings Beat, Plunge Y/Y
Cincinnati Financial Corporation (CINF - Free Report) reported first-quarter 2017 operating income of 59 cents per share that beat the Zacks Consensus Estimate of 54 cents by 9.3%. However, the bottom line deteriorated 33.7% year over year, mainly due to weak underwriting results and higher expenses.
Including net realized investment gains of 62 cents per share, the company’s net income grew 7.1% year over year to $1.21 per share.
Operational Update
Total operating revenue in the quarter was $1.36 billion, up 4.6% year over year. The top-line growth was driven by 4.7% higher premiums earned and 2.8% rise in investment income. Moreover, revenues narrowly beat the Zacks Consensus Estimate.
Total benefits and expenses of Cincinnati Financial increased 13.5% 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 other operating costs.
Combined ratio – a measure of underwriting profitability – deteriorated 830 basis points (bps) year over year to 99.7%.
Cincinnati Financial had 1,643 agency relationships as of Mar 31, 2017 compared with 1,614 as of Dec 31, 2016.
Quarterly Segment Update
Commercial Lines Insurance: Total revenue of $782 million grew 2.8% year over year. The upside was primarily driven by an increase in premiums earned. However, the company incurred an underwriting loss of $2 million, which compared unfavorably with the underwriting profit of $50 million in the year-ago quarter. Combined ratio also deteriorated 680 bps year over year to 100.4%.
Personal Lines Insurance: Total revenue of $302 million rose 6.3% year over year owing to an increase in premiums earned. The segment incurred an underwriting loss of $15 million, which compared unfavorably with the year-ago profit of $28 million. Moreover, combined ratio deteriorated 1540 bps year over year to 105.5%.
Excess and Surplus Lines Insurance: The company reported earned premiums of $48 million, up 11.6% year over year. The segment’s underwriting profit grew 5.8% year over year to $18 million. Also, combined ratio deteriorated 120 bps year over year to 62.3%.
Life Insurance: Total revenue increased 4.1% year over year to $102 million. Total benefits and expenses remained flat year over year at $82 million.
Financial Update
As of Mar 31, 2017, Cincinnati Financial had assets worth $20.8 billion, up 1.8% from the 2016-end level.
Cincinnati Financial’s debt-to-capital ratio was 10.0% as of Mar 31, 2017. This reflects a slight improvement from 10.3% at the end of 2016.
As of Mar 31, 2017, Cincinnati Financial’s book value per share was a record high $44.07, up 2.6% from Dec 31, 2016.
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 has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other P&C Insurers
Among other players from the same space that have reported their first-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) missed their respective Zacks Consensus Estimate.
The Best & Worst of Zacks
Today you are invited to download the full, up-to-the-minute list of 220 Zacks Rank #1 "Strong Buys" free of charge. From 1988 through 2015 this list has averaged a stellar gain of +25% per year. Plus, you may download 220 Zacks Rank #5 "Strong Sells." Even though this list holds many stocks that seem to be solid, it has historically performed 6X worse than the market. See these critical buys and sells free >>