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Cincinnati Financial (CINF) Q2 Earnings Beat, Improves Y/Y

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Cincinnati Financial Corporation (CINF - Free Report) reported second-quarter 2017 operating income of 64 cents per share that substantially beat the Zacks Consensus Estimate of 46 cents by 39.1%. Also, the bottom line improved 12.3% year over year, banking on strong underwriting results and a segmental performance.

Including net realized investment losses of 4 cents per share, the company’s net income plunged 18.9% year over year to 60 cents per share.

Cincinnati Financial Corporation Price, Consensus and EPS Surprise

 

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

Operational Update    

Total operating revenue in the quarter was $1.4 billion, up 5.3% year over year. The top-line growth was driven by 5.8% higher premiums earned and 1.3% rise in investment income. Revenues beat the Zacks Consensus Estimate by 1.2%.

Total benefits and expenses of Cincinnati Financial increased 4.4% year over year to $1.3 billion, primarily due to higher insurance losses and contract holders’ benefits, plus underwriting, acquisition and insurance expenses.

Combined ratio – a measure of underwriting profitability – improved 100 basis points (bps) year over year to 98.3%.

Cincinnati Financial had 1,675 agency relationships as of Jun 30, 2017 compared with 1,614 as of Dec 31, 2016.

Quarterly Segment Update

Commercial Lines Insurance: Total revenue of $797 million grew 3.2% year over year. This upside was primarily driven by an increase in premiums earned. The company delivered an underwriting profit of $24 million, down 7.7% from the year-ago quarter. Combined ratio also deteriorated 30 bps year over year to 97.1%.

Personal Lines Insurance: Total revenue of $308 million rose 6.6% year over year owing to an increase in premiums earned. The segment incurred an underwriting loss of $24 million, wider than the year-ago loss of $20 million. Also, combined ratio deteriorated 90 bps year over year to 108.4%.

Excess and Surplus Lines Insurance: Total revenue of $53 million climbed 17.8% year over year, driven by higher premiums earned. The segment’s underwriting profit skyrocketed 280% year over year to $19 million. Also, combined ratio improved 2120 bps year over year to 66.2%.

Life Insurance: Total revenue of $99 million remained flat year over year. Total benefits and expenses dipped 1.2% year over year to $80 million.

Financial Update

As of Jun 30, 2017, Cincinnati Financial had assets worth $21.2 billion, up 4.1% from the 2016-end level.

Cincinnati Financial’s debt-to-capital ratio was 9.8% as of Jun 30, 2017. This reflects a slight improvement from 10.3% at the end of 2016.

As of Jun 30, 2017, Cincinnati Financial’s book value per share was a record high $44.97, up 4.7% from Dec 31, 2016.

Zacks Rank

Cincinnati Financial currently carries a Zacks Rank #4 (Sell).

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 second-quarter earnings so far, The Progressive Corporation (PGR - Free Report) and The Travelers Companies, Inc. (TRV - Free Report) missed their respective Zacks Consensus Estimate, while RLI Corp. (RLI - Free Report) beat the same.

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