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Cincinnati's (CINF) Q1 Earnings Miss Estimates, Down Y/Y

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Cincinnati Financial Corporation (CINF - Free Report) reported first-quarter 2020 operating income of 84 cents per share, which missed the Zacks Consensus Estimate by 23.6%. Further, the bottom line deteriorated 20% year over year.

The company’s earnings were impacted by lower underwriting income across its property & casualty (P&C) business, primarily due to high underwriting expenses, and loss and loss expenses.

Operational Update

Total operating revenues in the quarter under review were $1.6 billion, up 8.7% year over year. This improvement was driven by 9% higher premiums earned and a 5% rise in investment income. The top line also outpaced the Zacks Consensus Estimate by 4%.

Net written premiums improved 10% from the prior-year quarter to $1.5 billion, reflecting price increases and premium growth initiatives.

Total benefits and expenses of Cincinnati Financial increased 14.3% year over year to $1.5 billion, primarily due to higher insurance losses and contract holders’ benefits plus underwriting, acquisition and insurance expenses.

Combined ratio — a measure of underwriting profitability — expanded 550 basis points (bps) year over year to 98.5%.

Quarterly Segment Update

Commercial Lines Insurance: Total revenues of $864 million grew 7% year over year. This upside can primarily be attributed to solid premiums earned. It reported underwriting loss of $20 million against the prior-year quarter’s underwriting profit of $76 million. The combined ratio also expanded 1170 bps year over year to 102.5%.

Personal Lines Insurance: Total revenues of $360 million rose 4% year over year owing to 4% increase in premiums earned. The segment generated underwriting profit of $21 million against the prior-year quarter’s loss of $4 million. The combined ratio contracted 700 bps year over year to 94.3%.

Excess and Surplus Lines Insurance: Total revenues of $79 million climbed 23% year over year, aided by 24% higher earned premiums. However, the segment’s underwriting profit of $9 million declined 18% year over year. The combined ratio expanded 560 bps year over year to 89.1%.

Life Insurance: Total revenues were $74 million, down 29% year over year.

Financial Update

As of Mar 31, 2020, cash and cash equivalents were $486 million, down 36.6% from the 2019-end level.

Total assets of $23.4 billion declined 8% from the figure at 2019 end.

Long-term debt amounted to $788 million, which remained flat with the number at 2019 end.

Cincinnati Financial’s debt-to-capital ratio was 10.1% as of Mar 31, 2020, expanding 240 bps from the number at 2019 end.

As of Mar 31, 2020, its book value per share was at $50.02, down 17.4% from the figure at 2019 end.

Zacks Rank& Performance of Other Insurers

Cincinnati carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Among other insurance industry players, which have reported first-quarter earnings so far, the bottom lines of Chubb Limited (CB - Free Report) and First American Financial Corporation (FAF - Free Report) outpaced the Zacks Consensus Estimate, while that of Globe Life Inc. (GL - Free Report) matched the same.

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