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Cincinnati Financial (CINF) Q4 Earnings Top, Revenues Up Y/Y

Zacks

Cincinnati Financial Corporation CINF reported fourth-quarter 2017 operating income of 93 cents per share, beating the Zacks Consensus Estimate of 86 cents by 8.1%. Also, the bottom line improved 24% year over year, mainly on higher revenues and a solid segmental performance.

Cincinnati Financial Corporation Price, Consensus and EPS Surprise


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

Including net realized investment loss of 4 cents per share and effects of the U.S. tax reform legislation of $2.99, the company’s net income skyrocketed 546.7% year over year to $3.88.

Full-Year Highlights

For 2017, Cincinnati Financial reported operating income per share of $2.74, surpassing the Zacks Consensus Estimate by 3.4% but deteriorating 10.7% year over year.

Total operating revenues of $5.6 billion grew 4.9% year over year.

Operational Update

Total operating revenues in the quarter were $1.4 billion, up 5.2% year over year. The top-line growth was driven by 5.5% higher premiums earned and a 1.9% rise in investment income.

Total benefits and expenses of Cincinnati Financial increased 2.5% year over year to $1.2 billion, primarily due to higher underwriting, acquisition and insurance expenses.

Combined ratio — a measure of underwriting profitability — improved 330 basis points (bps) year over year to 92.9%.

Cincinnati Financial had 1,702 agency relationships as of Dec 31, 2017 compared with 1,614 as of Dec 31, 2016.

Quarterly Segment Update

Commercial Lines Insurance: Total revenues of $798 million grew 2.2% year over year. This upside was primarily driven by an increase in premiums earned. The company delivered an underwriting profit of $58 million, having soared 61.1% from the year-ago quarter. Combined ratio also improved 280 bps year over year to 92.9%.

Personal Lines Insurance: Total revenues of $321 million rose 7.7% year over year owing to a noticeable increase in premiums earned. The segment incurred an underwriting profit of $16 million, comparing favorably with the year-ago loss of $12 million. Moreover, combined ratio improved 890 bps year over year to 95.5%.

Excess and Surplus Lines Insurance: Total revenues of $56 million increased 19.1% year over year, driven by higher premiums earned. The segment’s underwriting profit slumped 45% year over year to $11 million. Also, combined ratio deteriorated 2110 bps year over year to 79.8%.

Life Insurance: Total revenues of $100 million improved 4.2% year over year. Total benefits and expenses increased 16.7% year over year to $84 million.

Financial Update

As of Dec 31, 2017, Cincinnati Financial had assets worth $21.8 billion, up 7.1% from the 2016-end level.

Cincinnati Financial’s debt-to-capital ratio was 9.0% as of Dec 31, 2017, reflecting a slight improvement from 10.3% at the end of 2016.

As of Dec 31, 2017, Cincinnati Financial’s book value per share was $50.29, up 17.1% from Dec 31, 2016.

Zacks Rank

Cincinnati Financial holds 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 other players from the same space having reported fourth-quarter earnings so far, the bottom line of The Progressive Corporation PGR, The Travelers Companies, Inc. TRV and RLI Corp. RLI outpaced the respective Zacks Consensus Estimate.

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