Cincinnati Financial Posts Strong Earnings

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Cincinnati Financial Corp. (CINF) reported second quarter 2013 operating earnings of 61 cents per share, significantly exceeding the Zacks Consensus Estimate of 32 cents per share. Earnings per share were 3.6 times higher than 17 cents reported in the year-ago quarter. 
 
The earnings beat came on the back of increased underwriting profits from each of the three property casualty segments.
 
Revenue for Cincinnati Financial was $1.1 billion, up 8% year over year. The increase was driven by higher premiums earned (up 9% year over year).
 
Investment income of Cincinnati Financial decreased 1% year over year from $131 million.
 
Total benefits and expenses for Cincinnati Financial in the quarter decreased 3.5% year over year to $956 million.
 
Cincinnati Financial had 1437 agency relationships as of Jun 30, 2013, compared to 1408 agency relationships at year-end 2012. During the second quarter 63 new agency appointments were made by Cincinnati Financial.
 
Quarterly Segment Update
 
Commercial Lines Insurance: Net premiums written in the segment increased 8% year over year to $678 million in the reported quarter. The improvement was driven by premium growth strategies, higher average pricing and increasing insured exposures.
 
Loss and loss expense ratio improved 820 basis points year over year to 61.9% in the quarter. Underwriting profit of $34 million was in contrast with underwriting loss of $20 million in the year-ago quarter.
 
Personal Lines Insurance: Net premiums written in the segment increased 9% year over year to $273 million, due to higher renewal written premiums that reflect rate increases. Loss and loss expense ratio improved 2840 basis points year over year to 69.5%. 
 
Excess and Surplus Lines Insurance: Net premiums written increased 22% year over year to $33 million due to average renewal price increases. Loss and loss expense ratio improved 1190 basis points year over year to 66.9%. 
 
Life Insurance: Premiums earned in the segment decreased 14% year over year to $44 million, led by a decrease in Universal Life Insurance partly offset by an increase in  premiums from Term Life Insurance and other life insurance, annuity and disability income products.
 
Financial Update
 
Cincinnati Financial exited the quarter with cash and cash equivalents of $382 million, down 22% from $487 million at Dec 31, 2012.
 
As of Jun 30, 2013, Cincinnati Financial had assets worth $17 billion, up 3% from $16.5 billion as of Dec 31, 2012.
 
Long-term debt of Cincinnati Financial was in line with the prior-year period. However, the debt to capital ratio improved 50 basis points to 13.6% from 14.1% at year end 2012.
 
As of Jun 30, 2013, book value per share of Cincinnati Financial was $34.83, up 4% from Dec 31, 2012.
 
CINF carries Zacks Rank #4 (Sell).
 
While Travelers Companies Inc. (TRV) have reported second quarter earnings ahead of the Zacks Consensus Estimate, like State Auto Financial Corp. (STFC) and ProAssurance Corp. (PRA) are scheduled to report their second quarter earnings soon. 
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Read the Full Research Report on TRV

Read the Full Research Report on PRA

Read the Full Research Report on STFC

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