On Sep 26, we upgraded our recommendation on the shares of Cincinnati Financial Corp. ( CINF) to Outperform from Neutral, reflecting our optimism regarding the company’s growth prospects.
Cincinnati Financial has continuously witnessed improving business conditions in Commercial line of business. This improvement has been due to several growth initiatives as well as a gradual increase in insurance rates.
Cincinnati Financial’s Excess and Surplus line is also performing well. The segment has been able to achieve rate increases for the last 34 consecutive months, continuing at a low double-digit range. We expect the trend to continue, given the improving excess and surplus lines market.
A strong relationship with its agencies also bodes well for Cincinnati Financial. The company made 140 appointments in 2012 and appointed 63 new agencies as of Jun 30th 2013. The company now estimates that it will exceed its initial 2013 goal of 65 agencies by about 15. According to management, these new agencies will bring in $5.0 billion of direct written premium by 2015.
Cincinnati Financial’s strong balance sheet, low reliance on debt and a disciplined capital management strategy also aids its bottom-line earnings.
Cincinnati Financial has also maintained its tradition of increasing dividend every year and has been doing so for the past 52 years. It is regular in buying back shares.
This Zacks Rank # 1 (Strong Buy) property and casualty insurer has been witnessing an increase in earnings estimate over the past 60 days. Earnings estimates for 2013 increased 15.3% to $2.56 as both the analysts covering the stock pulled up their estimates. The same for 2014 increased 4.3% to $2.43 over this time frame as the same number of analysts tweaked their estimates upwards.
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