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Cincinnati (CINF) Up 22.9% in a Year: More Room for Growth?

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Shares of Cincinnati Financial Corporation CINF have gained 22.9% in a year, outperforming the industry's increase of 13%. The Zacks S&P 500 composite has rallied 10.8% in the said time frame. With a market capitalization of $19.8 billion, the average volume of shares traded in the last three months was 0.6 million.

Zacks Investment Research
Zacks Investment Research


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The rally was largely driven by higher renewal written premiums, improved valuation of investment portfolio and price increases.

Cincinnati Financial has a decent earnings surprise history. Its bottom line beat estimates in each of the last four quarters, the average being 38.4%.

Will the Bull Run Continue?

Estimates for 2022 and 2023 have moved up nearly 5.7% and 5.5%, respectively, in the past seven days, reflecting investors’ optimism.

The Zacks Consensus Estimate for 2023 earnings per share is pegged at $5.75, indicating a year-over-year increase of nearly 3.6%.

Cincinnati Financial is well poised to grow on the back of solid performance across the Commercial Lines and Personal Lines segments.

Performance at the Personal lines segment is likely to be driven by planned expansion of high-net-worth business produced by the agencies, higher renewal written premiums and the expanded use of pricing precision tools.

The Commercial lines business is expected to grow, riding on price increases, growth initiatives and a higher level of insured exposure. In 2021, commercial lines average renewal pricing increased in the mid-single-digit percent range.

The insurer’s trailing 12-month return on equity (ROE) was 8.7%, which expanded 310 basis points year over year. ROE reflects its efficiency in using shareholders’ funds.

Strong operating results and improved valuation of investment portfolio are expected to boost the value creation ratio (VCR). VCR for 2021 was 25.7% that remained well above the average annual target range of 10% to 13%.

Cash flow, being the contributor of investment income and interest income, remained very strong in 2021. Consistent cash flow and sufficient cash balance continue to boost the liquidity of the insurer.

This Zacks Rank #1 (Strong Buy) insurer remains committed to rewarding shareholders directly through cash dividends as well as special dividends and share repurchase authorizations. CINF boasts a consistent increase in dividends with the metric witnessing an eight-year CAGR (2015-2022) of 5.2%. Its current dividend yield of 2% is higher than the industry average of 0.3%.

Other Stocks to Consider

Some other top-ranked insurers include W.R. Berkley WRB, Arch Capital Group ACGL, and American Financial Group AFG. While W.R. Berkley sports a Zacks Rank #1, Arch Capital and American Financial carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

W.R. Berkley’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 27.53%. In the past year, WRB has rallied 32.6%.

The Zacks Consensus Estimate for 2022 and 2023 earnings has moved 4.7% and 1.7% north, respectively, in the past 30 days. W.R. Berkley’s expected long-term earnings growth rate is pegged at 9%.

Arch Capital’s earnings surpassed estimates in each of the last four quarters, the average beat being 35.84%. In the past year, ACGL has rallied 34%.

The Zacks Consensus Estimate for 2022 and 2023 earnings has moved 2.9% and 1.6% north, respectively, in the past 30 days. Arch Capital’s expected long-term earnings growth rate is pegged at 10%.

The bottom line of American Financial surpassed earnings estimates in each of the last four quarters, the average being 39.58%. In the past year, the insurer has rallied 20.9%.

The Zacks Consensus Estimate for American Financial’s 2022 and 2023 earnings has moved 3.3% and 8.2% north, respectively, in the past seven days.


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