It has been about a month since the last earnings report for Cincinnati Financial (CINF). Shares have added about 1.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Cincinnati Financial due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Cincinnati Financial Q4 Earnings & Revenues Beat
Cincinnati Financial Corporation reported fourth-quarter 2021 operating income of $1.97 per share, which outpaced the Zacks Consensus Estimate by 31.3%. The bottom line improved 22.4% year over year.
Cincinnati Financial’s results benefited from improved revenues, strong underwriting results and improved combined ratio, partly offset by escalating costs.
Total operating revenues in the quarter under review were $1.8 billion, which improved 10% year over year. This improvement was driven by higher earned premiums and investment income. Also, the top line surpassed the consensus mark by 10.9%.
Net written premiums climbed 10% year over year to $1.5 billion, attributable largely to price increases and premium growth initiatives. Investment income, net of expenses increased 8% year over year to $186 million owing to growth in equity portfolio dividends and growth in interest income.
Total benefits and expenses of Cincinnati Financial increased 7.2% year over year to $1.5 billion, primarily due to higher insurance losses and contract holders’ benefits and underwriting, acquisition and insurance expenses.
In its property & casualty (P&C) insurance business, Cincinnati Financial witnessed an underwriting profit of $256 million, which surged 37% year over year.
Combined ratio — a measure of underwriting profitability — improved 310 basis points (bps) year over year to 84.2%.
Quarterly Segment Update
Commercial Lines Insurance: Total revenues of $948 million increased 8% year over year. This upside was primarily driven by solid premiums earned. The segment reported an underwriting profit of $141 million, which increased 47% year over year. The combined ratio improved 400 bps year over year to 85.2%.
Personal Lines Insurance: Total revenues of $397 million advanced 6% year over year on account of a 6% increase in premiums earned. The segment reported an underwriting profit of $81 million, which increased 14% from the prior-year quarter. The combined ratio improved 130 bps year over year to 80%.
Excess and Surplus Lines Insurance: Total revenues of $109 million grew 24% year over year, aided by 25% higher earned premiums. The segment’s underwriting profit improved 27% year over year to $19 million. The combined ratio remained flat year over year at 83.2%.
Life Insurance: Total revenues were $123 million, up 8% year over year, courtesy of 8% higher earned premiums and 3% increased investment income. Total benefits and expenses inched up 18% year over year to $112 million due to higher contract holders’ benefits incurred.
As of Dec 31, 2021, Cincinnati Financial had total assets worth $31.4 billion, up 14% from the level at 2020 end. Total debt amounted to $843 million as of Dec 31, 2021, up 0.1% from the 2020-end level. Cincinnati Financial’s debt-to-capital ratio was 6% as of Dec 31, 2021, up 120 bps from the end of 2020. As of Dec 31, 2021, Cincinnati Financial’s book value per share was at $81.72, up 22% from 2020 end.
For 2021, operating income was $6.41 per share, which surpassed the Zacks Consensus Estimate of $5.94. The bottom line surged 95.4% from the 2020-end figure. Total revenues for the year amounted to $7.2 billion, which outpaced the consensus mark of $7 billion. The top line increased 8.2% year over year.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
The consensus estimate has shifted 5.71% due to these changes.
Currently, Cincinnati Financial has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise Cincinnati Financial has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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