Cincinnati Financial (CINF) Up 10.1% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Cincinnati Financial (CINF). Shares have added about 10.1% 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 its most recent earnings report in order to get a better handle on the important catalysts.
Cincinnati Financial Q4 Earnings Top on Higher Premiums
Cincinnati Financial reported fourth-quarter 2023 operating income of $2.28 per share, which surpassed the Zacks Consensus Estimate by 18.1%. The bottom line surged 79.5% year over year.
Total operating revenues in the quarter under review were $2.3 billion, which improved 10.8% year over year. Also, the top line beat the consensus mark by 1%.
The strong quarterly results benefited from higher premiums, net investment income and improved combined ratio. Improved Underwriting profit and lower catastrophe losses in the property and casualty segment added to the upside. Higher expenses partially offset the positives.
Operational Update
Earned premiums climbed 10% year over year to $2.1 billion and beat our estimate by 1.2%. It was driven by premium growth initiatives, price increases and a higher level of insured exposures.
Investment income, net of expenses increased 15% year over year to $239 million and beat our estimate of $226.6 million. The growth was driven by an increase in bond interest income and a rise in stock portfolio dividends. The Zacks Consensus Estimate was pegged at $227 million.
Total benefits and expenses of Cincinnati Financial increased 2.1% year over year to $1.9 billion, primarily due to higher underwriting, acquisitions and insurance expenses and interest expense. Our estimate for the metric was $2 billion.
In its property & casualty insurance business, CINF witnessed an underwriting income of $252 million against an underwriting income of $93 million in the year-ago period. Our estimate of underwriting income was pegged at $135.3 million.
The combined ratio — a measure of underwriting profitability — improved 740 basis points (bps) year over year to 87.5. Our estimate was pinned at 93.3. The Zacks Consensus Estimate was pegged at 92.
Quarterly Segment Update
Commercial Lines Insurance: Total revenues of $1.1 billion increased 4% year over year, which missed the Zacks Consensus Estimate by 1.7%. Our estimate was $1.13 billion. This upside was primarily driven by 4% premiums earned.
Underwriting income was $85 million, which surged more than five-fold year over year. The combined ratio improved 670 bps year over year to 92.2. Our estimate was pegged at 93.6.
Personal Lines Insurance: Total revenues of $561 million increased 26% year over year on account of a 26% rise in premiums earned. Our estimate was $517.9 million, while the Zacks Consensus Estimate was pegged at $544 million.
Underwriting profit was $88 million, which increased more than three-fold year over year. The metric beat our estimate of $77.1 million.
The combined ratio improved 1,100 bps year over year to 84.7. Our estimate was 85.3, while the Zacks Consensus Estimate was pegged at 91.
Excess and Surplus Lines Insurance: Total revenues of $149 million grew 20% year over year, aided by 19% higher earned premiums. Our estimate was $147.3 million, while the Zacks Consensus Estimate was pegged at $143 million.
Underwriting profit increased nearly three-fold year over year to $16 million. Our estimate was pinned at $14.8 million. The combined ratio improved 650 bps year over year to 89.8. Our estimate was 90.6.
Life Insurance: Total revenues were $121 million, up 3% year over year, driven by 7% higher earned premiums, 7% higher investment income, net of expenses and higher fee revenues. The Zacks Consensus Estimate was pegged at $80 million. Our estimate was $79.6 million. Total benefits and expenses increased 14% year over year to $109 million due to higher contract holders’ benefits and underwriting expenses incurred.
Financial Update
As of Dec 31, 2023, Cincinnati Financial had total assets worth $32.8 billion, up 10.2% from 2022-end.
Total debt was $815 million as of Dec 31, 2023, down 2.9% from 2022-end. The company’s debt-to-capital ratio was 6.3% as of Dec 31, 2023, which improved 110 bps from the end of 2022.
As of Dec 31, 2023, CINF’s book value per share was $77.06, up 14.7% from 2022-end.
Dividend Update
The board of directors approved a dividend of 81 cents per share for the first quarter of 2024, reflecting an 8% increase. The dividend will be paid out on Apr 15 to shareholders of record as of Mar 19, 2024.
Full-Year Update
For 2023, operating income was $6.03 per share, which improved 42% year over year. The metric beat our estimate of $5.52 per share.
Adjusted revenues for the year amounted to $8.9 billion, which beat our estimate of $8.8 billion. The top line increased 10.6% year over year.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -6.5% due to these changes.
VGM Scores
Currently, Cincinnati Financial has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Cincinnati Financial has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Cincinnati Financial belongs to the Zacks Insurance - Property and Casualty industry. Another stock from the same industry, RLI Corp. (RLI), has gained 8.1% over the past month. More than a month has passed since the company reported results for the quarter ended December 2023.
RLI Corp. reported revenues of $378.44 million in the last reported quarter, representing a year-over-year change of +14.9%. EPS of $1.54 for the same period compares with $1.53 a year ago.
For the current quarter, RLI Corp. is expected to post earnings of $1.61 per share, indicating a change of -1.2% from the year-ago quarter. The Zacks Consensus Estimate has changed +1.4% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for RLI Corp. Also, the stock has a VGM Score of F.
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Cincinnati Financial Corporation (CINF) : Free Stock Analysis Report
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