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Cincinnati Financial (CINF) Up 8.3% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Cincinnati Financial (CINF). Shares have added about 8.3% 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 Q1 Earnings & Revenues Beat

Cincinnati Financial reported first-quarter 2021 operating income of $1.37 per share, which beat the Zacks Consensus Estimate by 30.5%. Moreover, the bottom line improved 63.1% year over year.

The company’s earnings witnessed higher premiums, lower expenses and improved combined ratio.

Operational Update

Total operating revenues in the quarter under review were $1.7 billion, up 5.9% year over year. This improvement was driven by 6% higher premiums earned and a 5% rise in investment income. The top line also outpaced the Zacks Consensus Estimate by 7.9%.

Net written premiums improved 12% from the prior-year quarter to $1.7 billion, reflecting premium growth initiatives and price increases. Growth included a contribution of 6% from Cincinnati Re.

Total benefits and expenses of Cincinnati Financial decreased 1.2% year over year to $1.5 billion, primarily due to lower underwriting, acquisition and insurance expenses and other operating expenses.

Combined ratio — a measure of underwriting profitability — improved 730 basis points (bps) year over year to 91.2%.

Quarterly Segment Update

Commercial Lines Insurance: Total revenues of $887 million grew 3% year over year. This upside can primarily be attributed to solid premiums earned. It reported underwriting profit of $130 million against the prior-year quarter’s underwriting loss of $20 million. The combined ratio also improved 1710 bps year over year to 85.4%.

Personal Lines Insurance: Total revenues of $377 million rose 5% year over year owing to 5% increase in premiums earned. The segment incurred underwriting loss of $3 million against the prior-year quarter’s profit of $21 million. The combined ratio deteriorated 680 bps year over year to 101.1%.

Excess and Surplus Lines Insurance: Total revenues of $89 million climbed 13% year over year, aided by 14% higher earned premiums. However, the segment’s underwriting profit of $8 million declined 11% year over year. The combined ratio deteriorated 290 bps year over year to 92%.

Life Insurance: Total revenues were $111 million, up 50% year over year.

Financial Update

As of Mar 31, 2021, cash and cash equivalents were $947 million, up 5.2% from the 2020-end level.

Total assets of $28.3 billion increased 2.8% from the figure at 2020 end.

Long-term debt amounted to $788 million, which remained flat compared with the figure at 2020 end.

Cincinnati Financial’s debt-to-capital ratio was 7.1% as of Mar 31, 2021, contracting 10 bps from 2020 end.

As of Mar 31, 2021, its book value per share was $69.16, up 3.2% from the figure at 2020 end.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 21.32% due to these changes.

VGM Scores

At this time, Cincinnati Financial has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, 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.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions 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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