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Cincinnati Financial (CINF) Q4 Earnings Top, Revenues Rise Y/Y

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Zacks Equity Research
·4 min read
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Cincinnati Financial Corporation CINF reported fourth-quarter 2020 operating income of $1.61 per share, which outpaced the Zacks Consensus Estimate by 37.6%. Moreover, the bottom line improved 31% year over year.

The company’s results benefited from improved revenues and strong underwriting results, partly offset by higher catastrophe losses and escalating costs.

Operational Update

Total operating revenues in the quarter under review were $1.7 billion, which improved 5.1% year over year. This improvement was driven by higher earned premiums and investment income. Also, the top line surpassed the consensus mark by 7.5%.

Net written premiums climbed 7% year over year to $1.4 billion attributable to price increases and premium growth initiatives. Investment income, net of expenses increased 2% year over year to $172 million owing to improved stock portfolio dividends and higher interest income.

Total benefits and expenses of Cincinnati Financial inched up 0.5% year over year to $1.4 billion, primarily due to higher underwriting, acquisition and insurance expenses, and increased interest expense.

In its property & casualty (P&C) insurance business, Cincinnati Financial witnessed underwriting profit of $187 million, which surged 57% year over year.

Combined ratio — a measure of underwriting profitability — improved 430 basis points (bps) year over year to 87.3%.

Cincinnati Financial Corporation Price, Consensus and EPS Surprise

Cincinnati Financial Corporation Price, Consensus and EPS Surprise
Cincinnati Financial Corporation Price, Consensus and EPS Surprise

Cincinnati Financial Corporation price-consensus-eps-surprise-chart | Cincinnati Financial Corporation Quote

Quarterly Segment Update

Commercial Lines Insurance: Total revenues of $878 million improved 3% year over year. This upside was primarily driven by solid premiums earned. The segment reported underwriting profit of $96 million, which dipped 1% year over year. Combined ratio deteriorated 40 bps year over year to 89.2%.

Personal Lines Insurance: Total revenues of $374 million advanced 4% year over year on account of 4% increase in premiums earned. The segment reported underwriting profit of $71 million, which increased by nearly 18-fold from the prior-year quarter. Combined ratio improved 1800 bps year over year to 81.3%.

Excess and Surplus Lines Insurance: Total revenues of $88 million grew 16% year over year, aided by 14% higher earned premiums. The segment’s underwriting profit improved 15% year over year to $15 million. Combined ratio deteriorated 30 bps year over year to 83.2%.

Life Insurance: Total revenues were $114 million, up 8% year over year, courtesy of 6% higher earned premiums and 5% increased investment income. Total benefits and expenses inched up 1% year over year to $95 million due to higher underwriting expenses incurred.

Financial Update

As of Dec 31, 2020, Cincinnati Financial had total assets worth $27.5 billion, up 8.4% from the level at 2019 end. Total debt amounted to $842 million as of Dec 31, 2020, up 1.8% from 2019-end level.

Cincinnati Financial’s debt-to-capital ratio was 7.2% as of Dec 31, 2020, down 50 bps from end of 2019.

As of Dec 31, 2020, Cincinnati Financial’s book value per share was at $67.04, up 10.7% from 2019 end.

Full-Year Update

For 2020, operating income was $3.28 per share, which surpassed the Zacks Consensus Estimate of $2.85. However, the bottom line plunged 22% from the 2019-end figure.

Total revenues for the year amounted to $7.5 billion, which outpaced the consensus mark of $6.42 billion. However, the top line declined 5% year over year.

Zacks Rank

Cincinnati Financial currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other P&C Insurers

Of the P&C insurance industry players, which have reported fourth-quarter results so far, earnings of The Progressive Corporation PGR, Arch Capital Group Ltd. ACGL and RLI Corp. RLI beat the respective Zacks Consensus Estimate.

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