Cincinnati Financial Corporation CINF has been showing a steady progress in premiums over the past several years. We expect this momentum to also continue in the future on the back of premium growth initiatives, price rises and a higher level of insured exposures.
Additionally, with the company owning an agent-centric business model, resorting to appointing new agencies has been one of its key strategic initiatives. In 2019, the company plans to appoint about 100 additional agencies, which will cater to most or all its property and casualty insurance products. This apart, the company plans to appoint 80 more agencies to market only the company’s personal lines products, mainly the ones with a high net worth focus.
Appointment of such agencies enables the insurer to grow its market share while being also confident that its agent-focused business model will drive long-term premium growth as is proven over the past 60 years.
Moreover, consistent premium growth across the P&C insurer’s business lines has contributed to the aforementioned improvement and is expected to retain the upside in the near term. Further, the insurer is anticipated to increase premiums via a disciplined expansion of Cincinnati Re, which has been making a modest accretion to the company’s earnings.
With respect to pricing, the company has experienced a favorable scenario across most business lines in the past. It is also optimistic about the fact that improved pricing for both its personal and commercial auto segments coupled with strategic plans might boost results for such business lines.
Given the rising interest rates, Cincinnati Financial has been experiencing better investment results over a considerable period of time and we expect this momentum to continue in the near term on the back of a benign interest rate environment.
With respect to capital deployment, the company has been indulging in shareholder-friendly moves like share buybacks, dividend hikes and payment of special dividends. Last December, the company approved a special dividend of 50 cents per share. Such measures speak volumes for the company’s strong liquidity position and in turn, not only retain investor confidence in the stock but also attract new ones.
Also that the P&C insurer has been constantly raising the yearly dividend for the past 59 years, a record matched by only seven other publicly-traded companies in the United States.
The consensus mark for current-year earnings per share is pegged at 3.48, representing a year-over-year increase of nearly 3.9%.
Also, the company pulled off a positive surprise in three of the last four reported quarters, the average beat being 18.08%.
Zacks Rank and Share Price Movement
Cincinnati Financial sports a Zacks Rank #1 (Strong Buy). Shares of the company have rallied 12.4% year to date, outperforming the S&P 500 index’s gain of 11.8%. We believe, the aforementioned upsides will push the stock up in the near term.
Other Stocks to Consider
Investors interested in other top-ranked stocks from the insurance industry can also consider Arch Capital Group Ltd. ACGL, Berkshire Hathaway Inc. BRK.B and Torchmark Corporation TMK.
Arch Capital Group provides property, casualty and mortgage insurance and reinsurance products worldwide. The company delivered positive surprises in all the last four reported quarters, the average being 14.72%. The company has a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Berkshire Hathaway provides property and casualty insurance and reinsurance plus life, accident and health reinsurance besides operating railroad systems in North America. The company came up with positive surprises in three of the preceding four reported quarters, the average beat being 4.31%. The company is a Zacks #1 Ranked player.
Torchmark provides various life and health insurance products and annuities in the United States, Canada and New Zealand. The company pulled off positive surprises in three of the preceding four reported quarters, the average beat being 2%. The company holds a Zacks Rank #2 (Buy).
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