Cincinnati Financial Corporation CINF reported first-quarter 2020 operating income of 84 cents per share, which missed the Zacks Consensus Estimate by 23.6%. Further, the bottom line deteriorated 20% year over year.
The company’s earnings were impacted by lower underwriting income across its property & casualty (P&C) business, primarily due to high underwriting expenses, and loss and loss expenses.
Total operating revenues in the quarter under review were $1.6 billion, up 8.7% year over year. This improvement was driven by 9% higher premiums earned and a 5% rise in investment income. The top line also outpaced the Zacks Consensus Estimate by 4%.
Net written premiums improved 10% from the prior-year quarter to $1.5 billion, reflecting price increases and premium growth initiatives.
Total benefits and expenses of Cincinnati Financial increased 14.3% year over year to $1.5 billion, primarily due to higher insurance losses and contract holders’ benefits plus underwriting, acquisition and insurance expenses.
Combined ratio — a measure of underwriting profitability — expanded 550 basis points (bps) year over year to 98.5%.
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 $864 million grew 7% year over year. This upside can primarily be attributed to solid premiums earned. It reported underwriting loss of $20 million against the prior-year quarter’s underwriting profit of $76 million. The combined ratio also expanded 1170 bps year over year to 102.5%.
Personal Lines Insurance: Total revenues of $360 million rose 4% year over year owing to 4% increase in premiums earned. The segment generated underwriting profit of $21 million against the prior-year quarter’s loss of $4 million. The combined ratio contracted 700 bps year over year to 94.3%.
Excess and Surplus Lines Insurance: Total revenues of $79 million climbed 23% year over year, aided by 24% higher earned premiums. However, the segment’s underwriting profit of $9 million declined 18% year over year. The combined ratio expanded 560 bps year over year to 89.1%.
Life Insurance: Total revenues were $74 million, down 29% year over year.
As of Mar 31, 2020, cash and cash equivalents were $486 million, down 36.6% from the 2019-end level.
Total assets of $23.4 billion declined 8% from the figure at 2019 end.
Long-term debt amounted to $788 million, which remained flat with the number at 2019 end.
Cincinnati Financial’s debt-to-capital ratio was 10.1% as of Mar 31, 2020, expanding 240 bps from the number at 2019 end.
As of Mar 31, 2020, its book value per share was at $50.02, down 17.4% from the figure at 2019 end.
Zacks Rank& Performance of Other Insurers
Cincinnati carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Among other insurance industry players, which have reported first-quarter earnings so far, the bottom lines of Chubb Limited CB and First American Financial Corporation FAF outpaced the Zacks Consensus Estimate, while that of Globe Life Inc. GL matched the same.
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