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CINF Beats EPS, Rev Up Y/Y

Zacks Equity Research

Cincinnati Financial Corp. (CINF) reported fourth quarter 2012 operating earnings of $1.11 per share, substantially beating the Zacks Consensus Estimate of 50 cents. Earnings were also up substantially 32% year over year. The earnings beat came on the back of increased property casualty underwriting profits.

Full year 2012 operating income was $2.40 per share, up more than three fold from 73 cents per share in the year ago period.  

Revenue for the quarter stood at $1.07 billion, up 12.0% year over year and ahead of the Zacks Consensus Estimate of $1.04 billion. The increase in total revenue was primarily led by higher premiums earned.

Investment income came in at $136 million, climbing 3% from the prior-year quarter.    

Segment Results

The Commercial Lines Insurance segment recorded written premium of $588 million, up 8.0% from the prior-year quarter, due to higher renewal written premiums. Lower loss and loss expenses led to underwriting profit of $107 million up 15% year over year.

Combined ratio, a measure of insurer’s profitability, improved 100 basis points year over year to 82.9% due to favorable prior accident year reserve development partly offset by higher catastrophe losses.

Premiums written in the Personal Lines Insurance segment increased 13% year over year to $222 million, aided by a rise in renewals as well as growth in new business written premium.  Underwriting profit was $46 million, compared with $1 million in the prior-year quarter.

Premiums written in Excess and Surplus Lines Insurance segment amounted to $27 million, surging 50.0% year over year. The increase was primarily due to the renewal of many accounts for the first time.

Earned premiums in the Life Insurance segment increased 14% year over year to $48 million led by an increase in premium from both Universal life insurance as well as Term Life insurance products. .

Book value per share – a measure of net worth – as on Dec 31, 2012 was recorded at $33.48, up 8% from Dec 31, 2011.

The company had 1,408 agency relationships at Dec 31, 2012, compared with 1,312 agency relationships at year-end 2011. The company appointed 140 new agencies, exceeding the initial full-year target of approximately 130.

Cincinnati Financial currently retains a Zacks Rank #3 (Hold). Other players from the same industry such as The Chubb Corp. (CB) and The Travelers Companies Inc. (TRV) and The Allstate Corp. (ALL), all reported earnings ahead of the Zacks Consensus Estimate despite incurring loss from Sandy. 

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