We are reiterating our Outperform recommendation on
Cincinnati Financial Corp.
) following better-than-expected third quarter results.
This Zacks Rank #1 (Strong Buy) property and casualty insurer
reported a solid third quarter which included a 27% positive
earnings surprise. Over the past four quarters this insurer
delivered an average positive surprise of 65%.
On Oct 24, Cincinnati Financial reported third-quarter operating
earnings of 70 cents per share, significantly exceeding the Zacks
Consensus Estimate of 55 cents per share. Earnings also grew 9.4%
year over year. The earnings beat came on the back of
increased premium income, and strong contribution from the
company's Personal as well as Excess and Surplus lines segments.
Revenue for Cincinnati Financial during the reported quarter was
$1.15 billion, up 11% year over year. The increase was driven by
higher premiums earned.
Cincinnati Financial has been witnessing rising earnings
estimates since the earnings release. Over the last 30 days, two
analysts covering the stock raised their estimates for 2013 by
7.4% to $2.75. Estimates for 2014 rose by a similar percentage to
$2.61 as both the analysts covering the stock pulled up their
ASPEN INS HLDGS (AHL): Free Stock Analysis
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Cincinnati Financial has continuously witnessed improving
business conditions in the Commercial line of business. This
improvement has been due to several growth initiatives as well as
a gradual increase in insurance rates.
Cincinnati Financial's Excess and Surplus line is also performing
well. The segment has been able to achieve rate increases for the
last 37 consecutive months, continuing at a low double-digit
range. We expect the trend to continue, given the improving
excess and surplus lines market.
A strong relationship with its agencies also bodes well for
Cincinnati Financial's strong balance sheet, low reliance on debt
and a disciplined capital management strategy also aids its
Cincinnati Financial has also maintained its tradition of
increasing dividend every year and has been doing so for the past
52 years. It is regular in buying back shares.
Other Stocks to Consider
Besides Cincinnati Financial
Aspen Insurance Holdings Ltd.
CNA Financial, Corporation
) sharing the same Zacks Rank look impressive.