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Cincinnati Financial (CINF) Q3 Earnings Miss, Revenues Up Y/Y

Cincinnati Financial Corporation CINF reported third-quarter 2020 operating income of 39 cents per share, which missed the Zacks Consensus Estimate by 4.9%. The bottom line also declined 63.9% year over year.

The company’s results reflected weak underwriting results, higher catastrophe losses and elevated costs, partly offset by higher revenues.

Operational Update  

Total operating revenues in the quarter under review were $1.7 billion, up 5% year over year. This improvement was driven by higher premiums earned and increase in investment income. However, the top line missed the Zacks Consensus Estimate by 0.5%.

Net written premiums increased 3% year over year to $1.4 billion, owing to price hikes and premium growth initiatives. Investment income improved 4% year over year to $167 million driven by improved dividends in stock portfolio and higher interest from bond portfolio.

Total benefits and expenses of Cincinnati Financial increased 14.7% year over year to $1.6 billion, primarily due to higher insurance loss and contract holders’ benefits.

In its property & casualty (P&C) insurance business, Cincinnati Financial witnessed underwriting loss of $51 million against underwriting profit of $83 million in the year-earlier period.

Combined ratio — a measure of underwriting profitability — deteriorated 940 basis points (bps) year over year to 103.6%.

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 $866 million grew 4% year over year. This upside was primarily driven by solid premiums earned. The segment reported underwriting loss of $20 million against underwriting profit of $56 million in the prior-year period.  Combined ratio deteriorated 900 bps year over year to 102.4%.

Personal Lines Insurance: Total revenues of $368 million rose 4% year over year owing to 4% increase in premiums earned. The segment reported underwriting loss of $2 million, against the year-ago profit of $3 million. Combined ratio deteriorated 110 bps year over year to 100.7%.

Excess and Surplus Lines Insurance: Total revenues of $82 million rose 12% year over year, aided by 14% higher earned premiums. The segment’s underwriting profit dropped 8% year over year to $11 million. Combined ratio deteriorated 350 bps year over year to 86.7%.

Life Insurance: Total revenues were $114 million, up 7% year over year, aided by 3% higher earned premiums and 5% increased investment income. Total benefits and expenses increased 1% year over year to $92 million due to higher contract holders’ benefits incurred.

Financial Update

As of Sep 30, 2020, Cincinnati Financial had total assets worth $26.4 billion, up 3.8% from the level at 2019 end. Total debt amounted to $911 million as of Sep 30, 2020, up 10.2% from 2019-end level.

Cincinnati Financial’s debt-to-capital ratio was 8.5% as of Sep 30, 2020, up 80 bps from end of 2019.

As of Sep 30, 2020, Cincinnati Financial’s book value per share was at $60.57, up 0.03% from 2019 end.

Zacks Rank

Cincinnati Financial currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other P&C Insurers

Of the insurance industry players, which have reported third-quarter results so far, earnings of The Progressive Corporation PGR, The Travelers Companies, Inc. TRV and RLI Corp. RLI beat the respective Zacks Consensus Estimate.

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