Markets

Cincinnati Financial (CINF) Q4 Earnings Beat, Plunge Y/Y

A generic image of two people across from each other
Credit: Shutterstock photo

Cincinnati Financial CorporationCINF reported fourth-quarter 2016 operating income of 75 cents per share that beat the Zacks Consensus Estimate of 68 cents by 10.3%. However, the bottom line deteriorated 31.8% year over year, mainly due to weak underwriting results and higher expenses.

Including lower net realized investment loss of 15 cents per share, the company's net income plunged 36.2% year over year to 60 cents per share.

Full-Year 2016 Highlights

Cincinnati Financial's full-year operating earnings came in at $3.07 per share, down 13.8% year over year.

Total revenue for 2016 increased about 5% year over year to $5.3 billion.

Operational Update

Total operating revenue in the reported quarter was $1.35 billion, up 3.5% year over year. The top-line growth was driven by 3.8% higher premiums earned and 2% rise in investment income. Moreover, revenues beat the Zacks Consensus Estimate of 1.24 billion by 8.6%.

Total benefits and expenses of Cincinnati Financial increased 13.1% year over year to $1.2 billion, primarily due to higher insurance losses and contract holders' benefits, underwriting, acquisition and insurance expenses as well as interest expenses.

Combined ratio - a measure of underwriting profitability - deteriorated 920 basis points (bps) year over year to 96.2%.

Cincinnati Financial had 1,614 agency relationships as of Dec 31, 2016 compared with 1,526 as of Dec 31, 2015.

Quarterly Segment Update

Commercial Lines Insurance : Total revenue of $781 million grew 2.5% year over year. The upside was primarily driven by an increase in premiums earned. However, underwriting profit plunged 64.4% year over year to $36 million. Combined ratio also deteriorated 890 bps year over year to 95.7%.

Personal Lines Insurance : Total revenue of $298 million rose 6% year over year owing to an increase in premiums earned. The segment incurred an underwriting loss of $12 million, which compared unfavorably with the year-ago profit of $18 million. Moreover, combined ratio deteriorated 1040 bps year over year to 104.4%.

Excess and Surplus Lines Insurance : Total revenue of $47 million improved 6.8% year over year due to an increase in premiums earned. The segment's underwriting profit, however, declined 9.1% year over year to $20 million. Also, combined ratio deteriorated 1060 bps year over year to 58.7%.

Life Insurance : Total revenue increased 4.3% year over year to $96 million. Total benefits and expenses decreased 6.5% year over year to $72 million.

Financial Update

As of Dec 31, 2016, Cincinnati Financial had assets worth $20.4 billion, up 7.9% from the 2015-end level.

Cincinnati Financial's debt-to-capital ratio was 10.3% as of Dec 31, 2016. This reflects an improvement from 11.3% at the end of 2015.

As of Dec 31, 2016, Cincinnati Financial's book value per share was $42.95, up 9.6% from Dec 31, 2015.

Cincinnati Financial Corporation Price, Consensus and EPS Surprise

Cincinnati Financial Corporation Price, Consensus and EPS Surprise | Cincinnati Financial Corporation Quote

Zacks Rank

Cincinnati Financial currently sports a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Performance of Other P&C Insurers

Among the other players from the same space that have reported their fourth-quarter earnings so far, the bottom line at The Progressive Corporation PGR , The Travelers Companies, Inc. TRV and RLI Corp. RLI beat their respective Zacks Consensus Estimate.

Zacks' Top 10 Stocks for 2017

In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017? Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

RLI Corp. (RLI): Free Stock Analysis Report

The Travelers Companies, Inc. (TRV): Free Stock Analysis Report

Cincinnati Financial Corporation (CINF): Free Stock Analysis Report

Progressive Corporation (The) (PGR): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

CINF TRV PGR RLI

Other Topics

Earnings Stocks

Latest Markets Videos

Zacks

Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

Learn More