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Cincinnati Q4 Earnings Beat on Better Underwriting Results - Analyst Blog

Cincinnati Financial Corp . ( CINF ) reported fourth-quarter 2014 operating income of 89 cents per share, which surpassed the Zacks Consensus Estimate by 12.7%. Results were also up 24% year over year.

Cincinnati Financial Corporation - Earnings Surprise | FindTheBest

Including 13 cents of realized investment gains, net income of $1.02 per share in the quarter were up 38% year over year.

Behind the Headlines

Revenues in the reported quarter grossed $1.3 billion, up 8% year over year. The increase was driven by higher premiums earned (up 6%) and investment income (up 2%).

Total benefits and expense of Cincinnati Financial increased 2.1% year over year to $1 billion, due to higher insurance losses and policy holder benefits along with underwriting, insurance and acquisition expense.

Combined ratio - a measure of underwriting profitability - improved 350 basis points (bps) year over year to 90.4%.

Cincinnati Financial had 1,466 agency relationships as of Dec 31, 2014, compared with 1,450 at the end of 2013.

Full-Year Review

Operating earnings of $2.66 per share outperformed the Zacks Consensus Estimate by 2.7%. Earnings however declined 5% from 2013.

Net income of $3.18 per share improved 2% over 2013.

Revenues improved 9% year over year to $4.9 billion.

Quarterly Segment Update

Commercial Lines Insurance : Total revenue of $731 million was up 7% year over year, led by an increase in premiums earned. Underwriting profit slid 4% year over year to $49 million, due to higher expenses. The combined ratio deteriorated 90 bps to 93.6%

Personal Lines Insurance : Premium earned increased 7% year over year to $263 million owing to higher renewal written premiums that also fueled a 7% improvement in revenues. Underwriting profit came in at $43 million in the quarter while it broke even in the prior-year quarter. Combined ratio improved 1,660 bps to 83.7%, mainly due to lower catastrophe losses.

Excess and Surplus Lines Insurance : The segment's earned premium of $39 million was up 26% year over year. Underwriting profit dropped 11% year over year to $8 million. The combined ratio saw a drastic 740 bps decline to 77.8% due to larger benefits from favorable prior accident year reserve development.

Life Insurance : Premiums earned in the segment decreased 22% year over year to $51 million, primarily due to a 63% drop in Universal life insurance premiums. Total benefit and expense decreased 15% year over year to $74 million.

Financial Update

As of Dec 31, 2014, Cincinnati Financial had assets worth $18.7 billion, up 6.2% from Dec 31, 2013.

Cincinnati Financial's debt-to-capital ratio improved to 11.3% as of Dec 31, 2014 from 12.8% on Dec 31, 2013.

As of Dec 31, 2014, book value per share of Cincinnati Financial was $40.14, up 7.9% year over year.

Zacks Rank

Cincinnati Financial currently carries a Zacks Rank #3 (Hold).

Performance by Other P&C Insurers

The bottom lines at RLI Corporation ( RLI ), ACE Limited ( ACE ) and The Travelers Companies Inc. ( TRV ) outperformed their respective Zacks Consensus Estimate in the fourth quarter.

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RLI CORP (RLI): Free Stock Analysis Report

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ACE LIMITED (ACE): Free Stock Analysis Report

CINCINNATI FINL (CINF): Free Stock Analysis Report

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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.

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