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