Cincinnati's EPS Beats, Rev Up Y/Y - Analyst Blog

Cincinnati Financial Corp. ( CINF ) reported third quarter 2012 operating earnings of 64 cents per share, substantially beating the Zacks Consensus Estimate of 41 cents. Earnings compared unfavorably with 13 cents reported in the year-ago quarter.

Including net realized investment gains and losses, Cincinnati reported a net income of $111 million or 68 cents per share improving significantly from $19 million or 11 cents per share in the year-ago quarter. The quarter benefited from strong property casualty underwriting.

Revenue for the quarter stood at $1.04 billion, up 10.0% year over year. The increase in total revenue was primarily led by higher premiums earned during the quarter.

Investment income came in at $132 million, climbing 2% from the prior-year quarter.

Total benefits and expenses decreased 5.4% year over year to $883 million due to lower insurance loss and benefits.

Segment Results

The Commercial Lines Insurance segment recorded written premium of $619 million, up 13.0% from the prior-year quarter, reflecting growth in renewal written premium. Lower loss and loss expenses led to underwriting profit of $60 million in contrast with an operating loss of $44 million in the year-ago quarter.

Combined ratio, a measure of insurer's profitability, improved 1770 basis points year over year to 90.2%, owing to lower catastrophe losses.

Premiums written in the Personal Lines Insurance segment increased 14% year over year to $253 million, aided by a rise in renewals as well as growth in new business written premium. Despite a higher top line, the segment posted underwriting loss of $12 million, compared with a loss of 38 million in the prior-year quarter.

Premiums written in the Excess and Surplus Lines Insurance segment amounted to $27 million, surging 23.0% year over year. The elevation was largely driven by persistent increase in average renewal price in the high-digit range.

Earned premiums in the Life Insurance segment fell 12% year over year to $38 million on the back of an 80% decline in Universal life insurance.

In the quarter under review, book value per share - a measure of net worth - was recorded at $32.95, up 6% from December 31, 2011.

Peer Take

Cincinnati Financial closely competes with The Chubb Corp. ( CB ) and The Travelers Companies Inc. ( TRV ). Chubb reported third-quarter operating earnings of $1.98 per share, significantly ahead of the Zacks Consensus Estimate of $1.51 per share. Travelers reported earnings of $2.22 per share in the third quarter of 2012, outshining the Zacks Consensus Estimate of $1.61 per share.

Zacks Rank

Cincinnati Financial currently retains a Zacks #1 Rank, which translates into a short-term Buy rating. However, we maintain a long-term 'Neutral' recommendation on its shares.

CHUBB CORP (CB): Free Stock Analysis Report

CINCINNATI FINL (CINF): Free Stock Analysis Report

TRAVELERS COS (TRV): 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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