Friday, July 1 2022

Cincinnati Financial Corporation (CINF Free Report) has been in the good book for investors thanks to rising new business premiums, average renewal price increases and growth in equity portfolio dividends.

Estimate revision

Estimates for 2022 and 2023 have risen nearly 3.6% and 1.7%, respectively, over the past 30 days, reflecting investor optimism.

Earnings Surprise History

Cincinnati Financial has a strong track record of beating earnings estimates in six of the past seven quarters.

Zacks Ranking and Price Performance

Cincinnati Financial currently carries a Zacks rank #2 (buy). Year-to-date, the stock is up 7.1%, beating the industry’s 1.3% rise.

Image source: Zacks Investment Research

Return on equity (ROE)

Cincinnati Financial’s ROE for the past 12 months is 8.8%, up 280 basis points year over year and above the industry average of 5.7%. This reflects the efficiency of the company in using shareholder funds.

Business winds

Appropriate pricing discipline for new business and renewals, higher new business premiums, increased renewal premiums written, growth in each core line of business and increased agency renewal premiums written should contribute to premium growth across its commercial and excess and excess insurance lines. . Premium growth remained above the industry average.

The insurer maintained higher levels of policy retention as well as average renewal price increases for each of the P&C insurance segments.

In the first quarter of 2022, the Commercial Lines Insurance segment continued to experience estimated average renewal price increases in the single-digit percentage range, while the Excess and Excess Lines Insurance segment experienced the same in the high single digit range.

Taking advantage of the growth in dividends from equity portfolios and the growth in interest income on fixed-maturity securities, investment income should continue to benefit.

CINF aims for a combined ratio of 95% to 100% over the long term. Lower catastrophe losses and improved net favorable property development versus prior accident years should benefit the combined ratio.

Cincinnati Financial has a strong balance sheet with high liquidity and low leverage. Cash flow, which contributes to investment income and interest income, remained strong.

Cincinnati Financial is targeting an average value creation ratio of 10% to 13% over the next five years.

Investors should be impressed by its stellar record of 62 consecutive years of dividend increases. In January 2022, Cincinnati Financial approved a 10% increase in its quarterly dividend to return more profits to shareholders. Its current dividend yield of 2.3% is above the industry average of 0.4%.

Zacks’ consensus estimate for 2023 earnings per share is pegged at $5.85, indicating a 1.7% year-over-year increase.

Other actions to consider

Some other leading stocks in the P&C insurance industry are RLI Corp. (RLI free report), WR Berkley Corporation (WRB free report) and American Financial Group, Inc. (AFG free report). While RLI Corp. currently sports a Zacks Rank #1 (Strong Buy), American Financial and WR Berkley carry a Zacks Rank #2. You can see the full list of today’s Zacks #1 Rank stocks here.

RLI has a strong track record of beating earnings estimates in each of the last seven quarters. Over the past year, RLI stock has risen 10.5%.

The Zacks consensus estimate for RLI’s earnings per share in 2022 and 2023 is pegged at $4.35 and $4.45, indicating year-over-year increases of 12.4% and 2. 3%, respectively.

Earnings for WR Berkley have exceeded estimates in each of the past four quarters, with the average earnings surprise being 27.08%. Over the past year, shares of WR Berkley have risen 27.4%.

The Zacks consensus estimate for WRB earnings in 2022 and 2023 has moved 4.9% and 4.1% north, respectively, over the past 30 days.

American Financial’s earnings beat estimates in each of the past four quarters, averaging 41.72%. Over the past year, American Financial has lost 0.3%.

The Zacks consensus estimate for AFG earnings in 2022 and 2023 has moved north 9.8% and 6.9%, respectively, over the past 30 days.

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