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Why Is Cincinnati Financial (CINF) Down 7.7% Since Last Earnings Report?
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A month has gone by since the last earnings report for Cincinnati Financial (CINF - Free Report) . Shares have lost about 7.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Cincinnati Financial due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Cincinnati Financial Q4 Earnings Miss, Dividend Up
Cincinnati Financial Corporation reported fourth-quarter 2022 operating income of $1.27 per share, which missed the Zacks Consensus Estimate by 0.7%. The bottom line decreased 35.5% year over year. The insurer’s results benefited from improved earned premiums and investment income, partly offset by escalating costs, poor underwriting results and deteriorated combined ratio.
Operational Update
Total operating revenues in the quarter under review were $2.1 billion, which improved 11.7% year over year. This improvement was driven by higher earned premiums, other revenues and investment income. Also, the top line surpassed the consensus mark by 0.7%.
Net written premiums climbed 10% year over year to $1.7 billion, attributable largely to premium growth initiatives, price increases and a higher level of insured exposures. The figure is higher than our estimate of $1.6 billion. Investment income, net of expenses increased 12% year over year to $208 million driven by growth in equity portfolio dividends and interest income. The figure is higher than our estimate of $196.1 million.
Total benefits and expenses of Cincinnati Financial increased 23.7% year over year to $1.8 billion, primarily because of higher insurance losses and contract holders’ benefits and underwriting, acquisition and insurance expenses. The figure matched our estimate.
In its property & casualty (P&C) insurance business, Cincinnati Financial witnessed an underwriting profit of $93 million, which plunged 64% year over year. The figure is higher than our estimate of $68.2 million. Combined ratio — a measure of underwriting profitability — deteriorated 1070 basis points (bps) year over year to 94.9%.
Quarterly Segment Update
Commercial Lines Insurance: Total revenues of $1 billion increased 10% year over year. This upside was primarily driven by solid premiums earned. The segment reported an underwriting profit of $13 million, which plunged 91% year over year. The combined ratio deteriorated 1370 bps year over year to 98.9%.
Personal Lines Insurance: Total revenues of $444 million advanced 12% year over year on account of a 12% increase in premiums earned. The segment reported an underwriting profit of $20 million, which decreased 75% from the prior-year quarter. The combined ratio deteriorated 1570 bps year over year to 95.7%.
Excess and Surplus Lines Insurance: Total revenues of $124 million grew 14% year over year, aided by 14% higher earned premiums. The segment’s underwriting profit decreased 79% year over year to $4 million. The combined ratio deteriorated 1310 bps year over year to 96.3%.
Life Insurance: Total revenues were $117 million, down 5% year over year due to 4% decline in earned premiums. Total benefits and expenses decreased 15% year over year to $95 million due to lower contract holders’ benefits incurred.
Financial Update
As of Dec 31, 2022, Cincinnati Financial had total assets worth $29.7 billion, down 5.3% from the level at 2021 end. Total debt amounted to $839 million as of Dec 31, 2022, down 0.5% from the 2021-end level. Cincinnati Financial’s debt-to-capital ratio was 7.4% as of Dec 31, 2022, which deteriorated 140 bps from the end of 2021. As of Dec 31, 2022, Cincinnati Financial’s book value per share was at $ 67.01, down 18% from 2021 end.
Dividend Update
The board of directors approved a dividend of 75 cents per share for the first quarter of 2023, reflecting a 9% increase. The dividend will be paid out on Apr 14 to shareholders of record as of Mar 17.
Full-Year Update
For 2022, operating income was $4.24 per share, which surpassed the Zacks Consensus Estimate of $4.21. The bottom line decreased 34% from the 2021-end figure. Total revenues for the year amounted to $8 billion, which matched the consensus mark. The top line increased 11.1% year over year.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
The consensus estimate has shifted 20.35% due to these changes.
VGM Scores
Currently, Cincinnati Financial has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Cincinnati Financial has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Cincinnati Financial is part of the Zacks Insurance - Property and Casualty industry. Over the past month, RLI Corp. (RLI - Free Report) , a stock from the same industry, has gained 0.5%. The company reported its results for the quarter ended December 2022 more than a month ago.
RLI Corp. reported revenues of $329.46 million in the last reported quarter, representing a year-over-year change of +19.4%. EPS of $1.53 for the same period compares with $1.26 a year ago.
For the current quarter, RLI Corp. is expected to post earnings of $1.21 per share, indicating a change of -15.4% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for RLI Corp. Also, the stock has a VGM Score of D.
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Why Is Cincinnati Financial (CINF) Down 7.7% Since Last Earnings Report?
A month has gone by since the last earnings report for Cincinnati Financial (CINF - Free Report) . Shares have lost about 7.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Cincinnati Financial due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Cincinnati Financial Q4 Earnings Miss, Dividend Up
Cincinnati Financial Corporation reported fourth-quarter 2022 operating income of $1.27 per share, which missed the Zacks Consensus Estimate by 0.7%. The bottom line decreased 35.5% year over year. The insurer’s results benefited from improved earned premiums and investment income, partly offset by escalating costs, poor underwriting results and deteriorated combined ratio.
Operational Update
Total operating revenues in the quarter under review were $2.1 billion, which improved 11.7% year over year. This improvement was driven by higher earned premiums, other revenues and investment income. Also, the top line surpassed the consensus mark by 0.7%.
Net written premiums climbed 10% year over year to $1.7 billion, attributable largely to premium growth initiatives, price increases and a higher level of insured exposures. The figure is higher than our estimate of $1.6 billion. Investment income, net of expenses increased 12% year over year to $208 million driven by growth in equity portfolio dividends and interest income. The figure is higher than our estimate of $196.1 million.
Total benefits and expenses of Cincinnati Financial increased 23.7% year over year to $1.8 billion, primarily because of higher insurance losses and contract holders’ benefits and underwriting, acquisition and insurance expenses. The figure matched our estimate.
In its property & casualty (P&C) insurance business, Cincinnati Financial witnessed an underwriting profit of $93 million, which plunged 64% year over year. The figure is higher than our estimate of $68.2 million. Combined ratio — a measure of underwriting profitability — deteriorated 1070 basis points (bps) year over year to 94.9%.
Quarterly Segment Update
Commercial Lines Insurance: Total revenues of $1 billion increased 10% year over year. This upside was primarily driven by solid premiums earned. The segment reported an underwriting profit of $13 million, which plunged 91% year over year. The combined ratio deteriorated 1370 bps year over year to 98.9%.
Personal Lines Insurance: Total revenues of $444 million advanced 12% year over year on account of a 12% increase in premiums earned. The segment reported an underwriting profit of $20 million, which decreased 75% from the prior-year quarter. The combined ratio deteriorated 1570 bps year over year to 95.7%.
Excess and Surplus Lines Insurance: Total revenues of $124 million grew 14% year over year, aided by 14% higher earned premiums. The segment’s underwriting profit decreased 79% year over year to $4 million. The combined ratio deteriorated 1310 bps year over year to 96.3%.
Life Insurance: Total revenues were $117 million, down 5% year over year due to 4% decline in earned premiums. Total benefits and expenses decreased 15% year over year to $95 million due to lower contract holders’ benefits incurred.
Financial Update
As of Dec 31, 2022, Cincinnati Financial had total assets worth $29.7 billion, down 5.3% from the level at 2021 end. Total debt amounted to $839 million as of Dec 31, 2022, down 0.5% from the 2021-end level. Cincinnati Financial’s debt-to-capital ratio was 7.4% as of Dec 31, 2022, which deteriorated 140 bps from the end of 2021. As of Dec 31, 2022, Cincinnati Financial’s book value per share was at $ 67.01, down 18% from 2021 end.
Dividend Update
The board of directors approved a dividend of 75 cents per share for the first quarter of 2023, reflecting a 9% increase. The dividend will be paid out on Apr 14 to shareholders of record as of Mar 17.
Full-Year Update
For 2022, operating income was $4.24 per share, which surpassed the Zacks Consensus Estimate of $4.21. The bottom line decreased 34% from the 2021-end figure. Total revenues for the year amounted to $8 billion, which matched the consensus mark. The top line increased 11.1% year over year.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
The consensus estimate has shifted 20.35% due to these changes.
VGM Scores
Currently, Cincinnati Financial has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Cincinnati Financial has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Cincinnati Financial is part of the Zacks Insurance - Property and Casualty industry. Over the past month, RLI Corp. (RLI - Free Report) , a stock from the same industry, has gained 0.5%. The company reported its results for the quarter ended December 2022 more than a month ago.
RLI Corp. reported revenues of $329.46 million in the last reported quarter, representing a year-over-year change of +19.4%. EPS of $1.53 for the same period compares with $1.26 a year ago.
For the current quarter, RLI Corp. is expected to post earnings of $1.21 per share, indicating a change of -15.4% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for RLI Corp. Also, the stock has a VGM Score of D.