Cincinnati Financial Corp. (CINF) reported fourth-quarter 2013 operating earnings of 72 cents per share, significantly exceeding the Zacks Consensus Estimate of 69 cents. Earnings, however, declined 35% year over year.
The earnings beat came on the back of increased premium income, and strong contribution from all of the company’s Personal, Commercial as well as Excess and Surplus lines segments.
During the reported quarter revenues at Cincinnati Financial amounted to $1.17 billion, up 10% year over year. The increase was driven by higher premiums earned which rose 12% year over year.
Investment income at Cincinnati Financial increased 1.0% year over year to $137.0 million.
Total benefits and expense increased 26.1% year over year to $1.0 billion, led by an increase in insurance and policy holder benefits, and higher underwriting and acquisition expense.
Combined ratio – a measure of underwriting profitability, deteriorated to 93.9% from 81.9%.
Cincinnati Financial had 1450 agency relationships as of Dec 31, 2013 compared to 1408 agency relationships at the end of 2012.
Full Year Highlights
For full year 2013, operating earnings came in at $2.80 per share, up 17% year over year while also surpassing the Zacks Consensus Estimate of $2.22 per share.
Full year 2013 revenues of $4.5 billion were up 10% year over year.
Quarterly Segment Update
Commercial Lines Insurance: This segment produced total revenue of $681 million, up 10% year over year, led by a 10% increase in net premiums written to $680 million. However, despite top-line growth, higher loss and underwriting expenses dragged down the underwriting profit by 52% year over year to $51.0 million.
Personal Lines Insurance: Revenues at this segment increased 10% year over year to $249 million, wholly attributable to an increase in earned premium. Despite the top-line improvement, the segment produced breakeven results due to a 53% spike in loss and loss expenses which ate into revenue growth.
Excess and Surplus Lines Insurance: This segment produced earned premium of $31 million, up 24% year over year. The segment reported an underwriting profit of $9 million which rose 29% year over year.
Life Insurance: Premiums earned in the segment increased 35% year over year to $65 million. Total benefit and expense increased 26% year over year to $87 million.
Financial Update
As of Sep 30, 2013, Cincinnati Financial had assets worth $17.7 billion, up 6.7% from $16.5 billion as of Dec 31, 2012.
Debt-to-capital ratio improved 130 basis points to 12.8% from 14.1% at 2012-end.
As of Dec 31, 2013, book value per share of Cincinnati Financial was $37.21, up 11% from Dec 31, 2012.
Last week, Cincinnati Financial announced an increase in its regular quarterly dividend to 44 cents per share, which will be paid on Apr 15, 2014. This marked the 54th consecutive hike in quarterly dividend at the company.
Cincinnati Financial presently carries a Zacks Rank #3 (Hold).
Better-ranked players worth considering include CNO Financial Group, Inc. (CNO), with a Zacks Rank #1 (Strong Buy), and American International Group, Inc. (AIG) and Cigna Corp. (CI), both with a Zacks Rank #2 (Buy). All these stocks are due to release their fourth-quarter earnings results soon.
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