On Dec 30, 2015, we issued an updated research report on Cincinnati Financial Corp. CINF.
Cincinnati Financial, in its efforts to ramp up operations and as part of its strategic initiatives, has been appointing new agencies. Targeting to appoint about 100 agencies, the company has estimated $5.0 billion of direct written premium by 2015 from the same.
Cincinnati Financial has also been benefiting from gradual increase in insurance rates, Commercial Lines Property Casualty Insurance in particular. The company aims to drive Excess and Surplus Lines Insurance results by penetrating this market.
Also, the reinsurance team, Cincinnati Re, continues to witness progress. It has entered into several diversified treaties to boost premium revenues. If treaties remain effective for its agreed full-term, the company expects to generate additional premiums of $30 million over the next year.
A sustained solid operational performance supports the company in effective capital deployment, which in turn, enhances shareholders’ value. Its track record of hiking dividend for straight 54 years is matched by only 9 other publicly-traded companies in the U.S. Last November too, the board approved another special dividend of 46 cents per share. Notably, the announcement of a special dividend came after more than a decade.
However, geographic concentration in the Midwest region, which is prone to catastrophes, remains a headwind for the company. As the occurrence and magnitude of catastrophic activities are uncertain, underwriting results remain volatile. Also, a soft interest rate environment, weighing on investment results, keeps us on the sidelines.
With respect to third-quarter results, earnings breezed past the Zacks Consensus Estimate and improved year over year on underwriting results and higher investment income. The Zacks Rank #3 (Hold) property and casualty insurer delivered positive surprises in three of the last four quarters with an average beat of 42.14%.
Stocks to Consider
Better-ranked stocks are Aspen Insurance Holdings Ltd. AHL, Hallmark Financial Services Inc. HALL and Infinity Property and Casualty Corp. IPCC. Each of these stocks sports a Zacks Rank #1 (Strong Buy).
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