Here's Why Hold Strategy is Apt for Cincinnati Financial

Cincinnati Financial Corporation CINF has been gaining momentum on the back of higher level of insured exposure, rate increase, agent-focused business model, consistent cash flow and a solid capital position.

Growth Projections

The Zacks Consensus Estimate for Cincinnati Financial's 2024 earnings per share indicates an increase of 9.1% from the year-ago reported number. The consensus estimate for revenues is pegged at $9.85 billion, implying a year-over-year improvement of 10.8%.

The consensus estimate for 2025 earnings per share and revenues indicates an increase of 7.1% and 10%, respectively, from the corresponding 2024 estimates.

Northbound Estimate Revision

The Zacks Consensus Estimate for 2024 and 2025 earnings has moved 5.6% and 0.8% north, respectively, in the past 30 days, reflecting analysts' optimism.

Earnings Surprise History

Cincinnati Financial has a solid earnings surprise history. It beat estimates in each of the last four quarters, the average being 27%.

Zacks Rank & Price Performance

Cincinnati Financial currently carries a Zacks Rank #3 (Hold). Year to date, the stock has gained 26.7% compared with the industry's growth of 23.7%.

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Style Score

CINF has a VGM Score of B. The VGM Score helps identify stocks with the most attractive value, best growth and the most promising momentum.

Business Tailwinds

Prudent pricing, an agent-centric model, a higher level of insured exposures and disciplined expansion of Cincinnati Re should benefit premiums, the primary driver of an insurer's top line. We expect 2026 net earned premiums to witness a three-year CAGR of 8.5%. CINF boasts above-average industry premium growth.

The Excess and Surplus line has been performing well since its inception in 2008. This segment should continue to benefit from new business written, higher renewal written premiums and higher average renewal estimated pricing. Technology and data are also being used to identify new exposures in emerging businesses.

Improving interest income from fixed-maturity securities and a decrease in equity portfolio dividends in an improved rate environment should drive net investment income.

Notably, its free cash flow conversion has remained more than 150% over the last many quarters, reflecting its solid earnings.

Banking on operational efficiency that ensures continuous cash flows, this insurer boasts increasing dividends for 64 straight years. Its dividend yield of 2.4% is better than the industry average of 0.2%, making the stock an attractive pick for yield-seeking investors. Given the board's positive outlook and confidence in outstanding capital, liquidity and financial flexibility, we expect the momentum to continue.

Being a property and casualty insurer, CINF is exposed to catastrophe losses, inducing volatility in its underwriting profitability. Nonetheless, banking on prudent underwriting, CINF's solid track record of 34 years of favorable reserve development is appreciable.

CINF has been witnessing an increase in expenses over the past many years due to a rise in insurance loss and policyholder benefits as well as underwriting, acquisition and insurance expenses, resulting in margin contraction.

Stocks to Consider

Some better-ranked stocks from the property and casualty insurance industry are NMI Holdings Inc NMIH, W.R. Berkley Corporation WRB and Arch Capital Group Ltd. ACGL, each carrying a Zacks Rank #2 (Buy) at present.

NMI Holdings' earnings surpassed estimates in each of the last four quarters, the average surprise being 10.15%. Shares of NMIH have jumped 28.9% year to date. The Zacks Consensus Estimate for NMIH's 2024 and 2025 earnings implies year-over-year growth of 15.6% and 5.5%, respectively.

W.R. Berkley's earnings surpassed estimates in each of the last four quarters, the average surprise being 11.43%. Shares of WRB have skyrocketed 22.1% year to date. The Zacks Consensus Estimate for WRB's 2024 and 2025 earnings implies year-over-year growth of 22.8% and 5.6%, respectively.

Arch Capital's earnings surpassed estimates in each of the last four quarters, the average surprise being 28.93%. Shares of ACGL have jumped 38.1% year to date. The Zacks Consensus Estimate for ACGL's 2024 and 2025 earnings implies year-over-year growth of 6.5% and 2.5%, respectively.

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