Insights

Why Shares of Cincinnati Financial Are Falling Today

What happened

Shares of the property and casualty insurer Cincinnati Financial (NASDAQ: CINF) had fallen more than 13% as of 10:50 a.m. ET today after the company reported earnings results for the year’s second quarter.

So what

Cincinnati Financial reported adjusted earnings per share of $0.65 on total revenue of $820 million for the second quarter of the year; both numbers fell short of analyst estimates.

While earned premiums of $1.77 billion were up year over year, the company took an underwriting loss of $52 million in the quarter compared to a $221 million gain one year ago.

“While not the result of any single storm, our field claims teams and headquarters claims associates have been busy, responding to 22 declared catastrophes in the quarter,” CEO Steven J. Johnston said in a statement.

He added, “We also took prudent reserving action in the quarter, reflecting elevated inflation in assorted forms and our belief that various pandemic effects have distorted paid loss cost trends.”

Now what

It was a challenging quarter for Cincinnati Financial that led to a combined ratio of more than 103%, indicating that the company paid out more money in claims in the second quarter than it earned in premiums.

But over the last six months, Cincinnati’s combined ratio is just above 96%, and Johnston thinks the insurer can generate a combined ratio in the low to mid 90s for the full year.

Cincinnati Financial is also a great dividend stock, having increased its payout for 62 consecutive years, so I’m still willing to give the stock the benefit of the doubt after a tough quarter.

Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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