Avoid Cincinnati Financial, Add These Top 4 Insurance Stocks

Cincinnati Financial Corporation (NASDAQ:CINF) has been witnessing southbound revisions of late. The stock has seen the Zacks Consensus Estimate for current-year earnings being revised 10.1% downward while for 2019, the consensus mark moved nearly 5.8% south.

The stock carries a Zacks Rank #5 (Strong Sell) with an unimpressive VGM Score of D. Back tested results show that stocks with a favorable VGM Score of A or B when combined with a bullish Zacks Rank #1 (Strong Buy) or 2 (Buy), comfortably outperform other stocks. You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Cincinnati Financial have also underperformed the industry year to date. The stock has lost 8.1%, massively wider than the industry’s 2.3% decline.

Further, valuation remains stretched at the current level. Looking at the company’s price-to-book ratio, the best multiple for valuing insurers, the company has a trailing 12-month P/B ratio of 1.42, higher than the industry average of 1.41.

Cincinnati Financial has been incurring rising expenses over the past few years, primarily due to higher insurance loss and contract holders’ benefits besides underwriting, acquisition and insurance expenses. We do not expect any major turnaround in this respect in the near term. It is important to note that escalating expenses are likely to restrict operating margin expansion, which in turn might hurt the company’s overall growth.

Additionally, the company with its concentration on the Midwest region has been exposed to devastating events. To that end, it has been experiencing high level of catastrophe loss over a considerable period of time and will continue to endure the same given the unpredictability of weather-related occurrences and natural disasters. Further, such huge losses have also induced deterioration in the company’s combined ratio, hampering underwriting profitability.

Moreover, Cincinnati Financial’s cash flow from operations has also been on the wane over an extended period of time and we expect volatility in this metric to continue in the near term. Dwindling cashflows might restrain the company’s financial flexibility.

Choosing the Stocks

Although Cincinnati Financial doesn’t appear an attractive pick right now, there are a few solid stocks in the insurance space promising greater returns. Also, these companies have outperformed the industry’s rally so far this year.

We have narrowed down to four investor-friendly stocks with an upside potential to enhance one’s portfolio through the aid of Zacks Stock Screener. Our search is refined by using the a robust Zacks Rank, northbound estimate revisions and a commendable VGM Score of A or B. Buy-rated stocks with strong Value Scores are the best deals on offer.

Birmingham, AL-based Infinity Property and Casualty Corporation (NASDAQ:IPCC) offers personal automobile insurance products in the United States. The company carries a Zacks Rank #2 with an impressive VGM Score of A. The stock has seen the Zacks Consensus Estimate for current-year earnings being revised 5% upward and for 2019, moved 1.1% north, over the last 60 days.

Shares of Infinity Property and Casualty have surged 36.3% year to date versus the industry’s decline of 2.3%.

Headquartered in Mayfield Village, OH, The Progressive Corporation (NYSE:PGR) provides personal and commercial auto insurance, residential property insurance and other specialty property-casualty insurance and related services, primarily in the United States. The company sports a Zacks Rank of 1 with a VGM Score of A. The stock has been witnessing upward estimate revisions — up 8.5% for 2018 and 6.7% for 2019 — over the last 60 days.

Shares of Progressive Corporation have risen 9.9% year to date against the industry’s decrease.

Kemper Corporation (NYSE:KMPR) based in Chicago, IL, offers property and casualty plus life and health insurance to individuals and businesses in the United States. The company has a VGM Score of B and a Zacks Rank of 1. The stock has seen the Zacks Consensus Estimate for 2018 bottom line being raised16.7% and for 2019, moved 7.5% up, over the last 60 days.

Shares of Kemper Corporation have gained 12.1% year to date, outperforming the industry’s rise of 7.7%.

Headquartered at Columbus, GA, Aflac Incorporated (NYSE:AFL) provides voluntary supplemental health and life insurance products. The company has a VGM Score of A and is a Zacks #2 Ranked player. The stock has been witnessing upward estimate revisions — up 2.1% for 2018 and 0.9% for next year — over the last 60 days.

Shares of Aflac have grown 4.1% year to date against the industry’s fall of 4.1%.

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