On Tuesday, Keefe, Bruyette & Woods updated their valuation of Cincinnati Financial (NASDAQ:CINF), raising the stock's price target from $128.00 to $136.00 while maintaining an Outperform rating. The adjustment follows a detailed analysis of the company's year-end 2023 Generally Accepted Accounting Principles (GAAP) reserves.
The firm's analysis indicated that Cincinnati Financial's GAAP loss and allocated loss adjustment expenses (ALAE) reserves were approximately $760 million higher than necessary at the end of 2022, suggesting a surplus across various insurance lines. This finding was primarily driven by excesses in workers' compensation, commercial casualty, and commercial property lines.
The positive reserve development for Cincinnati Financial in calendar year 2023 was largely attributed to the release of reserves from accident years 2020 to 2022 across most insurance lines. This was somewhat balanced by the need to strengthen reserves for older accident years in commercial casualty and excess & surplus (E&S) lines, with the company's E&S portfolio being predominantly casualty-focused.
Keefe, Bruyette & Woods reaffirmed their earnings per share (EPS) estimates for Cincinnati Financial for the years 2024 and 2025 at $6.45 and $7.35, respectively. These projections are based on anticipated net reserve releases of $223 million in 2024 and $262 million in 2025.
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