Cincinnati Financial Corp Valuation – January 2019 $CINF

Company Profile (excerpt from Reuters): Cincinnati Financial Corporation, incorporated on March 4, 1992, is an insurance holding company. As of December 31, 2016, the Company was engaged in the business of property casualty insurance marketed through independent insurance agencies in 41 states. The Company operates through five segments: Commercial lines insurance, Personal lines insurance, Excess and surplus lines insurance, and Life insurance and Investments. The Company’s subsidiaries include The Cincinnati Insurance Company, CSU Producer Resources Inc. and CFC Investment Company. The Cincinnati Insurance Company owns four additional insurance subsidiaries. The Company’s market property casualty insurance group includes two of those subsidiaries: The Cincinnati Casualty Company and The Cincinnati Indemnity Company. This group writes a range of business, homeowner and auto policies. Other subsidiaries of The Cincinnati Insurance Company includes The Cincinnati Life Insurance Company, which provides life insurance, disability income policies and fixed annuities, and The Cincinnati Specialty Underwriters Insurance Company, which offers excess and surplus lines insurance products.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CINF – January 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $39,190,000,000 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 151.17% Pass
5. Moderate PEmg Ratio PEmg < 20 16.06 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.52 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.82
MG Growth Estimate 11.84%
MG Value $155.08
Opinion Undervalued
MG Grade A
MG Value based on 3% Growth $69.89
MG Value based on 0% Growth $40.97
Market Implied Growth Rate 3.78%
Current Price $77.42
% of Intrinsic Value 49.92%

Cincinnati Financial Corporation qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position . The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.69 in 2014 to an estimated $4.82 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.78% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Cincinnati Financial Corporation revealed the company was trading above its Graham Number of $76.19. The company pays a dividend of $2 per share, for a yield of 2.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 16.06, which was below the industry average of 32.22, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Cincinnati Financial Corporation fares extremely well in the ModernGraham grading system, scoring an A.

Stage 3: Information for Further Research

Graham Number $76.19
PEmg 16.06
PB Ratio 1.52
Dividend Yield 2.58%
TTM Dividend $2.00
Number of Consecutive Years of Dividend Growth 20

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Long-Term Debt & Capital Lease Obligation $830,000,000
Total Assets $22,480,000,000
Intangible Assets $0
Total Liabilities $14,146,000,000
Shares Outstanding (Diluted Average) 164,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.13
Dec2017 $6.29
Dec2016 $3.55
Dec2015 $3.83
Dec2014 $3.18
Dec2013 $3.12
Dec2012 $2.57
Dec2011 $1.01
Dec2010 $2.30
Dec2009 $2.65
Dec2008 $2.62
Dec2007 $4.97
Dec2006 $5.30
Dec2005 $3.40
Dec2004 $3.28
Dec2003 $2.10
Dec2002 $1.32
Dec2001 $1.08
Dec2000 $0.66
Dec1999 $1.38
Dec1998 $1.28

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.82
Dec2017 $4.44
Dec2016 $3.43
Dec2015 $3.16
Dec2014 $2.69
Dec2013 $2.41
Dec2012 $2.11
Dec2011 $2.16
Dec2010 $3.01
Dec2009 $3.51
Dec2008 $3.93
Dec2007 $4.33
Dec2006 $3.70
Dec2005 $2.68
Dec2004 $2.10
Dec2003 $1.45
Dec2002 $1.13

Recommended Reading:

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Best Dividend Paying Stocks for Dividend Growth Investors – August 2018
Best Dividend Paying Stocks for Dividend Growth Investors – June 2018
Best Dividend Paying Stocks for Dividend Growth Investors – April 2018
5 Great Stocks This Week – 3/5/18
Cincinnati Financial Corp Valuation – February 2018 $CINF

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Cincinnati Financial Corp Valuation – February 2018 $CINF

Company Profile (obtained from Marketwatch): Cincinnati Financial Corp. engages in the provision of property casualty and life insurance services. It operates its business through following segments: Commercial Lines Insurance; Personal Lines Insurance; Excess and Surplus Lines Insurance; Life Insurance; and Investments. The Commercial Lines Insurance segment includes commercial casualty, commercial property, commercial auto, worker’s compensation, and other commercial lines insurance. The Personal Lines Insurance segment manages personal auto, homeowner, and other personal lines insurance. The Excess and Surplus Lines Insurance segment covers business risks such as the nature of the business or its claim history, that are difficult to profitably insure in the standard commercial lines market. The Life Insurance segment offers term life insurance, universal life insurance, worksite products, and whole life insurance services. The Investment segment generates revenue from the fixed-maturity investment and equity investment. The company was founded by John Jack Schiff Sr., Robert Cleveland Schiff, and Harry M. Turner in 1968 and is headquartered in Fairfield, OH.

CINF Chart

CINF data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CINF – February 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $12,231,884,533 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 115.44% Pass
5. Moderate PEmg Ratio PEmg < 20 18.15 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.50 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.11
MG Growth Estimate 7.88%
MG Value $99.74
Opinion Undervalued
MG Grade B+
MG Value based on 3% Growth $59.60
MG Value based on 0% Growth $34.94
Market Implied Growth Rate 4.82%
Current Price $74.59
% of Intrinsic Value 74.78%

Cincinnati Financial Corporation qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position . The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.69 in 2014 to an estimated $4.11 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.82% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Cincinnati Financial Corporation revealed the company was trading above its Graham Number of $58.26. The company pays a dividend of $2 per share, for a yield of 2.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 18.15, which was below the industry average of 20.16, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Cincinnati Financial Corporation performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

Graham Number $58.26
PEmg 18.15
PB Ratio 1.50
Dividend Yield 2.68%
TTM Dividend $2.00
Number of Consecutive Years of Dividend Growth 20

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Long-Term Debt & Capital Lease Obligation $851,000,000
Total Assets $21,843,000,000
Intangible Assets $0
Total Liabilities $13,600,000,000
Shares Outstanding (Diluted Average) 165,700,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.00
Dec2017 $6.29
Dec2016 $3.55
Dec2015 $3.83
Dec2014 $3.18
Dec2013 $3.12
Dec2012 $2.57
Dec2011 $1.01
Dec2010 $2.30
Dec2009 $2.65
Dec2008 $2.62
Dec2007 $4.97
Dec2006 $5.30
Dec2005 $3.40
Dec2004 $3.28
Dec2003 $2.10
Dec2002 $1.32
Dec2001 $1.08
Dec2000 $0.66
Dec1999 $1.38
Dec1998 $1.28

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.11
Dec2017 $4.44
Dec2016 $3.43
Dec2015 $3.16
Dec2014 $2.69
Dec2013 $2.41
Dec2012 $2.11
Dec2011 $2.16
Dec2010 $3.01
Dec2009 $3.51
Dec2008 $3.93
Dec2007 $4.33
Dec2006 $3.70
Dec2005 $2.68
Dec2004 $2.10
Dec2003 $1.45
Dec2002 $1.13

Recommended Reading:

Other ModernGraham posts about the company

Best Dividend Paying Stocks for Dividend Growth Investors – August 2017
Best Dividend Paying Stocks for Dividend Growth Investors – March 2017
Best Dividend Paying Stocks for Dividend Growth Investors – February 2017
Best Dividend Paying Stocks for Dividend Growth Investors – January 2017
Best Dividend Paying Stocks for Dividend Growth Investors – December 2016

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Hanover Insurance Group Valuation – Initial Coverage $THG
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Assurant Inc Valuation – March 2017 $AIZ
American International Group Inc Valuation – March 2017 $AIG
Torchmark Corporation Valuation – March 2017 $TMK
Humana Inc Valuation – Initial Coverage $HUM
Chubb Ltd Valuation – March 2017 $CB
Stewart Information Services Corp Valuation – Initial Coverage $STC

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Cincinnati Financial Corporation Valuation – May 2016 $CINF

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – March 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Cincinnati Financial Corporation (CINF) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Cincinnati Financial Corporation is an insurance holding company. The Company is engaged in the business of property casualty insurance marketed through independent insurance agencies in over 40 states. It operates through five segments: Commercial lines insurance, Personal lines insurance, Excess and surplus lines insurance, Life insurance and Investments. It operates through three subsidiaries: The Cincinnati Insurance Company, CSU Producer Resources Inc. and CFC Investment Company. Its market property casualty insurance group includes two of those subsidiaries: The Cincinnati Casualty Company and The Cincinnati Indemnity Company. This group writes business, homeowner and auto policies. Other subsidiaries of The Cincinnati Insurance Company include The Cincinnati Life Insurance Company, which provides life insurance, disability income policies and fixed annuities, and The Cincinnati Specialty Underwriters Insurance Company, which offers excess and surplus lines insurance products.

To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of CINF – May 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $11,184,155,321 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -3.22% Fail
5. Moderate PEmg Ratio PEmg < 20 21.22 Fail
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.68 Pass
Score
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

CINF value chart May 2016

EPSmg $3.21
MG Growth Estimate 7.74%
MG Value $76.98
Opinion Fairly Valued
MG Grade B
MG Value based on 3% Growth $46.56
MG Value based on 0% Growth $27.30
Market Implied Growth Rate 6.36%
Current Price $68.16
% of Intrinsic Value 88.54%

Cincinnati Financial Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth over the last ten years, and the high PEmg ratio. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $2.12 in 2012 to an estimated $3.21 for 2016. This level of demonstrated earnings growth supports the market’s implied estimate of 6.36% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

Cincinnati Financial Corporation performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

CINF charts May 2016

Graham Number $51.70
PEmg 21.22
PB Ratio 1.68
Current Dividend $1.86
Dividend Yield 2.73%
Number of Consecutive Years of Dividend Growth 20

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Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2016
Long-term Debt $860,000,000
Total Assets $19,447,000,000
Intangible Assets $0
Total Liabilities $12,712,000,000
Shares Outstanding (Diluted Average) 166,000,000

Earnings Per Share History

Next Fiscal Year Estimate $2.90
12/1/2015 $3.83
12/1/2014 $3.18
12/1/2013 $3.12
12/1/2012 $2.57
12/1/2011 $1.02
12/1/2010 $2.31
12/1/2009 $2.65
12/1/2008 $2.62
12/1/2007 $4.97
12/1/2006 $5.30
12/1/2005 $3.40
12/1/2004 $3.28
12/1/2003 $2.10
12/1/2002 $1.32
12/1/2001 $1.08
12/1/2000 $0.66
12/1/1999 $1.38
12/1/1998 $1.28
12/1/1997 $1.61
12/1/1996 $1.19

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.21
12/1/2015 $3.16
12/1/2014 $2.70
12/1/2013 $2.41
12/1/2012 $2.12
12/1/2011 $2.17
12/1/2010 $3.02
12/1/2009 $3.51
12/1/2008 $3.93
12/1/2007 $4.33
12/1/2006 $3.70
12/1/2005 $2.67
12/1/2004 $2.10
12/1/2003 $1.45
12/1/2002 $1.13
12/1/2001 $1.09
12/1/2000 $1.14

Recommended Reading:

Other ModernGraham posts about the company

Dividend Growth Stocks for Intelligent Investors – February 2016
Dividend Growth Stocks for Intelligent Investors – February 2016
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Cincinnati Financial Corp Valuation – November 2015 Update $CINF
Cincinnati Financial Corp Valuation – November 2015 Update $CINF

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Assurant Inc Valuation – February 2016 $AIZ
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Humana Inc Stock Valuation – February 2016 $HUM
Prudential Financial Inc Valuation – February 2016 $PRU

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Cincinnati Financial Corp Valuation – November 2015 Update $CINF

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – October 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Cincinnati Financial Corp (CINF) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Cincinnati Financial Corporation is an insurance holding company. The Company is engaged in the business of property casualty insurance marketed through independent insurance agencies in 39 states. The Company operates through five segments: Commercial lines, Personal lines, Excess and surplus lines, Life insurance and Investments. It operates through its three subsidiaries: The Cincinnati Insurance Company, CSU Producer Resources Inc. and CFC Investment Company. Its market property casualty insurance group includes two of those subsidiaries: The Cincinnati Casualty Company and The Cincinnati Indemnity Company. This group writes a range of business, homeowner and auto policies. Other subsidiaries of The Cincinnati Insurance Company include The Cincinnati Life Insurance Company, which provides life insurance, disability income policies and fixed annuities, and The Cincinnati Specialty Underwriters Insurance Company, which offers excess and surplus lines insurance products.

[level-free]

To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
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Downloadable PDF version of this valuation:

ModernGraham Valuation of CINF – November 2015

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $9,917,953,915 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -22.27% Fail
5. Moderate PEmg Ratio PEmg < 20 19.39 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.58 Pass
Score
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

CINF value Chart November 2015

EPSmg $3.12
MG Growth Estimate 6.65%
MG Value $68.04
Opinion Fairly Valued
MG Value based on 3% Growth $45.27
MG Value based on 0% Growth $26.54
Market Implied Growth Rate 5.44%
Current Price $60.53
% of Intrinsic Value 88.96%

Cincinnati Financial Corp qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the insufficient earnings growth over the last ten years.  The Enterprising Investor has no initial concerns.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $2.16 in 2011 to an estimated $3.12 for 2015.  This level of demonstrated earnings growth supports the market’s implied estimate of 5.44% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Cincinnati Financial Corp (CINF)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

CINF Charts November 2015

Graham Number $56.97
PEmg 19.39
PB Ratio 1.58
Dividend Yield 3.01%
Number of Consecutive Years of Dividend Growth 20

 

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Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Long-Term Debt $861,000,000
Total Assets $18,751,000,000
Intangible Assets $0
Total Liabilities $12,401,000,000
Shares Outstanding (Diluted Average) 165,500,000

Earnings Per Share History

Next Fiscal Year Estimate $3.72
Dec14 $3.18
Dec13 $3.12
Dec12 $2.57
Dec11 $1.01
Dec10 $2.31
Dec09 $2.65
Dec08 $2.62
Dec07 $4.97
Dec06 $5.30
Dec05 $3.40
Dec04 $3.28
Dec03 $2.10
Dec02 $1.32
Dec01 $1.08
Dec00 $0.66
Dec99 $1.38
Dec98 $1.28
Dec97 $1.61
Dec96 $1.19
Dec95 $1.21

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $3.12
Dec14 $2.69
Dec13 $2.41
Dec12 $2.12
Dec11 $2.16
Dec10 $3.02
Dec09 $3.51
Dec08 $3.93
Dec07 $4.33
Dec06 $3.70
Dec05 $2.68
Dec04 $2.10
Dec03 $1.45
Dec02 $1.13
Dec01 $1.09
Dec00 $1.14
Dec99 $1.36

Recommended Reading:

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The Best Companies of the Insurance Industry – October 2015
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Cincinnati Financial Corporation Analysis – August 2015 Update $CINF
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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Cincinnati Financial Corporation Analysis – August 2015 Update $CINF

CINCINNATI FINANCIAL CORPORATION LOGOBenjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 5 Most Undervalued Companies for the Defensive Investor – July 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Cincinnati Financial Corporation (CINF) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Cincinnati Financial Corporation is an insurance holding company. The Company is engaged in the business of property casualty insurance marketed through independent insurance agencies in 39 states. The Company operates through five segments: Commercial lines, Personal lines, Excess and surplus lines, Life insurance and Investments. It operates through its three subsidiaries: The Cincinnati Insurance Company, CSU Producer Resources Inc. and CFC Investment Company. Its market property casualty insurance group includes two of those subsidiaries: The Cincinnati Casualty Company and The Cincinnati Indemnity Company. This group writes a range of business, homeowner and auto policies. Other subsidiaries of The Cincinnati Insurance Company include The Cincinnati Life Insurance Company, which provides life insurance, disability income policies and fixed annuities, and The Cincinnati Specialty Underwriters Insurance Company, which offers excess and surplus lines insurance products.

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Defensive Investor – must pass all 6 of the following tests: Score = 5/6

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  3. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  4. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  5. Moderate PEmg ratio – PEmg is less than 20 – PASS
  6. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass all 3 of the following tests or be suitable for a defensive investor: Score = 3/3

  1. Earnings Stability – positive earnings per share for at least 5 years – PASS
  2. Dividend Record – currently pays a dividend – PASS
  3. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $55.33
MG Value $55.58
MG Opinion Fairly Valued
Value Based on 3% Growth $42.37
Value Based on 0% Growth $24.84
Market Implied Growth Rate 5.22%
PEmg 18.94
PB Ratio 1.41

Balance Sheet – June 2015

Total Debt $872,000,000
Total Assets $18,888,000,000
Intangible Assets $0
Total Liabilities $12,391,000,000
Outstanding Shares 165,500,000

Earnings Per Share

2015 (estimate) $3.12
2014 $3.18
2013 $3.12
2012 $2.57
2011 $1.01
2010 $2.31
2009 $2.65
2008 $2.62
2007 $4.97
2006 $5.30
2005 $3.40

Earnings Per Share – ModernGraham

2015 (estimate) $2.92
2014 $2.69
2013 $2.41
2012 $2.12
2011 $2.16
2010 $3.02

Dividend History

Free Cash Flow

Conclusion:

Cincinnati Financial Corporation qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the insufficient earnings growth over the last ten years.  The Enterprising Investor has no initial concerns.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the evaluation.

As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $2.16 in 2011 to an estimated $2.92 for 2015.  This level of demonstrated earnings growth supports the market’s implied estimate of 5.22% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Cincinnati Financial Corporation (CINF)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

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Cincinnati Financial Corporation Annual Valuation – 2014 $CINF

CINCINNATI FINANCIAL CORPORATION LOGOIn the wake of the great financial crisis it can sometimes be difficult for Intelligent Investors to find a solid financial company in which to invest, because they require specific achievements over the historical period.  Many investors may simply decide to throw out the worst years with the rationale that they are outliers that shouldn’t be considered when evaluating the company’s prospects, but doing so would involve speculation.  We don’t know whether the financial crisis will happen again, but we do know that if it does, we can expect to see similar results as we did before.  By continuing to require the same standards for the historical period, Intelligent Investors are able to widdle down banks to only those with the best financial position, and then they are able to determine an intrinsic value to get a sense of whether the company is a good investment.  In addition, a company must have strong financial statements to prove that it is stable enough for Intelligent Investors.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Cincinnati Financial Corp (CINF) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Cincinnati Financial Corporation is engaged in property casualty insurance marketed through independent insurance agents in 39 states. During the year ended December 31, 2012, the Company owned 100% of three subsidiaries: The Cincinnati Insurance Company, CSU Producer Resources Inc., and CFC Investment Company. The Company operates in five segments: Commercial lines property casualty insurance, Personal lines property casualty insurance, Excess and surplus lines property casualty insurance, Life insurance and Investments. Its standard market property casualty insurance group includes two subsidiaries: The Cincinnati Casualty Company and The Cincinnati Indemnity Company. This group writes a range of business, homeowner and auto policies.

CINF Chart

CINF data by YCharts

Defensive Investor – must pass all 6 of the following tests: Score = 5/6

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  3. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  4. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  5. Moderate PEmg ratio – PEmg is less than 20 – PASS
  6. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass all 3 of the following tests or be suitable for a defensive investor: Score = 2/3

  1. Earnings Stability – positive earnings per share for at least 5 years – PASS
  2. Dividend Record – currently pays a dividend – PASS
  3. Earnings growth – EPSmg greater than 5 years ago – FAIL

Valuation Summary

Key Data:

Recent Price $46.46
MG Value $3.83
MG Opinion Overvalued
Value Based on 3% Growth $33.77
Value Based on 0% Growth $19.79
Market Implied Growth Rate 5.73%
PEmg 19.95
PB Ratio 1.20

Balance Sheet – 6/30/2014

Total Debt $880,000,000
Total Assets $18,335,000,000
Intangible Assets $0
Total Liabilities $11,992,000,000
Outstanding Shares 164,000,000

Earnings Per Share

2014 (estimate) $2.07
2013 $3.13
2012 $2.57
2011 $1.02
2010 $2.31
2009 $2.65
2008 $2.63
2007 $4.97
2006 $5.30
2005 $3.40
2004 $3.27

Earnings Per Share – ModernGraham 

2014 (estimate) $2.33
2013 $2.42
2012 $2.12
2011 $2.17
2010 $3.02
2009 $3.51

Dividend History

CINF Dividend Chart

CINF Dividend data by YCharts

Conclusion:

Cincinnati Financial Corp does not qualify for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned by the lack of sufficient earnings growth over the last ten years, while the Enterprising Investor has an issue with the lack of earnings growth over the last five years.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  From a valuation side of things, the company appears overvalued after seeing its EPSmg (normalized earnings) drop from $3.02 in 2010 to only an estimated $2.33 for 2014.  This demonstrated drop in earnings does not support the market’s implied estimate of 5.73% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham’s formula, to return an estimate of intrinsic value below the market price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Cincinnati Financial Corp (CINF)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Cincinnati Financial Corp (CINF) or any of the other companies listed in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from the Wikipedia; this article is not affiliated with the company in any manner.

Allstate Corp Valuation – February 2019 $ALL

Company Profile (excerpt from Reuters): The Allstate Corporation (Allstate), incorporated on November 5, 1992, is a holding company for Allstate Insurance Company. The Company’s business is conducted principally through Allstate Insurance Company, Allstate Life Insurance Company and other subsidiaries. The Company is engaged in the property-liability insurance business and the life insurance, retirement and investment products business. Its segments include Allstate Protection, Allstate Financial, Discontinued Lines and Coverages, and Corporate and Other. The Company offers its products in the United States and Canada.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ALL – February 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $32,508,453,889 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 190.33% Pass
5. Moderate PEmg Ratio PEmg < 20 13.38 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.54 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $7.05
MG Growth Estimate 5.99%
MG Value $144.44
Opinion Undervalued
MG Grade A-
MG Value based on 3% Growth $102.28
MG Value based on 0% Growth $59.96
Market Implied Growth Rate 2.44%
Current Price $94.38
% of Intrinsic Value 65.34%

Allstate Corp qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position . The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $5.04 in 2015 to an estimated $7.05 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.44% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Allstate Corp revealed the company was trading below its Graham Number of $105.68. The company pays a dividend of $1.84 per share, for a yield of 1.9% Its PEmg (price over earnings per share – ModernGraham) was 13.38, which was below the industry average of 32.96, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Allstate Corp fares extremely well in the ModernGraham grading system, scoring an A-.

Stage 3: Information for Further Research

Graham Number $105.68
PEmg 13.38
PB Ratio 1.54
Dividend Yield 1.95%
TTM Dividend $1.84
Number of Consecutive Years of Dividend Growth 8

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Long-Term Debt & Capital Lease Obligation $6,451,000,000
Total Assets $112,249,000,000
Intangible Assets $2,530,000,000
Total Liabilities $90,937,000,000
Shares Outstanding (Diluted Average) 347,100,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $8.50
Dec2018 $5.96
Dec2017 $8.36
Dec2016 $4.67
Dec2015 $5.05
Dec2014 $6.27
Dec2013 $4.81
Dec2012 $4.68
Dec2011 $1.50
Dec2010 $1.68
Dec2009 $1.58
Dec2008 -$3.06
Dec2007 $7.77
Dec2006 $7.84
Dec2005 $2.64
Dec2004 $4.54
Dec2003 $3.83
Dec2002 $1.60
Dec2001 $1.60
Dec2000 $2.95
Dec1999 $3.38

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $7.05
Dec2018 $6.24
Dec2017 $6.20
Dec2016 $5.11
Dec2015 $5.04
Dec2014 $4.62
Dec2013 $3.48
Dec2012 $2.30
Dec2011 $1.37
Dec2010 $1.93
Dec2009 $2.49
Dec2008 $3.27
Dec2007 $6.07
Dec2006 $4.84
Dec2005 $3.18
Dec2004 $3.26
Dec2003 $2.64

Recommended Reading:

Other ModernGraham posts about the company

Allstate Corp Valuation – April 2018 $ALL
Allstate Corp Valuation – November 2016 $ALL
10 Best Stocks For Value Investors This Week – 5/21/16
Allstate Corporation Valuation – May 2016 $ALL
10 Best Stocks For Value Investors This Week – 10/31/15

Other ModernGraham posts about related companies

Hartford Financial Services Group Inc Valuation – February 2019 $HIG
Unum Group Valuation – February 2019 $UNM
Everest Re Group Ltd Valuation – February 2019 $RE
Cigna Corp Valuation – January 2019 $CI
MetLife Inc Valuation – January 2019 $MET
Aflac Inc Valuation – January 2019 $AFL
Principal Financial Group Inc Valuation – January 2019 $PFG
Progressive Corp Valuation – January 2019 $PGR
Lincoln National Corp Valuation – January 2019 $LNC
Cincinnati Financial Corp Valuation – January 2019 $CINF

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Hartford Financial Services Group Inc Valuation – February 2019 $HIG

Company Profile (excerpt from Reuters): The Hartford Financial Services Group, Inc., incorporated on December 9, 1985, is a holding company for insurance and financial services subsidiaries. The Company, through its subsidiaries, provides property and casualty insurance, group life and disability products, and mutual funds and exchange-traded products to individual and business customers in the United States. The Company’s segments include Commercial Lines, Personal Lines, Property & Casualty Other Operations, Group Benefits, Mutual Funds, and Corporate. The Company administers life insurance and annuity products previously sold.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of HIG – February 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $17,456,035,313 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -72.65% Fail
5. Moderate PEmg Ratio PEmg < 20 28.38 Fail
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.35 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Fail
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.71
MG Growth Estimate -1.62%
MG Value $9.01
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $24.86
MG Value based on 0% Growth $14.57
Market Implied Growth Rate 9.94%
Current Price $48.66
% of Intrinsic Value 540.08%

Hartford Financial Services Group Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, and the high PEmg ratio. The Enterprising Investor has concerns regarding the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.92 in 2015 to an estimated $1.71 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 9.94% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Hartford Financial Services Group Inc revealed the company was trading below its Graham Number of $60.98. The company pays a dividend of $1.1 per share, for a yield of 2.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 28.38, which was below the industry average of 32.96, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Hartford Financial Services Group Inc receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Graham Number $60.98
PEmg 28.38
PB Ratio 1.35
Dividend Yield 2.26%
TTM Dividend $1.10
Number of Consecutive Years of Dividend Growth 6

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Long-Term Debt & Capital Lease Obligation $4,265,000,000
Total Assets $62,307,000,000
Intangible Assets $1,947,000,000
Total Liabilities $49,206,000,000
Shares Outstanding (Diluted Average) 364,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.65
Dec2018 $4.95
Dec2017 -$8.61
Dec2016 $2.27
Dec2015 $3.96
Dec2014 $1.73
Dec2013 $0.36
Dec2012 -$0.18
Dec2011 $1.40
Dec2010 $2.40
Dec2009 -$2.93
Dec2008 -$8.99
Dec2007 $9.24
Dec2006 $8.69
Dec2005 $7.44
Dec2004 $7.12
Dec2003 -$0.33
Dec2002 $3.97
Dec2001 $2.10
Dec2000 $4.34
Dec1999 $3.79

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.71
Dec2018 $0.45
Dec2017 -$1.22
Dec2016 $2.19
Dec2015 $1.92
Dec2014 $0.98
Dec2013 $0.48
Dec2012 -$0.20
Dec2011 -$0.06
Dec2010 $0.03
Dec2009 $0.13
Dec2008 $2.67
Dec2007 $7.81
Dec2006 $6.53
Dec2005 $4.98
Dec2004 $3.65
Dec2003 $2.20

Recommended Reading:

Other ModernGraham posts about the company

Hartford Financial Services Analysis – 2015 Annual Update $HIG
15 Companies in the Spotlight This Week – 5/31/14
Hartford Financial Services 2014 Annual Valuation $HIG

Other ModernGraham posts about related companies

Unum Group Valuation – February 2019 $UNM
Everest Re Group Ltd Valuation – February 2019 $RE
Cigna Corp Valuation – January 2019 $CI
MetLife Inc Valuation – January 2019 $MET
Aflac Inc Valuation – January 2019 $AFL
Principal Financial Group Inc Valuation – January 2019 $PFG
Progressive Corp Valuation – January 2019 $PGR
Lincoln National Corp Valuation – January 2019 $LNC
Cincinnati Financial Corp Valuation – January 2019 $CINF
Aon PLC Valuation – November 2018 $AON

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Unum Group Valuation – February 2019 $UNM

Company Profile (excerpt from Reuters): Unum Group, incorporated on March 22, 1995, is a provider of financial protection benefits in the United States and the United Kingdom. The Company’s products include disability, life, accident, critical illness, dental and vision, and other related services. Its segments include Unum US, Unum UK, Colonial Life, Closed Block and Corporate. Its Unum US segment includes group long-term and short-term disability insurance, group life and accidental death and dismemberment products, and supplemental and voluntary lines of business. Its Unum UK segment includes insurance for group long-term disability, group life, and supplemental lines of business, which include dental, individual disability and critical illness products. Its Colonial Life segment includes insurance for accident, sickness, and disability products, life products, and cancer and critical illness products issued primarily by Colonial Life & Accident Insurance Company and marketed to employees, on both a group and an individual basis, at the workplace through an independent contractor agency sales force and brokers. Its Closed Block segment consists of other insurance products. Its principal operating subsidiaries in the United States are Unum Life Insurance Company of America (Unum America), Provident Life and Accident Insurance Company (Provident), The Paul Revere Life Insurance Company (Paul Revere Life), and Colonial Life & Accident Insurance Company, and in the United Kingdom, Unum Limited.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of UNM – February 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $7,623,067,828 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 76.32% Pass
5. Moderate PEmg Ratio PEmg < 20 8.85 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.90 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $4.02
MG Growth Estimate 7.24%
MG Value $92.24
Opinion Undervalued
MG Grade A
MG Value based on 3% Growth $58.22
MG Value based on 0% Growth $34.13
Market Implied Growth Rate 0.17%
Current Price $35.53
% of Intrinsic Value 38.52%

Unum Group qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position . The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.71 in 2015 to an estimated $4.02 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.17% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Unum Group revealed the company was trading below its Graham Number of $68.83. The company pays a dividend of $0.98 per share, for a yield of 2.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 8.85, which was below the industry average of 32.96, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Unum Group fares extremely well in the ModernGraham grading system, scoring an A.

Stage 3: Information for Further Research

Graham Number $68.83
PEmg 8.85
PB Ratio 0.90
Dividend Yield 2.76%
TTM Dividend $0.98
Number of Consecutive Years of Dividend Growth 10

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Long-Term Debt & Capital Lease Obligation $2,971,300,000
Total Assets $61,875,600,000
Intangible Assets $350,300,000
Total Liabilities $53,253,800,000
Shares Outstanding (Diluted Average) 217,400,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.24
Dec2018 $2.38
Dec2017 $4.37
Dec2016 $3.95
Dec2015 $3.50
Dec2014 $1.57
Dec2013 $3.19
Dec2012 $3.17
Dec2011 $0.94
Dec2010 $2.69
Dec2009 $2.57
Dec2008 $1.62
Dec2007 $1.91
Dec2006 $1.23
Dec2005 $1.64
Dec2004 -$0.86
Dec2003 -$1.31
Dec2002 $1.66
Dec2001 $2.21
Dec2000 $2.22
Dec1999 -$0.77

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.02
Dec2018 $3.32
Dec2017 $3.63
Dec2016 $3.20
Dec2015 $2.71
Dec2014 $2.31
Dec2013 $2.63
Dec2012 $2.30
Dec2011 $1.89
Dec2010 $2.24
Dec2009 $1.94
Dec2008 $1.46
Dec2007 $1.09
Dec2006 $0.61
Dec2005 $0.43
Dec2004 $0.14
Dec2003 $0.69

Recommended Reading:

Other ModernGraham posts about the company

5 Low P/E Companies In The S&P 500 – August 2018
Best Stocks Below Their Graham Number – August 2018
10 Low PE Stock Picks for the Defensive Investor – August 2018
Best Stocks Below Their Graham Number – June 2018
10 Low PE Stock Picks for the Defensive Investor – June 2018

Other ModernGraham posts about related companies

Everest Re Group Ltd Valuation – February 2019 $RE
Cigna Corp Valuation – January 2019 $CI
MetLife Inc Valuation – January 2019 $MET
Aflac Inc Valuation – January 2019 $AFL
Principal Financial Group Inc Valuation – January 2019 $PFG
Progressive Corp Valuation – January 2019 $PGR
Lincoln National Corp Valuation – January 2019 $LNC
Cincinnati Financial Corp Valuation – January 2019 $CINF
Aon PLC Valuation – November 2018 $AON
Travelers Companies Inc Valuation – November 2018 $TRV

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Everest Re Group Ltd Valuation – February 2019 $RE

Company Profile (excerpt from Reuters): Everest Re Group, Ltd., incorporated on August 26, 1999, through its subsidiaries, is engaged in the underwriting of reinsurance and insurance in the United States, Bermuda and international markets. The Company operates in segments: U.S. Reinsurance, International, Bermuda and Insurance. The Company underwrites reinsurance both through brokers and directly with ceding companies. The Company underwrites insurance principally through general agent relationships, brokers and surplus lines brokers. The Company offers treaty and facultative reinsurance, and admitted and non-admitted insurance. Its products include the range of property and casualty reinsurance, and insurance coverage’s, including marine, aviation, surety, errors and omissions liability (E&O), directors’ and officers’ liability (D&O), medical malpractice, other specialty lines, accident and health (A&H) and workers’ compensation. The Company’s subsidiaries include Everest Reinsurance (Bermuda), Ltd. (Bermuda Re), Everest International Reinsurance, Ltd., Everest Reinsurance Company (Ireland) Limited (Ireland Re), Everest Reinsurance Company (Everest Re), Everest Insurance Company of Canada, Everest National Insurance Company, Everest Indemnity Insurance Company, Everest Security Insurance Company and Everest International Assurance, Ltd.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of RE – February 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $9,035,643,647 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 62.33% Pass
5. Moderate PEmg Ratio PEmg < 20 17.24 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.08 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $12.90
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $186.99
MG Value based on 0% Growth $109.62
Market Implied Growth Rate 4.37%
Current Price $222.29
% of Intrinsic Value N/A

Everest Re Group Ltd does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years. The Enterprising Investor has concerns regarding the lack of earnings growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $19.09 in 2014 to an estimated $12.9 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 4.37% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Everest Re Group Ltd revealed the company was trading above its Graham Number of $79.48. The company pays a dividend of $5.05 per share, for a yield of 2.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 17.24, which was below the industry average of 32.96, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Everest Re Group Ltd scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Graham Number $79.48
PEmg 17.24
PB Ratio 1.08
Dividend Yield 2.27%
TTM Dividend $5.05
Number of Consecutive Years of Dividend Growth 5

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Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Long-Term Debt & Capital Lease Obligation $236,634,000
Total Assets $24,410,857,000
Intangible Assets $0
Total Liabilities $16,081,844,000
Shares Outstanding (Diluted Average) 40,542,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.37
Dec2017 $11.36
Dec2016 $23.68
Dec2015 $22.10
Dec2014 $25.91
Dec2013 $25.44
Dec2012 $15.79
Dec2011 -$1.49
Dec2010 $10.70
Dec2009 $13.22
Dec2008 -$0.30
Dec2007 $13.19
Dec2006 $12.87
Dec2005 -$3.79
Dec2004 $8.71
Dec2003 $7.74
Dec2002 $4.52
Dec2001 $2.10
Dec2000 $4.02
Dec1999 $3.25
Dec1998 $3.26

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $12.90
Dec2017 $19.67
Dec2016 $23.41
Dec2015 $21.37
Dec2014 $19.09
Dec2013 $14.70
Dec2012 $8.75
Dec2011 $5.84
Dec2010 $9.65
Dec2009 $8.43
Dec2008 $6.07
Dec2007 $8.75
Dec2006 $6.35
Dec2005 $3.35
Dec2004 $6.42
Dec2003 $4.96
Dec2002 $3.52

Recommended Reading:

Other ModernGraham posts about the company

Everest Re Group Ltd Valuation – Initial Coverage $RE

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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