A month has gone by since the last earnings report for CNA Financial (CNA). Shares have added about 0.2% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is CNA Financial due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
CNA Financial Q4 Earnings Miss Estimates, Premiums Up
CNA Financial incurred fourth-quarter 2018 core loss of 8 cents per share versus the Zacks Consensus Estimate of core income of 81 cents. Also, the bottom line came in against the year-ago quarter’s core income of $1.05 per share.
Limited partnership investment returns and catastrophe losses affected the fourth-quarter results.
Including net realized investment losses, net loss of 31 cents per share came in against the prior-year quarter’s net income of 82 cents.
For 2018, CNA Financial reported core income of $3.10 per share, missing the Zacks Consensus Estimate by 22.7%. Also, the bottom line declined 8.3% from the year-ago quarter.
Nonetheless, the company witnessed a significant progress in 2018. This property and casualty (P&C) insurer displayed improvement in both combined and underlying combined ratios while achieving considerable premium growth.
Behind Fourth-Quarter Headlines
Net investment income dropped 23.8% year over year to $279 million.
Net written premiums at Property & Casualty Operations improved 3.6% year over year to $1.7 billion. Core income plummeted nearly 94% year over year to $16 million. Combined ratio deteriorated 1140 basis points (bps) on a year-over-year basis to 105.4%.
As of Dec 31, 2018, book value (excluding AOCI) was $44.55 per share, dipping 1% from the level on Dec 31, 2017.
Specialty’s net written premiums rose 2.6% year over year to $682 million. Increase in new business and a positive renewal premium change were responsible for the upside. However, lower retention partially offset this improvement. Combined ratio deteriorated 260 bps to 91.2%.
Commercial’s net written premiums inched up 0.3% year over year to $721 million. Combined ratio improved 1510 bps to 113.3%.
International’s net written premiums increased nearly 18% year over year to $256 million, attributable to positive renewal premium change and a favorable change in estimate of ultimate premium. However, lower retention and new business partially offset this upside. Combined ratio improved 2280 bps to 119.5%.
Life & Group’s total operating revenues rose 1.8% year over year to $337 million. Core income of $7 million plunged 77.4% from the year-ago period.
Corporate & Other’s core loss of $46 million was substantially wider than the loss of $8 million in the prior-year period.
CNA Financial’s board of directors approved a quarterly dividend of 35 cents and a special dividend of $2 per share. Both dividends will be paid on Mar 14, 2019 to stockholders of record as of Feb 25, 2019.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
Currently, CNA Financial has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, CNA Financial has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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