CNA Financial (CNA) Q2 Earnings Beat, Premiums Rise Y/Y
CNA Financial Corporation CNA reported second-quarter 2023 core earnings of $1.13 per share, which beat the Zacks Consensus Estimate by 0.9%. The bottom line increased 25.5% year over year.
The insurer’s results reflect higher investment income and record high pretax underlying underwriting income, partially offset by higher catastrophe losses and lower favorable net prior-year development.
CNA Financial Corporation Price, Consensus and EPS Surprise
CNA Financial Corporation price-consensus-eps-surprise-chart | CNA Financial Corporation Quote
Behind Second-Quarter Headlines
Total operating revenues of CNA Financial were $2.9 billion, up 13.1% year over year due to higher premiums and net investment income. The top line beat the Zacks Consensus Estimate by 4.4%.
Net written premiums of Property & Casualty Operations increased 9% year over year to $2.2 billion, driven by a retention rate of 86% and renewal premium change of 7%, with written rate of 5%, exposure change of 2% and 11% increase in new business.
Net investment income increased 33.1% year over year to $575 million, driven by an $83 million increase in income from limited partnership and common stock investments and a $60 million increase in income from fixed-income securities and other investments. Our estimate for net investment was $409.4 million. The Zacks Consensus estimate was pegged at $439 million.
Total claims, benefits and expenses decreased 9% to $2.5 billion, primarily due to Insurance claims and policyholders' benefits. Our estimate was $2.8 billion.
Catastrophe losses were $68 million, wider than losses of $37 million in the year-ago quarter.
Underwriting income declined 25.4% year over year to $138 million. The combined ratio deteriorated 280 basis points (bps) year over year to 93.8. The Zacks Consensus estimate was pegged at 95.
Segment Results
Specialty’s net written premiums increased 2% year over year to $825 million. Our estimate was $818.3 million. The combined ratio deteriorated 280 bps to 90.9. The Zacks Consensus estimate was pegged at 94.
Commercial’s net written premiums increased 17% year over year to $1.3 billion. Our estimate was $1.2 billion. The combined ratio deteriorated 310 bps to 96.3. The Zacks Consensus estimate was pegged at 99.
International’s net written premiums increased 9% year over year to $359 million. Our estimate was $387.3 million. The combined ratio deteriorated 60 bps to 92.2. The Zacks Consensus estimate was pegged at 99.
Life & Group’s net earned premiums were $113 million, down 4.2% year over year. Our estimate was $114.3 million. The core loss was $20 million, wider than $9 million incurred in the year-ago quarter, primarily due to long-term care policy buyouts.
Corporate & Other’s core loss of $46 million was narrower than a loss of $78 million in the year-earlier quarter.
Financial Update
The core return on equity was 10.2%, up 280 bps. Book value excluding AOCI as of Jun 30 was $44.86 per share, up 0.1% from Dec 31, 2022. Statutory surplus decreased 0.5% from 2022 end to $10.5 billion at quarter end.
Net cash flow provided by operating activities dropped 17.6% to $501 million in the quarter.
Dividend Update
CNA Financial’s board of directors approved a quarterly dividend of 42 cents per share to be paid out on Aug 31 to shareholders as of Aug 14.
Zacks Rank
CNA Financial currently has a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Insurers
The Travelers Companies TRV reported second-quarter 2023 core income of 6 cents per share, which missed the Zacks Consensus Estimate of $2.27. The bottom line decreased 97.7% year over year, primarily attributable to higher-than-expected catastrophe loss.
Travelers’ total revenues increased 9.8% from the year-ago quarter to $10.1 billion, primarily driven by higher premiums. The top-line figure was almost in line with the Zacks Consensus Estimate.
Net written premiums increased 14% year over year to a record $10.3 billion, driven by strong growth across all three segments. The figure was higher than our estimate of $9.1 billion.
Travelers witnessed an underwriting gain of $781 million, up 38% year over year, driven by record net earned premiums of $9.2 billion and a consolidated underlying combined ratio, which improved 170 basis points. The combined ratio deteriorated 820 basis points year over year to 106.5 due to higher catastrophe losses and lower net favorable prior-year reserve development, partially offset by a lower underlying combined ratio.
The Progressive Corporation’s PGR second-quarter 2023 earnings per share of 50 cents missed the Zacks Consensus Estimate of 88 cents. The bottom line declined 47.4% year over year.
Net premiums earned grew 19% to $14.5 billion and beat our estimate of $12.9 billion as well as the Zacks Consensus Estimate of $14.3 billion. The combined ratio deteriorated 480 bps from the prior-year quarter’s level to 104.
Policies in force were solid in the Personal Auto segment, increasing 17% from the year-ago month’s figure to 19.7 million. Special Lines improved 7% to 5.8 million.
W.R. Berkley Corporation’s WRB second-quarter 2023 operating income of $1.14 per share beat the Zacks Consensus Estimate by 6.5%. The bottom line increased 1.8% year over year.
Operating revenues came in at $2.9 billion, down 57.4% year over year, on the back of higher net premiums earned as well as higher net investment income. The top line missed the consensus estimate by 1.2%.
W.R. Berkley’s net premiums written were a record $2.8 billion, up 8.7% year over year, as market conditions remained favorable for most lines of business. Our estimate for the same was $2.7 billion.
Catastrophe losses totaled $53.5 million in the quarter. The consolidated combined ratio (a measure of underwriting profitability) deteriorated 100 basis points to 89.6, in line with the Zacks Consensus Estimate. Our estimate for combined ratio was 91.3.
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