CNA Financial CNA is poised for growth, given its compelling product suite, prudent underwriting and solid capital position. Its return on equity was 7.8% in the trailing 12-month period, higher than the industry average of 6.8%. Return on equity is a profitability measure that identifies a company’s efficiency in utilizing its shareholders’ funds.
Shares of CNA Financial have gained 10.9% year to date outperforming the industry's growth of 7.3%. The company has seen its estimates for 2019 and 2020 move up 2% and 1.2% in the past 60 days respectively, indicating investor optimism on the stock.
The insurer has been witnessing improved combined ratio, a measure of underwriting profitability. Better pricing, prudent underwriting practices and compelling portfolio should help to retain the momentum. Per Willis Towers Watson plc’s Commercial Lines Insurance Pricing Survey in 2019, most of the commercial insurance lines should witness rate increase. This apart, occurrence of natural disasters might lead to an accelerated rate of policy renewals and new policy writings, which will boost premiums.
Continued investment in technology and analytics as well as disciplined expense management should help safeguard profitability.
CNA Financial’s debt-to-capital ratio has exhibited improvement over the last several years while staying below the 20-25% target. A robust liquidity position shields the company from market volatility and enables it to pursue new opportunities, consistent with its long-term strategy. The company enjoys solid credit ratings.
A robust capital position has been helping the company hike dividends as well as pay special dividend. Its dividend has increased at a five-year CAGR of 11.8% since 2013. The company paid out special dividend in each of the last four years. The current dividend yield of the company is nearly 2.9%, better than the industry yield of 0.4%, making it an attractive pick for yield-seeking investors.
The Zacks Rank #2 (Buy) property and casualty insurer has a decent history of delivering positive surprise in three of the last four quarters.
The Zacks Consensus Estimate for 2019 earnings indicates 34.8% year-over-year increase with expected long-term earnings growth currently pegged at 5%.
Shares are also underpriced at the current level, implying upside potential. Price to book of 1.1X is lower than the industry average of 1.4X. Also, the stock has an impressive Value Score of A. This style score helps to identify the most attractive value stocks. Back-tested results show that stocks with a VGM Score of A or B and a Zacks Rank #1 (Strong Buy) or 2 offer the best investment opportunities.
Other Stocks to Consider
Some other top-ranked property and casualty insurance stocks include Alleghany Y, Hallmark Financial Services HALL and Cincinnati Financial CINF.
Alleghany provides property and casualty reinsurance and insurance products in the United States and internationally. The company delivered positive surprise of 30.80% in the last reported quarter. The stock sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Hallmark Financial underwrites, markets, distributes, and services property/casualty insurance products to businesses and individuals in the United States. The company delivered positive surprise of 20.0% in the last reported quarter. The stock sports a Zacks Rank #1
Cincinnati Financial provides property casualty insurance products in the United States. The company pulled off a positive surprise of 32.81% in the last reported quarter. It is a Zacks #2 Ranked stock.
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Cincinnati Financial Corporation (CINF) : Free Stock Analysis Report
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