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Here's Why You Should Retain CNA Financial in Your Portfolio

Zacks Equity Research

CNA Financial Corporation CNA is poised for growth, given its compelling product suite, improving combined ratio and solid capital position. The Zacks Consensus Estimate for 2019 indicates 32.3% year-over-year growth while the expected long-term earnings growth is 5%. The stock carries a favorable Growth Score of B. This style score analyzes growth prospects of a company.

The property and casualty insurer’s investment in technology and analytics, disciplined expense management and prudent underwriting approach (better risk selection and pricing) drive underwriting profits and underlying combined ratio results.

A favorable macro environment should continue to help insurers retain their momentum. In the first quarter of 2019, in personal lines insurance, homeowners, automobile and personal articles saw rate increase of 2%, 2.5% and 1%, respectively. In Commercial, most of the lines saw premium rate increase of 2%, while Commercial Auto saw a 7% rate increase.

In the rest of 2019, most of the commercial insurance lines should witness rate increase.  This should help insurers sustain underwriting profitability despite claims stemming from catastrophes. Also, occurrence of natural disasters might lead to an accelerated rate of policy renewals and new policy writings, which will boost premiums.

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 also helps the company to engage in shareholder-friendly moves. CNA Financial’s quarterly dividend payment witnessed a five-year CAGR (2013-2018) of 11.8%. The company also paid special dividends.  The current dividend yield of the company is nearly 3%, better than the sector yield of 0.4%, making it an attractive pick for yield-seeking investors.

Notably, CNA Financial has an impressive VGM Score of A. This score helps to identify stocks with the most attractive value, growth, and momentum.

CNA Financial currently carries a Zacks Rank #3 (Hold). Shares of the company have gained 6.6% year to date, underperforming the industry’s increase of 7.1%. We expect that the aforementioned upsides should drive shares higher.

Stocks to Consider

Some better-ranked property and casualty insurance stocks are Alleghany Corporation Y, Argo Group International Holdings, Ltd. ARGO and RLI Corp. RLI, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Alleghany provides property and casualty reinsurance and insurance products in the United States and internationally. The company delivered positive surprise of 32.51% in the last reported quarter.

Argo Group underwrites specialty insurance and reinsurance products in the property and casualty markets. The company delivered positive surprise of 34.09% in the last reported quarter.

RLI underwrites property and casualty insurance in the United States and internationally. The company delivered positive surprise of 20.34% in the last reported quarter.

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