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It has been about a month since the last earnings report for CNA Financial (CNA). Shares have added about 8.9% in that time frame, outperforming 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 catalysts.
CNA Financial Q3 Earnings Beat, Revenues Rise Y/Y
CNA Financial Corporation reported third-quarter 2020 core earnings of 71 cents per share, which beat the Zacks Consensus Estimate of 62 cents by 14.5%. However, the bottom line decreased 38.8% year over year.
The quarter witnessed higher premiums across most of its segments and increased net investment income, which were offset by elevated expenses.
Behind Third-Quarter Headlines
Total operating revenues of CNA Financial were nearly $2.5 billion, up about 3.8% year over year on the back of higher net investment income, premiums and non-insurance warranty revenues. However, the top line missed the Zacks Consensus Estimate by 0.6%.
Net written premiums at Property & Casualty Operations improved about 6.6% year over year to $1.8 billion driven by strong rate and higher new business.
Pretax net investment income increased 6.2% year over year to $517 million driven by limited partnership and common stock investments, partially offset by lower yields in fixed income portfolio.
Total claims, benefits and expenses increased 6% to $2.1 billion, primarily due to higher insurance claims and policyholders' benefits, amortization of deferred acquisition costs and non-insurance warranty expense.
Catastrophe losses of $160 million surged 400% from the year-ago quarter, driven by severe weather-related events, primarily Hurricanes Laura, Isaias and Sally, and the Midwest derecho.
Combined ratio deteriorated 330 basis points year over year to 100.9%.
Book value as of Sep 30, 2020 was $44.30 per share, down 1.6% from Dec 31, 2019.
Core return on equity was 6.7%, up 330 basis points (bps).
Specialty’s net written premiums rose nearly 9% year over year to $795 million, driven by strong rate and higher new business. Combined ratio improved 30 bps to 89.5%.
Commercial’s net written premiums increased 4% year over year to $804 million, driven by strong rate. Combined ratio deteriorated 990 bps to 111.5%.
International’s net written premiums increased 10% year over year to $222 million, driven by growth in Europe and Canada, partially offset by the continued impact of the strategic exit from certain Lloyd’s business classes. Combined ratio improved 930 bps to 98.1%.
Life & Group’s total operating revenues were $335 million, down 0.3% year over year. Core loss of $35 million was narrower than loss of $122 million in the year-earlier quarter.
Corporate & Other’s core loss of $19 million was wider than loss of $17 million in the year-earlier quarter.
CNA Financial’s board of directors approved a quarterly dividend of 37 cents to be paid out on Dec 3, 2020 to stockholders of record as of Nov 16.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 14.67% due to these changes.
At this time, CNA Financial has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. 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 #3 (Hold). We expect an in-line return from the stock in the next few months.
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