Why Is CNA Financial (CNA) Down 0.1% Since Last Earnings Report?
A month has gone by since the last earnings report for CNA Financial (CNA). Shares have lost about 0.1% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is CNA Financial due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
CNA Financial Q2 Earnings Beat, Premiums Rise Y/Y
CNA Financial Corporation 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.
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.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month.
VGM Scores
At this time, CNA Financial has a subpar Growth Score of D, however its Momentum Score is doing a lot 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 quintile 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.
Outlook
CNA Financial has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
CNA Financial Corporation (CNA) : Free Stock Analysis Report
