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CNA Financial Corporation CNA is well-poised for growth, driven by business growth across Specialty, Commercial and International segments, improving rate environment, financial flexibility and effective capital deployment.
Earnings History
The insurer has a solid track record of beating earnings estimates in two of the last four quarters while missing in the other two, the average being 2.18%.
Factors Favoring CNA
CNA Financial’s premiums should continue to grow on solid retention, favorable renewal premium change and new business growth across Specialty, Commercial and International segments.
An improving rate environment is favorable for an insurer. Amid the lower rate environment, the company’s fixed-income investment strategy with the highest allocations to diversified investment grade corporates as well as highly rated municipal securities should support investment results.
CNA Financial has a solid balance sheet with capital remaining above the target levels required for all ratings. It exited 2024 with statutory capital and surplus for the Combined Continental Casualty Companies of $11.2 billion, which grew 2% from the end of 2023. CNA Financial continues to maintain a conservative capital structure. It maintains liquidity in the form of cash and short-term investments, which helps to sustain business variability.
Strong financial position enables CNA Financial to engage in shareholder-friendly moves like dividend hikes. The insurer’s dividend history is impressive, where it witnessed a 10-year CAGR (2015-2025) of 6.3%. The current dividend yield of 3.6% is better than the industry average of 0.2%. On the back of a disciplined execution, denoted by strong underwriting results and confidence in future earnings performances, the insurer has been hiking dividends, apart from paying special dividends over the past couple of years. Thus, the company remains committed to returning more value to shareholders.
CNA’s Favorable Return on Capital
CNA Financial’s trailing 12-month ROE of 3.66% is better than the industry average of 0.2%. Core ROE expanded 10 bps to 10.5% in 2024.
Concerns for CNA
CNA Financial, being a property and casualty insurer and remains exposed to catastrophe loss stemming from natural disasters and weather-related events. The company reported catastrophe losses of $358 million for 2024, which were wider than the year-ago period's loss of $236 million. Catastrophe losses were primarily related to Hurricane Milton. Catastrophe losses pose an inherent risk to the P&C insurance business because of its unpredictability, inducing volatility to the company’s results.
CNA Financial has also been witnessing escalating expenses over the past few years, primarily due to increasing net incurred claims and benefits and amortization of deferred acquisition costs. The company’s net operating income has been affected by this increasing trend, which, in turn, might hurt its overall profitability.