CNA Financial Corporation CNA has been gaining momentum on the back of new businesses, improved non-catastrophe current accident year underwriting results, higher net earned premium and effective capital deployment.
Optimistic Growth Projections
The Zacks Consensus Estimate for 2023 and 2024 earnings per share is pegged at $4.33 and $4.44, indicating a 12.7% and 2.4% increase from the year-ago reported figure, driven by 8.9% and 2.8% higher revenues of $11.44 billion and $11.77 billion, respectively. The expected long-term earnings growth rate is pegged at 5%.
Northbound Estimate Revision
The Zacks Consensus Estimate for CNA Financial’s 2022 and 2023 earnings has moved 1.2% and 0.4% north, respectively, in the past 30 days. This should instill investors' confidence in the stock.
Earnings Surprise History
CNA Financial has a decent earnings surprise history. It beat estimates in three of the last four quarters and missed in one, with the average being 12.41%.
Zacks Rank & Price Performance
CNA Financial currently carries a Zacks Rank #3 (Hold). In the past year, the stock has lost 3% against the industry’s increase of 16.9%.
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Return on Equity (ROE)
In the second quarter of 2023, CNA Financial’s trailing 12-month ROE expanded 380 basis points (bps) to 13.1%. The core ROE expanded 180 bps to 10.4% in the first half of 2023. ROE reflects the insurer’s efficiency in using shareholders’ funds.
Style Score
CNA Financial has a favorable VGM Score of B. The VGM Score helps identify stocks with the most attractive value, best growth and most promising momentum.
Business Tailwinds
CNA Financial remains well-poised to gain from a rise in new businesses, strong rate, lower net catastrophe losses, improved non-catastrophe current accident year underwriting results and higher net earned premium, which contribute to premium growth across its Specialty, Commercial and International segments.
Net investment income should gain from fixed-income securities and other investments as well as a rise in income from limited partnership and common stock investments. Fixed income continues to benefit from favorable reinvestment yields and strong operating cash flows. CNA Financial’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 has been able to maintain the underlying combined ratio below 95 for straight 13 quarters. Through targeted portfolio management strategies, the company made significant progress in successfully repositioning the portfolio underwritten via Lloyd’s syndicate in its effort to improve the overall underwriting results of its international operation.
The company has a solid balance sheet with capital remaining above the target levels required for all ratings and exited the second quarter of 2023 with $10.5 billion in statutory surplus. Cash flow from P&C underwriting activities and fixed-income investments remained very strong, reflecting continued excellent underwriting and fixed-income results.
Robust balance sheet and cash flows enable CNA Financial to engage in shareholder-friendly moves like dividend hikes. CNA’s quarterly dividend payment has witnessed a 10-year (2013-2023) CAGR of 7.7%. The current dividend yield of 4.3% is better than the industry average of 0.3%. On the back of strong underwriting results, CNA hiked its dividend over the past couple of years.
Stocks to Consider
Some better-ranked stocks from the property and casualty insurance industry are Arch Capital Group Ltd. ACGL, Axis Capital Holdings Limited AXS and Kinsale Capital Group, Inc. KNSL. While Arch Capital and Axis Capital sport a Zacks Rank #1 (Strong Buy) each, Kinsale Capital carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Arch Capital has a solid track record of beating earnings estimates in each of the last trailing four quarters, the average being 26.83%. In the past year, ACGL has gained 62.2%.
The Zacks Consensus Estimate for ACGL’s 2023 and 2024 earnings per share is pegged at $6.73 and $7.43, indicating a year-over-year increase of 38.1% and 10.4%, respectively.
Axis Capital has a solid track record of beating earnings estimates in three of the last four quarters and missing in one, the average being 9.75%. In the past year, AXS has gained 2.3%.
The Zacks Consensus Estimate for AXS’ 2023 and 2024 earnings per share is pegged at $8.41 and $9.31, indicating a year-over-year increase of 44.7% and 10.7%, respectively.
Kinsale Capital beat estimates in each of the last four quarters, the average being 14.88%. In the past year, KNSL has rallied 43.4%.
The Zacks Consensus Estimate for 2023 and 2024 has moved 8.5% and 7.8% north, respectively, in the past 30 days, reflecting analysts’ optimism.
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Free: See Our Top Stock and 4 Runners Up >>Axis Capital Holdings Limited (AXS) : Free Stock Analysis Report
CNA Financial Corporation (CNA) : Free Stock Analysis Report
Arch Capital Group Ltd. (ACGL) : Free Stock Analysis Report
Kinsale Capital Group, Inc. (KNSL) : Free Stock Analysis Report
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