Why Is CNA Financial Up 3.3% Since Last Earnings Report?

A month has gone by since the last earnings report for CNA Financial CNA. Shares have added about 3.3% in that time frame, underperforming 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 the most recent earnings report in order to get a better handle on the important catalysts.

CNA Financial Q2 Earnings Miss, Revenues Rise Y/Y
CNA Financial Corporation reported second-quarter 2024 core earnings of $1.19 per share, which missed the Zacks Consensus Estimate by 1.6%. However, the bottom line increased 5.3% year over year. The quarterly results of CNA reflected higher income from fixed income securities, larger invested asset base, improved retention and renewal premium change, partly offset by poor underwriting income and escalating expenses.

Behind Second-Quarter Headlines

Total operating revenues of CNA Financial were $3.1 billion, up 6.7% year over year due to higher premiums, net investment income and other revenues. The top line beat the Zacks Consensus Estimate by 1.3%. Net written premiums of Property & Casualty Operations increased 6% year over year to $2.6 billion, driven by retention of 85% and renewal premium change of 5% with a written rate of 4%.

Net investment income rose 7.4% year over year to $618 million. The increase was driven by higher income from fixed income securities as a result of favorable reinvestment rates and a larger invested asset base, as well as favorable limited partnership and common stock returns. Our estimate for net investment was $601.1 million. The Zacks Consensus Estimate was pegged at $592.3 million.

Total claims, benefits and expenses increased 7.3% to $2.6 billion, primarily due to higher insurance claims and policyholders' benefits, amortization of deferred acquisition costs, non-insurance warranty expense, other insurance related expenses and other expenses. Our estimate was $2.5 billion.

Catastrophe losses were $82 million, wider than a loss of $68 million in the year-ago quarter. Underwriting income declined 10.1% year over year to $124 million. Our estimate was $175.3 million. The combined ratio deteriorated 100 basis points (bps) year over year to 94.8. The Zacks Consensus Estimate was pegged at 93.6 while our estimate was 92.8.

Segment Results

Specialty's net written premiums increased 4% year over year to $857 million. Our estimate was $900 million. The combined ratio deteriorated 180 bps to 92.7. The Zacks Consensus Estimate was pegged at 85.1.

Commercial's net written premiums increased 10% year over year to $1.4 billion. Our estimate was $1.3 billion. The combined ratio deteriorated 70 bps to 97. The Zacks Consensus Estimate was pegged at 94.8.

International's net written premiums remained flat year over year at $359 million. Our estimate was $402.7 million. The combined ratio improved 30 bps to 91.9. The Zacks Consensus Estimate was pegged at 106.9.

Life & Group's net earned premiums were $109 million, down 3.5% year over year. Our estimate was $105.9 million. The core loss was $1 million, narrower than a loss of $20 million incurred in the year-ago quarter, primarily due to a reduced impact from long-term care policy buyouts and higher net investment income.

Corporate & Other's core loss of $53 million was wider than a loss of $46 million incurred in the year-earlier quarter.

Financial Update

The core return on equity expanded 40 bps to 10.6%. Book value, excluding AOCI, as of Jun 30 was $45.86 per share, down 1.1% from the 2023-end level. Statutory capital and surplus for the Combined Continental Casualty Companies increased 0.7% from the 2023-end level to $11 billion at quarter end. Net cash flow provided by operating activities increased 23% to $616 million in the quarter.

Dividend Update

CNA Financial's board of directors approved a quarterly dividend of 44 cents per share to be paid out on Aug 29 to shareholders as of Aug 12.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

The consensus estimate has shifted -6.02% due to these changes.

VGM Scores

At this time, CNA Financial has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, CNA Financial has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

CNA Financial belongs to the Zacks Insurance - Property and Casualty industry. Another stock from the same industry, Kinsale Capital Group, Inc. KNSL, has gained 5.6% over the past month. More than a month has passed since the company reported results for the quarter ended June 2024.

Kinsale Capital Group reported revenues of $384.55 million in the last reported quarter, representing a year-over-year change of +30%. EPS of $3.75 for the same period compares with $2.88 a year ago.

For the current quarter, Kinsale Capital Group is expected to post earnings of $3.73 per share, indicating a change of +12.7% from the year-ago quarter. The Zacks Consensus Estimate has changed -1.4% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Kinsale Capital Group. Also, the stock has a VGM Score of C.

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