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Analyst Blog

CNA Financial Corporation’s (CNA - Snapshot Report) fourth-quarter 2013 earnings of $1.24 per share far exceeded the Zacks Consensus Estimate of 85 cents per share.

Net premium written at CNA Financial increased 4.7% year over year to $1.7 billion, led by higher contribution from the Specialty and Hardy segments, partly offset by lower contribution from the Commercial line of business.  

CNA Financial's property & casualty operations' net operating income came in at $340 million, up 5.7 times year over year. This increase was primarily due to improved current accident year underwriting results, including lower catastrophe losses and higher net investment income.

Pretax net investment income came in at $642 million, up 14.0% year over year, led by higher income from limited partnership investments.

Full Year Highlights

For full year 2013 CNA Financial reported earnings per share of $3.85, up 76.7% year over year and also significantly ahead of the Zacks Consensus Estimate of $2.96 per share.

Segment Update

CNA Specialty reported net written premium of $754 million which rose 5.0% year over year led by increased rate. Net operating income increased 78.5% year over year due to improved underwriting results and higher net investment income.

CNA Commercial’s net written premium of $808 million fell 2.7% year over year driven by previous underwriting actions taken in certain business classes. Notwithstanding the decline in the top line, net operating results posted an operating profit of $100 million, rebounding from the operating loss of $44 million incurred in the year-ago quarter. The reversal came on the back of improved current accident year underwriting results and higher net investment income.

CNA Financial's another segment named Hardy reported net premium of $122 million which increased 2 times year over year. Net operating income came in at $8 million comparing favorably with an operating loss of $26 million in the year-ago quarter. The improvement was primarily attributable to improved underwriting result.

CNA Financial also announced the sale of its life insurance company to a subsidiary of Wilton Re. This transaction – once completed – will reduce the company’s Life & Group gross GAAP reserves by $3.4 billion or 25% and dispose off the vast majority of its payout annuity business, thus simplifying its operations. It is currently expected that the transaction will result in net proceeds of approximately $650 million inclusive of tax benefits.

Led by strong results, CNA Financial raised its quarterly dividend by 25% to 25 cents per share and also declared a special dividend of $1.00 per share. This marks the third consecutive year of dividend increase at the company.

Book value per share increased 4% in the fourth quarter to $46.91 per share.

CNA Financial retains a Zacks Rank #3 (Hold).

Better-ranked stocks like OneBeacon Insurance Group, Ltd. (OB - Snapshot Report), White Mountains Insurance Group, Ltd. (WTM - Snapshot Report), and RLI Corp. (RLI - Analyst Report), all with a Zacks Rank #1 (Strong Buy) are worth considering. All these companies have reported impressive earnings beats in their fourth-quarter results released recently.

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