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Why Is CNA Financial (CNA) Down 0.5% Since Last Earnings Report?

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A month has gone by since the last earnings report for CNA Financial (CNA - Free Report) . Shares have lost about 0.5% in that time frame, underperforming 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 In Line, Premiums Rise Y/Y

CNA Financial reported second-quarter 2020 core earnings of 36 cents per share, which matched the Zacks Consensus Estimate. The bottom line decreased 66.7% year over year.
 
The quarterly results suffered substantially from catastrophe losses attributable to COVID-19, civil unrest and weather-related events.  Nonetheless, the company benefited from accelerating P&C rate momentum and stable new business.

Behind Second-Quarter Headlines

Net written premiums at Property & Casualty Operations improved about 3% year over year to $1.9 billion driven by rate increase and higher new business.

Net investment income increased 6.9% year over year to $324 million driven by limited partnership and common stock investments.

Catastrophe losses of $301 million pretax, including $182 million related to COVID-19, $61 million related to civil unrest and $58 million primarily related to severe weather-related events.

Combined ratio deteriorated 1660 basis points year over year to 112.3%.

Book value as of Jun 30, 2020 was $42.91 per share, down 4.6% from Dec 31, 2019.

Core return on equity was 3.4%, down 650 basis points (bps).

Segment Results

Specialty’s net written premiums rose nearly 4% year over year to $742 million, driven by solid rate.  Combined ratio deteriorated 1350 bps to 104.2%.

Commercial’s net written premiums increased 4% year over year to $949 million, driven by higher new business and favorable rate. Combined ratio deteriorated 1880 bps to 118.5%.

International’s net written premiums declined 4% year over year to $239 million, attributable to continued impact of the strategic exit from certain Lloyd's business classes, offset by growth in Europe. Combined ratio deteriorated 1780 bps to 115.3%.

Life & Group’s total operating revenues were $332 million, down 0.9% year over year. Core income of $14 million doubled year over year driven by better-than-expected persistency.

Corporate & Other’s core loss of $11 million was flat year over year.

Dividend Update

CNA Financial’s board of directors approved a quarterly dividend of 35 cents to be paid out on Sep 3, 2020 to stockholders of record as of Aug 17.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -38.5% due to these changes.

VGM Scores

At this time, CNA Financial has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, 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 C. 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 this revision 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.


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