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CNA Financial (CNA) Reinsures Excess Workers' Compensation

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CNA Financial Corporation’s (CNA - Free Report) subsidiary, Continental Casualty Company has inked a reinsurance deal with Cavello Bay Reinsurance Limited. Per the agreement with Cavello Bay, a subsidiary of Enstar Group Limited will reinsure a legacy portfolio of CNA Financial’s excess workers' compensation policies.

Effective Jan 1, 2020, this Zacks Rank #3 (Hold) property and casualty insurer will cede about $690 million of net excess workers compensation liabilities relating to business written in 2007 and prior under a retroactive reinsurance agreement with an aggregate limit of $1 billion.

However, CNA Financial estimates loss of about $12 million. Nonetheless, this transaction is a strategic move to focus more on its core property and casualty insurance business. A reinsurance agreement is a kind of reimbursement program for an insurance company. Programs such as these lower the financial exposure of the company. Thus, the company cedes insurance to reinsurers to limit its loss, provide greater diversification of risk, minimize exposure to larger risks and to exit certain lines of business.

CNA Financial remains committed to grow its property & casualty underwriting profits on a sustained basis. It has been able to maintain underlying combined ratio below 95% for six straight quarters. Moreover, leveraging targeted portfolio management strategies, the company made progress in repositioning the portfolio underwritten via Lloyd’s syndicate in its effort to improve overall underwriting results of its International operation.

Shares of CNA Financial have lost 14.2% compared with the industry’s decline of 2% year to date. Nonetheless, a compelling product portfolio, better retention, improving pricing, and new business growth should help the stock rebound.

Stocks to Consider

Some better-ranked companies from the same space are Alleghany (Y - Free Report) , American Financial Group (AFG - Free Report) and The Allstate Corporation (ALL - Free Report) .    

Alleghany delivered an earnings surprise of 195.85% in the last reported quarter. It sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

American Financial Group delivered an earnings surprise of 58.06% in the last reported quarter. It currently carries a Zacks Rank #2 (Buy).

Allstate delivered an earnings surprise of 66.10% in the last reported quarter. It currently carries a Zacks Rank #2.

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CNA Quick QuoteCNA - Free Report) %20subsidiary,%20Continental%20Casualty%20Company%20has%20inked%20a%20reinsurance%20deal%20with%20Cavello%20Bay%20Reinsurance%20Limited.%20Per%20the%20agreement%20with%20Cavello%20Bay,%20a%20subsidiary%20of%20Enstar%20Group%20Limited%20will%20reinsure%20a%20legacy%20portfolio%20of%20CNA%20Financial???s%20excess%20workers'%20compensation%20policies.%20%20Effective%20Jan%201,%202020,%20this%20Zacks%20Rank%20#3%20(Hold)%20property%20and%20casualty%20insurer%20will%20cede%20about%20%24690%20million%20of%20net%20excess%20workers%20compensation%20liabilities%20relating%20to%20business%20written%20in%202007%20and%20prior%20under%20a%20retroactive%20reinsurance%20agreement%20with%20an%20aggregate%20limit%20of%20%241%20billion.%20%20However,%20CNA%20Financial%20estimates%20loss%20of%20about%20%2412%20million.%20Nonetheless,%20this%20transaction%20is%20a%20strategic%20move%20to%20focus%20more%20on%20its%20core%20property%20and%20casualty%20insurance%20business.%20A%20reinsurance%20agreement%20is%20a%20kind%20of%20reimbursement%20program%20for%20an%20insurance%20company.%20Programs%20such%20as%20these%20lower%20the%20financial%20exposure%20of%20the%20company.%20Thus,%20the%20company%20cedes%20insurance%20to%20reinsurers%20to%20limit%20its%20loss,%20provide%20greater%20diversification%20of%20risk,%20minimize%20exposure%20to%20larger%20risks%20and%20to%20exit%20certain%20lines%20of%20business.%20%20CNA%20Financial%20remains%20committed%20to%20grow%20its%20property%20&%20casualty%20underwriting%20profits%20on%20a%20sustained%20basis.%20It%20has%20been%20able%20to%20maintain%20underlying%20combined%20ratio%20below%2095%%20for%20six%20straight%20quarters.%20Moreover,%20leveraging%20targeted%20portfolio%20management%20strategies,%20the%20company%20made%20progress%20in%20repositioning%20the%20portfolio%20underwritten%20via%20Lloyd???s%20syndicate%20in%20its%20effort%20to%20improve%20overall%20underwriting%20results%20of%20its%20International%20operation.%20%20Shares%20of%20CNA%20Financial%20have%20lost%2014.2%%20compared%20with%20the%20industry???s%20decline%20of%202%%20year%20to%20date.%20%20Nonetheless,%20a%20compelling%20product%20portfolio,%20better%20retention,%20improving%20pricing,%20and%20new%20business%20growth%20should%20help%20the%20stock%20rebound.%20%20Stocks%20to%20Consider%20%20Some%20better-ranked%20companies%20from%20the%20same%20space%20are%20Alleghany%20(Y - Free Report) ,%20The%20Hanover%20Insurance%20Group%20(THG)%20and%20The%20Allstate%20Corporation%20(ALL - Free Report) .%20%20Alleghany%20delivered%20an%20earnings%20surprise%20of%20195.85%%20in%20the%20last%20reported%20quarter.%20It%20sports%20a%20Zacks%20Rank%20#1%20at%20present.%20You%20can%20see%20the%20complete%20list%20of%20today???s%20Zacks%20#1%20Rank.%20%20The%20Hanover%20Insurance%20Group%20delivered%20an%20earnings%20surprise%20of%209.85%%20in%20the%20last%20reported%20quarter.%20It%20currently%20carries%20a%20Zacks%20Rank%20#2.%20%20Allstate%20delivered%20an%20earnings%20surprise%20of%2066.10%%20in%20the%20last%20reported%20quarter.%20It%20currently%20carries%20a%20Zacks%20Rank%20#2.%20%20Legal%20Marijuana:%20An%20Investor???s%20Dream%20%20Imagine%20getting%20in%20early%20on%20a%20young%20industry%20primed%20to%20skyrocket%20from%20%2417.7%20billion%20in%202019%20to%20an%20expected%20%2473.6%20billion%20by%202027.%20%20%20Although%20marijuana%20stocks%20did%20better%20as%20the%20pandemic%20took%20hold%20than%20the%20market%20as%20a%20whole,%20they???ve%20been%20pushed%20down.%20This%20is%20exactly%20the%20right%20time%20to%20get%20in%20on%20selected%20strong%20companies%20at%20a%20fraction%20of%20their%20value%20before%20COVID%20struck.%20Zacks???%20Special%20Report,%20Marijuana%20Moneymakers,%20reveals%2010%20exciting%20tickers%20for%20urgent%20consideration.%20%20%20Download%20Marijuana%20Moneymakers%20FREE%20>>">Download Marijuana Moneymakers FREE >>