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CNA Financial (CNA) Up 0.8% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for CNA Financial (CNA - Free Report) . Shares have added about 0.8% 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 drivers.

CNA Financial Q2 Earnings & Revenues Beat Estimates

CNA Financial Corporation reported second-quarter 2021 core earnings of $1.25 per share, which beat the Zacks Consensus Estimate by 11.6%. Moreover, the bottom line increased more than three-fold year over year.

The quarterly performance was driven by higher net investment income, lower catastrophe losses, improved loss ratio as well as lower expenses.

Behind Second-Quarter Headlines

Total operating revenues of CNA Financial were nearly $2.6 billion, up 10.2% year over year on the back of higher net investment income and premiums earned. The top line beat the Zacks Consensus Estimate by 3.9%.

Net written premiums at Property & Casualty Operations decreased 1.1% year over year to $1.9 billion.

Pretax net investment income increased 10.7% year over year to $591 million driven by limited partnership and common stock investments.

Total claims, benefits and expenses decreased 0.6% to $2.6 billion, primarily due to lower insurance claims and policyholders' benefits and interest.

Catastrophe losses of $54 million pretax, due to severe weather-related events, decreased 82% year over year. Combined ratio improved 1520 basis points year over year to 94%. Book value as of Jun 30, 2021 was $46.69 per share, down 0.3% from Dec 31, 2020. Core return on equity was 11.3%, up 790 basis points (bps).

Segment Results

Specialty’s net written premiums rose nearly 5.9% year over year to $786 million. Combined ratio improved 1630 bps to 87.9% due to lower catastrophe losses and improved loss ratio.

Commercial’s net written premiums decreased 12.4% year over year to $831 million. Combined ratio improved 1230 bps to 99.6% due to lower catastrophe losses and improved loss ratio.

International’s net written premiums increased 22% year over year to $292 million. Combined ratio improved 2230 bps to 93% due to lower catastrophe losses and improved loss ratio.

Life & Group’s total operating revenues were $390 million, up 17.5% year over year. Core income of $43 million increased three-fold year over year due to higher net investment income, which was driven by returns in the limited partnership portfolio and better than expected morbidity in the long-term care business. It was partially offset by unfavorable persistency.

Corporate & Other’s core loss of $53 million was wider than the year-ago loss of $40 million. The higher losses were due to lower allocated net investment income.

Dividend Update

CNA Financial’s board of directors approved a quarterly dividend of 38 cents to be paid out on Sep 2, 2021 to stockholders of record as of Aug 16.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

VGM Scores

At this time, CNA Financial has a subpar Growth Score of D, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise CNA Financial has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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