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Here's Why Investors Should Retain CNA Financial (CNA) Stock
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CNA Financial Corporation (CNA - Free Report) is well-poised for growth, driven by higher new businesses, strong rate and higher net earned premiums as well as effective capital deployment.
Growth Projections
The Zacks Consensus Estimate for 2021 and 2022 earnings per share is pegged at $3.95 and $4.28, indicating growth of 46.3% and 8.2%, respectively, from the year-ago reported figures. The expected long-term earnings growth rate is pegged at 5%.
Estimate Revision
Estimates for 2021 and 2022 have moved up 1.8% and 0.7%, respectively, in the past 60 days, which reflects investors’ optimism.
Earnings Surprise History
CNA Financial has a decent earnings surprise history. It beat estimates in each of the last four quarters, the average being 10.81%.
Zacks Rank & Price Performance
CNA Financial currently carries a Zacks Rank #3 (Hold). In the past year, the stock has rallied 40.1% compared with the industry’s growth of 21.7%.
Image Source: Zacks Investment Research
Return on Equity (ROE)
The company’s ROE for the trailing 12 months is 9.1%, better than the industry average of 5.7%, reflecting the company’s efficiency in utilizing shareholders’ funds.
Business Tailwinds
CNA Financial remains well-poised to gain from higher new businesses, strong rate, lower net catastrophe losses, improved non-catastrophe current accident year underwriting results, higher net earned premium, which continue to contribute to premium growth across its Specialty, Commercial and International segments.
By the virtue of strong investment income and lower level of catastrophe losses, earnings of the property and casualty insurer are likely to improve in the long run.
The combined ratio has been improving largely due to lower net catastrophe losses as well as higher underlying underwriting profit.
While the expense ratio should continue to gain from higher net earned premiums, lower acquisition costs and a favorable acquisition ratio; the loss ratio should benefit from improved non-catastrophe current accident year underwriting results and lower net catastrophe losses.
Given higher income from limited partnerships, investment income is expected to improve despite the current low interest rate environment. The strong limited partnership returns across both P&C and life and group segments were significantly driven by private equity investments.
The insurer maintains liquidity in the forms of cash and short-term investments, and has sufficient liquidity holdings to meet obligations and withstand significant business variability. Riding on improved current accident year underwriting profitability and a lower level of paid losses, operating cash flow continues to remain strong.
Courtesy of solid financial strength, the insurer engages in capital deployment to enhance its shareholders’ value. Notably, its dividend payments have witnessed a CAGR of 24.1% in the past seven years (2014-2021) and currently yield 3.6%, which is better than the industry average of 0.4%. This makes the stock an attractive pick for yield-seeking investors.
The bottom line of American Financial surpassed estimates in each of the last four quarters, the average being 52.82%.
Everest Re surpassed estimates in two of the last four quarters and missed in the other two, the average earnings surprise being 20.33%.
Cincinnati Financial’s earnings surpassed estimates in three of the last four quarters and missed the mark on the remaining occasion, the average surprise being 36.01%.
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Here's Why Investors Should Retain CNA Financial (CNA) Stock
CNA Financial Corporation (CNA - Free Report) is well-poised for growth, driven by higher new businesses, strong rate and higher net earned premiums as well as effective capital deployment.
Growth Projections
The Zacks Consensus Estimate for 2021 and 2022 earnings per share is pegged at $3.95 and $4.28, indicating growth of 46.3% and 8.2%, respectively, from the year-ago reported figures. The expected long-term earnings growth rate is pegged at 5%.
Estimate Revision
Estimates for 2021 and 2022 have moved up 1.8% and 0.7%, respectively, in the past 60 days, which reflects investors’ optimism.
Earnings Surprise History
CNA Financial has a decent earnings surprise history. It beat estimates in each of the last four quarters, the average being 10.81%.
Zacks Rank & Price Performance
CNA Financial currently carries a Zacks Rank #3 (Hold). In the past year, the stock has rallied 40.1% compared with the industry’s growth of 21.7%.
Image Source: Zacks Investment Research
Return on Equity (ROE)
The company’s ROE for the trailing 12 months is 9.1%, better than the industry average of 5.7%, reflecting the company’s efficiency in utilizing shareholders’ funds.
Business Tailwinds
CNA Financial remains well-poised to gain from higher new businesses, strong rate, lower net catastrophe losses, improved non-catastrophe current accident year underwriting results, higher net earned premium, which continue to contribute to premium growth across its Specialty, Commercial and International segments.
By the virtue of strong investment income and lower level of catastrophe losses, earnings of the property and casualty insurer are likely to improve in the long run.
The combined ratio has been improving largely due to lower net catastrophe losses as well as higher underlying underwriting profit.
While the expense ratio should continue to gain from higher net earned premiums, lower acquisition costs and a favorable acquisition ratio; the loss ratio should benefit from improved non-catastrophe current accident year underwriting results and lower net catastrophe losses.
Given higher income from limited partnerships, investment income is expected to improve despite the current low interest rate environment. The strong limited partnership returns across both P&C and life and group segments were significantly driven by private equity investments.
The insurer maintains liquidity in the forms of cash and short-term investments, and has sufficient liquidity holdings to meet obligations and withstand significant business variability. Riding on improved current accident year underwriting profitability and a lower level of paid losses, operating cash flow continues to remain strong.
Courtesy of solid financial strength, the insurer engages in capital deployment to enhance its shareholders’ value. Notably, its dividend payments have witnessed a CAGR of 24.1% in the past seven years (2014-2021) and currently yield 3.6%, which is better than the industry average of 0.4%. This makes the stock an attractive pick for yield-seeking investors.
Stocks to Consider
Some better-ranked players in the property and casualty industry are American Financial Group, Inc. (AFG - Free Report) , Everest Re Group, Ltd. and Cincinnati Financial Corporation (CINF - Free Report) , each currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The bottom line of American Financial surpassed estimates in each of the last four quarters, the average being 52.82%.
Everest Re surpassed estimates in two of the last four quarters and missed in the other two, the average earnings surprise being 20.33%.
Cincinnati Financial’s earnings surpassed estimates in three of the last four quarters and missed the mark on the remaining occasion, the average surprise being 36.01%.