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CNA Financial (CNA) Down 8.2% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for CNA Financial (CNA - Free Report) . Shares have lost about 8.2% 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 drivers.

CNA Financial Beats on Q4 Earnings, Hikes Dividend

CNA Financial Corporation delivered fourth-quarter 2021 core earnings of 97 cents per share, which surpassed the Zacks Consensus Estimate by 2.1%. The bottom line declined 21.1% year over year.

The quarterly results benefited from higher gross written premiums in Property & Casualty (P&C) business driven by 8% rate improvements and new business growth of 28%. Better underwriting results contributed to the upside. However, the improvement was partly offset by continued incidence of catastrophe losses and escalating expenses.

Behind Q4 Headlines

CNA Financial’s operating revenues amounted to $2.7 billion, which rose 5.4% year over year driven by higher net earned premiums. The top line outpaced the Zacks Consensus Estimate by 4%.

Net written premiums at Property & Casualty Operations climbed 11% year over year to $2.2 billion in the fourth quarter. Pretax net investment income of $551 million dipped 0.7% year over year.

Total claims, benefits and expenses escalated 11% year over year to $2.7 billion in the quarter under review. The increase was due to higher insurance claims and policyholders' benefits, non-insurance warranty expense and other operating expenses.

Net catastrophe losses totaled $40 million (pretax), which increased to nearly three-fold year over year. Combined ratio improved 50 basis points (bps) year over year to 92.9. In the reported quarter, CNA Financial seems to have attained the lowest quarterly combined ratio over the past five years.

Segment Results

Specialty’s net written premiums amounted to $875 million, which grew 8% year over year. The combined ratio deteriorated 50 bps to 89.9 in the fourth quarter.

Commercial’s net written premiums improved 13% year over year to $973 million. The combined ratio improved 90 bps year over year to 94.9 on the back of favorable net prior period development.

International’s net written premiums of $318 million advanced 13% year over year. The combined ratio improved 210 bps year over year to 94.8.

Life & Group’s total operating revenues rose 3.4% year over year to $365 million in the fourth quarter. Core income of $6 million declined more than four-fold year over year due to unfavorable morbidity.

Corporate & Other’s core loss of $94 million was wider than the prior-year quarter’s loss of $49 million due to lower net investment income coupled with an after-tax impact arising from unfavorable development.

Financial Update

CNA Financial exited the fourth quarter with total assets of $66.6 billion, which increased 4.1% from the 2020-end level. Debt amounted to $2.8 billion, which remained flat year over year. Total stockholders’ equity came in at $12.8 billion as of Dec 31, 2021, up 0.8% from the figure at 2020 end. The core return on equity was 8.5%, down 290 bps year over year.

Dividend Update

CNA Financial’s board of directors approved a 5% hike in quarterly dividend. With this, the dividend payout now stands at 40 cents per share compared with the prior payout of 38 cents. Simultaneously, CNA announced a special dividend of $2 per share. Both the increased dividend and special dividend will be paid on Mar 10, 2022 to shareholders of record as on Feb 22.

Full-Year Highlights

In 2021, core income of $4.06 per share beat the Zacks Consensus Estimate of $4.03. The bottom line surged 50.4% year over year. Total revenues grew 10% year over year to $11.9 billion and outpaced the consensus mark of $4.03 billion.

Combined ratio improved 390 bps year over year to 96.2, which similar to the quarterly trend, reached the lowest figure in the last five years. Net cash provided by operating activities amounted to $2 billion, up 12.5% from the 2020-end level.

As of Dec 31, 2021, book value per share came in at $47.20 per share. The metric inched up 0.8% year over year. Core return on equity was 9.1%, which improved 300 bps from the 2020 figure.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.

VGM Scores

At this time, CNA Financial has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.


CNA Financial has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

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