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Should You Retain CNA Financial (CNA) Stock in Your Portfolio?

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CNA Financial Corporation (CNA - Free Report) is poised for growth on a rise in new businesses, strong rate, lower net catastrophe losses, favorable growth estimates and effective capital deployment.

Optimistic Growth Projections

The Zacks Consensus Estimate for CNA Financial’s 2022 earnings is pegged at $4.43, indicating a 9.1% increase from the year-ago reported figure on 3.9% higher revenues of $10.8 billion. The consensus estimate for 2023 earnings is pegged at $4.58, indicating a 3.4% increase from the year-ago reported figure on 5.5% higher revenues of $11.4 billion.

The expected long-term earnings growth rate is pegged at 5%.

Earnings Surprise History

CNA Financial has a solid track record of beating earnings estimates in the last six quarters.

Zacks Rank & Price Performance

CNA Financial currently carries a Zacks Rank #3 (Hold). In the past year, the stock has rallied 4.8% compared with the industry’s growth of 17.9%.

 

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Return on Equity (ROE)

CNA Financial’s ROE for the trailing 12 months is 8.8%, expanding 250 basis points year over year. This compares favorably with the industry average of 5.9%. ROE reflects the insurer’s efficiency in using shareholders’ funds.

Style Score

CNA Financial has a favorable VGM Score of B. VGM Score helps identify stocks with the most attractive value, best growth and the most promising momentum.

Business Tailwinds

CNA Financial remains well-poised to gain from a rise in new businesses, strong rate, lower net catastrophe losses, improved non-catastrophe current accident year underwriting results and higher net earned premium, which continue to contribute to premium growth across its Specialty, Commercial and International segments.

CNA expects written rate increases to remain above loss cost trends in 2022, leading to earned rates above loss cost trends for the third straight year.

In 2021, CNA Financial seemed to have attained the lowest quarterly combined ratio over the past five years. Improvement in the loss and expense ratios is likely to improve the combined ratio.

Both loss and expense ratios stand to benefit from lower net catastrophe losses, higher net earned premiums, lower acquisition costs and lower underwriting expenses and improved non-catastrophe current accident year underwriting results.

Sturdy Balance Sheet

CNA Financial has a conservative capital structure, with a level leverage ratio of 18%. The insurer continues to maintain capital above the target levels in support of the ratings. Currently, there are no amounts outstanding under the $250-million senior unsecured revolving credit facility and no outstanding borrowings through membership in the Federal Home Loan Bank of Chicago.

Impressive Dividend History

Based on operational excellence, CNA Financial’s dividend payments have witnessed a CAGR of 28.6% in the past nine years (2014-2022) and currently yield 3.3%, which is better than the industry average of 0.3%.

In addition to the increase in the regular quarterly dividend, CNA declared a special dividend in the first quarter of 2022, which marked eight special dividends. This makes the stock an attractive pick for yield-seeking investors.

Stocks to Consider

Some better-ranked stocks from the property and casualty insurance sector are Cincinnati Financial Corporation (CINF - Free Report) , United Fire Group, Inc. (UFCS - Free Report) and Kinsale Capital Group, Inc. (KNSL - Free Report) , each currently carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The bottom line of Cincinnati Financial surpassed earnings estimates in each of the last four quarters, the average being 38.48%. In the past year, the insurer has rallied 31.4%.

The Zacks Consensus Estimate for Cincinnati Financial’s 2022 and 2023 earnings has moved 5.7% and 5.5% north, respectively, in the past 60 days.

United Fire’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 275.45%. In the past year, the UFCS stock has declined 9.8%.

The Zacks Consensus Estimate for UFCS’ 2022 and 2023 earnings has moved 122.2% and 76.9% north, respectively, in the past 60 days.

Kinsale Capital’s earnings surpassed estimates in each of the last four quarters, the average beat being 32.04%. In the past year, Kinsale Capital has rallied 42.4%.

The Zacks Consensus Estimate for KNSL’s 2022 and 2023 earnings has moved 5.9% and 8.2% north, respectively, in the past 60 days.