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CNA Financial (CNA) Up 1.2% Since Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for CNA Financial Corporation (CNA - Free Report) . Shares have added about 1.2% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is CNA 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 (CNA - Free Report) Q4 Earnings Beat Estimates, Increase Y/Y

CNA Financial reported fourth-quarter 2017 core income of $1.05 per share, beating the Zacks Consensus Estimate by 28%. Also, the bottom line improved 28% from the year-ago quarter’s level.

Despite being the costliest year in terms of catastrophe loss, CNA Financial delivered a significant amount of core income that marked the highest level in almost a decade. Also, the figure was 12% higher than the same in 2016.

Moreover, the quarter witnessed improved premiums across its segments — Commercial and International.

Including net realized investment gains and net deferred tax asset remeasurement, net income of 82 cents per share declined 7.9% year over year.

Full-Year Highlights

For 2017, CNA Financial reported core income per share of $3.38, surpassing the consensus mark by 4.9% and also improving 11.2% year over year.

Behind Fourth-Quarter Headlines

Net investment income declined about 3.4% year over year to $366 million due to decrease in fixed income securities and limited partnership returns in the quarter.

Net written premiums at Property & Casualty Operations improved 4.9% year over year to $1.6 billion. Core income jumped about 21.2% year over year to $263 million, driven by higher favorable net prior-period loss reserve development and improved current accident year underwriting results. Combined ratio improved 590 basis points (bps) on a year-over-year basis to 94%.

As of Dec 31, 2017, book value (excluding AOCI) was $45.02 per share, up 0.3% from Dec 31, 2016.

Segment Results

Specialty net written premiums dipped 0.1% year over year to $671million. Combined ratio deteriorated 400 bps to 89.6%.

Commercial net written premiums rose 6.6% year over year to $713 million, driven by higher new business within the Middle Markets as well as a positive renewal change. Retention came in at 86% in the quarter under review. Combined ratio deteriorated 2060 bps to 97.4%.

International net written premiums increased 17.9% year over year to $217 million, fueled by higher new business, retention and renewal premium change. Combined ratio deteriorated 1060 bps to 96.7%.

Life & Group Non-Core operating revenues slipped 0.9% year over year to $331 million. Core income soared 55% year over year to $31 million owing to higher release of long-term care claim reserves from the prior-year quarter.
 
Corporate & Other Non-Core core loss of $8 million was considerably narrower than the loss of $16 million in the year-ago quarter. A release of unallocated loss adjustment expense reserves in the reported quarter led to the improvement.

Dividend Update

The board of directors of CNA Financial announced a dividend of 30 cents per share and a special dividend of $2 during the reported quarter. Both dividends will be paid on Mar 14 to stockholders of record as of Feb 26, 2018.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There has been one revision higher for the current quarter.

CNA Financial Corporation Price and Consensus

VGM Scores

At this time, CNA has a subpar Growth Score of D, however its Momentum is doing a bit better with a C. Charting a somewhat similar path, 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for value investors than momentum investors.

Outlook

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




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