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CNA Financial (CNA) Down 3.6% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for CNA Financial (CNA - Free Report) . Shares have lost about 3.6% 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 its most recent earnings report in order to get a better handle on the important catalysts.

CNA Financial Q2 Earnings Top & Up Y/Y, Premiums Rise

CNA Financial Corporation reported second-quarter 2018 core income of 99 cents per share, beating the Zacks Consensus Estimate by 3.1%. Also, the bottom line improved 12.5% from the year-ago quarter.

Apart from displaying considerable growth in core income, CNA Financial’s first half core income of $2.02 per share marked the highest first-half result for the company in over a decade. Also, the company’s first half underlying combined ratio showed a substantial improvement that will lend an impetus to the company in delivering continued top quartile underwriting results.

This apart, the quarter witnessed improved premiums across its Commercial and International segments.  

Including net realized investment gains, net income of 99 cents per share slipped 1% year over year.

Behind Second-Quarter Headlines

Net investment income grew nearly 21% year over year to $416 million owing to higher limited partnership returns and a lower tax rate.

Net written premiums at Property & Casualty Operations increased 3.9% year over year to $1.8 billion. Core income improved 22.2% year over year to $319 million. Combined ratio deteriorated 30 basis points (bps) on a year-over-year basis to 93.8%.

As of Jun 30, 2018, book value (excluding AOCI) was $44.29 per share, down 1.6% from the level on Dec 31, 2017.

Segment Results

Specialty net written premiums slid 1.9% year over year to $688 million due to higher level of ceded reinsurance and lower retention. However, increase in new business and a positive renewal change partially offset this downside. Combined ratio improved 350 bps to 86.8%.

Commercial net written premiums rose 3.6% year over year to $810 million owing to positive renewal change and higher level of new business. Combined ratio improved 460 bps to 96.6%.

International net written premiums increased 23.7% year over year to $271 million, fueled by higher new business and a positive renewal premium change. Combined ratio deteriorated 460 bps to 104.7%.

Life & Group Non-Core total operating revenues dipped 0.3% year over year to $329 million. Core loss of $10 million compared unfavorably with the core income of $5 million in the year-ago quarter.

Corporate & Other Non-Core core loss of $39 million was noticeably wider than the loss of $27 million in the prior-year period.
 
Dividend Update


The board of directors of CNA Financial approved a 17% hike in its quarterly dividend amounting to 35 cents per share, payable Aug 29 to stockholders of record as of Aug 13, 2018.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

Currently, CNA Financial has a poor Growth Score of F, however its Momentum Score is doing a lot 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 C. 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 broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Interestingly, CNA Financial has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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