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Why Is CNA Financial (CNA) Down 0.9% Since Last Earnings Report?

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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 0.9% 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 Q3 Earnings Beat Estimates, Down Y/Y

CNA Financial Corporation’s third-quarter 2019 core earnings of $1.16 per share,  beat the Zacks Consensus Estimate by 11.5%. However, the bottom line decreased 0.8% year over year.
 
The improvement stemmed from improved net written premiums, increase in new business and favorable rate.

Behind Third-Quarter Headlines

Net written premiums at Property & Casualty Operations improved 8% year over year to $1.7 billion driven by rate increase and higher new business.

Net investment income almost remained unchanged year over year at $399 million.

Combined ratio deteriorated 340 basis points year over year to 97.6%.

Book value as of Sep 30, 2019 was $44.66 per share, up 8.1% from Dec 31, 2018.

Core return on equity was 3.4%, down 710 basis points.

Segment Results

Specialty’s net written premiums rose nearly 6% year over year to $732 million, driven by strong retention and favorable rate. Combined ratio deteriorated 280 bps to 89.8%.

Commercial’s net written premiums increased 11% year over year to $775 million, driven by higher new business and favorable rate. Combined ratio deteriorated 420 bps to 101.6%.

International’s net written premiums increased 3% year over year to $201 million driven by change in the timing of ceded reinsurance contract renewals. Combined ratio deteriorated 350 bps to 107.4%.

Life & Group’s total operating revenues were $336 million, up 1.2% year over year. Core loss was $122 million against the year-ago income of $32 million.

Corporate & Other’s core loss of $17 million was narrower than loss of $20 million incurred in the prior-year period.
 
Dividend Update

CNA Financial’s board of directors approved a quarterly dividend of 35 cents to be paid out on Dec 2, 2019 to stockholders of record as of Nov 11.
 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

VGM Scores

Currently, CNA Financial has a subpar Growth Score of D, however its Momentum Score 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 top 40% 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.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, 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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