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CNA Financial Banks on High Premiums, Strong Capital Position
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CNA Financial Corporation (CNA - Free Report) is currently riding on strong net written premiums attributable to its strong Property & Casualty (P&C) business plus a robust capital position.
The company has an impressive surprise history. CNA Financial surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being 9.4%. The Zacks Consensus Estimate for current-quarter earnings has been revised 7.3% upward in the past 60 days.
What’s Driving CNA Financial?
The Zacks Rank #1 (Strong Buy) P&C insurer reports results under three core segments — Specialty, Commercial and International. It continues to benefit from higher premium growth across the company’s Specialty and Commercial segments. Both segments accounted for 46.5% and nearly 40% of CNA Financial’s total net written premiums in 2019, respectively. While net written premiums in the Commercial segment improved 8.3% in 2019, the same metric moved up 3.8% in the Specialty segment in the same time frame.
CNA Financial also rides on improved net investment income, attributable to common stock investments and higher limited partnership returns. In 2019, net investment income, after tax, increased 15.1% year over year. The insurer has also been able to maintain its combined ratio at favorable levels, even under the toughest operating environment, which is praiseworthy. This reflects the company’s strength in underwriting profitability. Combined ratio in its International and Commercial segments improved 470 basis points (bps) and 30 bps, respectively, in 2019.
On strong capital position, CNA Financial believes in returning value to shareholders in forms of dividend hikes and special dividend payments. Its dividend payments have witnessed a CAGR of nearly 7% over the past five years (2014-2019). Apart from paying a special dividend of $2 per share last month, the company raised its quarterly dividend payment by 5.7% to 37 cents. Its dividend yield of 4.2% also lies above the industry average of 0.5%, making CNA Financial an attractive stock for yield-seeking investors.
Notably, its return on equity was 10% in the trailing 12 months, higher than the industry average of 6.4%. Return on equity is a profitability measure that identifies a company’s efficiency in utilizing its shareholders’ funds.
However, due to headwinds like elevated expenses, shares of the insurer have lost 19.5% in a year compared with the industry’s decline of 7.5%.
Nevertheless, we believe that the company’s strong fundamentals are likely to retain its existing momentum in the long run.
Other Stocks to Consider
Some other top-ranked stocks in the same space are American Financial Group, Inc. (AFG - Free Report) , First American Financial Corporation (FAF - Free Report) , and RLI Corp. (RLI - Free Report) . While First American Financial currently sports a Zacks Rank #1, American Financial and RLI carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
All three companies surpassed estimates in the last reported quarter by 0.45%, 33.33% and 28.57%, respectively.
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CNA Financial Banks on High Premiums, Strong Capital Position
CNA Financial Corporation (CNA - Free Report) is currently riding on strong net written premiums attributable to its strong Property & Casualty (P&C) business plus a robust capital position.
The company has an impressive surprise history. CNA Financial surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being 9.4%. The Zacks Consensus Estimate for current-quarter earnings has been revised 7.3% upward in the past 60 days.
What’s Driving CNA Financial?
The Zacks Rank #1 (Strong Buy) P&C insurer reports results under three core segments — Specialty, Commercial and International. It continues to benefit from higher premium growth across the company’s Specialty and Commercial segments. Both segments accounted for 46.5% and nearly 40% of CNA Financial’s total net written premiums in 2019, respectively. While net written premiums in the Commercial segment improved 8.3% in 2019, the same metric moved up 3.8% in the Specialty segment in the same time frame.
CNA Financial also rides on improved net investment income, attributable to common stock investments and higher limited partnership returns. In 2019, net investment income, after tax, increased 15.1% year over year. The insurer has also been able to maintain its combined ratio at favorable levels, even under the toughest operating environment, which is praiseworthy. This reflects the company’s strength in underwriting profitability. Combined ratio in its International and Commercial segments improved 470 basis points (bps) and 30 bps, respectively, in 2019.
On strong capital position, CNA Financial believes in returning value to shareholders in forms of dividend hikes and special dividend payments. Its dividend payments have witnessed a CAGR of nearly 7% over the past five years (2014-2019). Apart from paying a special dividend of $2 per share last month, the company raised its quarterly dividend payment by 5.7% to 37 cents. Its dividend yield of 4.2% also lies above the industry average of 0.5%, making CNA Financial an attractive stock for yield-seeking investors.
Notably, its return on equity was 10% in the trailing 12 months, higher than the industry average of 6.4%. Return on equity is a profitability measure that identifies a company’s efficiency in utilizing its shareholders’ funds.
However, due to headwinds like elevated expenses, shares of the insurer have lost 19.5% in a year compared with the industry’s decline of 7.5%.
Nevertheless, we believe that the company’s strong fundamentals are likely to retain its existing momentum in the long run.
Other Stocks to Consider
Some other top-ranked stocks in the same space are American Financial Group, Inc. (AFG - Free Report) , First American Financial Corporation (FAF - Free Report) , and RLI Corp. (RLI - Free Report) . While First American Financial currently sports a Zacks Rank #1, American Financial and RLI carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
All three companies surpassed estimates in the last reported quarter by 0.45%, 33.33% and 28.57%, respectively.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
See their latest picks free >>