A month has gone by since the last earnings report for CNA Financial (CNA). Shares have lost about 5.8% 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 Q1 Earnings Miss, Revenues Beat Estimates
CNA Financial Corporation reported first-quarter 2023 core earnings of $1.19 per share, which missed the Zacks Consensus Estimate by 0.8%. The bottom line however increased 2.6% year over year and our estimate of $1.04. The insurer’s results reflected solid top-line growth and strong underwriting profitability.
Behind First-Quarter Headlines
Total operating revenues of CNA Financial were $2.8 billion, up 10.6% year over year due to higher premiums and net investment income. The top line beat the Zacks Consensus Estimate by 0.9% and came in line with our estimate.
Net written premiums of Property & Casualty Operations improved 11% year over year to $2.2 billion, driven by a retention rate of 86% and renewal premium change of 7%.
Net investment income increased 17.2% year over year to $525 million, driven by an increase in income from fixed-income securities and other investments as well as an increase in income from limited partnership and common stock investments. Our estimate of $409.4 million.
Total claims, benefits and expenses decreased 2.8% to $2.8 billion, primarily due to Insurance claims and policyholders' benefits. Our estimate of $2.8 billion.
Catastrophe losses were $52 million, wider than losses of $19 million in the year-ago quarter. The combined ratio deteriorated 200 basis points (bps) year over year to 93.9.
Specialty’s net written premiums increased 2% year over year to $788 million. Our estimate was $781.3 million. The combined ratio deteriorated 130 bps to 90.
Commercial’s net written premiums increased 19% year over year to $1.2 billion. Our estimate was $1.1 billion. The combined ratio deteriorated 150 bps to 96.
International’s net written premiums increased 8% year over year to $271 million. Our estimate was $271.8 million. The combined ratio deteriorated 480 bps to 97.2.
Life & Group’s net earned premiums were $115 million, down 4.2% year over year. Our estimate was $116.7 million. The core loss was $3 million against $5 million earned in the year-ago quarter, primarily due to long-term care policy buyouts.
Corporate & Other’s core loss of $18 million was narrower than a loss of $28 million in the year-earlier quarter.
The core return on equity was 10.8%, up 110 bps. Book value excluding AOCI as of Mar 31 was $44.21 per share, down 1.8% from Dec 31, 2022. Statutory surplus decreased 0.9% from 2021 end to $10.5 billion at quarter end. Leverage improved 20 basis points to 24.3 at quarter end.
Net cash flows provided by operating activities dropped 32.5% to $436 million at quarter end.
CNA Financial’s board of directors approved a quarterly dividend of 42 cents per share to be paid out on Jun 1 to shareholders as of May 15.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
At this time, CNA Financial has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. 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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