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CNA Financial (CNA) Down 10.2% Since Last Earnings Report: Can It Rebound?

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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 10.2% 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 & Revenues Top, Rise Y/Y

CNA Financial reported third-quarter 2021 core earnings of 87 cents per share, which beat the Zacks Consensus Estimate by 50%. The bottom line increased 22.5% year over year.

The quarterly performance reflects double-digit gross written premium growth across P&C business segments, rate increase, excellent new business growth of 24%, and favorable life and group results.

Behind Third-Quarter Headlines

Total operating revenues of CNA Financial were nearly $2.6 billion, up 4.2% year over year on the back of higher premiums earned. The top line beat the Zacks Consensus Estimate by 0.7%.

Net written premiums at Property & Casualty Operations increased 5% year over year to $1.9 billion.

Pretax net investment income decreased 0.8% year over year to $513 million.

Total claims, benefits and expenses increased 3% to $2.6 billion, primarily due to lower insurance claims and policyholders' benefits, amortization of deferred acquisition costs, non-insurance warranty expense and other operating expenses.

Catastrophe losses of $178 million pretax widened from $160 million loss incurred in the year- ago quarter, largely attributable to Hurricane Ida.

The combined ratio improved 900 basis points (bps) year over year to 100.

Book value as of Sep 30, 2021 was $46.67 per share, down 0.3% from Dec 31, 2020.

The core return on equity was 7.7%, up 100 bps.

Segment Results

Specialty’s net written premiums rose 3% year over year to $822 million. The combined ratio improved 130 bps to 88.2 due to favorable net prior period development.

Commercial’s net written premiums increased 3% year over year to $831 million. The combined ratio deteriorated 30 bps to 111.6 due to higher catastrophe losses.

International’s net written premiums increased 15% year over year to $256 million. The combined ratio improved 260 bps to 95.5 due to higher catastrophe losses and unfavorable net prior period development.

Life & Group’s total operating revenues were $362 million, up 8.1% year over year. Core income of $41 million rebounded from the year-ago loss of $35 million, reflecting favorable impact from the reduction in long-term care claim reserves, resulting from the annual claim reserve review.

Corporate & Other’s core loss of $21 million was wider than the year-ago loss of $8 million due to lower net investment income.

Dividend Update

CNA Financial’s board of directors approved a quarterly dividend of 38 cents to be paid out on Dec 2, 2021 to stockholders of record as of Nov 15.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.

VGM Scores

At this time, CNA Financial has an average Growth Score of C, a grade with the same score on the momentum front. 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

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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