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Should You Retain CNA Financial (CNA) Stock in Your Portfolio?

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·4-min read
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CNA Financial Corporation CNA has been gaining momentum on the back of higher new business and rate increases, growth in invested asset base and sufficient liquidity

Optimistic Growth Projections

The consensus estimate for 2023 earnings is pegged at $4.43, indicating a 9.2% increase from the year-ago reported figure on 6.6% higher revenues of $11.2 billion. The expected long-term earnings growth rate is pegged at 5%.

Earnings Surprise History

CNA Financial has a solid track record of beating earnings estimates in six of the last seven quarters.

Zacks Rank & Price Performance

CNA Financial currently carries a Zacks Rank #3 (Hold). In the past year, the stock has lost 7.4% compared with the industry’s decline of 2.7%.

Zacks Investment Research
Zacks Investment Research


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Return on Equity (ROE)

CNA Financial’s ROE for the trailing 12 months is 9.5%, expanding 220 basis points year over year. This compares favorably with the industry average of 5.7%. ROE reflects the insurer’s efficiency in using shareholders’ funds.

Style Score

CNA Financial has a favorable VGM Score of B. VGM Score helps identify stocks with the most attractive value, best growth and the most promising momentum.

Business Tailwinds

Higher new business and rate increases, improved current accident year underwriting results and higher net earned premiums are expected to drive the Specialty segment.

The Commercial segment stands to gain from higher rate and retention, lower catastrophe losses, higher net earned premiums as well as lower acquisition costs.

The International segment should continue to gain from higher rate, improved current accident year underwriting results, lower acquisition costs and higher net earned premiums and improved current accident year underwriting results.

The fixed-income portfolio continues to provide consistent earnings. Returns in the limited partnership portfolio, common stock returns, improved current accident year underwriting results and growth in invested asset base should contribute to its net investment income.

A lower expense ratio as well as an underlying loss ratio is expected to improve the underlying combined ratio.

Sturdy Balance Sheet

CNA Financial maintains a conservative capital structure and continues to sustain capital above target levels in support of the ratings. Its first-quarter operating cash flow was solid owing to improved underwriting and investment results. CNA maintains liquidity in the form of cash and short-term investments, which together provide sufficient liquidity to meet financial obligations.

Impressive Dividend History

CNA Financial raised its dividend at a nine-year (2014-2022) CAGR of 28.6%. Its current dividend yield of 3.6% is better than the industry average of 0.4%. Also, in the first quarter of 2022, CNA declared a special dividend, which marked the eighth special dividend.

Stocks to Consider

Some better-ranked stocks from the property and casualty insurance sector are HCI Group, Inc. HCI, W.R. Berkley Corporation WRB and American Financial Group, Inc. AFG. While HCI Group and W.R. Berkley currently sport a Zacks Rank #1 (Strong Buy), American Financial carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for HCI Group’s 2022 and 2023 earnings has moved 33.3% and 40% north, respectively, in the past 30 days. In the past year, HCI Group stock has lost 13.7%.

The Zacks Consensus Estimate for 2022 and 2023 earnings per share indicates year-over-year increases of 280.9% and 75%, respectively.

W.R. Berkley’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 27.08%. In the past year, W.R. Berkley's stock has increased 26.6%.

The Zacks Consensus Estimate for WRB’s 2022 and 2023 earnings has moved 6.3% and 6.2% north, respectively, in the past 30 days.

American Financial’s earnings surpassed estimates in each of the last four quarters, the average beat being 41.72%. In the past year, American Financial has rallied 0.6%.

The Zacks Consensus Estimate for AFG’s 2022 and 2023 earnings has moved 9.8% and 6.9% north, respectively, in the past seven days.


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W.R. Berkley Corporation (WRB) : Free Stock Analysis Report
 
CNA Financial Corporation (CNA) : Free Stock Analysis Report
 
American Financial Group, Inc. (AFG) : Free Stock Analysis Report
 
HCI Group, Inc. (HCI) : Free Stock Analysis Report
 
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