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CNA Financial (CNA) Down 2.3% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for CNA Financial (CNA - Free Report) . Shares have lost about 2.3% in that time frame, outperforming 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 Q1 Earnings Beat Estimates
CNA Financial Corporation reported first-quarter 2019 core earnings of $1.17 per share, which beat the Zacks Consensus Estimate of $1.04. Also, the bottom line increased 13.6% year over year.
In the quarter, P&C segments generated modest gross premium growth. Premium rate increased across many major lines. Investment income rebounded favorably and long-term care generated positive core income.
Including net realized investment gain, net income was $1.25 per share, up from $1.07 in the year-ago quarter.
Behind First-Quarter Headlines
Net investment income improved 26.3% year over year to $360 million. Net written premiums at Property & Casualty Operations declined 0.4% year over year to $1.8 billion.
Combined ratio deteriorated 470 basis points year over year to 97.8%. Book value as of Mar 31, 2019 was $43.38 per share, down 2.6% from Dec 31, 2018.
Core return on equity was 10.7%, up 140 basis points (bps).
Segment Results
Specialty’s net written premiums rose nearly 2% year over year to $698 million, driven by strong retention, higher new business and positive renewal premium change. Combined ratio deteriorated 200 bps to 93.5%, attributable to 180 bps-point increase in expense ratio driven by an unusually low acquisition ratio in the first quarter of 2018 and lower earned premium.
Commercial’s net written premiums increased nearly 2% year over year to $849 million, driven by positive renewal premium change, partially offset by a higher level of ceded reinsurance. Combined ratio deteriorated 260 bps to 96.5%.
International’s net written premiums dropped nearly 12% year over year to $259 million. Combined ratio improved 200 bps to 94.1% due to improvement in underlying loss ratio, partially offset by a 90 bps-point increase in expense ratio due to higher acquisition costs.
Life & Group’s total operating revenues were $335 million, flat year over year. Core income of $10 million plunged 28.6% from the year-ago period.
Corporate & Other’s core loss of $6 million was substantially narrower than a loss of $60 million in the prior-year period.
Dividend Update
CNA Financial’s board of directors approved a quarterly dividend of 35 cents to be paid on May 30, 2019 to stockholders of record as of May 14, 2019.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
At this time, CNA Financial has an average Growth Score of C, a grade with the same score on the momentum front. 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise CNA Financial has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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CNA Financial (CNA) Down 2.3% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for CNA Financial (CNA - Free Report) . Shares have lost about 2.3% in that time frame, outperforming 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 Q1 Earnings Beat Estimates
CNA Financial Corporation reported first-quarter 2019 core earnings of $1.17 per share, which beat the Zacks Consensus Estimate of $1.04. Also, the bottom line increased 13.6% year over year.
In the quarter, P&C segments generated modest gross premium growth. Premium rate increased across many major lines. Investment income rebounded favorably and long-term care generated positive core income.
Including net realized investment gain, net income was $1.25 per share, up from $1.07 in the year-ago quarter.
Behind First-Quarter Headlines
Net investment income improved 26.3% year over year to $360 million.
Net written premiums at Property & Casualty Operations declined 0.4% year over year to $1.8 billion.
Combined ratio deteriorated 470 basis points year over year to 97.8%.
Book value as of Mar 31, 2019 was $43.38 per share, down 2.6% from Dec 31, 2018.
Core return on equity was 10.7%, up 140 basis points (bps).
Segment Results
Specialty’s net written premiums rose nearly 2% year over year to $698 million, driven by strong retention, higher new business and positive renewal premium change. Combined ratio deteriorated 200 bps to 93.5%, attributable to 180 bps-point increase in expense ratio driven by an unusually low acquisition ratio in the first quarter of 2018 and lower earned premium.
Commercial’s net written premiums increased nearly 2% year over year to $849 million, driven by positive renewal premium change, partially offset by a higher level of ceded reinsurance. Combined ratio deteriorated 260 bps to 96.5%.
International’s net written premiums dropped nearly 12% year over year to $259 million. Combined ratio improved 200 bps to 94.1% due to improvement in underlying loss ratio, partially offset by a 90 bps-point increase in expense ratio due to higher acquisition costs.
Life & Group’s total operating revenues were $335 million, flat year over year. Core income of $10 million plunged 28.6% from the year-ago period.
Corporate & Other’s core loss of $6 million was substantially narrower than a loss of $60 million in the prior-year period.
Dividend Update
CNA Financial’s board of directors approved a quarterly dividend of 35 cents to be paid on May 30, 2019 to stockholders of record as of May 14, 2019.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
At this time, CNA Financial has an average Growth Score of C, a grade with the same score on the momentum front. 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise CNA Financial has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.