Why Is CNA Financial (CNA) Down 19% Since Last Earnings Report?

A month has gone by since the last earnings report for CNA Financial (CNA). Shares have lost about 19% 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 Q4 Earnings Beat Estimates, Rise Y/Y

CNA Financial Corporation reported fourth-quarter 2019 core earnings of 97 cents per share, which beat the Zacks Consensus Estimate by 6.6%. In the year-ago quarter the company incurred a loss of 8 cents per share.

The upside can be attributed to improved net written premiums, an increase in new business and favorable rates.

Behind Fourth-Quarter Headlines

Net written premiums at Property & Casualty Operations improved 5.2% year over year to $1.7 billion.

Net investment income improved significantly year over year to $336 million.
Combined ratio improved 980 basis points (bps) year over year to 95.6%.

Book value as of Dec 31, 2019, was $45 per share, up 8.9% from Dec 31, 2018.

Core return on equity was 8.8%, up 950 bps.

Segmental Results

Specialty’s net written premiums rose 3.4% year over year to $705 million, driven by favorable rates. Combined ratio improved 300 bps to 88.2%.

Commercial’s net written premiums increased 8% year over year to $779 million, driven by higher new business, strong retention and favorable rates. Combined ratio improved 1270 bps to 100.6%.

International’s net written premiums increased 2.3% year over year to $262 million driven by strong growth in Canada and Europe. Combined ratio improved 1920 bps to 100.3%.

Life & Group’s total operating revenues were $334 million, down 0.9% year over year. Core loss was $4 million against the year-ago income of $7 million.
Corporate & Other’s core loss of $68 million was wider than the loss of $46 million incurred in the prior-year period.

Dividend Update

CNA Financial hiked its dividend to 37 cents per share, up from the prior payout of 35 cents. The dividend will be paid out on Mar 12, 2020, to stockholders of record as of Feb 24, 2020.

How Have Estimates Been Moving Since Then?

Estimates revision followed an upward path over the past two months. The consensus estimate has shifted 7.33% due to these changes.

VGM Scores

At this time, CNA Financial has a subpar Growth Score of D, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. 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 #1 (Strong Buy). We expect an above average return from the stock in the next few months.