Why Should You Hold Onto CNA Financial (CNA) Stock Now?

CNA Financial Corporation (NYSE:CNA) has responded well to the evolving demands and expectations of clients thus building a solid service portfolio over the years. The company continues to set sights on keeping up this momentum and achieving impressive results in the future.

CNA Financial has an excellent track record of combined ratio over a considerable period of time. This clearly indicates the company’s consistent underwriting profitability and discipline despite a tough operating environment. Notably, it saw a substantial improvement in the metric during the first half of 2017. Hence, we expect the company to maintain combined ratio at favorable levels in the near term.

This Zacks Rank #3 (Hold) property and casualty (P&C) insurer remains committed to boosting and improving management of Long Term Care business. Besides offering better services to policyholders, the Long Term Care business has delivered a rise in claim outcomes efficiently and has achieved breakeven or better financial results. The company’s second-quarter earnings report also vouches for this fact that the business has certainly been reaching a better breakeven level and displaying efficient execution.

Interestingly, the company has also been witnessing improvement in net investment income since last year and the first half was no exception. With the Federal Reserve’s announcement of interest rate hikes (0.25%) on Dec 16, 2016, (1%) Mar 15, 2017 and (1.25%) Jun 14, 2017 respectively, — reflecting the regulatory body’s confidence in the improving U.S. economy — this insurer can now look forward to a further upside shortly.

The P&C insurer boasts a solid capital position, backed by strong liquidity. The company remains confident about its liquidity position and believes that it is capable of funding the current and expected working capital plus debt obligation needs.

Shares of CNA Financial have rallied 24.53% year to date, significantly outperforming the industry’s 8.84% increase. We expect bottom-line and premium growth as well as a strong segmental performance to drive the stock higher in the near term.

However, the company’s escalating expenses remain a concern as it might restrict the operating margin expansion in turn. Also, exposure to catastrophe losses poses a challenge.

Nonetheless, valuation is attractive at present as the stock is currently trading at a price to book multiple of 1.16, a 20.5% discount to the industry average of 1.46. Also, CNA Financial has a trailing 12-month return on equity (ROE) of 8.4%, higher than the industry average of 6.2%.

Stocks to Consider

Some better-ranked stocks from the insurance industry are First American Corporation (NYSE:FAF) , CNO Financial Group, Inc. (NYSE:CNO) and Argo Group International Holdings, Ltd. (NASDAQ:AGII) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

First American Corporation provides financial services. The company delivered positive surprises in all the last four quarters with an average beat of 12.64%.

CNO Financial develops, markets and administers health insurance, annuity, individual life insurance and other insurance products for senior and middle-income markets in the United States. The company delivered positive surprises in three of the last four quarters with an average beat of 6.69%.

Argo Group underwrites specialty insurance and reinsurance products in the property and casualty market worldwide. The company delivered positive surprises in all the last four quarters with an average beat of 26.51%.

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