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CNA Financial (CNA) Banks on Premium Growth Amid Cost Concerns

CNA Financial Corporation CNA has been gaining momentum on the back of improved underlying combined ratio, lower acquisition costs, lower underwriting expenses and sufficient liquidity.

CNA Financial remains well poised to gain from a rise in new businesses, strong rate, lower net catastrophe losses, improved non-catastrophe current accident year underwriting results and higher net earned premium, which contribute to premium growth across its Specialty, Commercial and International segments.

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

Both loss and expense ratios stand to gain from lower net catastrophe losses, higher net earned premiums, lower acquisition costs, lower underwriting expenses and improved non-catastrophe current accident year underwriting results.

CNA Financial has been witnessing substantial improvement in the combined ratio over the past few years. Its combined ratio reflects its underwriting profitability. CNA has been able to maintain an underlying combined ratio below 95 for 11 straight quarters. A lower expense ratio as well as an underlying loss ratio is expected to improve the underlying combined ratio.

The property and casualty insurer maintains a conservative capital structure and continues to sustain capital above target levels in support of the ratings. CNA maintains liquidity in the form of cash and short-term investments, which together provide sufficient liquidity to meet financial obligations.

A strong balance sheet and cash flows enable CNA Financial to engage in shareholder-friendly moves like dividend hikes. CNA raised its dividend at a nine-year (2014-2022) CAGR of 28.6%.

CNA Financial’s expenses escalated over the last several years due to higher net incurred claims and benefits, higher non-insurance warranty expenses and amortization of deferred acquisition costs. A persistent elevation of expenses might weigh on its margins.

Other Industry Players

Other key players in the property and casualty insurance industry include Arch Capital Group Ltd. ACGL, American Financial Group, Inc. AFG and ProAssurance Corporation PRA.

The bottom line of Arch Capital surpassed earnings estimates in three of the last four quarters and missed in one, the average being 33.64%.

Arch Capital stands to gain from rate increases, new business opportunities and growth in existing accounts, and in travel, primarily due to new business and growth in existing accounts. This leading specialty property and casualty and mortgage insurer actively pursues acquisitions to expand internationally, enhance capabilities, boost operations and diversify the business.

American Financial’s earnings surpassed estimates in each of the last four quarters, the average beat being 37.09%.

Sustained solid performances across Property and Transportation, Specialty Casualty, and Specialty Financial lines of business should continue to drive American Financial. Premiums should benefit from new business opportunities, growth in the surplus lines and excess liability businesses, rate increases and higher retentions in renewal business.

The bottom line of ProAssurance surpassed earnings estimates in three of the last four quarters and missed in one, the average being 150.9%.

ProAssurance is poised well for growth owing to solid volumes and a diversified footprint. PRA achieved significant inorganic growth via successful acquisitions and integrations of companies owing to its financial size and strength.


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ProAssurance Corporation (PRA): Free Stock Analysis Report
 
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