Solid Premiums Aid CNA Financial, Cat Loss and High Costs Ail

CNA Financial Corporation CNA is well-poised for growth, driven by business growth across Specialty, Commercial and International segments, improving rate environment, financial flexibility and effective capital deployment.Earnings HistoryThe insurer has a solid track record of beating earnings estimates in two of the last four quarters while missing in the other two, the average being 2.18%.Factors Favoring CNACNA Financial’s premiums should continue to grow on solid retention, favorable renewal premium change and new business growth across Specialty, Commercial and International segments.An improving rate environment is favorable for an insurer. Amid the lower rate environment, the company’s fixed-income investment strategy with the highest allocations to diversified investment grade corporates as well as highly rated municipal securities should support investment results.CNA Financial has a solid balance sheet with capital remaining above the target levels required for all ratings. It exited 2024 with statutory capital and surplus for the Combined Continental Casualty Companies of $11.2 billion, which grew 2% from the end of 2023. CNA Financial continues to maintain a conservative capital structure. It maintains liquidity in the form of cash and short-term investments, which helps to sustain business variability.Strong financial position enables CNA Financial to engage in shareholder-friendly moves like dividend hikes. The insurer’s dividend history is impressive, where it witnessed a 10-year CAGR (2015-2025) of 6.3%. The current dividend yield of 3.6% is better than the industry average of 0.2%. On the back of a disciplined execution, denoted by strong underwriting results and confidence in future earnings performances, the insurer has been hiking dividends, apart from paying special dividends over the past couple of years. Thus, the company remains committed to returning more value to shareholders.CNA’s Favorable Return on CapitalCNA Financial’s trailing 12-month ROE of 3.66% is better than the industry average of 0.2%. Core ROE expanded 10 bps to 10.5% in 2024.Concerns for CNACNA Financial, being a property and casualty insurer and remains exposed to catastrophe loss stemming from natural disasters and weather-related events. The company reported catastrophe losses of $358 million for 2024, which were wider than the year-ago period's loss of $236 million. Catastrophe losses were primarily related to Hurricane Milton. Catastrophe losses pose an inherent risk to the P&C insurance business because of its unpredictability, inducing volatility to the company’s results.CNA Financial has also been witnessing escalating expenses over the past few years, primarily due to increasing net incurred claims and benefits and amortization of deferred acquisition costs. The company’s net operating income has been affected by this increasing trend, which, in turn, might hurt its overall profitability.Other Industry PlayersOther players in the insurance industry are The Progressive Corporation PGR, Kingstone Companies, Inc. KINS and Palomar Holdings, Inc. PLMR.Progressive’s earnings surpassed estimates in each of the last four quarters, the average surprise being 18.49%. A compelling product portfolio, leadership position, healthy policies in force, better pricing and a solid retention ratio should continue to drive premium improvement for Progressive. Distinctive new auto insurance options, along with competitive pricing, should help sustain improvement in policy life expectancy, a measure of customer retention.Kingstone Companies is well poised for growth, given its heightened focus on its core business and scaling back of unprofitable non-core businesses. The insurer only writes businesses that meet its underwriting standards and profit-margin objectives. KINS expects direct written premiums in the core business to grow between 15% and 25% in 2025.Palomar’s earnings surpassed estimates in each of the last four quarters, the average surprise being 16.64%. It is poised to gain from the increased volume of policies written across the lines of business, strong retention rates, strategic expansion of products’ geographic and distribution footprint and new partnerships. Palomar envisions being an industry leader in the crop business and among the top 10 crop premium riders in the United States by 2025. Its projections for the year exceed $200 million in premiums. It also believes that crops will secure $500 million of premiums in the intermediate future.Zacks Names #1 Semiconductor StockIt's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report The Progressive Corporation (PGR): Free Stock Analysis Report CNA Financial Corporation (CNA): Free Stock Analysis Report Kingstone Companies, Inc (KINS): Free Stock Analysis Report Palomar Holdings, Inc. (PLMR): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks