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Sept 18 (Reuters) - CNA Financial Corp CNA.N:
CNA FINANCIAL-UNIT,AS SPONSOR OF CNA EMPLOYEE RETIREMENT PLAN TRUST,EVALUATING POTENTIAL COUNTERPARTIES ON PURCHASE OF GROUP ANNUITY CONTRACT
CNA FINANCIAL- POTENTIAL CONTRACT EXPECTED TO COVER ABOUT 6,000-8,000 PLAN PARTICIPANTS,BENEFICIARIES & ABOUT $800 MILLION- $1 BILLION OF PLAN’S OBLIGATIONS
CNA FINANCIAL- POTENTIAL PURCHASE OF GROUP ANNUITY CONTRACT IS EXPECTED TO BE FUNDED DIRECTLY BY ASSETS OF THE PLAN
CNA FINANCIAL-ON TRANSACTION CLOSE, SEES TO RECOGNIZE ONE-TIME NON-CASH PRETAX PENSION SETTLEMENT CHARGE SEEN BETWEEN ABOUT $300 TO $400 MILLION IN Q4
Source text for Eikon: [ID:n0000021175-24-000076]
Further company coverage: CNA.N
Shares of Cincinnati Financial Corporation CINF have rallied 31.5% year to date (YTD), outperforming the industry’s 27.2% growth. The insurer also outperformed the Zacks S&P 500 composite and the Finance sector’s return of 18.1% and 14.1%, respectively, YTD. With a market capitalization of $21.27 billion, the average volume of shares traded in the last three months was 0.6 million. Currently priced at $136.17, the stock is a little below its 52-week high of $139.34.
CINF Outperforms Industry, Sector & S&P YTD
Earnings have grown 11.90% in the past five years, better than the industry average of 10.5%. This Zacks Rank #2 (Buy) property and casualty insurance's bottom line outpaced estimates in each of the trailing four quarters, the average surprise being 27.01%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The rally was largely driven by a higher level of insured exposure, rate increase, agent-focused business model, consistent cash flow and effective capital deployment.
CINF Trading Above 50-Day Moving Average
The stock is trading above its 50-day and 200-day simple moving average (SMA) of $129.37 and $117.43, respectively, indicating solid upward momentum. SMA is a widely used technical analysis tool to predict future price trends by analyzing historical price data.
CINF’s Growth Projection Encourages
The Zacks Consensus Estimate for Cincinnati Financial’s 2024 earnings per share indicates a year-over-year increase of 9.1%. The consensus estimate for revenues is pegged at $9.85 billion, implying a year-over-year improvement of 10.8%. The consensus estimate for 2025 earnings per share and revenues indicates an increase of 7% and 10.1%, respectively, from the corresponding 2024 estimates.
Optimistic Analyst Sentiment on CINF
Each of the seven analysts covering the stock has raised estimates for 2024 and three analysts have raised the same for 2025 over the past 60 days. Thus, the Zacks Consensus Estimate for 2024 and 2025 moved 5.6% and 0.8% north, respectively, in the last 60 days.
CINF’s Favorable Return on Capital
Return on equity in the trailing 12 months was 9.1%, better than the industry average of 7.9%. This highlights the company’s efficiency in utilizing shareholders’ funds.
Also, the return on invested capital (ROIC) has been increasing over the last few quarters as the company raised its capital investment over the same time frame, reflecting Cincinnati Financial’s efficiency in utilizing funds to generate income. ROIC in the trailing 12 months was 4%, better than the industry average of 6%.
Will the Bull Run Continue?
Prudent pricing, an agent-centric model, a higher level of insured exposures and disciplined expansion of Cincinnati Re should benefit premiums, the primary driver of an insurer’s top line. CINF boasts above-average industry premium growth.
The Excess and Surplus line has been performing well since its inception in 2008. This segment should continue to benefit from new business written, higher renewal written premiums and higher average renewal estimated pricing. Technology and data are also being used to identify new exposures in emerging businesses.
Improving interest income from fixed-maturity securities and a decrease in equity portfolio dividends in an improved rate environment should drive net investment income.
Notably, its free cash flow conversion has remained more than 150% over the last many quarters, reflecting its solid earnings.
CINF’s Wealth Distribution
In terms of capital management, Cincinnati Financial has returned capital to shareholders through share buybacks, regular cash dividends as well as special dividends. The board of directors had increased the annual cash dividend rate for 64 consecutive years. Its dividend yield of 2.3% is better than the industry average of 0.2%, making the stock an attractive pick for yield-seeking investors. The dividend increase reflected strong operating performance and signaled management's and the board's positive outlook and confidence in outstanding capital, liquidity and financial flexibility.
CINF’s Expensive Valuation
CINF is currently expensive. It is trading at a P/B multiple of 1.67, higher than the industry average of 1.60.
However, shares of First American Financial Corporation FAF, CNA Financial Corporation CNA and Axis Capital Holdings Limited AXS are trading at a multiple lower than the industry average.
Zacks Investment Research
Reporter Name | James Mark Steven |
Relationship | EVP, Chief Risk & Rein Off |
Type | Sell |
Amount | $938,107 |
SEC Filing | Form 4 |
James Mark Steven, EVP, Chief Risk & Rein Off at CNA Financial Corp, sold 18,547 shares of Common Stock on September 16, 2024, for a total of $938,107. The weighted average selling price was $50.58 per share. Following the transaction, Steven directly owns 22,917 shares of the company.
SEC Filing: CNA FINANCIAL CORP [ CNA ] - Form 4 - Sep. 17, 2024
Shares of Kinsale Capital Group, Inc. KNSL have rallied 38.7% year to date (YTD), outperforming the industry’s 26% growth. The insurer also outperformed the Zacks S&P 500 composite and the Finance sector’s return of 17.8% and 13.2%, respectively, YTD. With a market capitalization of $10.81 billion, the average volume of shares traded in the last three months was 0.1 million.
KNSL Outperforms Industry, Sector & S&P YTD
The rally was largely driven by a focus on the excess and supply (E&S) market, prudent underwriting, lower expense ratio, growth in the investment portfolio, solid growth projections and effective capital deployment.
This property and casualty insurer has a solid track record of beating earnings estimates in each of the last four quarters, the average being 9.28%.
KNSL has a VGM Score of B. VGM Score helps identify stocks with the most attractive value, best growth and the most promising momentum.
KNSL Trading Above 50-Day Moving Average
This Zacks Rank #3 (Hold) insurance broker closed at $464.53 on Friday, above its 50-day and 200-day simple moving average (SMA) of $442.60 and $421, respectively, indicating solid upward momentum. SMA is a widely used technical analysis tool to predict future price trends by analyzing historical price data. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Optimistic Analyst Sentiment for KNSL
Each of the seven analysts covering the stock has raised estimates for 2024, while five analysts have raised the same for 2025 over the past 60 days. Thus, the Zacks Consensus Estimate for 2024 and 2025 moved 2.2% and 1.4% north, respectively, in the last 60 days, reflecting analyst optimism.
Growth Projection for KNSL
The Zacks Consensus Estimate for Kinsale Capital’s 2024 earnings per share indicates an increase of 22.4% from the year-ago reported number. The consensus estimate for revenues is pegged at $1.58 billion, implying a year-over-year improvement of 29.7%.
The consensus estimate for 2025 earnings per share and revenues indicates an increase of 18.6% and 19%, respectively, from the corresponding 2024 estimates.
Earnings have grown 45.7% in the past five years, better than the industry average of 10.5%. The expected long-term earnings growth rate is 15%, outperforming the industry average of 11.1%.
Will the Bull Run Continue?
Premiums should continue to improve, given the company’s strong presence across the E&S market in the United States and high retention rates stemming from contract renewals. Management noted that the E&S market has witnessed significant growth and generated better underwriting results than the broader P&C industry. It remains well-poised to benefit from continued market dislocation, aiding improved submission flows and better pricing decisions.
KNSL’s solid market presence helped it to deliver improved margins and lower loss ratios. The insurer targets clients with small-sized and medium-sized accounts with better pricing and less prone to competition. Management estimates low double-digit rate increases across the book of business.
Kinsale Capital enjoys the best combination of high growth and low combined ratio among its peers. It targets a combined ratio in the mid-80s range over the long term. Also, KNSL is well-poised to generate an improved expense ratio given its proprietary technology platform, which is likely to provide it with a competitive edge over other industry players and scalability in business.
Investment of excess operating funds at higher rates in an improved rate environment should drive investment results. Notably, its free cash flow conversion has remained more than 85% over the last many quarters, reflecting its solid earnings.
The insurer has increased dividends since 2017 at a seven-year (2017-2024) CAGR of 12%, riding on the strength of operational excellence that supports a solid capital position.
KNSL’s Favorable Return on Capital
Return on equity in the trailing 12 months was 30.3%, better than the industry average of 7.9%. This highlights the company’s efficiency in utilizing shareholders’ funds.
Also, the return on invested capital (ROIC) has been increasing over the last few quarters as the company raised its capital investment over the same time frame, reflecting ACGL’s efficiency in utilizing funds to generate income. ROIC in the trailing 12 months was 25.4%, better than the industry average of 6%.
KNSL’s Expensive Valuation
KNSL is currently expensive. It is trading at a P/B multiple of 8.60, higher than the industry average of 1.58.
Shares of other insurers like Arch Capital Group Ltd. ACGL and NMI Holdings Inc NMIH are also trading at a multiple higher than the industry average.
However, shares of CNA Financial Corporation CNA are trading at a multiple lower than the industry average.
Zacks Investment Research
Shares of Arch Capital Group Ltd. ACGL closed at $110.26 on Thursday, near its 52-week high of $114.62, after having gained 48.5% year to date. Shares outperformed the industry, the Finance sector as well as the Zacks S&P 500 composite index in the same time frame. ACGL shares are trading well above the 50-day moving average, indicating a bullish trend.
Arch Capital Outperforms Industry, Sector & S&P YTD
This leading specialty P&C and mortgage insurer has the potential to retain the momentum, given new business opportunities, rate improvement, growth in existing accounts and a solid capital position.
Growth Projection for ACGL
The Zacks Consensus Estimate for 2024 earnings is pegged at $9.01 per share, suggesting an increase of 6.6% on 15.3% higher revenues of $15.6 billion. The consensus estimate for 2025 earnings per share is pegged at $9.23, suggesting an increase of 2.5% on 9.2% higher revenues of $17 billion.
The long-term earnings growth rate is expected to be 6.1%. We expect the 2026 bottom line to witness a three-year CAGR of 4.2%.
ACGL’s Northbound Estimate Revision
Six of eight analysts covering the stocks have raised estimates for 2024 while five have raised estimates for 2025.
The Zacks Consensus Estimate for 2024 and 2025 earnings has moved 5% and 1.5% north, respectively, in the past 60 days, reflecting analyst optimism.
ACGL’s Favorable Return on Capital
Return on equity in the trailing 12 months was 21.4%, better than the industry average of 8%. This highlights the company’s efficiency in utilizing shareholders’ funds.
Also, the return on invested capital (ROIC) has been increasing over the last few quarters as the company raised its capital investment over the same time frame, reflecting ACGL’s efficiency in utilizing funds to generate income. ROIC in the trailing 12 months was 16.5%, better than the industry average of 6.1%.
ACGL’s Expensive Valuation
ACGL is currently expensive. It is trading at a P/B multiple of 2.09, higher than the industry average of 1.59.
It has a Value Score of B. This style score helps find the most attractive value stocks.
Back-tested results have shown that stocks with a Value Score of A or B combined with a Zacks Rank #1 (Strong Buy) or #2 (Buy) are the most attractive, and their returns are better.
Given its market-leading presence, growth prospects, rising estimates and better return on capital, its premium valuation is justified.
Shares of other insurers like Fidelity National Financial FNF and W.R. Berkley Corporation WRB are also trading at a multiple higher than the industry average. However, shares of CNA Financial Corporation CNA are trading at a multiple lower than the industry average.
What Makes Arch Capital a Buy?
Arch Capital is set to gain from its compelling product portfolio and widespread operations that also provide meaningful diversification and earnings stability. This insurer continues to undertake international expansion, enhance operations and diversify business at attractive risk-adjusted returns.
The diversification of its Mortgage Insurance business via strategic acquisitions complements the strength of the specialty insurance and reinsurance businesses.
Amid the high chances of an interest rate cut this September, investment income is poised to improve banking on a growing base of invested assets driven by improving cash flows.
Sufficient liquidity coupled with low leverage has helped ACGL strengthen its balance. It also shields it from market volatility and supports growth initiatives. While cash position improved, leverage too lowered and compared favorably with industry. A solid liquidity position should support Arch Capital in meeting any short-term obligation.
Notably, its free cash flow conversion has remained more than 85% over the last many quarters, reflecting its solid earnings.
Despite its premium valuation, all these positives make this Zacks Rank #2 stock a strong contender for addition to one’s portfolio. You can see the complete list of today’s Zacks #1 Rank stocks here.
Zacks Investment Research
A month has gone by since the last earnings report for CNA Financial . Shares have added about 3.3% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is CNA Financial due for a pullback? 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 catalysts.
CNA Financial Q2 Earnings Miss, Revenues Rise Y/Y
CNA Financial Corporation reported second-quarter 2024 core earnings of $1.19 per share, which missed the Zacks Consensus Estimate by 1.6%. However, the bottom line increased 5.3% year over year. The quarterly results of CNA reflected higher income from fixed income securities, larger invested asset base, improved retention and renewal premium change, partly offset by poor underwriting income and escalating expenses.
Behind Second-Quarter Headlines
Total operating revenues of CNA Financial were $3.1 billion, up 6.7% year over year due to higher premiums, net investment income and other revenues. The top line beat the Zacks Consensus Estimate by 1.3%. Net written premiums of Property & Casualty Operations increased 6% year over year to $2.6 billion, driven by retention of 85% and renewal premium change of 5% with a written rate of 4%.
Net investment income rose 7.4% year over year to $618 million. The increase was driven by higher income from fixed income securities as a result of favorable reinvestment rates and a larger invested asset base, as well as favorable limited partnership and common stock returns. Our estimate for net investment was $601.1 million. The Zacks Consensus Estimate was pegged at $592.3 million.
Total claims, benefits and expenses increased 7.3% to $2.6 billion, primarily due to higher insurance claims and policyholders' benefits, amortization of deferred acquisition costs, non-insurance warranty expense, other insurance related expenses and other expenses. Our estimate was $2.5 billion.
Catastrophe losses were $82 million, wider than a loss of $68 million in the year-ago quarter. Underwriting income declined 10.1% year over year to $124 million. Our estimate was $175.3 million. The combined ratio deteriorated 100 basis points (bps) year over year to 94.8. The Zacks Consensus Estimate was pegged at 93.6 while our estimate was 92.8.
Segment Results
Specialty’s net written premiums increased 4% year over year to $857 million. Our estimate was $900 million. The combined ratio deteriorated 180 bps to 92.7. The Zacks Consensus Estimate was pegged at 85.1.
Commercial’s net written premiums increased 10% year over year to $1.4 billion. Our estimate was $1.3 billion. The combined ratio deteriorated 70 bps to 97. The Zacks Consensus Estimate was pegged at 94.8.
International’s net written premiums remained flat year over year at $359 million. Our estimate was $402.7 million. The combined ratio improved 30 bps to 91.9. The Zacks Consensus Estimate was pegged at 106.9.
Life & Group’s net earned premiums were $109 million, down 3.5% year over year. Our estimate was $105.9 million. The core loss was $1 million, narrower than a loss of $20 million incurred in the year-ago quarter, primarily due to a reduced impact from long-term care policy buyouts and higher net investment income.
Corporate & Other’s core loss of $53 million was wider than a loss of $46 million incurred in the year-earlier quarter.
Financial Update
The core return on equity expanded 40 bps to 10.6%. Book value, excluding AOCI, as of Jun 30 was $45.86 per share, down 1.1% from the 2023-end level. Statutory capital and surplus for the Combined Continental Casualty Companies increased 0.7% from the 2023-end level to $11 billion at quarter end. Net cash flow provided by operating activities increased 23% to $616 million in the quarter.
Dividend Update
CNA Financial’s board of directors approved a quarterly dividend of 44 cents per share to be paid out on Aug 29 to shareholders as of Aug 12.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -6.02% due to these changes.
VGM Scores
At this time, CNA Financial has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, CNA Financial has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
CNA Financial belongs to the Zacks Insurance - Property and Casualty industry. Another stock from the same industry, Kinsale Capital Group, Inc. , has gained 5.6% over the past month. More than a month has passed since the company reported results for the quarter ended June 2024.
Kinsale Capital Group reported revenues of $384.55 million in the last reported quarter, representing a year-over-year change of +30%. EPS of $3.75 for the same period compares with $2.88 a year ago.
For the current quarter, Kinsale Capital Group is expected to post earnings of $3.73 per share, indicating a change of +12.7% from the year-ago quarter. The Zacks Consensus Estimate has changed -1.4% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Kinsale Capital Group. Also, the stock has a VGM Score of C.
Zacks Investment Research
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