CNA Financial Corporation CNA closed at $48.85 on Wednesday, near its 52-week high of $52.36. This proximity underscores investor confidence. It has the ingredients for further price appreciation. The stock is trading above the 200-day simple moving average (SMA) of $46.66, indicating solid upward momentum. SMA is a widely used technical analysis tool to predict future price trends by analyzing historical price data.

With a market capitalization of $13.23 billion, the average volume of shares traded in the last three months was 0.3 million.

Shares of this Zacks Rank #3 (Hold) property and casualty insurer have gained 15.4% year to date compared with the industry’s growth of 30.9%. The 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 6%.

Image Source: Zacks Investment Research

CNA’s Encouraging Growth Projection

The Zacks Consensus Estimate for CNA Financial’s 2024 earnings per share indicates a year-over-year increase of 1.2%. The consensus estimate for revenues is pegged at $12.52 billion, implying a year-over-year improvement of 6.3%. The consensus estimate for 2025 earnings per share and revenues indicates an increase of 0.9% and 5.5%, respectively, from the corresponding 2024 estimates.

CNA’s Favorable Return on Capital

CNA Financial’s trailing 12-month ROE of 13.3% is better than the industry average of 7.6%. Core ROE expanded 20 bps to 10.3% in the first nine months of 2024.

Factors Acting in Favor of CNA

CNA Financial’s premiums should continue to grow on solid retention, favorable renewal premium change and new business growth across Specialty, Commercial and International segments.

Net investment income should continue to benefit from fixed-income securities and other investments, as well as a rise in income from limited partnership and common stock investments. Favorable reinvestment yields and strong operating cash flows add to the upside. CNA Financial’s fixed-income investment strategy, with the highest allocations to diversified investment grade corporates, as well as highly rated municipal securities, should continue to drive improved investment results.

CNA Financial has a solid balance sheet with capital remaining above the target levels required for all ratings. It exited the third quarter of 2024 with $11.3 billion in statutory surplus. CNA continues to maintain a conservative capital structure with a low leverage ratio and a well-balanced debt maturity schedule. It continues to maintain liquidity in the form of cash and short-term investments, which help it sustain business variability.

Consistent cash flow generation, backed by strong underwriting performance, supports the insurer in distributing wealth to its shareholders. While CNA has paid special dividends for 10 years, its quarterly dividend witnessed a 10-year CAGR of 5.8%.

Headwinds

However, CNA Financial remains exposed to catastrophe loss stemming from natural disasters and weather-related events. Catastrophe losses pose an inherent risk to the P&C insurance business because of its unpredictability, inducing volatility in the company’s results. Moreover, CNA Financial has been witnessing rising 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.

Key Picks

Investors interested in the property and casualty insurance industry may look at some better-ranked players like First American Financial Corporation FAF, Mercury General Corporation MCY and The Travelers Companies, Inc. TRV. While First American and Mercury General sport a Zacks Rank #1 (Strong Buy) each, The Travelers carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for First American’s 2024 and 2025 earnings indicates 5% and 32.1% year-over-year growth, respectively. In the year-to-date period, shares of FAF have gained 0.6%.

The Zacks Consensus Estimate for 2024 and 2025 earnings has moved 2.5% and 4.3% north, respectively, in the past 30 days.

Mercury General's bottom line outpaced estimates in each of the trailing four quarters, the average surprise being 694.28%. In the year-to-date period, shares of MCY have rallied 96.7%.

The Zacks Consensus Estimate for 2024 and 2025 earnings has moved 2,016.67% and 8.66% north, respectively, in the past 30 days.

The Travelers' bottom line outpaced estimates in three of the trailing four quarters and missed in one, the average surprise being 25.40%. In the year-to-date period, shares of TRV have gained 34.6%.

The Zacks Consensus Estimate for 2024 and 2025 earnings has moved 9.1% and 1.2% north, respectively, in the past 30 days, reflecting analysts’ optimism.

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 Travelers Companies, Inc. (TRV) : Free Stock Analysis Report

First American Financial Corporation (FAF) : Free Stock Analysis Report

CNA Financial Corporation (CNA) : Free Stock Analysis Report

Mercury General Corporation (MCY) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research