CNA Financial (CNA) Prospects Look Bright: Should You Buy?

Shares of CNA Financial Corporation (NYSE:CNA) gained 10.77% year to date, outperforming the Zacks categorized Property and Casualty Insurance industry’s increase of 2.47%. Also, the company witnessed the 2018 estimates moving north by nearly 1.9% over the last 60 days. We expect the stock to retain its momentum on the back of a number of positives.

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 in spite of a tough operating environment. Although the metric deteriorated slightly in 2016 and in the first quarter of 2017, we expect the company to maintain combined ratio at favorable levels in the near term.

Further, the Zacks Rank #2 (Buy) property and casualty (P&C) insurer remains committed to boosting and improving management of Long Term Care business. Apart from offering better services to policyholders, the Long Term Care business has delivered improved claim outcomes efficiently, and has achieved breakeven or better financial results. The first-quarter results reflect that this business has been performing at a breakeven level and displaying efficient execution.

Interestingly, the company has been witnessing improvement in net investment income since the last year and the first quarter was also no exception. With the Federal Reserve’s announcement of an interest rate hike (0.25%) on Dec 16, 2016 and another (1%) on Mar 15, 2017 – which reflect the regulatory body’s confidence in the improving U.S. economy – the insurer can now look forward to further improvement in the near term.

Moreover, 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 its current and expected working capital and debt obligation needs.

Notably, valuation is also attractive at present as the stock is currently trading at a price to book multiple of 1.06, a 24.8% discount to the industry average of 1.41. Also, CNA Financial has a trailing 12-month return on equity (ROE) of 8.1%, which is higher than the industry average of 6.5%.

The company also carries a VGM Score of B. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three metrics.

Other Stocks That Warrant a Look

Investors interested in other stocks from the same space might consider Infinity Property and Casualty Corporation (NASDAQ:IPCC) , ProAssurance Corporation (NYSE:PRA) and Fidelity National Financial, Inc. (NYSE:FNF) . Each of these stocks holds a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Infinity Property and Casualty provides personal automobile insurance products in the United States. The company delivered positive surprises in three of the last four quarters with an average beat of 37.45%.

ProAssurance Corporation offers P&C insurance, and reinsurance products in the United States. The company delivered positive surprises in all of the last four quarters with an average beat of 16.59%.

Fidelity National provides title insurance, and technology and transaction services to the real estate and mortgage industries in the United States. The company delivered positive surprises in three of the last four quarters with an average beat of 8.47%.

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