CNA Financial (CNA) Q2 Earnings Beat Estimates, Surge Y/Y

CNA Financial Corporation (NYSE:CNA) reported second-quarter 2016 operating income of 74 cents per share that beat the Zacks Consensus Estimate of 72 cents by 2.8%. Also, the bottom line improved 51% from 49 cents per share in the year-ago quarter. The outperformance can be attributed to solid results across all of the company’s North American businesses as well as strong underwriting result in its Specialty segment.

Including net realized investment gains, net income came in at 77 cents per share, up about 51% from the year-ago quarter.

Behind the Second-Quarter Headlines

Net investment income inched up 1.7% year over year to $362 million due to higher limited partnership investments.

Net written premiums at Property & Casualty Operations dipped 0.8% year over year to $1.6 billion. Net operating income declined 3.4% year over year to $229 million due to lower net investment income and foreign currency exchange rate losses, partially offset by improved underwriting results. Combined ratio improved 100 basis points (bps) to 97.4% on a year-over-year basis.

Book value (excluding AOCI) as of Jun 30, 2016 was $43.16 per share, down 3.4% from Dec 31, 2015.

Segment Results

Specialty net written premiums grew 2.8% year over year to $691 million. Steady retention, positive rate and a modest amount of new business led to the improvement. Retention was 86% in the reported quarter. Average rate for policies went up 1% year over year. Combined ratio improved 580 bps to 85.4%.

Commercial net written premiums increased 3.2% year over year to $740 million on higher retention and a steady level of new business. While retention was 83%, average rate for the policies remained flat year over year. Combined ratio improved 370 bps to 103.5%.

International net written premiums plunged 22.1% year over year to $194 million, mainly due to lower retention and rate. The company achieved retention of 70%, whereas average rate on policies decreased 2% year over year. Combined ratio deteriorated 2640 bps to 118.6%.

Life & Group Non-Core operating revenues dipped 3.5% year over year to $327 million. Net operating loss narrowed to $4 million from the year-ago loss of $24 million.

Corporate & Other Non-Core net operating loss narrowed to $24 million from a loss of $81 million in the year-ago quarter.

Dividend Update

The board of directors of CNA Financial announced a quarterly dividend of 25 cents per share during the reported quarter. The dividend will be paid on Aug 31, 2016 to stockholders on record as of Aug 15, 2016.

Zacks Rank and Performance by Other P&C Insurers

CNA Financial currently carries a Zacks Rank #4 (Sell). Among other property and casualty insurers that have reported their second-quarter earnings so far, the bottom line at RLI Corp. (NYSE:RLI) and Progressive Corp. (NYSE:PGR) missed their respective Zacks Consensus Estimates, while First American Financial Corporation’s (NYSE:FAF) earnings beat the same.

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