CNA Financial Corporation (NYSE:CNA) reported third-quarter 2016 operating income of $1.15 per share that surpassed the Zacks Consensus Estimate of 84 cents by 36.9%. Also, the bottom line improved 49.4% from 77 cents per share earned in the year-ago quarter. The outperformance can be attributed to higher net investment income and net written premium growth.
Including net realized investment gains, net income soared approximately 90.9% year over year to $1.26 per share.
Behind the Third-Quarter Headlines
Net investment income surged 40% year over year to $371 million due to higher limited partnership returns.
Net written premiums at Property & Casualty Operations improved 6.2% year over year to $1.6 billion. Net operating income climbed 25.1% year over year to $329 million due to higher net investment income. Combined ratio deteriorated 470 basis points (bps) to 90.4% on a year-over-year basis.
As of Sep 30, 2016, book value (excluding AOCI) was $44.21 per share, down 0.9% from that as of Dec 31, 2015.
Segment Results
Specialty net written premiums grew 3.7% year over year to $733 million. Continued steady retention and growth in warranty and surety led to the improvement. Retention was 87% in the reported quarter. Average rate for policies remained flat year over year. Combined ratio deteriorated 550 bps to 79.9%.
Commercial net written premiums increased 6.5% year over year to $684 million on higher retention and new business in middle markets. Retention was 83% in the quarter under review. Average rate for the policies remained flat year over year. Combined ratio deteriorated 400 bps to 99.8%.
International net written premiums climbed 15% year over year to $207 million, mainly due to middle market products in the U.K. and Continental Europe. Product lines, which are currently being delivered across all international platforms like healthcare and technology, also contributed to the upside. The company achieved retention of 70% in the third quarter. Average rate on policies dipped 1% year over year. Combined ratio deteriorated 280 bps to 93.2%.
Life & Group Non-Core operating revenues increased 1.3% year over year to $322 million. Net operating income of $6 million compared favorably with the year-ago loss of $30 million.
Corporate & Other Non-Core net operating loss of $24 million was wider than a loss of $23 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 Nov 30, to stockholders on record as of Nov 14, 2016.
CNA FINL CORP Price, Consensus and EPS Surprise
CNA FINL CORP Price, Consensus and EPS Surprise | CNA FINL CORP Quote
Zacks Rank
CNA Financial currently holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance by Other P&C Insurers
Among other players in the insurance industry that have reported third-quarter earnings so far, the bottom line at Progressive Corp. (NYSE:PGR) and The Travelers Companies Inc. (NYSE:TRV) beat the respective Zacks Consensus Estimate, while RLI Corp.’s (NYSE:RLI) earnings missed the same.
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RLI CORP (RLI): Free Stock Analysis Report
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CNA FINL CORP (CNA): Free Stock Analysis Report
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