We came across a bullish thesis on CNA Financial Corp. (NYSE:CNA) on ValueInvestorsClub by natty813. In this article, we will summarize the bulls’ thesis on CNA. The company’s shares were trading at $50.23 when this thesis was published, vs. the closing price of $47.81 on Jan 03.
CNA offers commercial property and casualty insurance products in the United States and internationally. Its primary segments include Specialty, Commercial, International, Life & Group, and Corporate.
CNA has been subjected to underwriting issues in the past but there has been a turnaround after Dino Robusto joined the firm in 2016. The exposure to insurance pertaining to long-term care has been reduced, with a focus on commercial insurance. The commercial insurance segment grew by 16% in 2023 with the combined ratio reducing to 96% in 2023 from 105% in 2020. The International portfolio has also been a performing business, managing to turn profitable in 2021. The business grew by 6%, with the combined ratio reducing to 92.6% in 2023 from 102.4% in 2020.
CNA enjoys a favorable rating (A+ from S&P, A2 from Moody’s) due to its financial health and business performance. The debt to capital stands at 23% and it maintains a statutory surplus of $11 billion which is almost equal to the value of the net premium written in Q2-24. The investment portfolio has an average rating of A and is offering higher income as interest rates remain high. The ROE stands at a healthy 13.3%.
CNA offers a fixed regular dividend of $0.44 per quarter or $1.76 per year. At its current price, the dividend yield is 3.5%. It has also disbursed $2/year as variable dividends in 8 of the last 10 years. After accounting for the variable dividend, the total yield is approximately 7.5%.
91.7% of CNA is owned by Loews and this is one of the reasons why it is available at a discounted valuation. It is available at 1.39x tangible book value and 9.8x forward earnings. Combining the attractive dividend yield with the attractive valuation, CNA is certainly a Buy and Hold case, offering a potential for long-term double-digit returns.
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This article was originally published at Insider Monkey.
