CNA Financial (CNA)

Insurance provider CNA Financial (NYSE:CNA) announced better-than-expected revenue in Q4 CY2025, with sales up 3.2% year on year to $3.85 billion. Its non-GAAP profit of $1.16 per share was 13.4% below analysts’ consensus estimates.

Company Overview

With roots dating back to 1853 and majority ownership by Loews Corporation, CNA Financial (NYSE:CNA) is a commercial property and casualty insurance provider offering coverage for businesses, including professional liability, surety bonds, and specialized risk management services.

Property & Casualty (P&C) insurers protect individuals and businesses against financial loss from damage to property or from legal liability. This is a cyclical industry, and the sector benefits when there is 'hard market', characterized by strong premium rate increases that outpace loss and cost inflation, resulting in robust underwriting margins. The opposite is true in a 'soft market'. Interest rates also matter, as they determine the yields earned on fixed-income portfolios. On the other hand, P&C insurers face a major secular headwind from the increasing frequency and severity of catastrophe losses due to climate change. Furthermore, the liability side of the business is pressured by 'social inflation'—the trend of rising litigation costs and larger jury awards.

CNA Financial competes with other major commercial insurance providers including Chubb (NYSE:CB), The Hartford (NYSE:HIG), Travelers (NYSE:TRV), and American International Group (NYSE:AIG), as well as specialty insurers in various market segments.

Insurers earn revenue three ways. The core insurance business itself, often called underwriting and represented in the income statement as premiums earned, is one way. Investment income from investing the “float” (premiums collected upfront not yet paid out as claims) in assets such as fixed-income assets and equities is the second way. Fees from various sources such as policy administration, annuities, or other value-added services is the third. Over the last five years, CNA Financial grew its revenue at a mediocre 6.8% compounded annual growth rate. This fell short of our benchmark for the insurance sector and is a tough starting point for our analysis.

Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. CNA Financial’s annualized revenue growth of 6.1% over the last two years aligns with its five-year trend, suggesting its demand was consistently weak. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, CNA Financial reported modest year-on-year revenue growth of 3.2% but beat Wall Street’s estimates by 0.6%.

Net premiums earned made up 70.9% of the company’s total revenue during the last five years, meaning insurance operations are CNA Financial’s largest source of revenue.

Markets consistently prioritize net premiums earned growth over investment and fee income, recognizing its superior quality as a core indicator of the company’s underwriting success and market penetration.

When insurers sell policies, they protect themselves from extremely large losses or an outsized accumulation of losses with reinsurance (insurance for insurance companies). Net premiums earned are therefore net of what’s ceded to reinsurers as a risk mitigation and transfer strategy.

CNA Financial’s net premiums earned has grown at a 7.4% annualized rate over the last five years, slightly worse than the broader insurance industry and in line with its total revenue.

When analyzing CNA Financial’s net premiums earned over the last two years, we can paint a similar picture as it recorded an annual growth rate of 7.6%. Since two-year net premiums earned grew faster than total revenue over this period, it's implied that other line items such as investment income grew at a slower rate. While these additional streams certainly contribute to the bottom line, their impact can vary. Some firms have shown greater success and long-term consistency in investing their float compared to peers. However, sharp fluctuations in the fixed income and equity markets can significantly affect short-term performance.

Revenue growth is one major determinant of business quality, and the efficiency of operations is another. For insurance companies, we look at the combined ratio rather than the operating expenses and margins that define sectors such as consumer, tech, and industrials.

The combined ratio sums the costs of underwriting (salaries, commissions, overhead) as well as what an insurer pays out in claims (losses) and divides it by net premiums earned. If a company boasts a combined ratio under 100%, it is underwriting profitably. If above 100%, it is losing money on its core operations of selling insurance policies.

Given the calculation, a lower expense ratio is better. Over the last five years, CNA Financial’s combined ratio has swelled by 12.7 percentage points, going from 106% to 95.6%. However, fixed cost leverage was muted more recently as the company’s combined ratio was flat on a two-year basis.

In Q4, CNA Financial’s combined ratio was 93.8%. This result was 1.6 percentage points worse than the same quarter last year.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

CNA Financial’s EPS grew at a decent 12.8% compounded annual growth rate over the last five years, higher than its 6.8% annualized revenue growth. However, we take this with a grain of salt because its combined ratio didn’t improve and it didn’t repurchase its shares, meaning the delta came from factors we consider non-core or less sustainable over the long term.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For CNA Financial, its two-year annual EPS growth of 2.2% was lower than its five-year trend. We hope its growth can accelerate in the future.

In Q4, CNA Financial reported adjusted EPS of $1.16, down from $1.25 in the same quarter last year. This print missed analysts’ estimates, but we care more about long-term adjusted EPS growth than short-term movements. Over the next 12 months, Wall Street expects CNA Financial’s full-year EPS of $4.92 to shrink by 7.3%.

Insurance companies are balance sheet businesses, collecting premiums upfront and paying out claims over time. The float – premiums collected but not yet paid out – are invested, creating an asset base supported by a liability structure. Book value captures this dynamic by measuring:

• Assets (investment portfolio, cash, reinsurance recoverables) - liabilities (claim reserves, debt, future policy benefits)

BVPS is essentially the residual value for shareholders.

We therefore consider BVPS very important to track for insurers and a metric that sheds light on business quality because it reflects long-term capital growth and is harder to manipulate than more commonly-used metrics like EPS.

CNA Financial’s BVPS declined at a 1.7% annual clip over the last five years. However, BVPS growth has accelerated recently, growing by 8.4% annually over the last two years from $36.52 to $42.93 per share.

The debt-to-equity ratio is a widely used measure to assess a company's balance sheet health. A higher ratio means that a business aggressively financed its growth with debt. This can result in higher earnings (if the borrowed funds are invested profitably) but also increases risk.

If debt levels are too high, there could be difficulties in meeting obligations, especially during economic downturns or periods of rising interest rates if the debt has variable-rate payments.

CNA Financial currently has $2.97 billion of debt and $11.62 billion of shareholder's equity on its balance sheet, and over the past four quarters, has averaged a debt-to-equity ratio of 0.3×. We think this is safe and raises no red flags. In general, we’re comfortable with any ratio below 1.0× for an insurance business. Anything below 0.5× is a bonus.

Return on equity (ROE) is a crucial yardstick for insurance companies, measuring their ability to generate returns on the capital provided by shareholders. Insurers that consistently deliver superior ROE tend to create more value for their investors over time through strategic capital allocation and shareholder-friendly policies.

Over the last five years, CNA Financial has averaged an ROE of 10.3%, uninspiring for a company operating in a sector where the average shakes out around 12.5%.

It was good to see CNA Financial narrowly top analysts’ revenue expectations this quarter. On the other hand, its EPS missed. Overall, this was a softer quarter. The stock remained flat at $49.02 immediately following the results.

Updated: February 10, 2026 at 11:49 PM EST

A common mistake we notice when investors are deciding whether to buy a stock or not is that they simply look at the latest earnings results. Business quality and valuation matter more, so we urge you to understand these dynamics as well.

CNA Financial doesn’t pass our quality test. To kick things off, its revenue growth was mediocre over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its improving combined ratio shows the business has become more productive, the downside is its BVPS has declined over the last five years. On top of that, its projected EPS for the next year is lacking.

CNA Financial’s P/E ratio based on the next 12 months is 10.8x. At this valuation, there’s a lot of good news priced in - you can find more timely opportunities elsewhere.

Wall Street analysts have a consensus one-year price target of $43 on the company (compared to the current share price of $49.15), implying they don’t see much short-term potential in CNA Financial.