CNA Financial: A Case Study in Resilient Underwriting and Sustainable Dividend Growth

The insurance sector has long been a battleground for companies balancing underwriting discipline with the pressures of volatile markets. CNA Financial (CNA) stands out as a rare entity that has consistently navigated this terrain with both financial prudence and a shareholder-centric mindset. From 2023 to 2025, the company has demonstrated a unique ability to generate resilient core income, maintain robust underwriting metrics, and deliver aggressive dividend growth—all while operating in a sector marked by unpredictable catastrophe losses and macroeconomic headwinds. For income-focused investors, CNA's strategy offers a compelling case study in how to marry long-term value creation with capital returns.

Underwriting Discipline: A Foundation for Long-Term Stability

CNA's underwriting strength lies in its ability to control costs and manage risk exposure effectively. In Q2 2025, the company's combined ratio improved to 94.1%, a 0.7-point reduction from the prior year, driven by a sharp decline in catastrophe losses. This improvement underscores CNA's ability to adapt to external shocks while maintaining profitability. The expense ratio for its Property & Casualty (P&C) segments fell to 29.8%, the lowest since 2008, reflecting operational efficiency that is rare in the insurance industry.

The net written premium growth of 6% in Q2 2025 further highlights CNA's market positioning. With a 5% renewal rate increase and an 86% retention rate, the company has successfully leveraged pricing power and customer loyalty to drive revenue. Notably, this growth is not merely top-line; the underlying loss ratio for P&C segments remained stable at 61.5%, indicating disciplined risk selection and pricing.

Capital Returns: Balancing Aggressiveness with Prudence

CNA's capital return strategy has been a hallmark of its appeal to income investors. In 2024, the company introduced a special one-time dividend of $2.00 per share, in addition to its regular quarterly payout of $0.46. This move pushed its dividend yield to 8.64%, far exceeding the 2.89% average for the Financial Services sector. While the payout ratio rose to 115.5% in 2024—well above the sector average of 45.1%—CNA's balance sheet strength justified the risk.

The company's debt-to-equity ratio of 18.4% as of Q4 2024 and Q2 2025 highlights its conservative leverage. Coupled with a Return on Equity (ROE) of 8.64% in early 2025 (despite a slight decline from 13.45% in 2023), CNA's ability to generate returns remains robust. Its statutory capital and surplus of $11.2 billion by the end of 2024 further solidify its financial flexibility, allowing it to sustain aggressive payouts even in challenging conditions.

Sustainability in a Volatile Sector

CNA's resilience stems from its high-margin personal lines of business, which account for 80% of its premiums, and a disciplined underwriting approach that has delivered an 8-year streak of underwriting profits. Its credit ratings, consistently above industry averages, reflect this strength. However, investors should remain cautious about the elevated payout ratio and monitor the company's core income and investment performance, which are critical to sustaining dividends.

For example, in Q1 2025, a combined ratio of 98.4% was heavily impacted by 3.8 points of catastrophe losses and adverse prior period development. While CNA's underlying metrics (91.7% combined ratio in Q2 2025) suggest long-term stability, short-term volatility is inevitable in the insurance sector.

Investment Implications

CNA Financial offers a unique value proposition for long-term investors: a combination of defensive underwriting metrics, attractive dividend yields, and a strong balance sheet. However, its aggressive capital return strategy comes with risks. The company's ability to maintain its ROE above industry averages and continue net written premium growth will be key indicators of its sustainability.

For investors willing to accept the elevated payout ratio in exchange for a premium yield, CNA is a compelling option. Yet, it is essential to diversify within the insurance sector and monitor macroeconomic trends, such as interest rate changes and catastrophe frequency, which could impact CNA's investment income and underwriting performance.

Conclusion

CNA Financial's journey from 2023 to 2025 exemplifies how disciplined underwriting and strategic capital allocation can create long-term value in a volatile sector. While its dividend growth and capital return policies are aggressive, the company's robust balance sheet, low leverage, and strong core income provide a buffer against potential downturns. For investors seeking a blend of income and growth, CNA remains a standout name—provided they remain attuned to its financial health and the broader economic environment.