CNA Financial's Q1 2025 Results: A Mixed Bag Amid Rising Catastrophe Costs and Premium Growth

CNA Financial (NYSE: CNA) reported its first quarter 2025 earnings, revealing net income attributable to Loews Corporation of $252 million, or $1.00 per share, down from $310 million ($1.30 per share) in the prior-year period. Core income, which excludes investment volatility and noncontrolling interests, came in at $281 million, or $1.03 per share, below both the $1.30 prior-year mark and the $1.14 consensus estimate. While premium growth and underwriting discipline provided亮点, rising catastrophe losses and unfavorable reserve developments underscored the challenges facing the insurer.

Key Metrics and Drivers

1. Underwriting Performance:
2. Net Written Premiums: Rose 9% year-over-year, driven by strong retention (86%) and renewal premium increases of +6% (4% rate hikes + 2% exposure growth). Commercial segments, including property and casualty lines, were key contributors.
3. Catastrophe Losses: Surged to $97 million pretax, a +10% increase compared to $88 million in Q1 2024, with wildfires in California accounting for $53 million.
4. Reserve Developments: Unfavorable prior-year loss adjustments added 2.5 points to the P&C combined ratio, primarily due to commercial auto claims from 2024 accident years.

The Property & Casualty (P&C) combined ratio expanded to 98.4% from 94.6% in 2024, reflecting the drag from catastrophes and reserve adjustments. However, the underlying combined ratio, excluding these items, remained disciplined at 92.1%, slightly above the 91% in Q1 2024 but still within CNA’s long-term target range.

1. Investment Income:

2. Net investment income fell $5 million year-over-year to $604 million pretax, due to lower returns from limited partnerships and equities. This aligns with broader market trends as rising interest rates compress yields.

3. Core Income Miss:

4. The $1.03 per share core income missed estimates by $0.11, marking the first quarterly miss in four years. Analysts had already reduced full-year 2025 EPS forecasts by $0.78 to $4.35, citing concerns over macroeconomic volatility and investment headwinds.

Market Context and Expectations

• Premium Growth Momentum: The 9% net written premium rise outperformed the industry’s average, signaling CNA’s ability to retain clients and win new business. Commercial auto and liability lines, however, faced rising loss costs, highlighting execution risks.
• Catastrophe Exposure: Q1 2025’s elevated catastrophe costs were part of a broader industry trend. For CNA, this underscores the need for robust capital management and underwriting selectivity to offset such volatility.
• Dividend and Capital Allocation: Despite the earnings miss, CNA maintained its $0.46 quarterly dividend, a 5% increase from 2024, while Loews Corporation’s book value per share rose to $89.74, up 1.8% from year-end 2024.

Forward-Looking Risks and Opportunities

• Underwriting Discipline: CNA’s eighth consecutive quarter of $200 million+ pretax underwriting profits reflects its focus on profitable growth. However, sustaining this amid rising commercial auto losses and potential rate softening remains a challenge.
• Investment Environment: With the Federal Reserve’s rate hikes stabilizing, CNA may benefit from higher fixed-income yields in 2025, though equity market volatility could persist.
• Share Repurchases: Loews’ repurchase of 5.1 million shares (valued at $429 million) since December 2024 signals confidence in CNA’s long-term value, though the stock’s P/E of 13.72 suggests limited upside unless earnings recover.

Conclusion: A Hold with Caution

CNA Financial’s Q1 2025 results reflect a company navigating conflicting forces: strong premium growth and underwriting resilience vs. rising catastrophe costs and investment headwinds. While the $9 billion revenue forecast and 9% premium expansion provide optimism, the core income miss and elevated loss ratios suggest execution risks.

Investors should prioritize:
- Underwriting Margins: Monitor the P&C combined ratio’s trajectory. A return to sub-95% would alleviate concerns about profitability.
- Catastrophe Management: The $97 million Q1 loss was within CNA’s expectations, but sustained high costs could pressure capital returns.
- Valuation: At a 13.72 P/E and 1.04 price-to-book ratio, shares are fairly valued but offer limited upside unless earnings rebound.

In summary, CNA’s fundamentals remain solid, but the path to meeting lowered EPS estimates hinges on stabilizing loss costs and capitalizing on premium growth. For now, a Hold rating is warranted, with a preference for investors seeking stability over aggressive growth.