Is CNA Financial Still Undervalued Amid Solid Earnings Growth and a Favorable Risk Profile?

The insurance sector has long been a barometer of macroeconomic resilience, with companies like CNA Financial (CNA) offering a blend of cyclical exposure and long-term stability. As the market digests CNA's recent third-quarter 2025 results, the question of whether the stock remains undervalued-despite its strong earnings growth-demands a nuanced analysis of its financial performance, valuation metrics, and risk landscape.

Earnings Momentum and Operational Resilience

CNA's Q3 2025 earnings report underscored its ability to navigate a challenging macroeconomic environment. The company reported net income of $403 million, or $1.48 per share, with core income reaching a record $409 million, or $1.50 per share-a 40% year-over-year increase according to the company's announcement. This growth was driven by three key factors: lower catastrophe losses, improved underwriting discipline, and higher net investment income. Specifically, the Property &Casualty (P&C) segment contributed $456 million in core income, up from $346 million in the prior year, reflecting disciplined risk management and favorable claims experience. Meanwhile, net investment income rose 2% to $638 million, bolstered by stronger returns from fixed-income securities. These results highlight CNA's operational agility in a market where margin preservation is critical.

Valuation Metrics: A Discount to Peers

CNA's valuation appears compelling when benchmarked against industry peers. The stock currently trades at a price-to-earnings (P/E) ratio of 12.6x to 13x according to Webull data, below the US insurance industry average of 13.4x and the peer average of 13.8x as reported by Yahoo Finance. This discount suggests the market is pricing in caution, potentially underestimating CNA's earnings potential. A discounted cash flow (DCF) analysis further reinforces this view, estimating a fair value of approximately $63.65 per share, implying the stock is undervalued by 27% to 30%. Analysts also project a fair P/E ratio of 15.9x according to Webull analysis, indicating room for valuation expansion if earnings growth or investor sentiment improves.

Risk Factors: Balancing Strengths and Vulnerabilities

While CNA's financials are robust, its risk profile warrants careful scrutiny. Operational and cybersecurity risks account for 29% of its disclosed vulnerabilities as per TipRanks data, with potential disruptions to business operations or vendor relationships posing significant threats. Additionally, the company faces underwriting challenges, including competitive pricing pressures and margin compression in a softening market as reported by Yahoo Finance. These factors could constrain earnings growth if market conditions deteriorate or if the company struggles to maintain premium rates. However, CNA's strong capital position and disciplined underwriting practices provide a buffer against such headwinds.

Long-Term Investment Potential

CNA's long-term appeal lies in its ability to balance growth with risk management. The company's recent dividend declaration of $0.46 per share according to the company's announcement signals confidence in its cash flow sustainability, while its P&C segment's resilience suggests a capacity to adapt to evolving market dynamics. For investors, the key question is whether the current valuation discount adequately compensates for these risks. Given CNA's strong earnings trajectory, favorable DCF valuation, and relatively conservative P/E ratio, the stock appears to offer asymmetric upside potential. However, this potential hinges on the company's ability to navigate operational risks and maintain underwriting discipline in a competitive landscape.

Conclusion

CNA Financial's combination of solid earnings growth, a discounted valuation, and a manageable risk profile positions it as an intriguing long-term investment. While operational and underwriting challenges persist, the company's financial strength and strategic focus on margin preservation mitigate these concerns. For investors with a medium- to long-term horizon, CNA's current valuation appears to reflect a prudent balance of caution and opportunity-a reflection of both its strengths and the market's cautious outlook. As the insurance sector continues to evolve, CNA's disciplined approach may prove to be its most valuable asset.