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CF

CNA FINANCIAL CORP (CNA)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 core EPS was $1.03 and GAAP EPS was $1.00; EPS came in exactly in line with S&P Global consensus ($1.03), with core income down 21% year over year on higher catastrophe losses and unfavorable prior-period development in Commercial auto . EPS consensus: $1.03 vs actual $1.03* (inline). Revenues were $3.627B; Q1 revenue consensus was not available* .
  • P&C combined ratio deteriorated to 98.4% (from 93.1% in Q4 and 94.6% in 1Q24) on $97M catastrophe losses (3.8 pts) and 2.5 pts of unfavorable prior-year development (commercial auto AY2024), while underlying combined ratio remained resilient at 92.1% .
  • Growth solid: P&C GWP ex. captives +7% and NWP +9% with retention 86%, written rate +4% and renewal premium change +6%; Specialty growth strengthened and D&O/cyber rate turned slightly positive, a notable shift after prolonged pressure .
  • Investment income remained a stabilizer ($604M pretax), with 2% y/y increase in fixed-income income; management guided Q2 fixed-income and other investment income to ~$555M and 2025 to ~$2.225B, supporting earnings carry into the year .
  • Key watch items/catalysts: sustained rate momentum (Commercial casualty + excess), remediation in commercial auto (raised long-run trend; 18% rate action in the quarter), and execution against expense ratio (~30.5% FY guide) amid elevated catastrophe activity .

What Went Well and What Went Wrong

What Went Well

  • Underlying profitability durable: “eighth consecutive quarter of pre-tax underlying underwriting gain of $200 million or greater” and an overall underwriting profit in an elevated catastrophe quarter .
  • Rate/pricing improved: Rate +4% (up 1 pt q/q) and renewal premium change +6% (up 2 pts), with strong Specialty new business (+19%) and D&O/cyber rates turning slightly positive after many quarters of declines .
  • Investment income stability and guidance: Fixed income and other investments up 2% y/y to $550M; outlook of ~$555M in Q2 and ~$2.225B for 2025 provides visibility (tailwind vs 2024) .

What Went Wrong

  • Combined ratio slippage: P&C combined ratio 98.4% vs 93.1% in Q4 and 94.6% in 1Q24 on $97M cats (3.8 pts) and 2.5 pts unfavorable prior-year development largely in commercial auto (AY2024) .
  • Commercial auto headwinds: Elevated bodily injury severity trends drove unfavorable development (+3.8 pts to loss ratio in Commercial) and pushed the segment to a 101.1% combined ratio despite solid underlying (91.0%) .
  • Specialty margin pressure persists: Specialty underlying combined ratio rose to 93.8% (from 91.3% in 1Q24) on pricing pressure in management liability and higher acquisition/employee costs; unfavorable development in auto warranty added 1.3 pts .

Financial Results

Headline Financials vs prior quarters and estimates

MetricQ3 2024Q4 2024Q1 2025
Revenues ($B)$3.618*$3.689*$3.627
GAAP EPS$1.04 $0.07 $1.00
Core EPS$1.08 $1.25 $1.03
EPS Consensus ($)$1.085*$1.205*$1.03*
EPS SurpriseIn line (−$0.005*)Beat +$0.045*In line
P&C Combined Ratio (%)97.2 93.1 98.4
P&C Underlying Combined Ratio (%)91.6 91.4 92.1
Catastrophe Losses ($M)$143 $45 $97
P&C Net Earned Premiums ($B)$2.484 $2.571 $2.520

Asterisked values are from S&P Global consensus/actuals. Values retrieved from S&P Global.

Segment results (Q1 2025 vs prior-year Q1)

SegmentNEP ($M)Underwriting Gain ($M)Combined RatioUnderlying Combined Ratio
Specialty (Q1’25 / Q1’24)830 / 814 42 / 76 95.1% / 90.7% 93.8% / 91.3%
Commercial (Q1’25 / Q1’24)1,380 / 1,202 (17) / 29 101.1% / 97.6% 91.0% / 90.8%
International (Q1’25 / Q1’24)310 / 315 15 / 21 95.4% / 93.3% 91.8% / 91.3%

P&C production and pricing KPIs (trend)

KPIQ3 2024Q4 2024Q1 2025
Rate3% 3% 4%
Renewal Premium Change5% 4% 6%
Retention85% 86% 86%
GWP ex. 3rd-party captives ($M)2,825 3,230 3,142
New Business ($M)547 591 565

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
P&C Expense RatioFY 2025Not provided~30.5% New/maintained around 30.5%
Fixed Income & Other Investment IncomeQ2 2025Not provided~$555M New
Fixed Income & Other Investment IncomeFY 2025Not provided~$2,225M (+2% vs 2024) New
Effective Tax Rate on Core IncomeFY 2025Not provided~21% (Q1 21.4%) New
DividendQuarterly$0.46 (raised in Feb)$0.46 declared; payable June 5, 2025 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
Commercial auto severity/social inflationContinued elevated severity; underlying loss ratio up; record-low Commercial expense ratio helped offset Unfavorable prior-year development (+3.8 pts); raised long-run trend; took 18% rate increase in quarter in commercial auto; optimizing underwriting terms/conditions Worsened severity but aggressive pricing/action to mitigate
Specialty management liability pricingPricing pressure; negative rates; margin compression Rates improved to +3%; public D&O and cyber slightly positive; underlying still up y/y Early improvement after prolonged pressure
Catastrophe environment$143M Q3 cats; elevated $45M in Q4 (1.8 pts) $97M in Q1 incl. $53M CA wildfires (3.8 pts)
Investment income tailwindNII +13% y/y NII +5% q/q; +10% FY $604M; guidance Q2 ~$555M; FY ~$2.225B
Capital/book value (ex-AOCI)BVPS ex-AOCI $46.50 $46.16; +8% adj. for dividends $44.58; +2% adj. for dividends
Macro/tariffs——Potentially higher loss costs in property/auto physical damage; offsets via valuation updates

Management Commentary

  • CEO Douglas Worman: “We produced solid core income while achieving an overall underwriting gain… the eighth consecutive quarter of pre-tax underlying underwriting gain of $200 million or greater… we continue to grow our top-line at a strong pace.”
  • On Q1 drivers: “The P&C all-in combined ratio was 98.4%… including $97 million of catastrophe loss… Prior period development… was unfavorable by $63 million… driven by accident year 2024 in our commercial auto and auto warranty businesses.”
  • On pricing: “Rate increase was 4%… renewal premium change… 6%… in the U.S. rates were up… fueled by excess casualty… and commercial auto.”
  • CFO Scott Lindquist: “We expect [fixed income and other investments] to be about $555 million in the second quarter… for the full year… about $2,225 million, or a 2% increase as compared to… 2024.”
  • CFO on expenses/taxes: “P&C expense ratio… we currently expect… about 30.5% [for 2025]… effective tax rate on core income… 21%.”

Q&A Highlights

  • Reserve review cadence: No workers’ comp reserve review this quarter; broader line reviews scheduled in Q2 and Q4 2025, with off-cycle actions if warranted .
  • Tariff impacts: Potential near-term effect is higher loss costs in property and auto physical damage; CNA would adjust property valuations and believes it is well positioned to navigate impacts .
  • Commercial auto in construction: Heavier vehicles lead to higher bodily injury claim severity, contributing to loss cost trends and unfavorable development; CNA pursuing higher rates (18%) and underwriting optimization .

Estimates Context

  • EPS vs consensus:
    • Q3 2024: $1.085* vs $1.08 actual (inline) | Revenue: $3.566B* vs $3.618B* (beat)
    • Q4 2024: $1.205* vs $1.25 actual (beat) | Revenue: $3.624B* vs $3.689B* (beat)
    • Q1 2025: $1.03* vs $1.03 actual (inline) | Revenue: consensus N/A*; actual $3.627B
  • Target price consensus: $45.00*; current quarter recommendation data not available*.

Asterisked values are from S&P Global consensus/actuals. Values retrieved from S&P Global.

Key Takeaways for Investors

  • Core earnings quality remains anchored by steady underlying underwriting gains and investment income; elevated cats and commercial auto severity were managed with pricing and underwriting actions .
  • Commercial auto remains the biggest risk vector; watch rate adequacy (18% in Q1) and whether severity trends stabilize across construction exposures .
  • Specialty inflecting: early signs of price improvement in public D&O and cyber could alleviate multi-quarter margin compression; monitor rate momentum and expense discipline .
  • Expect modest tailwind from fixed income reinvestment; Q2 and FY 2025 investment income guidance implies stability to slight growth vs 2024 .
  • Expense ratio framework (~30.5% for 2025) provides a benchmark for operating efficiency; deviations will matter for P&C margin trajectory .
  • Capital remains solid (statutory surplus ~$11.0B); BVPS ex-AOCI trends stable adjusting for dividends; dividend maintained at $0.46/sh .
  • Near-term trading setup: stock likely sensitive to updates on commercial auto loss cost trends, realized rate capture in casualty, catastrophe activity into Q2, and delivering against the investment income outlook .

Additional Detail and Data Sources

  • Press release and financial supplement for Q1 2025: net income $274M, core income $281M, P&C combined ratio 98.4%, underlying combined ratio 92.1%, cats $97M, dividend $0.46 .
  • Segment performance (Specialty/Commercial/International) and YoY comparisons as detailed above .
  • Q4 2024 reference (for sequential comparisons): combined ratio 93.1%; core EPS $1.25; net income impacted by pension settlement .
  • Q3 2024 reference (for trend): combined ratio 97.2%; core EPS $1.08; cats $143M .