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CF

CNA FINANCIAL CORP (CNA)·Q2 2025 Earnings Summary

Executive Summary

  • Core EPS $1.23 beat S&P Global consensus $0.88 by ~40% as underwriting and investment income outperformed; GAAP EPS $1.10; revenue $3.72B, up 6% y/y (estimate not available).*
  • P&C combined ratio improved to 94.1% (vs 98.4% in Q1 and 94.8% y/y) on lower cats ($62M) and a record-low expense ratio since 2008 at 29.8% . P&C underlying combined ratio stayed strong at 91.7% .
  • Investment income rose 7% to $662M on higher fixed income yields (4.9%) and stronger LP/common stock returns (3.6%); management raised FY25 “fixed income & other” NII outlook to ~$2.25B (from ~$2.225B) and guided Q3 to ~$565M .
  • Corporate segment took an $88M after-tax mass tort reserve charge; book value per share ex-AOCI $45.25 (+4% from YE’24 adjusting for dividends); quarterly dividend maintained at $0.46 .
  • Reinsurance treaties were renewed on “very favorable terms,” and CNA launched Cardinal E&S to expand in excess & surplus—potential catalysts alongside the substantial EPS beat .

What Went Well and What Went Wrong

What Went Well

  • Strong core earnings and margin performance: Core income up 3% y/y to $335M; P&C combined ratio 94.1% with underlying combined ratio 91.7% and expense ratio down to 29.8% (lowest since 2008) . CEO: “underlying underwriting gain of $213M was the ninth consecutive quarter of $200M or more” .
  • Investment engine delivered: Net investment income up 7% y/y to $662M; fixed income effective yield 4.9% and LP/common stock return 3.6%; TTM LP/common stock 13% .
  • Commercial momentum and disciplined growth: Commercial combined ratio improved to 94.8% (from 97.0% y/y) on lower cat and lower expense ratio; gross written premiums ex-captives +6%; new business $420M (+4%) . CFO expects expense ratio ~30% for balance of 2025 .

What Went Wrong

  • Corporate headwind from legacy mass tort: Corporate & Other core loss widened to $114M (vs $53M y/y) due to $88M after-tax mass tort reserve charge tied to legacy abuse claims and Rochester Diocese matter .
  • Specialty margins modestly softer y/y: Specialty combined ratio 93.6% (vs 92.7% y/y) as underlying loss ratio edged up; growth moderated with net written premiums +4% .
  • Rate pressure in certain pockets: International reported negative rates (-4%) with competitive pressure; national accounts property rates fell five points q/q; retention dipped to 83% overall as CNA prioritized profitability over growth .

Financial Results

MetricQ2 2024Q1 2025Q2 2025
Revenue ($B)$3.52 $3.63 $3.72
Core EPS ($)$1.19 $1.03 $1.23
GAAP EPS ($)$1.17 $1.00 $1.10
P&C Combined Ratio (%)94.8% 98.4% 94.1%
P&C Underlying Combined Ratio (%)91.6% 92.1% 91.7%
P&C Expense Ratio (%)30.7% 30.2% 29.8%
Catastrophe Losses (pretax, $M)$82 $97 $62
Net Investment Income (pretax, $M)$618 $604 $662
P&C Underwriting Gain ($M)$124 $40 $150
EPS Consensus Mean* ($)—1.03*0.88*
Revenue Consensus Mean* ($B)———
  • EPS estimates and revenue consensus values marked with * are from S&P Global; consensus revenue for Q2 2025 was unavailable.*

Segment Breakdown (Q2 2025 vs Q2 2024)

SegmentNEP ($M)NEP ($M)UW Gain ($M)UW Gain ($M)Combined RatioCombined RatioUnderlying Combined RatioUnderlying Combined Ratio
Q2 2024Q2 2025Q2 2024Q2 2025Q2 2024Q2 2025Q2 2024Q2 2025
Specialty831 862 60 53 92.7% 93.6% 93.1% 93.6%
Commercial1,247 1,402 39 74 97.0% 94.8% 91.0% 90.6%
International311 324 25 23 91.9% 92.8% 90.9% 91.4%

KPIs (P&C)

KPIQ2 2024Q1 2025Q2 2025
Rate4% 4% 3%
Renewal Premium Change5% 6% 5%
Retention85% 86% 83%
New Business ($M)$595 $565 $645
GWP ex 3rd-Party Captives ($M)$3,203 $3,142 $3,353

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
P&C Expense RatioFY 2025 run-rate~30.5% (Q1 view) ~30% for balance of 2025 Lowered
Fixed Income & Other NII (pretax)Q3 2025—~ $565M New datapoint
Fixed Income & Other NII (pretax)FY 2025~ $2.225B (Q1 guide) ~ $2.250B Raised
Effective Tax Rate on CoreFY 2025~21% ~21% Maintained
DividendRegular$0.46 per share $0.46 per share; payable Sep 4, 2025 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24, Q1’25)Current Period (Q2’25)Trend
Commercial auto & social inflationElevated severity drove Q1 adverse development; pushing >10%+ rate; excess casualty +14%; commercial auto +18% in Q1 U.S. rates consistent at 5%; commercial auto ~20% in Q2; underlying loss ratio steady; disciplined underwriting Stable–disciplined pricing continues
Specialty financial lines rateRate turned slightly positive in Q1 for public D&O and cyber; still margin pressure Aggregate Specialty rate +3%; first positive quarter in FI & Mgmt Liability after 10 quarters of declines Improving
Expense ratio30.0% in Q4; ~30.5% FY25 run-rate (Q1 view) 29.8% in Q2; guide ~30% for balance of 2025 Better than prior
Investment income/yieldsNII +10% in FY’24; Q1 guide ~$555M for Q2 and ~$2.225B FY’25 Q2 NII $662M; guide ~$565M Q3 and ~$2.25B FY’25; fixed income yield 4.9% Incrementally higher
Reinsurance treatiesQ4: strong renewals; favorable economics Q2: “very successful” property treaty renewals with favorable terms/pricing Positive
International pricing/competitionQ4: rates turned slightly negative; portfolio profitable Rates pressured (-4%); consistent profitability; strong new business +43% Mixed: growth vs rate
Mass tort/legacy reservesQ4: ongoing LPT and mass tort reviews; A&EP review in Q4 $88M after-tax mass tort charge in Q2; asbestos & environmental review slated for Q4 Ongoing headwind

Management Commentary

  • “Our underwriting gain of $150 million was up 21% from the prior year second quarter… underlying underwriting gain of $213 million was the ninth consecutive quarter of $200 million or more.” – CEO Douglas Worman .
  • “P&C expense ratio… 29.8%… we expect the expense ratio to continue to track at approximately 30% for the balance of 2025.” – CFO Scott Lindquist .
  • “Based on the current interest rate environment we expect income from fixed income and other investments to be about $565 million in the third quarter… and about $2,250 million for the full year 2025.” – CFO Scott Lindquist .
  • “We had extremely successful renewals of our property reinsurance treaties… achieved very favorable terms, conditions, and pricing.” – CEO Douglas Worman .
  • “Cardinal E&S… furthering our dedication to serving the excess and surplus market… dedicated underwriting teams focused on casualty, property, healthcare and financial lines.” – CEO Douglas Worman .

Q&A Highlights

  • No live call; management provided prepared remarks. Key clarifications included: expense ratio trajectory (~30% 2H’25) and investment income outlook (Q3 ~$565M; FY’25 ~$2.25B) .
  • Corporate reserves: second-quarter comprehensive review resulted in $88M after-tax mass tort charge; A&EP review scheduled for Q4 .
  • Pricing/mix: Commercial rate +5% with continued double-digit increases in commercial casualty; national accounts property rate down q/q; retention moderated as CNA prioritized margins .

Estimates Context

MetricQ4 2024Q1 2025Q2 2025
EPS Consensus Mean* ($)1.205*1.03*0.88*
EPS Actual ($)1.25 1.03 1.23
Revenue Consensus Mean* ($B)3.624*——
Revenue Actual ($B)3.689 3.627 3.717
  • Q2 2025: EPS beat was significant (1.23 vs 0.88; +$0.35); revenue consensus unavailable.*
  • Q1 2025: EPS in line with consensus (1.03 vs 1.03).*
  • Q4 2024: EPS modest beat (1.25 vs 1.205); revenue beat (3.689 vs 3.624).*

*Values retrieved from S&P Global.

Key Takeaways for Investors

  • The quarter’s material EPS beat was driven by strong investment income and improved expense ratio; underlying P&C profitability remains firmly sub-92% combined, supporting earnings durability .
  • Commercial execution stands out: better expense ratio and lower cat impact drove a 220 bps combined ratio improvement y/y; continued double‑digit rate in casualty counteracts social inflation pressures .
  • Specialty is stabilizing with FI & Mgmt Liability rate turning positive; watch retention and margin progression as pricing normalizes .
  • Investment tailwinds persist: fixed income yield lift and LP/common stock gains support NII; management nudged FY’25 NII higher and set Q3 run‑rate expectations .
  • Corporate mass tort reserve strengthening remains a swing factor; additional A&EP review in Q4 is a watch item .
  • Strategic catalysts: favorable reinsurance renewals reduce earnings volatility; Cardinal E&S launch broadens profitable E&S exposure .
  • Near-term: Positive reaction bias given the sizeable EPS beat and margin improvement; medium-term: focus on sustaining sub‑92% underlying CR, Specialty pricing momentum, and monitoring legacy reserve actions .