CNA FINANCIAL CORP (CNA)·Q4 2024 Earnings Summary

Executive Summary

• Core EPS was $1.25 on core income of $342M, down 6% YoY, while net EPS was $0.07 due to a $290M after-tax pension settlement charge; P&C underlying combined ratio remained strong at 91.4% and underlying underwriting gain hit a record $222M .
• Property & Casualty combined ratio was 93.1% vs 92.1% LY, with catastrophes adding 1.8 pts (mainly Hurricane Milton), offset by a 1.2-pt expense ratio improvement from NEP growth; net investment income rose 5% to $644M .
• Commercial delivered record underlying profitability (90.0% underlying CR) and all-in underwriting gain of $106M as NEP grew 14%; Specialty margins compressed on management liability pricing; International saw FX headwinds and higher cats .
• Capital and dividends: regular dividend raised 5% to $0.46 and a $2.00 special dividend declared; book value/share ex-AOCI was $46.16 (+8% YoY adjusted for dividends); AM Best revised outlooks to Positive in December .
• 2025 setup: CFO guides fixed-income and other investment income of ~$550M in Q1 2025 and ~$2.225B for FY 2025, ~21% core tax rate, and expense ratio run-rate ~30.5%; management estimates $40–$70M net exposure to California wildfires—watch estimate updates and catastrophe trends .

What Went Well and What Went Wrong

What Went Well

• Record underlying underwriting gain ($222M) and lowest P&C expense ratio since 2008 (30.0%): “The expense ratio of 30.0% was the lowest since 2008, a significant contributing factor to our excellent underlying combined ratio” — CEO Douglas Worman .
• Commercial segment records: underlying combined ratio 90.0% (lowest since 2008), all-in underwriting gain $106M, and NEP +14%; commercial auto rate +17% and excess casualty +11% supported rate adequacy above loss cost trends .
• Investment income momentum: total NII $644M (+5% YoY) with favorable fixed income and strong LP/common stock performance; full-year NII $2.497B (+10%) .

What Went Wrong

• Core EPS down and Specialty margin compression: Specialty combined ratio rose to 93.8% (vs 90.8% LY) on continued management liability pricing pressure (underlying LR +1.5 pts) and higher expense ratio .
• International headwinds: cats of $12M (3.9 pts) and FX losses ($15M pretax) drove combined ratio to 94.8% (vs 93.0% LY) despite NEP +11% .
• Corporate charges and legacy exposures: core loss widened to $(91)M, including non-economic A&EP LPT accounting charge ($35M after-tax) and $17M after-tax legacy mass tort development; watch continued reserve reviews .

Financial Results

Consolidated headline metrics (oldest → newest)

Segment breakdown – profitability and mix (Q4 2024 vs Q4 2023)

KPIs and production (oldest → newest; P&C consolidated)

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “The underlying underwriting gain was up 10% in the quarter to a record high of $222 million… expense ratio of 30.0% was the lowest since 2008” — Douglas Worman, CEO .
• “Commercial… underlying combined ratio was a record low of 90.0%… all-in underwriting gain of $106 million was the best on record” — Management remarks .
• “We currently believe an expense ratio of about 30.5% is a reasonable run rate heading into 2025” — Scott Lindquist, CFO .
• “We expect income from fixed income and other investments to be about $2,225 million [FY 2025]” — CFO .
• “We currently estimate net exposure relating to the California wildfires in the range of $40 million to $70 million” — Management .

Q&A Highlights

• Net vs gross written premium growth: Higher net growth driven by mix in Commercial/Specialty and favorable prior-year reinsurance treaty adjustments in International .
• 2025 fixed-income guidance: Despite favorable long rates, lower short-term rates temper “other investments”; expect ~2% YoY increase vs 2024 .
• International FX variance: U.S. dollar vs GBP caused ~$15M pretax FX loss; Lloyd’s assets largely USD hedge through OCI .
• Reinsurance renewals: Most third-party treaties oversubscribed with favorable terms and ceding economics, supporting underwriting stability .
• Legacy liabilities: A&EP LPT accounting creates timing differences; deferred gain of ~$425M to be amortized over time .

Estimates Context

• We attempted to retrieve S&P Global consensus estimates for Q4 2024 EPS and revenue; data was unavailable in this session due to provider limits. As a result, we cannot assess beat/miss vs Street for EPS or revenue at this time.
• Actuals for Q4 2024: Revenue $3.689B, Core EPS $1.25, Net EPS $0.07 (includes $290M after-tax pension settlement) .

Key Takeaways for Investors

• Underlying profitability remains robust: record underlying underwriting gain and sub-92% underlying CR; Commercial is driving the quality of earnings despite casualty inflation .
• Specialty margin pressure is the key risk to monitor; management liability rate discipline remains necessary to stabilize loss ratio trajectory .
• Investment income provides a durable tailwind; 2025 fixed-income guide suggests stability/upside even with lower short rates—supports core ROE ~10% context .
• Expense ratio structurally improved (30.0% in Q4) with 2025 run-rate ~30.5%; operating leverage from NEP growth is a persistent positive .
• Capital return: dividend increase and $2.00 special dividend are near-term catalysts; AM Best outlook revision to Positive adds a credibility premium .
• Watch cats and wildfire exposure ($40–$70M), FX in International, and legacy charges (A&EP LPT, mass tort) as potential sources of earnings volatility .
• Near-term trading implications: dividend actions and strong Commercial margins are supportive; sensitivity to Specialty pricing trends and catastrophe headlines could introduce volatility around prints .