CHICAGO, IL – August 4, 2025 – CNA Financial Corporation (NYSE: CNA), a prominent player in the commercial property and casualty insurance market, today announced its second-quarter 2025 earnings, revealing a resilient performance in a dynamic and competitive industry. The company’s results underscore its ability to manage underwriting challenges effectively while capitalizing on a favorable investment landscape. A comprehensive valuation analysis, leveraging two distinct models, suggests that the stock may be significantly undervalued, presenting a compelling opportunity for investors.
CNA reported a net income of $299 million, or $1.10 per share, a slight decrease from the $317 million, or $1.17 per share, reported in the second quarter of 2024. However, the more telling metric of core income—which excludes non-recurring items—showed an encouraging improvement, rising to $335 million, or $1.23 per share, from $326 million, or $1.19 per share, in the prior-year quarter. This growth was largely fueled by a 7% increase in pretax net investment income to $662 million, with contributions from fixed income securities ($562 million) and limited partnerships ($100 million).
The company’s core Property & Casualty (P&C) segment delivered strong results, with core income climbing to $448 million from $380 million. This was driven by a more efficient operation, as the P&C combined ratio improved to 94.1% from 94.8%. The improvement was also a result of better catastrophe management, as losses dropped to $62 million from $82 million.
CNA’s commitment to profitable growth was evident in its premium figures. Gross written premiums in P&C segments grew by 5%, with net written premiums up 6%. Renewal premium change was a healthy +5%, supported by a +3% increase in rates and a +1% rise in exposure. These metrics highlight the company’s focus on maintaining strong performance in its specialty and commercial lines, even as industry-wide rate increases begin to moderate.
In-Depth Valuation Analysis: A Look at Intrinsic Value
A deep dive into CNA’s valuation, using two sophisticated models, reveals a compelling case for a significant gap between the company’s current market price and its estimated intrinsic value.
Valuation Methodology
For financial services firms like CNA, traditional valuation metrics such as Free Cash Flow (FCF) can be misleading. Instead, these models use Distributable Earnings, which are proxied by Net Income from Continuing Operations. All projections are discounted at an 8% rate, which serves as a conservative required return, and a 2.5% perpetual growth rate is used for the terminal value, aligning with long-term economic expectations. A 40% Margin of Safety (MoS) is applied to account for the inherent uncertainties in the insurance sector, such as claims volatility.
Valuation Results
| Stock Ticker | Valuation Method | Intrinsic Value per Share | Price with 40% Margin of Safety | Last Closing Price | Action |
| CNA | Buffett-Inspired | $62.52 | $37.51 | $43.89 | Buy |
| CNA | McGrew Growth | $129.02 | $77.41 | $43.89 | Screaming Buy |
The Buffett-Inspired method, which assumes a consistent 3% growth in distributable earnings over the next decade, yields an intrinsic value of $62.52 per share. Based on this model, the stock is a “Buy” as its intrinsic value is between 25% and 50% above the last closing price of $43.89.
The McGrew Growth method, on the other hand, classifies CNA as a “growth stock” due to its robust 3-year earnings CAGR of 17.9%. This model projects an initial growth rate of 17.9% that declines linearly to 6% over 10 years. This approach results in a significantly higher intrinsic value of $129.02 per share, leading to a “Screaming Buy” rating as the intrinsic value exceeds 50% of the current price.
The average intrinsic value across both methods is a substantial $95.77 per share, suggesting a wide margin of safety and a strong potential for capital appreciation.
A Look at CNA’s Financial Health and Business Moat
Beyond the valuations, a closer look at CNA’s financial and operational metrics provides a clear picture of its stability and competitive advantages.
Key Financial Metrics
- Trailing 12-Month ROE (Return on Equity): 8.36%
- Trailing 12-Month ROTA (Return on Tangible Assets): 1.3%
- Debt-to-Equity Ratio: 0.29
- Interest Coverage Ratio: 9.72x
- Free Cash Flow (FCF) Yield: 21.9%
- Operating Margin (TTM): 8.9%
- Capital Expenditures as % of FCF: 3.56%
CNA maintains a conservative and financially sound profile, with a low debt-to-equity ratio and strong interest coverage, indicating minimal financial risk. Its impressive 21.9% FCF yield highlights the company’s ability to generate significant cash, supporting a generous dividend payout ratio that has exceeded 100% of earnings without compromising its solvency.
Business Moat and Competitive Landscape
CNA’s competitive advantage, or “narrow moat,” is built on its scale, established distribution networks, and deep underwriting expertise. As a subsidiary of Loews Corporation, it benefits from an extensive data pool for risk selection and pricing. This allows CNA to offer competitive rates while maintaining strong profitability, particularly in its specialized commercial lines. The company’s business model is also highly resilient, as the demand for insurance remains constant regardless of economic cycles.
The insurance market is highly concentrated, with CNA facing competition from giants like Chubb and Travelers. While Chubb boasts superior global diversification and Travelers is known for its tech-driven efficiency, CNA holds a strong position through its focus on specific U.S. specialty lines. Its strong relationships with brokers and consistent premium growth demonstrate its ability to hold its own against these larger rivals.
Future Outlook and Investment Summary
CNA’s management is cautiously optimistic, focusing on continued momentum in new business and international growth, which saw an 8% increase. With a disciplined approach to underwriting and the benefit of a strong investment portfolio, the company is well-positioned for sustained profitability even as market conditions evolve.
CNA Financial presents a compelling investment case for those seeking stable income and potential capital appreciation in a resilient sector. Its conservative financial management, coupled with a narrow but defensible competitive moat, provides a solid foundation. The substantial undervaluation suggested by the valuation models, supported by strong cash generation and a consistent dividend, makes CNA an attractive option for value-oriented investors.
Additional Quantitative Results Table
| Metric Name | Value | Timeframe |
| ROE | 9.67% | 3-Year Avg |
| ROE | 8.8% | 5-Year Avg |
| ROE | 9.4% | Latest Year |
| ROE | 8.36% | TTM |
| ROIC | 9% | 3-Year Avg |
| ROIC | 8.3% | Latest Year |
| ROIC | 7.8% | TTM |
| Gross Profit Margin | 44.7% | Latest Year |
| Gross Profit Margin | 43.9% | TTM |
| Net Profit Margin | 6.85% | Latest Year |
| Net Profit Margin | 6.18% | TTM |
| Return on Tangible Assets (ROTA) | 1.4% | Latest Year |
| Return on Tangible Assets (ROTA) | 1.3% | TTM |
| Debt-to-Cash and Equivalents | 6.3 | Latest Year |
| Debt-to-Cash and Equivalents | 6.15 | TTM |
| Debt-to-Equity Ratio | 0.28 | Latest Year |
| Debt-to-Equity Ratio | 0.29 | TTM |
| Earnings Growth Rate | -0.8% | 5-Year CAGR |
| Earnings Growth Rate | 17.9% | 3-Year CAGR |
| Revenue Growth Rate | 5.4% | 5-Year CAGR |
| Revenue Growth Rate | 8.5% | 3-Year CAGR |
| Free Cash Flow Yield | 21.9% | TTM |
| Operating Margin | 9.6% | Latest Year |
| Operating Margin | 8.9% | TTM |
| Interest Coverage Ratio | 10.3 | Latest Year |
| Interest Coverage Ratio | 9.72 | TTM |
| Capital Expenditures as % of FCF | 3.56% | TTM |
| Dividend Payout Ratio | 107% | Latest Year |
| Dividend Payout Ratio | 117% | TTM |
| Per Share Book Value Growth | -4.6% | 5-Year CAGR |
| Share Buyback/Dilution Trends | 0% | 3-Year Avg |
| Capital Structure | Long-term dominant | TTM |
| Debt-Adjusted ROE (DAROE) | 7.1% | 3-Year Avg |
| Debt-Adjusted ROE (DAROE) | 6.48% | TTM |
