CNA Q3 Deep Dive: Underwriting Discipline and Investment Gains Shape Results

Insurance provider CNA Financial (NYSE:CNA) met Wall Streets revenue expectations in Q3 CY2025, with sales up 5.5% year on year to $3.82 billion. Its non-GAAP profit of $1.50 per share was 13.6% above analysts’ consensus estimates.

Is now the time to buy CNA? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

CNA Financial’s third quarter results were marked by robust underwriting gains and improved net investment income, both highlighted by management as core contributors to profitability. CEO Douglas Worman pointed to a "record core income of $409 million, driven by very strong underwriting gain and higher net investment income." Management emphasized that lower catastrophe losses and continued expense control supported the quarter, with underwriting income nearly tripling year over year. Despite some caution on loss cost trends and pockets of competitive pricing pressure, CNA’s disciplined approach to portfolio optimization and risk selection underpinned the solid outcome.

Looking ahead, CNA’s guidance reflects measured optimism, with management focusing on maintaining underwriting discipline amid evolving market conditions and leveraging technology, including artificial intelligence, to drive efficiency. Worman stated, “We are managing our expense ratio effectively while continuing to increase our investment in talent and technology.” The company believes that ongoing opportunities in the excess and surplus lines market will be a key growth lever, while proactive management of long-term care reserves and investment portfolio actions are expected to support financial stability. Management also underscored the importance of adapting to market dynamics by expanding in profitable segments and retrenching where pricing is inadequate.

Key Insights from Management’s Remarks

CNA’s solid third quarter was shaped by strong underwriting performance, effective expense management, and strategic portfolio adjustments in response to market trends.

• Underwriting discipline drives gains: Management attributed the surge in underwriting income to strong risk selection and a willingness to walk away from business when pricing or terms were not aligned with risk. This approach was especially evident in certain commercial auto and specialty lines, where competitive pressures did not deter CNA from prioritizing profitability over growth.
• Expense ratio improvement: The company reported an expense ratio below 30% for the quarter, a notable achievement that management connected to operational efficiency initiatives and higher net earned premiums. This improvement was called out as the “first quarter on record below 27%” for the Commercial segment, reflecting the benefits of cost control.
• Benign catastrophe environment: Catastrophe losses were considerably lower than historical averages, contributing to a lower combined ratio and freeing up capital for core underwriting activities. Management noted that this was a key driver of the nearly threefold increase in underwriting income versus the prior year quarter.
• Excess and surplus lines opportunity: CNA’s Cardinal E&S offering continues to expand as the company sees attractive opportunities in the excess and surplus market. Management believes this segment will represent a growing portion of the overall business, citing favorable market dynamics and increasing demand for tailored insurance solutions.
• Long-term care (LTC) reserve management: In the Life & Group segment, CNA completed its annual review of long-term care reserves, with assumption updates leading to a modest, deferred favorable impact. Management highlighted ongoing de-risking strategies, including policy buyouts and benefit reductions, which have contributed to a stronger statutory margin and improved outlook for the closed LTC blocks.

Drivers of Future Performance

CNA expects continued profitability to be supported by underwriting discipline, expansion in selected markets, and ongoing investment in technology, while remaining vigilant about loss trends and competitive pressures.

• Selective growth focus: Management plans to grow in segments and geographies where risk-adjusted returns are compelling, particularly in excess and surplus lines, while withdrawing from areas where pricing does not reflect underlying loss costs. This disciplined growth approach is expected to support both revenue and margin stability.
• Technology and operational investments: The company is increasing investment in technology, including artificial intelligence, to enhance underwriting, claims management, and client engagement. Management expects these investments to drive further efficiencies and improve the quality of risk assessment across the portfolio.
• Monitoring social inflation and loss cost trends: CNA remains cautious about persistent social inflation—a term for rising claims costs due to legal trends and larger jury awards—and is maintaining prudent reserving practices in affected lines. Management acknowledged that while pricing remains adequate overall, certain pockets require ongoing vigilance and could impact future profitability if trends worsen.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be closely watching (1) the pace of premium growth in excess and surplus lines as CNA seeks to expand its Cardinal E&S offering, (2) the company’s ability to maintain or further reduce the expense ratio amid ongoing investments in technology, and (3) how effectively management navigates loss cost trends and competitive pressure, particularly in commercial auto and specialty lines. The impact of long-term care reserve management and investment portfolio performance will also be key areas to monitor.

CNA Financial currently trades at $46.89, up from $44.55 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free for active Edge members).

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