CNA
CNA
Hold 2026-03-20
Model
DDM
Price at Report
$45.12
Base IV
$48.49
Bear IV
$37.01
Bull IV
$64.43
Entry Zone: 39-45 · Sell Above: 55
Bore Family Office
Valuation Report — CNA Financial Corporation (CNA) • March 20, 2026
3-Stage DDM (Ke) • Discount Rate: 7.20% • Current Price: $45.12
Prepared by Lurch • Bore Family Office • Data: Finnhub, StockAnalysis.com, S&P Global Market Intelligence
🏢 Business Overview
CNA Financial Corporation, founded in 1853 and headquartered in Chicago, is the seventh-largest US commercial property & casualty insurer with $14.99B in FY2025 revenue. CNA is 82% owned by Loews Corporation (L), making it effectively a controlled subsidiary with limited public float (~18% free float, ~49M shares available). The company provides professional liability, management liability, surety, and standard commercial P&C coverage through ~8,000 independent agents and brokers across the US, Canada, UK, and Continental Europe.
CNA's competitive position is anchored in specialty commercial lines expertise — particularly professional and management liability — where it has deep underwriting experience and long-standing broker relationships. The company's combined ratio averaged ~95% over the past 5 years, slightly below industry average. CNA also maintains a large legacy Life & Group segment in run-off, which creates periodic reserve volatility but is declining in materiality.
| Business Segment | Revenue | % of Total | YoY Growth | Margin | Notes |
|---|---|---|---|---|---|
| Specialty | $4,500M | 42% | +7.0% | — | Professional liability, management liability, surety — highest margin segment |
| Commercial | $4,200M | 39% | +5.0% | — | Standard commercial P&C: property, casualty, auto, workers comp |
| International | $1,300M | 12% | +6.0% | — | Canada, UK, Europe — Hardy underwriting at Lloyd's |
| Life & Group (run-off) | $700M | 7% | -5.0% | — | Legacy long-term care and group benefits in run-off; declining |
| Blended Growth Rate | — | 100% | +5.3% | — | Weighted avg across segments |
🔍 Quality Scorecard
| Metric | Value | Assessment |
|---|---|---|
| ROIC | 11.0% | 8–12% adequate |
| FCF Margin | 16.0% | ≥10% strong |
| Debt / EBITDA | 1.6x | ≤2x conservative |
| Revenue Trend | Growing 3yr | 3-year directional trend |
| FCF Margin Trend | Stable (±1pp) | Directional margin trajectory |
| Analyst Revisions | Neutral | Last 90 days consensus direction |
✅ Quality profile supports the valuation
📊 Financial Snapshot
| Metric | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|
| Revenue ($M) | $11,908 | $11,879 | $13,299 | $14,270 | $14,989 |
| EBITDA ($M) | $1,629 | $977 | $1,718 | $1,411 | $1,825 |
| Operating Income ($M) | $1,575 | $926 | $1,645 | $1,344 | $1,755 |
| Net Income ($M) | $1,184 | $682 | $1,205 | $959 | $1,278 |
| EPS (diluted) | $4.34 | $2.51 | $4.43 | $3.52 | $4.69 |
| Free Cash Flow ($M) | $1,971 | $2,450 | $2,195 | $2,476 | $2,404 |
| Annual DPS | $1.520 | $1.600 | $1.680 | $1.760 | $1.840 |
| Total Debt ($M) | $2,779 | $2,781 | $3,031 | $2,973 | $2,971 |
| Rev YoY Growth | — | -0.2% | +12.0% | +7.3% | +5.0% |
| Gross Margin | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% |
| EBITDA Margin | 13.7% | 8.2% | 12.9% | 9.9% | 12.2% |
| Operating Margin | 13.2% | 7.8% | 12.4% | 9.4% | 11.7% |
| Net Margin | 9.9% | 5.7% | 9.1% | 6.7% | 8.5% |
📈 DDM Scenarios
$37
🔴 Bear
$48
📊 Base
$64
🚀 Bull
$45.12
Current Price
$50
Analyst Avg PT
| Scenario | Stage 1 (Yrs 1–5) | Stage 2 (Yrs 6–10) | Terminal g | Ke | Intrinsic Value | vs Price |
|---|---|---|---|---|---|---|
| 🔴 Bear | 2.0% | 1.5% | 2.0% | 7.20% | $37 | ▼18.0% |
| 📊 Base | 5.0% | 3.5% | 2.5% | 7.20% | $48 | ▲7.5% |
| 🚀 Bull | 8.0% | 5.5% | 3.0% | 7.20% | $64 | ▲42.8% |
📋 Full 10-Year Projection Tables
Bear Scenario
Stage 1: 2.0% | Stage 2: 1.5% | Terminal: 2.0%
| Period | Stage | DPS / Dist. | PV of DPS | Cumulative IV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $1.958 | $1.827 | $1.83 |
| Year 2 | Stage 1 | $1.998 | $1.738 | $3.57 |
| Year 3 | Stage 1 | $2.038 | $1.654 | $5.22 |
| Year 4 | Stage 1 | $2.078 | $1.574 | $6.79 |
| Year 5 | Stage 1 | $2.120 | $1.497 | $8.29 |
| Year 6 | Stage 2 | $2.152 | $1.418 | $9.71 |
| Year 7 | Stage 2 | $2.184 | $1.342 | $11.05 |
| Year 8 | Stage 2 | $2.217 | $1.271 | $12.32 |
| Year 9 | Stage 2 | $2.250 | $1.203 | $13.52 |
| Year 10 | Stage 2 | $2.284 | $1.139 | $14.66 |
| Terminal | — | TV=$44.79 | PV(TV)=$22.35 (60% of IV) | $37.01 |
| Intrinsic Value | — | — | PV(Divs) $14.66 + PV(TV) $22.35 | $37.01 |
How the price per share is derived: Each year's projected dividend is discounted back at Ke (7.20%) to get its present value. After Year 10, dividends are assumed to grow at the terminal rate (2.0%) in perpetuity — the Gordon Growth formula gives a terminal value of DPS11 / (Ke − gT) = $44.79. That terminal value is then discounted back 10 years to today's dollars (PV of TV = $22.35). Intrinsic value = PV of all dividends ($14.66) + PV of terminal value ($22.35) = $37.01 per share.
Base Scenario
Stage 1: 5.0% | Stage 2: 3.5% | Terminal: 2.5%
| Period | Stage | DPS / Dist. | PV of DPS | Cumulative IV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $2.016 | $1.881 | $1.88 |
| Year 2 | Stage 1 | $2.117 | $1.842 | $3.72 |
| Year 3 | Stage 1 | $2.223 | $1.804 | $5.53 |
| Year 4 | Stage 1 | $2.334 | $1.767 | $7.29 |
| Year 5 | Stage 1 | $2.450 | $1.731 | $9.02 |
| Year 6 | Stage 2 | $2.536 | $1.671 | $10.70 |
| Year 7 | Stage 2 | $2.625 | $1.613 | $12.31 |
| Year 8 | Stage 2 | $2.717 | $1.558 | $13.87 |
| Year 9 | Stage 2 | $2.812 | $1.504 | $15.37 |
| Year 10 | Stage 2 | $2.910 | $1.452 | $16.82 |
| Terminal | — | TV=$63.47 | PV(TV)=$31.67 (65% of IV) | $48.49 |
| Intrinsic Value | — | — | PV(Divs) $16.82 + PV(TV) $31.67 | $48.49 |
How the price per share is derived: Each year's projected dividend is discounted back at Ke (7.20%) to get its present value. After Year 10, dividends are assumed to grow at the terminal rate (2.5%) in perpetuity — the Gordon Growth formula gives a terminal value of DPS11 / (Ke − gT) = $63.47. That terminal value is then discounted back 10 years to today's dollars (PV of TV = $31.67). Intrinsic value = PV of all dividends ($16.82) + PV of terminal value ($31.67) = $48.49 per share.
Bull Scenario
Stage 1: 8.0% | Stage 2: 5.5% | Terminal: 3.0%
| Period | Stage | DPS / Dist. | PV of DPS | Cumulative IV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $2.074 | $1.934 | $1.93 |
| Year 2 | Stage 1 | $2.239 | $1.949 | $3.88 |
| Year 3 | Stage 1 | $2.419 | $1.963 | $5.85 |
| Year 4 | Stage 1 | $2.612 | $1.978 | $7.82 |
| Year 5 | Stage 1 | $2.821 | $1.993 | $9.82 |
| Year 6 | Stage 2 | $2.976 | $1.961 | $11.78 |
| Year 7 | Stage 2 | $3.140 | $1.930 | $13.71 |
| Year 8 | Stage 2 | $3.313 | $1.899 | $15.61 |
| Year 9 | Stage 2 | $3.495 | $1.869 | $17.48 |
| Year 10 | Stage 2 | $3.687 | $1.840 | $19.32 |
| Terminal | — | TV=$90.42 | PV(TV)=$45.12 (70% of IV) | $64.43 |
| Intrinsic Value | — | — | PV(Divs) $19.32 + PV(TV) $45.12 | $64.43 |
How the price per share is derived: Each year's projected dividend is discounted back at Ke (7.20%) to get its present value. After Year 10, dividends are assumed to grow at the terminal rate (3.0%) in perpetuity — the Gordon Growth formula gives a terminal value of DPS11 / (Ke − gT) = $90.42. That terminal value is then discounted back 10 years to today's dollars (PV of TV = $45.12). Intrinsic value = PV of all dividends ($19.32) + PV of terminal value ($45.12) = $64.43 per share.
🔲 Sensitivity Table
| Ke \ gT | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 5.2% | $67 | $74 | $85 | $101 | $125 |
| 5.7% | $59 | $64 | $72 | $82 | $97 |
| 6.2% | $52 | $56 | $62 | $69 | $79 |
| 6.7% | $47 | $50 | $54 | $60 | $66 |
| 7.2% | $43 | $45 | $48 | $52 | $57 |
| 7.7% | $39 | $41 | $44 | $47 | $51 |
| 8.2% | $36 | $38 | $40 | $42 | $45 |
| 8.7% | $33 | $35 | $37 | $38 | $41 |
| 9.2% | $31 | $32 | $34 | $35 | $37 |
Green = >10% above current price. Red = >10% below. Gold = within ±10%.
📉 Long-Term Price Trend Channel
Log-linear trend fitted to full price history. ±1.5σ bands. Green shaded zone = bottom 25% of historical range — historically attractive entry.
🏦 Comparable Valuation
| Company | P/E | Div Yield | Combined Ratio | Note |
|---|---|---|---|---|
| CNA (current) | 9.6x | 8.6% | ~95% | Controlled by Loews; includes ~$2/yr special div |
| CNA (5yr avg) | ~10x | ~7% | ~96% | Historically trades at control discount |
| TRV (Travelers) | 11.2x | 1.7% | 93% | Best-in-class P&C; Dow component |
| CINF | 10.4x | 2.4% | 95% | Dividend King; similar quality but no control overhang |
| HIG (Hartford) | 10.1x | 2.1% | 94% | Diversified P&C + group benefits |
| AIG | 8.5x | 2.0% | 97% | Turnaround story; higher combined ratio |
💰 Dividend / Distribution Analysis
| Metric | Value |
|---|---|
| Annual DPS | $1.920 |
| Current Yield | 8.56% |
| Consecutive Growth Years | 5 |
| 1-yr DPS CAGR | +4.5% |
| 3-yr DPS CAGR | +4.6% |
| 5-yr DPS CAGR | +4.8% |
| 10-yr DPS CAGR | +4.0% |
| Payout Ratio (DPS/EPS) | 41.0% |
| FCF Payout Ratio | 21.7% |
| Sustainability Verdict | ✅ Safe |
CNA's regular dividend ($1.92/yr) is well-covered at a 41% EPS payout ratio and 22% FCF payout. The dividend was maintained through FY2022's weak year (EPS $2.51) without any cut. In addition to the regular dividend, CNA has paid special dividends of $1.60-$2.46/yr since 2022 — funded by excess capital generation and Loews' desire for cash upstream. Total distributions (regular + special) of ~$3.92/yr represent an 84% payout vs EPS, which is sustainable given CNA's strong cash generation ($2.4B FCF). The regular dividend is Safe; the special is likely to continue but is discretionary.
🔮 Analyst Forecast Section
(a) EPS Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2021 | $4.34 | — | — | — | Actual |
| 2022 | $2.51 | — | — | — | Actual |
| 2023 | $4.43 | — | — | — | Actual |
| 2024 | $3.52 | — | — | — | Actual |
| 2025 | $4.69 | — | — | — | Actual |
| 2026 | $4.46 | $4.60 | $4.78 | 3 | Estimate |
| 2027 | $5.39 | $5.56 | $5.78 | 2 | Estimate |
(b) Revenue Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2021 | $11.9B | — | — | — | Actual |
| 2022 | $11.9B | — | — | — | Actual |
| 2023 | $13.3B | — | — | — | Actual |
| 2024 | $14.3B | — | — | — | Actual |
| 2025 | $15.0B | — | — | — | Actual |
| 2026 | $2.2B | $2.3B | $2.4B | 2 | Estimate |
(c) Individual Analyst Price Targets
| Analyst | Firm | Rating | PT | Upside |
|---|---|---|---|---|
| Meyer Shields | Keefe, Bruyette & Woods | Hold | $53 | +17.5% |
| Joshua Shanker | BofA Securities | Sell | $48 | +6.4% |
(d) Earnings Surprise History
| Quarter | EPS Act vs Est | EPS Beat/Miss | Rev Act vs Est | Rev Beat/Miss | Guidance |
|---|---|---|---|---|---|
| Q4 2025 | $1.16 vs $1.20 | $-0.04 ❌ | $3.4B vs $3.4B | $-0.0B ❌ | Raised regular dividend 4% |
| Q3 2025 | $1.48 vs $1.32 | +$0.16 ✅ | $3.9B vs $3.8B | +$0.1B ✅ | N/A |
| Q2 2025 | $1.22 vs $1.18 | +$0.04 ✅ | $3.8B vs $3.8B | +$0.1B ✅ | N/A |
| Q1 2025 | $0.83 vs $0.90 | $-0.07 ❌ | $3.9B vs $3.9B | $-0.0B ❌ | N/A |
💡 Investment Thesis
- High Total Yield (~8.6%): CNA offers one of the highest total dividend yields in P&C insurance. The $1.92 regular dividend (4.3% yield) is well-covered by earnings, and CNA has paid special dividends of $1.60-$2.46/yr since 2022. Total distributions of ~$3.92/yr provide an 8.6% yield — exceptional for a quality insurer with a 95% combined ratio.
- Specialty Lines Expertise: CNA's Specialty segment (42% of premiums) focuses on professional/management liability where underwriting expertise creates a competitive moat. Specialty lines typically earn combined ratios 5-10 points better than standard commercial, supporting above-average profitability.
- Hard Market Tailwind: Commercial and specialty P&C pricing remains firm with mid-single-digit rate increases. CNA's gross written premium growth of 5-7% is driven by both rate and new business expansion, supporting EPS growth in the mid-single digits.
- Loews Ownership — Double-Edged Sword: Loews (82% owner) provides financial stability and long-term strategic orientation, but the thin public float (~18%) limits liquidity and analyst coverage (only 2-3 analysts). The stock chronically trades at a conglomerate/control discount despite solid fundamentals.
- Key Risks — Control Discount and Legacy Liabilities: The Loews ownership creates a permanent liquidity discount. The Life & Group run-off segment (legacy long-term care) can produce adverse reserve development that hits earnings unpredictably. Q4 2025 missed estimates due partly to reserve charges.
⚖️ DDM Verdict: Hold — CNA Financial Corporation (CNA)
Current price: $45.12 | Analyst Avg PT: $50.50
$37
🔴 Bear
$48
📊 Base
$64
🚀 Bull
| Tier | Price | Action |
|---|---|---|
| Tier 1 — Starter | ≤$45 | Begin position |
| Tier 2 — Add | ≤$43 | Add on weakness |
| Tier 3 — Full | ≤$39 | Full allocation |
| Sell Alert | ≥$55 | Above fair value — consider trimming |
How tiers are set: Tier 1 = Base IV × 0.92 (8% discount to base case). Tier 2 = midpoint of Bear & Base IV (building on meaningful weakness). Tier 3 = Bear IV × 1.05 (just above worst-case — maximum margin of safety). Sell alert = Bull IV × 0.85 (15% discount to bull case — above fair value range).
Hold at current prices with a Base DDM target of ~$50. At $45.12, CNA trades near its 52-week low ($43.29) and offers a compelling 8.6% total yield (regular + special dividends). However, the thin float, Loews control discount, and legacy Life & Group liabilities limit rerating potential. CNA is a yield vehicle, not a growth story.
Income-focused investors can accumulate below $44 for the yield. The regular dividend ($1.92/yr) is well-covered at a 41% payout ratio, and the special dividend (~$2.00/yr) has been consistent since 2022. Risk is to the downside if Loews reduces/eliminates the special dividend or if legacy reserves develop adversely. CNA becomes a Sell above $55 where the total yield compresses below 7%.
🔧 Model Notes & Calibration
| Assumption | Rationale / Notes |
|---|---|
| Model Selection | DDM on regular DPS only ($1.92/yr). Special dividends (~$2.00/yr since 2022) excluded from DDM base because they are discretionary and variable. However, the market clearly prices the total yield (~8.6%), which explains why a regular-DPS DDM produces conservative fair value estimates. This is intentional — our DDM values the sustainable floor. |
| Ke Build & Calibration | CAPM: Rf=4.30%, β=0.35, ERP=5.5% → Ke=6.23%. The 0.35 beta is artificially depressed by Loews' 82% ownership and thin float (~49M public shares). Adjusted to Ke=7.20% to reflect underlying insurance risk (catastrophe exposure, reserve development, underwriting cycles). A 7.2% Ke is still conservative relative to CINF (7.1%) given CNA's control discount. |
| Special Dividend Treatment | CNA has paid special dividends every year since 2022: $1.60 (2022), $1.14 (2023), $2.46 (2024), $2.00 (2025), $2.00 (2026). These are funded by excess capital generation ($2.4B FCF vs ~$1.07B regular + special dividends). Loews uses CNA as a cash-generating subsidiary, making specials likely but not guaranteed. Total distributions of ~$3.92/yr = 84% of EPS. |
| Control Discount | CNA trades at a persistent P/E discount to P&C peers (9.6x vs 10-11x peers) due to Loews' 82% stake. This limits: (1) analyst coverage, (2) index inclusion, (3) institutional ownership, (4) M&A premium potential. The discount is permanent unless Loews divests or privatizes CNA. A privatization by Loews at $50-55 is a low-probability Bull case catalyst. |
Bore Family Office • Analysis generated by Lurch • Not investment advice.