Book Value Per Common Share of $37.97, an Increase of 6% from
December 31, 2009
CHICAGO--(BUSINESS WIRE)--
CNA Financial Corporation (NYSE: CNA) today announced first quarter 2010
results, which included net operating income of $223 million, or $0.74
per common share, and net income of $245 million, or $0.82 per common
share. Property & Casualty Operations combined ratio for the first
quarter was 102.0%. Book value per common share was $37.97 at March 31,
2010, as compared to $35.91 at December 31, 2009.
Results for the Three Months
Ended March 31(a)
($ millions) 2010 2009
Net operating income $ 223 $ 149
Net realized investment gains (losses) 22 (344 )
Net income (loss) from continuing operations 245 (195 )
Net income (loss) from discontinued operations - -
Net income (loss) $ 245 $ (195 )
References to net operating income (loss), net realized investment gains
(losses), net income (loss) from continuing operations and net income
(loss) used in this press release reflect amounts attributable to CNA,
(a) unless otherwise noted. Management utilizes the net operating income
financial measure to monitor the Company's operations. Please refer to
Note N of the Consolidated Financial Statements within the 2009 Form 10-K
for further discussion of this measure.
Earnings (Loss) Per Share Attributable to Common Stockholders
Results for the Three Months
Ended March 31
2010 2009
Net operating income $ 0.83 $ 0.56
2008 Senior Preferred dividend (0.09 ) (0.12 )
Net operating income attributable to CNA common 0.74 0.44
stockholders
Net realized investment gains (losses) 0.08 (1.28 )
Net income (loss) from continuing operations 0.82 (0.84 )
Net income (loss) from discontinued operations - -
Net income (loss) attributable to CNA common $ 0.82 $ (0.84 )
stockholders
Net operating income for the three months ended March 31, 2010 improved
$74 million as compared with the same period in 2009. Net operating
income for our core Property & Casualty Operations improved $45 million,
while results for our non-core segments improved $29 million. This
overall improvement was primarily due to higher net investment income,
partially offset by costs associated with our Information Technology
(IT) Transformation as discussed below. Our core Property & Casualty
Operations were also unfavorably impacted by higher catastrophe losses
and decreased favorable net prior year development. Catastrophe losses
were $26 million after-tax in the first quarter of 2010, as compared to
catastrophe losses of $8 million after-tax in the first quarter of 2009.
Our Property & Casualty Operations produced first quarter combined
ratios of 102.0% and 98.2% in 2010 and 2009, or 99.3% and 97.3% before
the 2.7 point and 0.9 point impacts related to catastrophes.
"We are pleased to report our first quarter results, which include solid
net operating income and strong investment results," said Thomas F.
Motamed, Chairman and Chief Executive Officer of CNA Financial
Corporation. "While the first quarter saw significant catastrophe losses
industrywide, they were not a major event for CNA. Catastrophe exposure
management plays a key part in our strategy for improved performance,
and we are pleased with our progress so far.
"Our CNA Specialty segment continues to perform very well, and we
continue to re-profile our CNA Commercial segment for improved
profitability. Our decision in Commercial to drive for improved pricing
in a competitive market and weak economy has put pressure on our top
line. However, our progress toward an adequately priced, more profitable
Commercial book of business is evident in an improving rate trend over
the past two years. We moved into positive rate territory in the fourth
quarter last year and our progress continues.
"We are also pleased by positive feedback from our distributors about
our expanded underwriting appetite and the investments we are making to
drive profitable growth. Submission flow, policy counts and hit ratios
all reflect our growing capabilities in chosen market segments.
"Lastly, we have finalized agreements to outsource certain IT functions
for increased efficiency and effectiveness. While one-time transition
costs have increased our IT costs temporarily, we believe that
significant efficiency gains will be realized in 2011 and beyond."
Pretax net investment income for the first quarter of 2010 increased
$170 million as compared with the same period in 2009. The increase was
primarily driven by improved results from limited partnership
investments.
After-tax net realized investment results improved $366 million for the
three months ended March 31, 2010 as compared with the same period in
2009, driven by significantly lower other-than-temporary impairment
(OTTI) losses recognized in earnings. OTTI losses of $39 million
after-tax were recorded in the first quarter of 2010. OTTI losses of
$399 million after-tax were recorded in the first quarter of 2009.
We have commenced a program to significantly transform our IT
organization and delivery model. We anticipate that the total costs for
this program will be approximately $41 million, of which $25 million was
incurred during the first quarter of 2010. When the results of this
program are fully operational, we anticipate annual savings of
approximately $65 million based on our current annual level of IT
spending. A significant portion of the annual savings is anticipated to
be achieved in 2011 with full annual savings in 2012. Some or all of
these estimated savings may be invested in IT or other enhancements
necessary to support our business strategies.
Business Operating Highlights
CNA Specialty provides professional and management liability as
well as other coverages through property and casualty products and
services, both domestically and abroad, through a network of brokers,
managing general underwriters and independent agencies.
-- Net written premiums decreased $16 million for the first quarter of 2010
as compared with the same period in 2009. The decrease in net written
premiums was driven by our architects & engineers, realtors and CNA
HealthProlines of business, as current economic and competitive market
conditions have led to decreased insured exposures and lower rates.
Average rate decreased 1% for the first quarter of 2010, as compared to
a decrease of 3% for the first quarter of 2009 for the policies that
renewed in each period. Retention rates of 86% and 85% were achieved for
those policies that were available for renewal in each period.
-- Net operating income improved $19 million for the first quarter of 2010
as compared with the same period in 2009. This improvement was primarily
due to higher net investment income, partially offset by increased
expenses.
-- The combined ratio increased 3.4 points for the first quarter of 2010 as
compared with the same period in 2009. The loss ratio increased 1.5
points primarily due to decreased favorable net prior year development.
The expense ratio increased 2.1 points primarily related to higher
underwriting expenses, driven by IT Transformation costs, and higher
commission rates.
CNA Commercial works with an independent agency distribution
system and network of brokers to market a broad range of property and
casualty insurance products and services to small, middle-market and
large businesses and organizations domestically and abroad.
-- Net written premiums decreased $91 million for the first quarter of 2010
as compared with the same period in 2009. Net written premiums were
unfavorably impacted by decreased new business and lower retention as a
result of competitive market conditions. Average rate increased 1% for
the first quarter of 2010, as compared to a decrease of 1% for the first
quarter of 2009 for the policies that renewed in each period. Retention
rates of 79% and 83% were achieved for those policies that were
available for renewal in each period.
-- Net operating income improved $26 million for the first quarter of 2010
as compared with the same period in 2009. This improvement was primarily
driven by higher net investment income, partially offset by higher
catastrophe losses.
-- The combined ratio increased 4.5 points for the first quarter of 2010 as
compared with the same period in 2009. The loss ratio increased 2.7
points primarily due to increased catastrophe losses, partially offset
by the impact of an improved current accident year non-catastrophe loss
ratio. The expense ratio increased 2.1 points primarily related to the
lower net earned premium base. Underwriting expenses were unfavorably
impacted by IT Transformation costs.
Life & Group Non-Core primarily includes the results of the
life and group lines of business that are in run-off. Net earned
premiums relate primarily to the individual and group long term care
businesses.
-- Net loss decreased $143 million for the first quarter of 2010 as
compared with the same period in 2009. This improvement was primarily
due to improved net realized investment results. Additionally, favorable
performance on our remaining pension deposit business and favorable
reserve development arising from a commutation of an assumed reinsurance
agreement also contributed to the improvement. Partially offsetting
these favorable impacts were unfavorable results in our long term care
business.
Corporate & Other Non-Core primarily includes certain
corporate expenses, including interest on corporate debt, and the
results of certain property and casualty business primarily in run-off,
including CNA Re. This segment also includes the results related to the
centralized adjusting and settlement of asbestos and environmental
pollution.
-- Net results improved $38 million for the first quarter of 2010 as
compared with the same period in 2009, primarily due to improved net
realized investment results and higher net investment income.
Segment Results for the Three Months Ended March 31, 2010
Corporate
CNA CNA Total P&C Life & Group & Other
($ millions) Specialty Commercial Operations Non-Core Non-Core Total
Net operating $ 128 $ 97 $ 225 $ 1 $ (3 ) $ 223
income (loss)
Net realized
investment 9 14 23 (4 ) 3 22
gains
(losses)
Net income
(loss) from $ 137 $ 111 $ 248 $ (3 ) $ - $ 245
continuing
operations
Segment Results for the Three Months Ended March 31, 2009
Corporate
CNA CNA Total P&C Life & Group & Other
($ Specialty Commercial Operations Non-Core Non-Core Total
millions)
Net
operating $ 109 $ 71 $ 180 $ (22 ) $ (9 ) $ 149
income
(loss)
Net
realized (71 ) (120 ) (191 ) (124 ) (29 ) (344 )
investment
losses
Net income
(loss)
from $ 38 $ (49 ) $ (11 ) $ (146 ) $ (38 ) $ (195 )
continuing
operations
Property & Casualty Operations Gross Written Premiums
Three Months Ended March 31
($ millions) 2010 2009
CNA Specialty $ 1,050 $ 1,093
CNA Commercial 912 1,012
Total P&C Operations $ 1,962 $ 2,105
Property & Casualty Operations Net Written Premiums
Three Months Ended March 31
($ millions) 2010 2009
CNA Specialty $ 656 $ 672
CNA Commercial 829 920
Total P&C Operations $ 1,485 $ 1,592
Property & Casualty Calendar Year Loss Ratios
Three Months Ended March 31
2010 2009
CNA Specialty 61.5 % 60.0 %
CNA Commercial 73.8 % 71.1 %
Total P&C Operations 68.4 % 66.3 %
Property & Casualty Calendar Year Combined Ratios
Three Months Ended March 31
2010 2009
CNA Specialty 92.5 % 89.1 %
CNA Commercial 109.5 % 105.0 %
Total P&C Operations 102.0 % 98.2 %
CNA Specialty Effect of Catastrophe Impacts and Development-Related Items
Three Months Ended March 31
2010 2009
Combined ratio excluding the effect of catastrophe 96.4 % 94.0 %
impacts and development-related items
Effect of catastrophe impacts 0.3 0.2
Effect of development-related items (4.2 ) (5.1 )
Combined ratio 92.5 % 89.1 %
CNA Commercial Effect of Catastrophe Impacts and Development-Related Items
Three Months Ended March 31
2010 2009
Combined ratio excluding the effect of catastrophe 106.3 % 106.1 %
impacts and development-related items
Effect of catastrophe impacts 4.7 1.4
Effect of development-related items (1.5 ) (2.5 )
Combined ratio 109.5 % 105.0 %
Property & Casualty Operations Effect of Catastrophe Impacts and
Development-Related Items
Three Months Ended March 31
2010 2009
Combined ratio excluding the effect of catastrophe 102.0 % 101.0 %
impacts and development-related items
Effect of catastrophe impacts 2.7 0.9
Effect of development-related items (2.7 ) (3.7 )
Combined ratio 102.0 % 98.2 %
About the Company
Serving businesses and professionals since 1897, CNA is the country's
seventh largest commercial insurance underwriter and the 13th
largest property and casualty insurance company. CNA insurance products
include commercial, specialty, information technology, surety, marine,
and other property and casualty coverages. CNA services include
underwriting, risk control consulting, and claim management. For more
information, please visit CNA at www.cna.com.
CNA is a registered trademark of CNA Financial Corporation.
Conference Call and Webcast Information:
A conference call for investors and the professional investment
community will be held at 10:00 a.m. (ET) today. On the
conference call will be Thomas F. Motamed, Chairman and Chief Executive
Officer of CNA Financial Corporation, and other members of senior
management. Participants can access the call by dialing (888)
455-2238, or for international callers, (719) 325-2345. The call
will also be broadcast live on the internet at http://investor.cna.com
or you may go to the investor relations pages of the CNA website (www.cna.com)
for further details.
The call is available to the media, but questions will be restricted
to investors and the professional investment community. A taped
replay of the call will be available through May 10, 2010 by dialing
(888) 203-1112, or for international callers, (719) 457-0820. The
replay passcode is 7128416. The replay will also be available on
CNA's website. Financial supplement information related to the
first quarter results is available on the investor relations pages of
the CNA website or by contacting David Adams at (312) 822-2183.
FINANCIAL MEASURES
In evaluating the results of CNA Specialty and CNA Commercial,
management utilizes the combined ratio, the loss ratio, the expense
ratio and the dividend ratio. These ratios are calculated using
accounting principles generally accepted in the United States of America
(GAAP) financial results. The loss ratio is the percentage of net
incurred claim and claim adjustment expenses to net earned premiums. The
expense ratio is the percentage of insurance underwriting and
acquisition expenses, including the amortization of deferred acquisition
costs, to net earned premiums. The dividend ratio is the ratio of
policyholders' dividends incurred to net earned premiums. The combined
ratio is the sum of the loss, expense and dividend ratios.
This press release may also reference or contain financial measures that
are not in accordance with GAAP. For reconciliations of non-GAAP
measures to the most comparable GAAP measures, please refer to CNA's
filings with the Securities and Exchange Commission, as well as the
financial supplement, available at www.cna.com.
FORWARD-LOOKING STATEMENT
This press release may include statements which relate to anticipated
future events (forward-looking statements) rather than actual present
conditions or historical events. These statements are made pursuant to
the safe harbor provisions of the Private Securities Litigation Reform
Act of 1995 and generally include words such as "believes", "expects",
"intends", "anticipates", "estimates" and similar expressions.
Forward-looking statements, by their nature, are subject to a variety of
inherent risks and uncertainties that could cause actual results to
differ materially from the results projected. Many of these risks and
uncertainties cannot be controlled by CNA. For a detailed description of
these risks and uncertainties, please refer to CNA's filings with the
Securities and Exchange Commission available at www.cna.com.
Any forward-looking statements made in this press release are made by
CNA as of the date of this press release. Further, CNA does not have any
obligation to update or revise any forward-looking statement contained
in this press release, even if CNA's expectations or any related events,
conditions or circumstances change.
Source: CNA Financial Corporation
Contact: CNA Financial Corporation
MEDIA:
Katrina W. Parker, 312/822-5167
Sarah J. Pang, 312/822-6394
or
ANALYSTS:
Nancy M. Bufalino, 312/822-7757
Marie Hotza, 312/822-4278
David C. Adams, 312/822-2183