Book Value Per Common Share of $40.43, an Increase of 6% from March
31, 2010
CHICAGO--(BUSINESS WIRE)--
CNA Financial Corporation (NYSE: CNA) today announced second quarter
2010 results, which included net operating income of $269 million, or
$0.91 per common share, and net income of $283 million, or $0.96 per
common share. Property & Casualty Operations combined ratio for the
second quarter was 89.4%. Book value per common share was $40.43 at June
30, 2010, as compared to $37.97 at March 31, 2010 and $35.91 at December
31, 2009.
|
|
|
|
| Results for the Three Months Ended June 30 (a) |
| Results for the Six Months Ended June 30 (a) |
($ millions) | 2010 | 2009 |
| 2010 | 2009 |
Net operating income |
$
|
269
|
$
|
305
| |
|
$
|
492
|
$
|
454
| |
Net realized investment gains (losses) |
|
13
|
|
(199
|
)
|
|
|
35
|
|
(543
|
)
|
Net income (loss) from continuing operations | |
282
| |
106
| | | |
527
| |
(89
|
)
|
Net income (loss) from discontinued operations |
|
1
|
|
(1
|
)
|
|
|
1
|
|
(1
|
)
|
Net income (loss) |
$
|
283
|
$
|
105
|
|
|
$
|
528
|
$
|
(90
|
)
|
| | | | | | | | | | |
|
| (a) |
| 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, 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 June 30 |
| Results for the Six Months Ended June 30 |
| 2010 | 2009 |
| 2010 | 2009 |
| | |
| | |
Net operating income |
$
|
1.00
| |
$
|
1.14
| | |
$
|
1.83
| |
$
|
1.68
| |
2008 Senior Preferred dividend |
|
(0.09
|
)
|
|
(0.12
|
)
|
|
|
(0.19
|
)
|
|
(0.23
|
)
|
Net operating income attributable to CNA common stockholders | |
0.91
| | |
1.02
| | | |
1.64
| | |
1.45
| |
Net realized investment gains (losses) |
|
0.05
|
|
|
(0.74
|
)
|
|
|
0.13
|
|
|
(2.01
|
)
|
Net income (loss) from continuing operations | |
0.96
| | |
0.28
| | | |
1.77
| | |
(0.56
|
)
|
Net income (loss) from discontinued operations |
|
-
|
|
|
(0.01
|
)
|
|
|
0.01
|
|
|
(0.01
|
)
|
Net income (loss) attributable to CNA common stockholders |
$
|
0.96
|
|
$
|
0.27
|
|
|
$
|
1.78
|
|
$
|
(0.57
|
)
|
| | | | | | | | | | | | |
|
Net operating income decreased $36 million for the three months ended
June 30, 2010 as compared with the same period in 2009. This decrease
was primarily due to lower net investment income, driven by
significantly decreased limited partnership results, and decreased
current accident year underwriting results, partially offset by
increased favorable net prior year development. For the three months
ended June 30, 2010, catastrophe losses were $31 million after-tax, as
compared to catastrophe losses of $28 million after-tax for the same
period in 2009. Our Property & Casualty Operations produced second
quarter combined ratios of 89.4% and 98.1% in 2010 and 2009.
“We are pleased to report our second quarter results, which include
strong P&C underwriting results and solid investment results,” said
Thomas F. Motamed, Chairman and Chief Executive Officer of CNA Financial
Corporation. “Continued growth in our book value per common share – up
13% to $40.43 from year end 2009 – reflects the ongoing improvement of
market values in our investment portfolio and consistent earnings.
“Our Specialty segment, which represents 45% of P&C Operations’ net
written premiums, continues to deliver very strong underwriting results
with a 79% combined ratio in the second quarter. In our Commercial
segment, our efforts to re-profile the business to improve its
profitability in the face of continued market and economic pressures are
ongoing. Improvement in the overall level of rate as well as pricing
differentiation are early signs of progress.”
Pretax net investment income for the three months ended June 30, 2010
decreased $154 million as compared with the same period in 2009. The
decrease was primarily driven by significantly lower limited partnership
results.
After-tax net realized investment results improved $212 million for the
three months ended June 30, 2010 as compared with the same period in
2009, driven by significantly lower other-than-temporary impairment
(OTTI) losses recognized in earnings.
Net operating income improved $38 million for the six months ended June
30, 2010 as compared with the same period in 2009. This improvement was
primarily due to increased favorable net prior year development,
partially offset by decreased current accident year underwriting
results, including higher catastrophe losses. For the six months ended
June 30, 2010, after-tax catastrophe losses were $57 million, as
compared to $36 million for the same period in 2009. Our Property &
Casualty Operations produced combined ratios of 95.7% and 98.1% in 2010
and 2009.
Pretax net investment income for the six months ended June 30, 2010
improved $16 million as compared with the same period in 2009. The
improvement was primarily driven by an investment shift from lower
yielding short term assets to higher yielding long term bonds, partially
offset by a decrease in limited partnership income.
After-tax net realized investment results improved $578 million for the
six months ended June 30, 2010 as compared with the same period in 2009,
driven by significantly lower OTTI losses recognized in earnings.
As previously reported, on July 14, 2010, we entered into an agreement
with National Indemnity Company (NICO), a subsidiary of Berkshire
Hathaway Inc., under which our legacy asbestos and environmental
pollution (A&E) liabilities will be ceded to NICO. Under the terms of
the transaction, effective January 1, 2010 we will cede approximately
$1.6 billion of net A&E liabilities to NICO under a retroactive
reinsurance agreement with an aggregate limit of $4 billion. We will pay
to NICO a reinsurance premium of $2 billion and also transfer to NICO
the right to collect billed third party reinsurance receivables with a
net book value of approximately $200 million. To secure its obligations,
NICO will deposit $2.2 billion in a collateral trust for our benefit. In
addition, Berkshire Hathaway Inc. will guarantee the payment obligations
of NICO up to the full aggregate reinsurance limit as well as certain of
NICO's performance obligations under the trust agreement. The closing of
this transaction is subject to the receipt of required regulatory
approvals and the satisfaction of other closing conditions. The closing
is expected to occur in the third quarter of 2010 at which time we
expect to recognize an after-tax loss of approximately $375 million.
Business Operating Highlights
CNA Specialty provides professional and management liability as
well as other property and casualty coverages and services, both
domestically and abroad, through a network of brokers, managing general
underwriters and independent agencies.
-
Net written premiums decreased $8 million for the three months ended
June 30, 2010 as compared with the same period in 2009. The decrease
in net written premiums was driven by our architects & engineers and
CNA HealthProlines of business, as current economic and
competitive market conditions have led to decreased insured exposures
and lower rates. Average rate decreased 2% for the three months ended
June 30, 2010 and 2009 for the policies that renewed in each period.
Retention rates of 85% and 84% were achieved for those policies that
were available for renewal in each period.
-
Net operating income improved $17 million for the three months ended
June 30, 2010 as compared with the same period in 2009. This
improvement was primarily due to increased favorable net prior year
development, partially offset by lower net investment income and
higher expenses.
-
The combined ratio improved 10.8 points for the three months ended
June 30, 2010 as compared with the same period in 2009. The loss ratio
improved 12.2 points primarily due to favorable net prior year
development. The expense ratio increased 1.3 points, primarily related
to higher underwriting expenses and commission rates.
-
Net income improved $94 million for the three months ended June 30,
2010 as compared with the same period in 2009. This was primarily due
to improved net realized investment results and net operating income,
as discussed above.
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 $102 million for the three months ended
June 30, 2010 as compared with the same period in 2009. Net written
premiums were unfavorably impacted by decreased insured exposures and
decreased new business as a result of competitive market conditions.
Average rate increased 2% for the three months ended June 30, 2010, as
compared to flat rates for the three months ended June 30, 2009 for
policies that renewed in each period. Retention rates of 79% and 80%
were achieved for those policies that were available for renewal in
each period.
-
Net operating income decreased $43 million for the three months ended
June 30, 2010 as compared with the same period in 2009. This decrease
was primarily driven by significantly lower net investment income and
decreased current accident year underwriting results, partially offset
by increased favorable net prior year development.
-
The combined ratio improved 6.4 points for the three months ended June
30, 2010 as compared with the same period in 2009. The loss ratio
improved 10.5 points primarily due to increased favorable net prior
year development, partially offset by increased catastrophe losses and
the impact of a higher current accident year non-catastrophe loss
ratio. The expense ratio increased 3.1 points primarily related to
higher underwriting expenses and the lower net earned premium base.
-
Net income improved $65 million for the three months ended June 30,
2010 as compared with the same period in 2009. This was due to
improved net realized investment results, partially offset by lower
net operating income, as discussed above.
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 increased $2 million for the three months ended June 30, 2010
as compared with the same period in 2009. This was primarily due to
less favorable performance on our pension deposit business and
decreased net realized investment results, largely offset by the
favorable period over period impact of a $28 million after-tax legal
accrual recorded in the second quarter of 2009 related to a previously
held limited partnership investment.
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 $19 million for the three months ended June 30,
2010 as compared with the same period in 2009 primarily due to
improved net realized investment results, partially offset by lower
net investment income.
|
Segment Results for the Three Months Ended June 30, 2010 |
($ millions) |
| CNA Specialty |
| CNA Commercial |
| Total P&C Operations |
| Life & Group Non-Core |
| Corporate & Other Non-Core |
| Total |
Net operating income (loss) |
|
$
|
168
| |
|
$
|
124
| |
|
$
|
292
| |
|
$
|
(18
|
)
|
|
$
|
(5
|
)
|
|
$
|
269
| |
Net realized investment gains (losses) |
|
|
21
|
|
|
|
(14
|
)
|
|
|
7
|
|
|
|
(1
|
)
|
|
|
7
|
|
|
|
13
|
|
Net income (loss) from continuing operations |
|
$
|
189
|
|
|
$
|
110
|
|
|
$
|
299
|
|
|
$
|
(19
|
)
|
|
$
|
2
|
|
|
$
|
282
|
|
|
Segment Results for the Three Months Ended June 30, 2009 |
($ millions) |
| CNA Specialty |
| CNA Commercial |
| Total P&C Operations |
| Life & Group Non-Core |
| Corporate & Other Non-Core |
| Total |
Net operating income (loss) | |
$
|
151
| | |
$
|
167
| | |
$
|
318
| | |
$
|
(26
|
)
| |
$
|
13
| | |
$
|
305
| |
Net realized investment gains (losses) |
|
|
(56
|
)
|
|
|
(122
|
)
|
|
|
(178
|
)
|
|
|
9
|
|
|
|
(30
|
)
|
|
|
(199
|
)
|
Net income (loss) from continuing operations |
|
$
|
95
|
|
|
$
|
45
|
|
|
$
|
140
|
|
|
$
|
(17
|
)
|
|
$
|
(17
|
)
|
|
$
|
106
|
|
|
Segment Results for the Six Months Ended June 30, 2010 |
($ millions) |
| CNA Specialty |
| CNA Commercial |
| Total P&C Operations |
| Life & Group Non-Core |
| Corporate & Other Non-Core |
| Total |
Net operating income (loss) | |
$
|
296
| | |
$
|
221
| | |
$
|
517
| | |
$
|
(17
|
)
| |
$
|
(8
|
)
| |
$
|
492
| |
Net realized investment gains (losses) |
|
|
30
|
|
|
|
-
|
|
|
|
30
|
|
|
|
(5
|
)
|
|
|
10
|
|
|
|
35
|
|
Net income (loss) from continuing operations |
|
$
|
326
|
|
|
$
|
221
|
|
|
$
|
547
|
|
|
$
|
(22
|
)
|
|
$
|
2
|
|
|
$
|
527
|
|
|
Segment Results for the Six Months Ended June 30, 2009 |
($ millions) |
| CNA Specialty |
| CNA Commercial |
| Total P&C Operations |
| Life & Group Non-Core |
| Corporate & Other Non-Core |
| Total |
Net operating income (loss) | |
$
|
260
| | |
$
|
238
| | |
$
|
498
| | |
$
|
(48
|
)
| |
$
|
4
| | |
$
|
454
| |
Net realized investment losses |
|
|
(127
|
)
|
|
|
(242
|
)
|
|
|
(369
|
)
|
|
|
(115
|
)
|
|
|
(59
|
)
|
|
|
(543
|
)
|
Net income (loss) from continuing operations |
|
$
|
133
|
|
|
$
|
(4
|
)
|
|
$
|
129
|
|
|
$
|
(163
|
)
|
|
$
|
(55
|
)
|
|
$
|
(89
|
)
|
| | | | | | | | | | | | | | | | | | | | | | | |
|
Property & Casualty Operations Gross Written Premiums |
|
| Three Months Ended June 30 |
| Six Months Ended June 30 |
($ millions) |
| 2010 |
| 2009 |
| 2010 |
| 2009 |
CNA Specialty |
|
$
|
1,043
|
|
$
|
1,031
|
|
$
|
2,093
|
|
$
|
2,124
|
CNA Commercial |
|
|
936
|
|
|
1,052
|
|
|
1,848
|
|
|
2,064
|
Total P&C Operations |
|
$
|
1,979
|
|
$
|
2,083
|
|
$
|
3,941
|
|
$
|
4,188
|
|
Property & Casualty Operations Net Written Premiums |
|
| Three Months Ended June 30 |
| Six Months Ended June 30 |
($ millions) |
| 2010 |
| 2009 |
| 2010 |
| 2009 |
CNA Specialty | |
$
|
647
| |
$
|
655
| |
$
|
1,303
| |
$
|
1,327
|
CNA Commercial |
|
|
838
|
|
|
940
|
|
|
1,667
|
|
|
1,860
|
Total P&C Operations |
|
$
|
1,485
|
|
$
|
1,595
|
|
$
|
2,970
|
|
$
|
3,187
|
|
Property & Casualty Calendar Year Loss Ratios |
|
|
| Three Months Ended June 30 |
|
| Six Months Ended June 30 |
|
|
| 2010 | 2009 |
|
| 2010 | 2009 |
CNA Specialty |
|
|
48.2%
|
60.4%
|
|
|
54.8%
|
60.2%
|
CNA Commercial | | |
60.7%
|
71.2%
| | |
67.4%
|
71.2%
|
Total P&C Operations |
|
|
55.0%
|
66.4%
|
|
|
61.7%
|
66.3%
|
|
Property & Casualty Calendar Year Combined Ratios |
|
|
| Three Months Ended June 30 |
|
| Six Months Ended June 30 |
|
|
| 2010 | 2009 |
|
| 2010 | 2009 |
CNA Specialty | | |
79.0%
|
89.8%
| | |
85.7%
|
89.5%
|
CNA Commercial | | |
98.2%
|
104.6%
| | |
103.9%
|
104.9%
|
Total P&C Operations |
|
|
89.4%
|
98.1%
|
|
|
95.7%
|
98.1%
|
|
CNA Specialty Effect of Catastrophe Impacts and
Development-Related Items |
| Three Months Ended June 30 |
| Six Months Ended June 30 |
| 2010 | 2009 |
| 2010 | 2009 |
Combined ratio excluding the effect of catastrophe impacts and development-related
items |
97.1%
|
94.6%
|
|
96.8%
|
94.3%
|
Effect of catastrophe impacts |
0.5
|
0.3
| |
0.4
|
0.3
|
Effect of development-related items |
(18.6)
|
(5.1)
|
|
(11.5)
|
(5.1)
|
Combined ratio |
79.0%
|
89.8%
|
|
85.7%
|
89.5%
|
|
CNA Commercial Effect of Catastrophe Impacts and
Development-Related Items |
| Three Months Ended June 30 |
| Six Months Ended June 30 |
| 2010 | 2009 |
| 2010 | 2009 |
Combined ratio excluding the effect of catastrophe impacts and development-related
items |
110.5%
|
104.3%
| |
108.3%
|
105.3%
|
Effect of catastrophe impacts |
5.7
|
4.8
| |
5.2
|
3.1
|
Effect of development-related items |
(18.0)
|
(4.5)
|
|
(9.6)
|
(3.5)
|
Combined ratio |
98.2%
|
104.6%
|
|
103.9%
|
104.9%
|
|
Property & Casualty Operations Effect of Catastrophe Impacts and
Development-Related Items |
| Three Months Ended June 30 |
| Six Months Ended June 30 |
| 2010 | 2009 |
| 2010 | 2009 |
Combined ratio excluding the effect of catastrophe impacts and development-related
items |
104.5%
|
100.1%
| |
103.3%
|
100.6%
|
Effect of catastrophe impacts |
3.3
|
2.9
| |
3.0
|
1.9
|
Effect of development-related items |
(18.4)
|
(4.9)
|
|
(10.6)
|
(4.4)
|
Combined ratio |
89.4%
|
98.1%
|
|
95.7%
|
98.1%
|
| | | | |
|
About the Company
Serving businesses and professionals since 1897, CNA is the country’s
seventh largest commercial insurance writer and the 13th
largest property and casualty company. CNA’s insurance products include
standard commercial lines, specialty lines, surety, marine and other
property and casualty coverages. CNA's services include risk management,
information services, underwriting, risk control and claims
administration. 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 (877)
719-9810, or for international callers, (719) 325-4806.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 August 9, 2010 by dialing
(888) 203-1112, or for international callers, (719) 457-0820.The
replay passcode is 9858540.The replay will also be available on
CNA’s website.Financial supplement information related to the
second 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 and, with respect to the
agreement to reinsure asbestos and environmental pollution (A&E)
liabilities referenced in this press release, include the satisfaction
of the conditions to closing, including receipt of regulatory approvals,
whether the contemplated transaction will close, whether the other
parties to the contemplated transaction will fully perform their
obligations to CNA, the uncertainty in estimating loss reserves for A&E
claims and the possible continued exposure of CNA to liabilities for A&E
claims. For a detailed description of other risks and uncertainties
affecting CNA, 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