Book Value Per Common Share of $42.76, an Increase of 6% from June
30, 2010
CHICAGO--(BUSINESS WIRE)--
CNA Financial Corporation (NYSE: CNA) today announced third quarter 2010
results, which included a net operating loss of $158 million, or $0.66
per common share, and net loss of $140 million, or $0.59 per common
share. Third quarter 2010 results included an after-tax net loss of $365
million related to the previously announced agreement to cede Asbestos
and Environmental Pollution liabilities to National Indemnity Company
(Loss Portfolio Transfer or LPT); $344 million was recognized in
continuing operations and $21 million was recognized in discontinued
operations.
Property & Casualty Operations combined ratio for the third quarter was
97.9%. Book value per common share was $42.76 at September 30, 2010, as
compared to $40.43 at June 30, 2010 and $35.91 at December 31, 2009.
|
|
|
|
|
|
| Results for the Three Months Ended September
30 (a) |
| Results for the Nine Months Ended September
30 (a) |
($ millions) |
| 2010 |
| 2009 |
| 2010 |
| 2009 |
Net operating income (loss): |
| |
| |
| |
| |
Net operating income before LPT | |
$
|
186
| | |
$
|
331
| | |
$
|
678
| | |
$
|
785
| |
Net loss related to LPT |
|
|
(344
|
)
|
|
|
-
|
|
|
|
(344
|
)
|
|
|
-
|
|
Net operating income (loss) | | |
(158
|
)
| | |
331
| | | |
334
| | | |
785
| |
Net realized investment gains (losses) |
|
|
40
|
|
|
|
(67
|
)
|
|
|
75
|
|
|
|
(610
|
)
|
Net income (loss) from continuing operations | | |
(118
|
)
| | |
264
| | | |
409
| | | |
175
| |
Net loss from discontinued operations |
|
|
(22
|
)
|
|
|
(1
|
)
|
|
|
(21
|
)
|
|
|
(2
|
)
|
Net income (loss) |
|
$
|
(140
|
)
|
|
$
|
263
|
|
|
$
|
388
|
|
|
$
|
173
|
|
(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 CNAF’s Annual Report on Form 10-K for the year ended
December 31, 2009 for further discussion of this measure.
|
Earnings (Loss) Per Share Attributable to Common Stockholders |
|
| Results for the Three Months Ended
September 30 |
| Results for the Nine Months Ended
September 30 |
|
| 2010 |
| 2009 |
| 2010 |
| 2009 |
Net operating income (loss): |
| |
| |
| |
| |
Net operating income before LPT | |
$
|
0.69
| | |
$
|
1.23
| | |
$
|
2.52
| | |
$
|
2.92
| |
Net loss related to LPT |
|
|
(1.28
|
)
|
|
|
-
|
|
|
|
(1.28
|
)
|
|
|
-
|
|
Net operating income (loss) | | |
(0.59
|
)
| | |
1.23
| | | |
1.24
| | | |
2.92
| |
2008 Senior Preferred dividend |
|
|
(0.07
|
)
|
|
|
(0.12
|
)
|
|
|
(0.25
|
)
|
|
|
(0.35
|
)
|
Net operating income (loss) attributable to CNA common
stockholders | | |
(0.66
|
)
| | |
1.11
| | | |
0.99
| | | |
2.57
| |
Net realized investment gains (losses) |
|
|
0.15
|
|
|
|
(0.25
|
)
|
|
|
0.28
|
|
|
|
(2.27
|
)
|
Net income (loss) from continuing operations | | |
(0.51
|
)
| | |
0.86
| | | |
1.27
| | | |
0.30
| |
Net loss from discontinued operations |
|
|
(0.08
|
)
|
|
|
-
|
|
|
|
(0.08
|
)
|
|
|
(0.01
|
)
|
Net income (loss) attributable to CNA common stockholders |
|
$
|
(0.59
|
)
|
|
$
|
0.86
|
|
|
$
|
1.19
|
|
|
$
|
0.29
|
|
Net operating results for the three months ended September 30, 2010
decreased $489 million as compared with the same period in 2009.
Excluding the loss associated with the Loss Portfolio Transfer, net
operating income decreased $145 million. Net operating income for our
core Property & Casualty Operations decreased $19 million. Our core
segments were unfavorably impacted by lower net investment income,
driven by less favorable limited partnership income, partially offset by
increased favorable net prior year development. Net operating results
for our non-core segments decreased $126 million, which includes the
favorable impact in 2009 of a $61 million after-tax gain arising from a
settlement that resolved litigation related to the placement of personal
accident reinsurance. For the three months ended September 30, 2010,
catastrophe losses were $8 million after-tax, as compared to catastrophe
losses of $15 million after-tax for the same period in 2009. Our
Property & Casualty Operations produced third quarter combined ratios of
97.9% and 101.0% in 2010 and 2009.
"We are pleased to report another quarter of steady performance and
continued focus on our profit-improvement strategies. Operating income
before the impact of the Loss Portfolio Transfer was $186 million. Our
Property & Casualty Operations combined ratio was 97.9%. Rates on our
renewal business were slightly negative, however, retention remained
strong and we wrote more new business than we lost,” said Thomas F.
Motamed, Chairman and Chief Executive Officer of CNA Financial
Corporation.
“CNA’s balance sheet and capital position remain very strong. Our book
value per common share increased 19% to $42.76 from year end 2009. We
are also very pleased to have completed the Loss Portfolio Transfer. We
believe the transaction enhances CNA’s financial stability by
substantially eliminating our exposures to legacy asbestos and pollution
liabilities.”
Pretax net investment income for the three months ended September 30,
2010 decreased $79 million as compared with the same period in 2009. The
decrease was driven primarily by less favorable income from our limited
partnership investments.
After-tax net realized investment results improved $107 million for the
three months ended September 30, 2010 as compared with the same period
in 2009, driven by lower other-than-temporary impairment (OTTI) losses
recognized in earnings.
Net loss from discontinued operations increased $21 million for the
three months ended September 30, 2010 as compared with the same period
in 2009, due to the loss associated with the Loss Portfolio Transfer.
Net operating income decreased $451 million for the nine months ended
September 30, 2010 as compared with the same period in 2009. Excluding
the loss associated with the Loss Portfolio Transfer, net operating
income decreased $107 million. This decrease was primarily due to the
same reasons discussed above in the three month comparison.
Additionally, results for our core segments were unfavorably impacted by
decreased current accident year underwriting results, including higher
catastrophe losses. For the nine months ended September 30, 2010,
after-tax catastrophe losses were $65 million, as compared to $51
million for the same period in 2009. Our Property & Casualty Operations
produced combined ratios of 96.5% and 99.1% in 2010 and 2009.
Pretax net investment income for the nine months ended September 30,
2010 decreased $63 million as compared with the same period in 2009. The
decrease was primarily driven by less favorable income from our limited
partnership investments, partially offset by the impact of reducing our
short term and tax-exempt assets and shifting to higher yielding taxable
long term bonds.
After-tax net realized investment results improved $685 million for the
nine months ended September 30, 2010 as compared with the same period in
2009, driven by significantly lower OTTI losses recognized in earnings.
Net loss from discontinued operations increased $19 million for the nine
months ended September 30, 2010 as compared with the same period in
2009, due to the loss associated with the Loss Portfolio Transfer.
Agreement to Cede Asbestos and Environmental Pollution (A&EP)
Liabilities to National Indemnity Company (NICO)
As previously reported on August 31, 2010, we completed a transaction
with NICO, a subsidiary of Berkshire Hathaway Inc., under which
substantially all of our legacy A&EP liabilities were ceded to NICO.
Under the terms of the NICO transaction, effective January 1, 2010 we
ceded approximately $1.6 billion of net A&EP claim and allocated claim
adjustment expense reserves to NICO under a retroactive reinsurance
agreement with an aggregate limit of $4 billion (Loss Portfolio
Transfer). We paid NICO a reinsurance premium of $2 billion and
transferred to NICO billed third party reinsurance receivables related
to A&EP claims with a net book value of $215 million. NICO deposited
approximately $2.2 billion in a collateral trust account as security for
its obligations to us. In addition, Berkshire Hathaway Inc. guaranteed
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.
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 increased $16 million for the three months ended
September 30, 2010 as compared with the same period in 2009. Net
written premiums increased in our professional management and
liability lines of business. This increase was partially offset by
continued decreased insured exposures and lower rates in our
architects & engineers and HealthPro lines of business due to current
economic and competitive market conditions. Average rate decreased 2%
for the three months ended September 30, 2010, as compared to a
decrease of 1% for the three months ended September 30, 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 decreased $9 million for the three months ended
September 30, 2010 as compared with the same period in 2009. This
decrease was primarily due to decreased current accident year
underwriting results and lower net investment income, partially offset
by increased favorable net prior year development.
-
The combined ratio improved 0.3 points for the three months ended
September 30, 2010 as compared with the same period in 2009. The loss
ratio improved 2.0 points, primarily due to increased favorable net
prior year development, partially offset by the impact of a higher
current accident year loss ratio. The expense ratio increased 1.6
points, primarily related to higher underwriting expenses.
-
Net income increased $24 million for the three months ended September
30, 2010 as compared with the same period in 2009. This increase was
due to improved net realized investment results, partially offset by
lower net operating income.
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 $24 million for the three months ended
September 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 was flat for the three months ended September
30, 2010 and 2009 for policies that renewed in each period. Retention
rates of 81% and 80% were achieved for those policies that were
available for renewal in each period.
-
Net operating income decreased $10 million for the three months ended
September 30, 2010 as compared with the same period in 2009. This
decrease was primarily due to lower net investment income, driven by
less favorable limited partnership income, partially offset by
increased favorable net prior year development.
-
The combined ratio improved 4.9 points for the three months ended
September 30, 2010 as compared with the same period in 2009. The loss
ratio improved 3.2 points, primarily due to increased favorable net
prior year development and decreased catastrophe losses. The expense
ratio improved 1.7 points primarily due to the favorable impact of a
reduction in the allowance for uncollectible insurance receivables and
decreased unfavorable changes in estimates for insurance-related
assessments, partially offset by the unfavorable impact of the lower
net earned premium base.
-
Net income improved $50 million for the three months ended September
30, 2010 as compared with the same period in 2009. This improvement
was due to improved net realized investment results, partially offset
by lower net operating income.
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 results decreased $107 million for the three months ended
September 30, 2010 as compared with the same period in 2009. This
decrease was primarily due to the favorable impact in 2009 of a $61
million after-tax gain arising from a settlement that resolved
litigation related to the placement of personal accident reinsurance.
Also contributing to the decrease in net results was a $39 million
pretax and after-tax increase to payout annuity benefit reserves
resulting from unlocking assumptions due to loss recognition, and less
favorable performance on our pension deposit 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 and A&EP.
-
Net loss increased $349 million for the three months ended September
30, 2010 as compared with the same period in 2009, driven by the
after-tax loss from continuing operations of $344 million as a result
of the Loss Portfolio Transfer, as previously discussed. Net results
were also impacted by lower net investment income and higher interest
expense. Partially offsetting these unfavorable items were improved
net realized investment results.
|
Segment Results for the Three Months Ended September 30, 2010 |
|
| |
| |
| |
| |
| Corporate |
| |
($ millions) |
| CNA Specialty |
| CNA Commercial |
| Total P&C Operations |
| Life & Group Non-Core |
| & Other Non-Core |
| Total |
Net operating income (loss) | |
$
|
144
| | |
$ 108
| | |
$
|
252
| | |
$
|
(55
|
)
| |
$ (355
|
)
| |
$
|
(158
|
)
|
Net realized investment gains |
|
|
9
|
|
|
14
|
|
|
|
23
|
|
|
|
13
|
|
|
4
|
|
|
|
40
|
|
Net income (loss) from continuing operations |
|
$
|
153
|
|
|
$ 122
|
|
|
$
|
275
|
|
|
$
|
(42
|
)
|
|
$ (351
|
)
|
|
$
|
(118
|
)
|
|
Segment Results for the Three Months Ended September 30, 2009 |
| | | | | | | | | | Corporate | | |
($ millions) |
| CNA Specialty |
| CNA Commercial |
| Total P&C Operations |
| Life & Group Non-Core |
| & Other Non-Core |
| Total |
Net operating income | |
$
|
153
| | |
$ 118
| | |
$
|
271
| | |
$
|
51
| | |
$ 9
| | |
$
|
331
| |
Net realized investment gains (losses) |
|
|
(24
|
)
|
|
(46
|
)
|
|
|
(70
|
)
|
|
|
14
|
|
|
(11
|
)
|
|
|
(67
|
)
|
Net income (loss) from continuing operations |
|
$
|
129
|
|
|
$ 72
|
|
|
$
|
201
|
|
|
$
|
65
|
|
|
$ (2
|
)
|
|
$
|
264
|
|
|
Segment Results for the Nine Months Ended September 30, 2010 |
| | | | | | | | | | Corporate | | |
($ millions) |
| CNA Specialty |
| CNA Commercial |
| Total P&C Operations |
| Life & Group Non-Core |
| & Other Non-Core |
| Total |
Net operating income (loss) | |
$
|
440
| | |
$ 329
| | |
$
|
769
| | |
$
|
(72
|
)
| |
$ (363
|
)
| |
$
|
334
| |
Net realized investment gains |
|
|
39
|
|
|
14
|
|
|
|
53
|
|
|
|
8
|
|
|
14
|
|
|
|
75
|
|
Net income (loss) from continuing operations |
|
$
|
479
|
|
|
$ 343
|
|
|
$
|
822
|
|
|
$
|
(64
|
)
|
|
$ (349
|
)
|
|
$
|
409
|
|
|
Segment Results for the Nine Months Ended September 30, 2009 |
| | | | | | | | | | Corporate | | |
($ millions) |
| CNA Specialty |
| CNA Commercial |
| Total P&C Operations |
| Life & Group Non-Core |
| & Other Non-Core |
| Total |
Net operating income | |
$
|
413
| | |
$ 356
| | |
$
|
769
| | |
$
|
3
| | |
$ 13
| | |
$
|
785
| |
Net realized investment losses |
|
|
(151
|
)
|
|
(288
|
)
|
|
|
(439
|
)
|
|
|
(101
|
)
|
|
(70
|
)
|
|
|
(610
|
)
|
Net income (loss) from continuing operations |
|
$
|
262
|
|
|
$ 68
|
|
|
$
|
330
|
|
|
$
|
(98
|
)
|
|
$ (57
|
)
|
|
$
|
175
|
|
|
Property & Casualty Operations Gross Written Premiums |
|
| Three Months Ended September 30 |
| Nine Months Ended September 30 |
($ millions) |
| 2010 |
| 2009 |
|
| 2010 |
| 2009 |
|
CNA Specialty | |
$ 1,087
|
|
$ 1,071
| | |
$ 3,180
|
|
$ 3,195
| |
CNA Commercial |
|
825
|
|
882
|
|
|
2,673
|
|
2,946
|
|
Total P&C Operations |
|
$ 1,912
|
|
$ 1,953
|
|
|
$ 5,853
|
|
$ 6,141
|
|
|
Property & Casualty Operations Net Written Premiums |
|
| Three Months Ended September 30 |
| Nine Months Ended September 30 |
($ millions) |
| 2010 |
| 2009 |
|
| 2010 |
| 2009 |
|
CNA Specialty | |
$ 706
| |
$ 690
| | |
$ 2,009
| |
$ 2,017
| |
CNA Commercial |
|
763
|
|
787
|
|
|
2,430
|
|
2,647
|
|
Total P&C Operations |
|
$ 1,469
|
|
$ 1,477
|
|
|
$ 4,439
|
|
$ 4,664
|
|
|
Property & Casualty Calendar Year Loss Ratios |
|
| Three Months Ended September 30 |
| Nine Months Ended September 30 |
|
| 2010 |
| 2009 |
| 2010 |
| 2009 |
CNA Specialty |
|
57.8%
|
|
59.8%
|
|
55.8%
|
|
60.1%
|
CNA Commercial | |
70.2%
| |
73.4%
| |
68.3%
| |
71.9%
|
Total P&C Operations |
|
64.6%
|
|
67.4%
|
|
62.7%
|
|
66.7%
|
|
Property & Casualty Calendar Year Combined Ratios |
|
| Three Months Ended September 30 |
| Nine Months Ended September 30 |
|
| 2010 |
| 2009 |
| 2010 |
| 2009 |
CNA Specialty | |
88.5%
| |
88.8%
| |
86.6%
| |
89.2%
|
CNA Commercial | |
105.7%
| |
110.6%
| |
104.5%
| |
106.8%
|
Total P&C Operations |
|
97.9%
|
|
101.0%
|
|
96.5%
|
|
99.1%
|
|
CNA Specialty Effect of Catastrophe Impacts and
Development-Related Items |
|
| Three Months Ended September 30 |
| Nine Months Ended September 30 |
|
| 2010 |
| 2009 |
| 2010 |
| 2009 |
Combined ratio excluding the effect of catastrophe impacts and
development-related items |
|
98.2
|
%
|
|
94.0
|
%
|
|
97.2
|
%
|
|
94.1
|
%
|
Effect of catastrophe impacts | |
0.1
| | |
0.3
| | |
0.3
| | |
0.3
| |
Effect of development-related items |
|
(9.8
|
)
|
|
(5.5
|
)
|
|
(10.9
|
)
|
|
(5.2
|
)
|
Combined ratio |
|
88.5
|
%
|
|
88.8
|
%
|
|
86.6
|
%
|
|
89.2
|
%
|
|
CNA Commercial Effect of Catastrophe Impacts and
Development-Related Items |
|
| Three Months Ended September 30 |
| Nine Months Ended September 30 |
|
| 2010 |
| 2009 |
| 2010 |
| 2009 |
Combined ratio excluding the effect of catastrophe impacts and
development-related items | |
108.2
|
%
| |
109.7
|
%
| |
108.3
|
%
| |
106.8
|
%
|
Effect of catastrophe impacts | |
1.4
| | |
2.4
| | |
3.9
| | |
2.8
| |
Effect of development-related items |
|
(3.9
|
)
|
|
(1.5
|
)
|
|
(7.7
|
)
|
|
(2.8
|
)
|
Combined ratio |
|
105.7
|
%
|
|
110.6
|
%
|
|
104.5
|
%
|
|
106.8
|
%
|
|
Property & Casualty Operations Effect of Catastrophe Impacts and
Development-Related Items |
|
| Three Months Ended September 30 |
| Nine Months Ended September 30 |
|
| 2010 |
| 2009 |
| 2010 |
| 2009 |
Combined ratio excluding the effect of catastrophe impacts and
development-related items | |
103.6
|
%
| |
102.8
|
%
| |
103.4
|
%
| |
101.4
|
%
|
Effect of catastrophe impacts | |
0.8
| | |
1.5
| | |
2.3
| | |
1.7
| |
Effect of development-related items |
|
(6.5
|
)
|
|
(3.3
|
)
|
|
(9.2
|
)
|
|
(4.0
|
)
|
Combined ratio |
|
97.9
|
%
|
|
101.0
|
%
|
|
96.5
|
%
|
|
99.1
|
%
|
| | | | | | | | | | | |
|
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 (888)
437-9481, or for international callers, (719) 325-2183.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 November 8, 2010 by dialing
(888) 203-1112, or for international callers, (719) 457-0820.The
replay passcode is 9295475.The replay will also be available on
CNA’s website.Financial supplement information related to the
third 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 herein
and/or to CNAF’s most recent 10-K and 10-Q on file 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&EP)
liabilities referenced in this press release, include whether the other
parties to the transaction will fully perform their obligations to CNA,
the uncertainty in estimating loss reserves for A&EP liabilities and the
possible continued exposure of CNA to liabilities for A&EP claims. For a
detailed description of other risks and uncertainties affecting CNA,
please refer to CNAF’s most recent 10-K and 10-Q on file 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