Book Value Per Common Share of $35.38, an Increase of 29% from June
30, 2009
CHICAGO--(BUSINESS WIRE)--
CNA Financial Corporation (NYSE: CNA) today announced third quarter 2009
results, which included net operating income of $331 million, or $1.11
per common share, and net income of $263 million, or $0.86 per common
share. The combined ratio for Property & Casualty Operations was 101.0%
for the quarter. Book value per common share was $35.38 at September 30,
2009, as compared to $27.53 at June 30, 2009 and $20.92 at December 31,
2008.
Results for the Three Months Results for the Nine Months
Ended September 30(a) Ended September 30(a)
($ millions) 2009 2008 2009 2008
Net operating income $ 331 $ 83 $ 785 $ 554
Net realized (67 ) (423 ) (610 ) (527 )
investment losses
Net income (loss)
from continuing 264 (340 ) 175 27
operations
Net (loss) income
from discontinued (1 ) 9 (2 ) 10
operations
Net income (loss) $ 263 $ (331 ) $ 173 $ 37
References to net operating income (loss), net realized investment gains
(losses) and net income (loss) used in this press release reflect amounts
attributable to CNA Financial Corporation (CNAF), unless otherwise noted.
(a) 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 2008 Form 10-K for further discussion of
this measure.
Earnings (Loss) Per Share Attributable to Common Stockholders
Results for the Results for the
Three Months Nine Months
Ended September 30 Ended September 30
2009 2008 2009 2008
Net operating income $ 1.23 $ 0.31 $ 2.92 $ 2.06
Less: 2008 Senior Preferred (0.12 ) - (0.35 ) -
dividend
Net operating income attributable 1.11 0.31 2.57 2.06
to CNAF common stockholders
Net realized investment losses (0.25 ) (1.57 ) (2.27 ) (1.96 )
Net income (loss) from continuing 0.86 (1.26 ) 0.30 0.10
operations
Net income (loss) from - 0.03 (0.01 ) 0.04
discontinued operations
Net income (loss) attributable to $ 0.86 $ (1.23 ) $ 0.29 $ 0.14
CNAF common stockholders
Net operating income for the three months ended September 30, 2009
improved $248 million as compared with the same period in 2008. Net
operating income for our core Property & Casualty Operations increased
$179 million, while results for our non-core operations increased $69
million. This improvement was primarily due to lower catastrophe losses,
higher net investment income and a $61 million after-tax gain from a
settlement that resolved litigation related to the placement of personal
accident reinsurance. Catastrophe losses were $15 million after-tax in
the third quarter of 2009, as compared with catastrophe impacts of $168
million after-tax in the third quarter of 2008. Partially offsetting
these favorable items was an unfavorable change in current accident year
underwriting results excluding catastrophes. Our Property & Casualty
Operations produced third quarter combined ratios of 101.0% and 107.0%
in 2009 and 2008, or 99.5% and 91.3% before the 1.5 point and 15.7 point
impacts related to catastrophes.
"CNA turned in another quarter of solid operating income, driven by
improved investment income and relatively light catastrophe losses,"
said Thomas F. Motamed, Chairman and Chief Executive Officer of CNA
Financial Corporation. "In our core Property & Casualty Operations, we
are pleased with the continued strong performance of the Specialty Lines
segment. We continue to focus on improving profitability in the Standard
Lines segment. Rate trends are encouraging across our portfolio.
However, the recession has reduced exposures, putting downward pressure
on premium volume."
"We are also pleased by the continued strong recovery of CNA's
investment portfolio. Book value per common share increased 29% over the
course of the quarter, even as we continued our efforts to reduce
portfolio risk and volatility," said Mr. Motamed.
Pretax net investment income for the third quarter of 2009 increased
$221 million as compared with the same period in 2008. This increase was
primarily driven by improved results from limited partnership
investments.
After-tax net realized investment losses decreased $356 million for the
three months ended September 30, 2009 as compared with the same period
in 2008, driven by decreased other-than-temporary impairment (OTTI)
losses recorded in the period.
Net results for the three months ended September 30, 2009 improved $594
million as compared with the same period in 2008. This improvement was
due to lower net realized investment losses and higher net operating
income.
Net operating income for the nine months ended September 30, 2009
improved $231 million as compared with the same period in 2008. Net
operating income for our core Property & Casualty Operations increased
$189 million, while results for our non-core operations increased $42
million. The overall improvement was primarily due to lower catastrophe
losses, higher net investment income and the gain from the settlement
discussed in the three month comparison above. Catastrophe losses were
$51 million after-tax for the nine months ended September 30, 2009, as
compared with catastrophe impacts of $233 million after-tax for the same
period in 2008. Partially offsetting these favorable items was an
unfavorable change in current accident year underwriting results
excluding catastrophes. Our Property & Casualty Operations produced
combined ratios of 99.1% and 100.9% for the nine months ended September
30, 2009 and 2008, or 97.4% and 93.6% before the 1.7 point and 7.3 point
impacts related to catastrophes.
Pretax net investment income for the nine months ended September 30,
2009 increased $306 million as compared with the same period in 2008,
driven by improved results from limited partnership investments.
Excluding indexed group annuity business trading portfolio losses of
$103 million in 2008, net investment income increased $203 million.
These trading portfolio losses were substantially offset by a
corresponding decrease in the policyholders' funds reserves supported by
this trading portfolio. We exited the indexed group annuity business in
2008.
After-tax net realized investment losses increased $83 million for the
nine months ended September 30, 2009 as compared with the same period in
2008. For the nine months ended September 30, 2009, OTTI losses of $752
million after-tax were primarily driven by credit issues in the
financial sector and the impact of difficult economic conditions on
residential and commercial mortgage-backed securities. OTTI losses of
$546 million after-tax were recorded for the nine months ended September
30, 2008.
Net income for the nine months ended September 30, 2009 improved $136
million as compared with the same period in 2008. This increase was
primarily due to higher net operating income, partially offset by higher
net realized investment losses.
Business Operating Highlights
Standard Lines works with an independent agency distribution
system and network of brokers to market a broad range of property and
casualty insurance products and services primarily to small,
middle-market and large businesses and organizations domestically.
-- Net written premiums decreased $91 million for the third quarter of 2009
as compared with the same period in 2008. The current economic
conditions have led to decreased insured exposures. Average rate was
flat for the third quarter of 2009, as compared to decreases of 5% for
the third quarter of 2008 for the policies that renewed during those
periods. Retention rates of 80% and 81% were achieved for those policies
that were available for renewal in each period.
-- Net operating results improved $165 million for the third quarter of
2009 as compared with the same period in 2008. This improvement was
primarily due to lower catastrophe losses and higher net investment
income. Catastrophe losses were $13 million after-tax in the third
quarter of 2009, as compared to catastrophe impacts of $160 million
after-tax in the third quarter of 2008. Partially offsetting these
favorable items was an unfavorable change in current accident year
underwriting results excluding catastrophes.
-- The combined ratio improved 17.1 points for the third quarter of 2009 as
compared with the same period in 2008. The loss ratio improved 22.3
points primarily due to decreased catastrophe losses, partially offset
by the impact of higher current accident year non-catastrophe loss
ratios. The expense ratio increased 3.3 points, primarily related to
higher underwriting expenses, unfavorable changes in estimates for
insurance-related assessments, and the lower net earned premium base.
Underwriting expenses increased primarily due to higher employee-related
costs.
-- Net results for the third quarter of 2009 improved $235 million as
compared with the same period in 2008. This increase was primarily
attributable to improved net operating results and lower net realized
investment losses.
Specialty Lines provides professional, financial and specialty
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 $30 million for the third quarter of 2009
as compared with the same period in 2008. This decrease reflects lower
net written premiums for CNA Global, partially offset by growth in U.S.
Specialty lines. CNA Global written premiums were unfavorably impacted
by current economic conditions and foreign exchange. Modest growth in
U.S. Specialty written premiums was driven by strong rate increases in
the financial institutions and directors and officers lines, partially
offset by the impact of current economic conditions. Average rate was
flat for the third quarter of 2009, as compared to decreases of 3% for
the third quarter of 2008 for the policies that renewed during those
periods. Retention rates of 84% were achieved for those policies that
were available for renewal in both periods.
-- Net operating income improved $14 million for the third quarter of 2009
as compared with the same period in 2008. This improvement was primarily
due to higher net investment income, partially offset by decreased
favorable net prior year development and an unfavorable change in
current accident year underwriting results.
-- The combined ratio increased 4.1 points for the third quarter of 2009 as
compared with the same period in 2008. The loss ratio increased 3.6
points primarily due to less favorable net prior year development and
higher current accident year loss ratios recorded in several lines of
business. The expense ratio increased 0.6 points primarily related to
the lower net earned premium base.
-- Net income improved $64 million for the third quarter of 2009 as
compared with the same period in 2008. This improvement was primarily
attributable to lower net realized investment losses.
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 group and individual long term care
businesses.
-- Net results improved $295 million for the third quarter of 2009 as
compared with the same period in 2008. This increase was primarily due
to improved net realized investment results, a $61 million after-tax
gain, net of reinsurance, from a settlement that resolved litigation
related to the placement of personal accident reinsurance and favorable
performance on our remaining pension deposit business. Partially
offsetting these favorable items 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 loss decreased $10 million for the third quarter of 2009 as compared
with the same period in 2008. The decrease was primarily due to lower
net realized investment losses and higher net investment income,
partially offset by a release in the third quarter of 2008 from the
allowance for uncollectible reinsurance receivables of $27 million
after-tax arising from a change in estimate.
Segment Results for the Three Months Ended September 30, 2009
Corporate
($ millions) Standard Specialty Total P&C Life & Group & Other Total
Lines Lines Ops. Non-Core Non-Core
Net operating $ 112 $ 159 $ 271 $ 51 $ 9 $ 331
income
Net realized
investment (45 ) (25 ) (70 ) 14 (11 ) (67 )
(losses)
gains
Net income
(loss) from $ 67 $ 134 $ 201 $ 65 $ (2 ) $ 264
continuing
operations
Segment Results for the Three Months Ended September 30, 2008
Corporate
($ millions) Standard Specialty Total P&C Life & Group & Other Total
Lines Lines Ops. Non-Core Non-Core
Net operating $ (53 ) $ 145 $ 92 $ (36 ) $ 27 $ 83
(loss) income
Net realized
investment (115 ) (75 ) (190 ) (194 ) (39 ) (423 )
losses
Net (loss)
income from $ (168 ) $ 70 $ (98 ) $ (230 ) $ (12 ) $ (340 )
continuing
operations
Segment Results for the Nine Months Ended September 30, 2009
Corporate
($ millions) Standard Specialty Total P&C Life & Group & Other Total
Lines Lines Ops. Non-Core Non-Core
Net operating $ 318 $ 451 $ 769 $ 3 $ 13 $ 785
income
Net realized
investment (272 ) (167 ) (439 ) (101 ) (70 ) (610 )
losses
Net income
(loss) from $ 46 $ 284 $ 330 $ (98 ) $ (57 ) $ 175
continuing
operations
Segment Results for the Nine Months Ended September 30, 2008
Corporate
($ millions) Standard Specialty Total P&C Life & Group & Other Total
Lines Lines Ops. Non-Core Non-Core
Net operating $ 166 $ 414 $ 580 $ (69 ) $ 43 $ 554
income (loss)
Net realized
investment (165 ) (99 ) (264 ) (209 ) (54 ) (527 )
losses
Net income
(loss) from $ 1 $ 315 $ 316 $ (278 ) $ (11 ) $ 27
continuing
operations
Property & Casualty Operations Gross Written Premiums
Three Months Ended September Nine Months Ended September
30 30
($ millions) 2009 2008 2009 2008
Standard Lines $ 711 $ 804 $ 2,399 $ 2,580
Specialty Lines 1,242 1,290 3,742 3,864
Total P&C $ 1,953 $ 2,094 $ 6,141 $ 6,444
Operations
Property & Casualty Operations Net Written Premiums
Three Months Ended September Nine Months Ended September
30 30
($ millions) 2009 2008 2009 2008
Standard Lines $ 632 $ 723 $ 2,156 $ 2,342
Specialty Lines 845 875 2,508 2,583
Total P&C $ 1,477 $ 1,598 $ 4,664 $ 4,925
Operations
Property & Casualty Calendar Year Loss Ratios
Three Months Ended September Nine Months Ended September
30 30
2009 2008 2009 2008
Standard Lines 74.0 % 96.3 % 72.4 % 81.1 %
Specialty 62.1 % 58.5 % 62.0 % 62.8 %
Lines
Total P&C 67.4 % 76.0 % 66.7 % 71.4 %
Operations
Total P&C 74.0 % 82.5 % 76.4 % 80.2 %
Companies(a)
Property & Casualty Calendar Year Combined Ratios
Three Months Ended September Nine Months Ended September
30 30
2009 2008 2009 2008
Standard Lines 112.2 % 129.3 % 108.0 % 112.2 %
Specialty 91.9 % 87.8 % 91.7 % 91.0 %
Lines
Total P&C 101.0 % 107.0 % 99.1 % 100.9 %
Operations
Total P&C 107.5 % 114.1 % 108.9 % 110.3 %
Companies(a)
P&C Companies includes Standard Lines, Specialty Lines and P&C business
(a) written in Life & Group Non-Core and Corporate & Other Non-Core,
including CNA Re and asbestos and environmental pollution exposures.
Standard Lines Effect of Catastrophe Impacts and Development-Related Items
Three Months Ended Nine Months Ended
September 30 September 30
2009 2008 2009 2008
Combined ratio excluding the effect of
catastrophe impacts and 109.7 % 96.0 % 106.6 % 98.6 %
development-related items
Effect of catastrophe impacts 2.9 32.4 3.5 14.9
Effect of development-related items (0.4 ) 0.9 (2.1 ) (1.3 )
Combined ratio 112.2 % 129.3 % 108.0 % 112.2 %
Specialty Lines Effect of Catastrophe Impacts and Development-Related Items
Three Months Ended Nine Months Ended
September 30 September 30
2009 2008 2009 2008
Combined ratio excluding the effect of
catastrophe impacts and 97.0 % 94.4 % 96.7 % 93.1 %
development-related items
Effect of catastrophe impacts 0.4 1.3 0.3 0.5
Effect of development-related items (5.5 ) (7.9 ) (5.3 ) (2.6 )
Combined ratio 91.9 % 87.8 % 91.7 % 91.0 %
Property & Casualty Operations Effect of Catastrophe Impacts and
Development-Related Items
Three Months Ended Nine Months Ended
September 30 September 30
2009 2008 2009 2008
Combined ratio excluding the effect of
catastrophe impacts and 102.8 % 95.2 % 101.4 % 95.6 %
development-related items
Effect of catastrophe impacts 1.5 15.7 1.7 7.3
Effect of development-related items (3.3 ) (3.9 ) (4.0 ) (2.0 )
Combined ratio 101.0 % 107.0 % 99.1 % 100.9 %
About the Company
Serving businesses and professionals since 1897, CNA is the country's
seventh largest commercial insurance writer and the thirteenth 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 trade mark 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)
378-4369, or for international callers, (719) 785-1754. 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 9, 2009 by dialing
(888) 203-1112, or for international callers, (719) 457-0820. The
replay passcode is 8835634. 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 the Standard Lines and Specialty Lines,
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