Full Year Net Operating Income of $982 Million, Net Income of $419
Million, P&C Combined Ratio of 96.9%
Book Value Per Common Share of $35.91, an Increase of 72% from
December 31, 2008
CHICAGO--(BUSINESS WIRE)--
CNA Financial Corporation (NYSE: CNA) today announced fourth quarter
2009 results, which included net operating income of $197 million, or
$0.63 per common share, and net income of $246 million, or $0.81 per
common share. Full year 2009 results included net operating income of
$982 million, or $3.20 per common share, and net income of $419 million,
or $1.10 per common share. Property & Casualty Operations combined
ratios for the fourth quarter and full year 2009 were 90.3% and 96.9%.
Book value per common share was $35.91 at December 31, 2009, as compared
to $20.92 at December 31, 2008.
Results for the Three Months Results for the Year Ended
Ended December 31 (a) December 31 (a)
($ millions) 2009 2008 2009 2008
Net operating income $ 197 $ (21 ) $ 982 $ 533
(loss)
Net realized
investment gains 49 (314 ) (561 ) (841 )
(losses)
Net income (loss) from 246 (335 ) 421 (308 )
continuing operations
Net income (loss) from
discontinued - (1 ) (2 ) 9
operations
Net income (loss) $ 246 $ (336 ) $ 419 $ (299 )
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, unless otherwise noted. Management utilizes the net
(a) operating income financial measure to monitor the Company's operations.
Please refer to Note K of the Condensed Consolidated Financial Statements
within the September 30, 2009 Form 10-Q for further discussion of this
measure.
Earnings (Loss) Per Share Attributable to Common Stockholders
Results for the Results for the
Three Months Year Ended
Ended December 31 December 31
2009 2008 2009 2008
Net operating income (loss) $ 0.73 $ (0.08 ) $ 3.65 $ 1.98
2008 Senior Preferred dividend (0.10 ) (0.07 ) (0.45 ) (0.07 )
Net operating income (loss)
attributable to CNA common 0.63 (0.15 ) 3.20 1.91
stockholders
Net realized investment gains 0.18 (1.16 ) (2.09 ) (3.12 )
(losses)
Net income (loss) from continuing 0.81 (1.31 ) 1.11 (1.21 )
operations
Net income (loss) from discontinued - - (0.01 ) 0.03
operations
Net income (loss) attributable to $ 0.81 $ (1.31 ) $ 1.10 $ (1.18 )
CNA common stockholders
Net operating income for the three months ended December 31, 2009
improved $218 million as compared with the same period in 2008. Net
operating income for our core Property & Casualty Operations improved
$205 million, while results for our non-core operations improved $13
million. The overall improvement was primarily due to higher net
investment income. Our Property & Casualty Operations produced fourth
quarter combined ratios of 90.3% and 89.1% in 2009 and 2008.
"We are pleased to report solid net operating income for the quarter and
year," said Thomas F. Motamed, Chairman and Chief Executive Officer of
CNA Financial Corporation. "In our core Property & Casualty Operations,
the Specialty segment continued to deliver very strong performance. In
the Commercial segment, our underwriting improvement strategies are
starting to show in the formof fourth quarter renewal rate
increases, higher submission volume and hit ratios in our target classes
of business.
"The sluggish economy and competitive insurance marketplace continue to
put pressure on revenues and margins across our P&C portfolio. However,
we continue to believe that focusing our appetite on specific industry
segments, shifting our mix of business and expanding our geographic
reach will help us manage through this environment until there is
sustained improvement in the underlying economy.
"We are also pleased by the continued recovery of CNA's investment
portfolio. Book value per common share increased 72% from year end 2008.
Additionally, we have made substantial progress in repositioning the
portfolio to better match the needs of the business," said Mr. Motamed.
Pretax net investment income for the fourth quarter of 2009 improved
$395 million as compared with the same period in 2008. This improvement
was primarily driven by results from limited partnership investments.
After-tax net realized investment results improved $363 million for the
three months ended December 31, 2009 as compared with the same period in
2008, driven by the $240 million after-tax gain from the sale of our
common stock holdings of Verisk Analytics Inc. as well as lower
other-than-temporary impairment (OTTI) losses.
Net operating income for the year ended December 31, 2009 improved $449
million as compared with the same period in 2008. Net operating income
for our core Property & Casualty Operations improved $394 million, while
results for our non-core operations improved $55 million. The overall
improvement was primarily due to higher net investment income and lower
catastrophe losses. Catastrophe losses were $58 million after-tax for
the year ended December 31, 2009, as compared with catastrophe impacts
of $239 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 96.9% and 98.0% for
the year ended December 31, 2009 and 2008, or 95.5% and 92.3% before the
1.4 point and 5.7 point impacts related to catastrophes.
Pretax net investment income for the year ended December 31, 2009
increased $701 million as compared with the same period in 2008,
primarily driven by improved results from limited partnership
investments. Excluding indexed group annuity business trading portfolio
losses of $146 million in 2008, net investment income increased $555
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 decreased $280 million for the
year ended December 31, 2009 as compared with the same period in 2008.
For the year ended December 31, 2009, OTTI losses of $879 million
after-tax were primarily driven by the impact of difficult economic
conditions on residential and commercial mortgage-backed securities as
well as credit issues in the financial sector. For the year ended
December 31, 2008, OTTI losses of $965 million after-tax were recorded.
Business Operating Highlights
CNA Specialty provides professional liability and 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 fourth quarter of
2009 as compared with the same period in 2008. The decrease in net
written premiums was driven by our architects & engineers and surety
bond lines of business, as current economic conditions have led to
decreased insured exposures. Average rate decreased 2% for the fourth
quarter of 2009, as compared to a decrease of 3% for the fourth quarter
of 2008 for the policies that renewed in each period. Retention rates of
84% and 86% were achieved for those policies that were available for
renewal in each period.
-- Net operating income improved $136 million for the fourth quarter of
2009 as compared with the same period in 2008. This improvement was
primarily due to higher net investment income and increased favorable
net prior year development.
-- The combined ratio improved 14.2 points for the fourth quarter of 2009
as compared with the same period in 2008. The loss ratio improved 16.4
points primarily due to higher favorable net prior year development and
lower current accident year loss ratios. The expense ratio increased 2.6
points primarily related to higher underwriting expenses driven by
higher employee-related costs.
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 $80 million for the fourth quarter of
2009 as compared with the same period in 2008. Net written premiums were
unfavorably impacted by current economic conditions, which have led to
decreased insured exposures. Average rate increased 1% for the fourth
quarter of 2009, as compared to a decrease of 3% for the fourth quarter
of 2008 for the policies that renewed in each period. Retention rates of
81% and 84% were achieved for those policies that were available for
renewal in each period.
-- Net operating income improved $69 million for the fourth quarter of 2009
as compared with the same period in 2008. This improvement was primarily
due to higher net investment income. Partially offsetting this favorable
item was an unfavorable change in current accident year underwriting
results.
-- The combined ratio increased 13.4 points for the fourth quarter of 2009
as compared with the same period in 2008. The loss ratio increased 8.0
points primarily due to unfavorable current accident year losses and the
impact of development. The expense ratio increased 5.3 points, primarily
related to higher underwriting expenses and the lower net earned premium
base. Underwriting expenses increased primarily due to higher
employee-related 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 increased $5 million for the fourth quarter of 2009 as compared
with the same period in 2008. This increase was primarily due to higher
net realized investment losses. Partially offsetting this unfavorable
item was favorable performance on our remaining 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. This segment also includes the results related to the
centralized adjusting and settlement of asbestos and environmental
pollution.
-- Net loss decreased $59 million for the fourth quarter of 2009 as
compared with the same period in 2008. This decrease was primarily due
to improved net realized investment results and improved net investment
income. Partially offsetting these favorable items was increased
unfavorable net prior year development. As a result of our most recent
actuarial ground up reviews, we recorded unfavorable net claim and claim
adjustment expense reserve development of $79 million related to
asbestos exposures and $76 million related to environmental pollution
exposures in the fourth quarter of 2009. We recorded unfavorable net
claim and claim adjustment expense reserve development of $89 million
related to asbestos exposures and environmental pollution exposures in
the fourth quarter of 2008.
Segment Results for the Three Months Ended December 31, 2009
Corporate
CNA CNA Total P&C Life & Group & Other
($ millions) Specialty Commercial Ops. Non-Core Non-Core Total
Net operating $ 178 $ 150 $ 328 $ (19 ) $ (112 ) $ 197
income (loss)
Net realized
investment 28 56 84 (52 ) 17 49
gains (losses)
Net income
(loss) from $ 206 $ 206 $ 412 $ (71 ) $ (95 ) $ 246
continuing
operations
Segment Results for the Three Months Ended December 31, 2008
Corporate
CNA CNA Total P&C Life & Group & Other
($ Specialty Commercial Ops. Non-Core Non-Core Total
millions)
Net
operating $ 42 $ 81 $ 123 $ (39 ) $ (105 ) $ (21 )
income
(loss)
Net
realized (79 ) (159 ) (238 ) (27 ) (49 ) (314 )
investment
losses
Net loss
from $ (37 ) $ (78 ) $ (115 ) $ (66 ) $ (154 ) $ (335 )
continuing
operations
Segment Results for the Year Ended December 31, 2009
Corporate
CNA CNA Total P&C Life & Group & Other
($ Specialty Commercial Ops. Non-Core Non-Core Total
millions)
Net
operating $ 591 $ 506 $ 1,097 $ (16 ) $ (99 ) $ 982
income
(loss)
Net
realized (123 ) (232 ) (355 ) (153 ) (53 ) (561 )
investment
losses
Net income
(loss) from $ 468 $ 274 $ 742 $ (169 ) $ (152 ) $ 421
continuing
operations
Segment Results for the Year Ended December 31, 2008
Corporate
CNA CNA Total P&C Life & Group & Other
($ Specialty Commercial Ops. Non-Core Non-Core Total
millions)
Net
operating $ 414 $ 289 $ 703 $ (108 ) $ (62 ) $ 533
income
(loss)
Net
realized (167 ) (335 ) (502 ) (236 ) (103 ) (841 )
investment
losses
Net income
(loss) from $ 247 $ (46 ) $ 201 $ (344 ) $ (165 ) $ (308 )
continuing
operations
Property & Casualty Operations Gross Written Premiums
Three Months Ended December 31 Year Ended December 31
($ millions) 2009 2008 2009 2008
CNA Specialty $ 1,027 $ 1,066 $ 4,222 $ 4,254
CNA Commercial 878 957 3,824 4,213
Total P&C Operations $ 1,905 $ 2,023 $ 8,046 $ 8,467
Property & Casualty Operations Net Written Premiums
Three Months Ended December 31 Year Ended December 31
($ millions) 2009 2008 2009 2008
CNA Specialty $ 667 $ 683 $ 2,684 $ 2,719
CNA Commercial 801 881 3,448 3,770
Total P&C Operations $ 1,468 $ 1,564 $ 6,132 $ 6,489
Property & Casualty Calendar Year Loss Ratios
Three Months Ended December 31 Year Ended December 31
2009 2008 2009 2008
CNA Specialty 47.8 % 64.2 % 56.9 % 61.7 %
CNA Commercial 62.5 % 54.5 % 69.6 % 73.0 %
Total P&C Operations 56.0 % 58.6 % 64.0 % 68.2 %
Property & Casualty Calendar Year Combined Ratios
Three Months Ended December 31 Year Ended December 31
2009 2008 2009 2008
CNA Specialty 78.4 % 92.6 % 86.5 % 89.5 %
CNA Commercial 99.9 % 86.5 % 105.1 % 104.2 %
Total P&C Operations 90.3 % 89.1 % 96.9 % 98.0 %
CNA Specialty Effect of Catastrophe Impacts and Development-Related Items
Three Months Ended December 31 Year Ended December 31
2009 2008 2009 2008
Combined ratio excluding
the effect of
catastrophe impacts and 95.4 % 98.9 % 94.6 % 92.8 %
development-related
items
Effect of catastrophe 0.1 0.6 0.2 0.6
impacts
Effect of
development-related (17.1 ) (6.9 ) (8.3 ) (3.9 )
items
Combined ratio 78.4 % 92.6 % 86.5 % 89.5 %
CNA Commercial Effect of Catastrophe Impacts and Development-Related Items
Three Months Ended December 31 Year Ended December 31
2009 2008 2009 2008
Combined ratio excluding
the effect of
catastrophe impacts and 110.4 % 101.2 % 107.7 % 99.7 %
development-related
items
Effect of catastrophe 1.1 0.6 2.4 9.3
impacts
Effect of
development-related (11.6 ) (15.3 ) (5.0 ) (4.8 )
items
Combined ratio 99.9 % 86.5 % 105.1 % 104.2 %
Property & Casualty Operations Effect of Catastrophe Impacts and
Development-Related Items
Three Months Ended December 31 Year Ended December 31
2009 2008 2009 2008
Combined ratio excluding
the effect of
catastrophe impacts and 103.6 % 100.3 % 102.0 % 96.7 %
development-related
items
Effect of catastrophe 0.7 0.6 1.4 5.7
impacts
Effect of
development-related (14.0 ) (11.8 ) (6.5 ) (4.4 )
items
Combined ratio 90.3 % 89.1 % 96.9 % 98.0 %
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 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)
293-6979, or for international callers, (719) 457-2707. 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 February 15, 2010 by
dialing (888) 203-1112, or for international callers, (719) 457-0820.
The replay passcode is 4407969. The replay will also be
available on CNA's website. Financial supplement information
related to the fourth 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