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|CNA Financial Announces Second Quarter 2010 Results: Net Operating Income of $269 Million, Net Income of $283 Million, P&C Combined Ratio of 89.4%, Net Operating ROE of 9.5%|
CHICAGO, Aug 02, 2010 (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.
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.
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.
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.
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.
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.
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.
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
CNA Financial Corporation