CONSOLIDATED SUBSIDIARY OVERVIEW
CHICAGO, Nov. 5, 2018 /PRNewswire/ -- CNA Financial Corporation (NYSE: CNA) today announced third quarter 2018 net income of $336 million, or $1.23 per share, and core income of $317 million, or $1.17 per share. Property & Casualty Operations combined ratio for the third quarter was 94.2% compared with 103.7% in the third quarter of 2017. Property & Casualty Operations net written premiums decreased 1% compared to the prior year quarter. Net investment income, after tax, was $400 million for the third quarter of 2018.
Net income for the nine months ended September 30, 2018 was $897 million, or $3.29 per share, and core income was $868 million, or $3.19 per share. Property & Casualty Operations combined ratio for the nine months ended September 30, 2018 was 93.7% compared with 98.2% in the prior year period. Property & Casualty Operations underlying combined ratio for the nine months ended September 30, 2018 was 94.4% compared with 95.4% in the prior year period. Property & Casualty Operations net written premiums grew 5% for the nine months ended September 30, 2018 compared to the prior year period. Net investment income, after tax, was $1,221 million for the nine months ended September 30, 2018.
CNA Financial declared a quarterly dividend of $0.35 per share, payable December 5, 2018 to stockholders of record on November 19, 2018.
Results for the Three Months
Ended September 30
Results for the Nine Months
($ millions, except per share data)
Core income (a)(b)
Net income per diluted share
Core income per diluted share
September 30, 2018
December 31, 2017
Book value per share
Book value per share excluding AOCI
Results in 2018 benefited from the reduction of the U.S. Federal tax rate from 35% to 21%.
Management utilizes the core income (loss) financial measure to monitor the Company's operations. Please refer herein to the Reconciliation of GAAP Measures to Non-GAAP Measures section of this press release for further discussion of this non-GAAP measure.
"I am pleased with the third quarter's strong core income of $1.17 per share, our best quarterly result since 2010. While our P&C business continues to perform well with a combined ratio of 94.2% for the quarter and 93.7% year-to-date, I am equally pleased that the results of our Long Term Care gross premium valuation resulted in a GAAP margin of $182 million," said Dino E. Robusto, Chairman and Chief Executive Officer of CNA Financial Corporation.
Property & Casualty Operations
Net written premiums
NWP change (% year over year)
Net investment income
Loss ratio excluding catastrophes and development
Effect of catastrophe impacts
Effect of development-related items
Combined ratio excluding catastrophes and development
Business Operating Highlights
Core income (loss)
Life & Group
Total operating revenues
Core income of $32 million was driven by a $24 million after-tax reduction of long term care claim reserves resulting from the annual claims experience study. This study was completed in the third quarter of 2018 as compared to the fourth quarter in 2017. Persistency continues to benefit from a high proportion of policyholders choosing to reduce benefits in lieu of premium rate increases. Morbidity continues to trend in line with expectations.
Management completed its annual gross premium valuation (GPV) process in the third quarter of 2018 indicating $182 million of margin on the GAAP long term care future policy benefit carried reserves. The update included the removal of the future morbidity improvement assumption and extended the period of the mortality improvement assumption.
Corporate & Other
Core loss increased $2 million for the third quarter of 2018 as compared with the prior year quarter.
Net Investment Income
Pretax net investment income decreased $22 million for the third quarter of 2018 as compared with the prior year quarter. The decrease was driven by limited partnership and common stock investments, which returned 0.9%, or $23 million, for the third quarter of 2018 as compared with 2.2%, or $51 million, in the prior year quarter. However, despite the decline in limited partnership income, net investment income, after tax, increased $37 million for the third quarter of 2018 as compared with the prior year quarter driven by the lower Federal corporate tax rate.
About the Company
CNA is the ninth largest commercial insurer in the United States. CNA provides a broad range of standard and specialized property and casualty insurance products and services for businesses and professionals in the U.S., Canada, Europe and Asia, backed by 120 years of experience and more than $45 billion of assets. For more information about CNA, visit our website at www.cna.com. "CNA" is a service mark registered by CNA Financial Corporation with the United States Patent and Trademark Office. Certain CNA Financial Corporation subsidiaries use the "CNA" service mark in connection with insurance underwriting and claims activities.
Conference Call and Webcast/Presentation 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 Dino E. Robusto, Chairman and Chief Executive Officer of CNA Financial Corporation, and other members of senior management. Participants can access the call by dialing (888) 572-7025, or for international callers, (719) 325-2420. The call will also be broadcast live on the internet and may be accessed from the Investor Relations page of the CNA website (www.cna.com). A presentation will be posted and available on the CNA website and will provide additional insight into the results.
The call is available to the media, but questions will be restricted to investors and the professional investment community. An online replay will be available on CNA's website following the call. Financial supplement information related to the results is available on the investor relations pages of the CNA website or by contacting firstname.lastname@example.org.
Definition of Reported Segments
Management utilizes the following metrics in their evaluation of the Property & Casualty Operations. These ratios are calculated using financial results prepared in accordance with accounting principles generally accepted in the United States of America (GAAP).
The Company's investment portfolio is monitored by management through analysis of various factors including unrealized gains and losses on securities, portfolio duration and exposure to market and credit risk.
Reconciliation of GAAP Measures to Non-GAAP Measures
This press release also contains financial measures that are not in accordance with GAAP. Management utilizes these financial measures to monitor the Company's insurance operations and investment portfolio. The Company believes the presentation of these measures provides investors with a better understanding of the significant factors that comprise the Company's operating performance. Reconciliations of these measures to the most comparable GAAP measures follow below.
Reconciliation of Net Income to Core Income
Core income (loss) is calculated by excluding from net income (loss) the after-tax effects of i) net realized investment gains or losses, ii) income or loss from discontinued operations, iii) any cumulative effects of changes in accounting guidance and iv) deferred tax asset and liability remeasurement as a result of an enacted U.S. Federal tax rate change. The calculation of core income (loss) excludes net realized investment gains or losses because net realized investment gains or losses are generally driven by economic factors that are not necessarily consistent with key drivers of underwriting performance, and are therefore not considered an indication of trends in insurance operations. Management monitors core income (loss) for each business segment to assess segment performance. Presentation of consolidated core income (loss) is deemed to be a non-GAAP financial measure.
Less: Net realized investment gains (losses)
Less: Net deferred tax asset remeasurement
Reconciliation of Net Income per Diluted Share to Core Income per Diluted Share
Core income (loss) per diluted share provides management and investors with a valuable measure of the Company's operating performance for the same reasons applicable to its underlying measure, core income (loss). Core income per diluted share is core income on a per diluted share basis.
Reconciliation of Book Value per Share to Book Value per Share Excluding AOCI
Book value per share excluding AOCI allows management and investors to analyze the amount of the Company's net worth primarily attributable to the Company's business operations. The Company believes this measurement is useful as it reduces the effect of items that can fluctuate significantly from period to period, primarily based on changes in interest rates.
Less: Per share impact of AOCI
Calculation of Return on Equity and Core Return on Equity
Core return on equity provides management and investors with a measure of how effectively the Company is investing the portion of the Company's net worth that is primarily attributable to its business operations.
Annualized net income
Average stockholders' equity including AOCI (a)
Return on equity
Annualized core income
Average stockholders' equity excluding AOCI (a)
Core return on equity
Average stockholders' equity is calculated using a simple average of the beginning and ending balances for the period.
For additional information, please refer herein and/or to CNA's most recent 10-K on file 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. For a detailed description of these risks and uncertainties affecting CNA, please refer to CNA's most recent 10-K 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.
Brandon Davis, 312-822-5885
James Anderson, 312-822-7757
SOURCE CNA Financial Corporation