CONSOLIDATED SUBSIDIARY OVERVIEW
CHICAGO, Nov. 2, 2020 /PRNewswire/ -- CNA Financial Corporation (NYSE: CNA) today announced third quarter 2020 net income of $213 million, or $0.79 per share, versus $107 million, or $0.39 per share, in the prior year quarter. Core income for the current quarter was $193 million, or $0.71 per share, versus $102 million, or $0.37 per share, in the prior year quarter.
Our Property & Casualty segments produced core income of $247 million for the third quarter of 2020, an increase of $6 million compared to the prior year quarter primarily due to improved non-catastrophe current accident year underwriting results, higher net investment income driven by limited partnership and common stock returns and favorable net prior year loss reserve development in the current year period. These results were largely offset by higher net catastrophe losses.
Our Life & Group and Corporate & Other segments produced core losses for the third quarter of 2020 of $(35) million and $(19) million, respectively. Life & Group results include a $59 million after-tax charge related to unlocking active life reserves as a result of the gross premium valuation (GPV) completed in the quarter primarily driven by actions taken on discount rate assumptions. Life & Group results were also impacted by a $36 million after-tax increase in the structured settlement reserves and a $30 million after-tax reduction in long term care (LTC) claim reserves.
CNA Financial declared a quarterly dividend of $0.37 per share, payable December 3, 2020 to stockholders of record on November 16, 2020.
Results for the Three Months Ended September 30
Results for the Nine MonthsEnded September 30
($ millions, except per share data)
Core income (a)
Net income per diluted share
Core income per diluted share
September 30, 2020
December 31, 2019
Book value per share
Book value per share excluding AOCI
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.
"CNA continued to execute effectively during these unprecedented times as evidenced by the ongoing acceleration in our P&C rate achievement, higher overall premium growth and a significantly improved underlying loss ratio and expense ratio in the third quarter. And, with our annual reserve review of our runoff Long Term Care business, we took significant actions on our discount rate assumptions intended to further protect our capital and earnings in the face of what can very well be a protracted low interest rate environment," said Dino E. Robusto, Chairman & Chief Executive Officer of CNA Financial Corporation.
Property & Casualty Operations
Results for the Three MonthsEnded September 30
Results for the Nine Months Ended September 30
Gross written premiums ex. 3rd party captives
GWP ex. 3rd party captives change (% year over year)
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
Gross written premiums
GWP change (% year over year)
Core income (loss)
Life & Group
Net earned premiums
Core loss improved $87 million for the third quarter of 2020 as compared with the prior year quarter. The core loss in the third quarter of 2020 included a $59 million after-tax charge related to the recognition of an active life reserve premium deficiency primarily driven by actions taken on discount rate assumptions. The normative risk free rate was lowered by 100 bps to 2.75% and the time period to grade up to the normative rate was extended from 6 years to 10 years. Results were also impacted by a $36 million after-tax increase in the structured settlement reserves and a $30 million after-tax reduction in LTC claim reserves, both resulting from the 2020 annual claim experience studies. Excluding the impacts of the reserve reviews, core results were favorable driven by better than expected morbidity in the LTC business.
The prior year quarter included a $170 million after-tax charge related to recognition of an active life reserve premium deficiency primarily driven by lower discount rate assumptions partially offset by a $44 million after-tax reduction in LTC claim reserves resulting from the 2019 annual claim experience study.
Corporate & Other
Core loss of $19 million for the third quarter of 2020 was generally consistent with the prior year quarter.
Net Investment Income
Pretax net investment income
Net investment income, after tax
Pretax net investment income increased $30 million as compared with the prior year quarter. The increase was driven by limited partnership and common stock investments, which returned 4.1%, or $71 million in the third quarter of 2020 compared with 0.9%, or $18 million, in the prior year quarter partially offset by lower yields in our fixed income portfolio.
About the Company
CNA is one of the largest U.S. commercial property and casualty insurance companies. 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 and Europe, backed by more than 120 years of experience and approximately $45 billion of invested assets. For more information, please visit CNA at www.cna.com.
Cara McCall, 312-822-1309
Amy C. Adams, 312-822-5533
Conference Call and Webcast/Presentation Information
A conference call for investors and the professional investment community will be held at 8:00 a.m. (CT) today. On the conference call will be Dino E. Robusto, Chairman and Chief Executive Officer of CNA Financial Corporation, Al Miralles, Executive Vice President and Chief Financial Officer of CNA Financial Corporation and other members of senior management. Participants can access the call by dialing (800) 289-0571, or for international callers, +1 (720) 543-0206. 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).
Gross written premiums ex. 3rd party captives represents gross written premiums excluding business which is ceded to third party captives, including business related to large warranty programs.
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 (Loss) to Core Income (Loss)
Core income (loss) is calculated by excluding from net income (loss) the after-tax effects of net investment gains or losses and any cumulative effects of changes in accounting guidance. The calculation of core income (loss) excludes net investment gains or losses because net investment gains or losses are generally driven by economic factors that are not necessarily reflective of our primary 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 investment gains (losses)
Reconciliation of Net Income (Loss) per Diluted Share to Core Income (Loss) 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 (loss) per diluted share is core income (loss) 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 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 includes statements that 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.
Any descriptions of coverage under CNA policies or programs in this press release are provided for convenience only and are not to be relied upon with respect to questions of coverage, exclusions or limitations. With regard to all such matters, the terms and provisions of relevant insurance policies are primary and controlling. In addition, please note that all coverages may not be available in all states.
"CNA" is a registered trademark of CNA Financial Corporation. Certain CNA Financial Corporation subsidiaries use the "CNA" trademark in connection with insurance underwriting and claims activities. Copyright © 2020 CNA. All rights reserved.
Contact email: Cara.McCall@cna.com