CNA
$43.50
Cna Financial
($.14)
(.32%)
Earnings Details
3rd Quarter September 2018
Monday, November 5, 2018 6:00:00 AM
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Summary

Cna Financial (CNA) Recent Earnings

Cna Financial (CNA) reported 3rd Quarter September 2018 earnings of $1.17 per share on revenue of $2.6 billion. The consensus earnings estimate was $1.13 per share on revenue of $2.6 billion. Revenue grew 9.3% on a year-over-year basis.

CNA Financial Corp is an insurance holding company. The Company offers commercial, property and casualty coverage, risk management, information services, warranty and claims administration.

Results
Reported Earnings
$1.17
Earnings Whisper
-
Consensus Estimate
$1.13
Reported Revenue
$2.62 Bil
Revenue Estimate
$2.59 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

CNA Financial Announces Third Quarter 2018 Results

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

Ended September 30

($ millions, except per share data)

2018


2017


2018


2017

Net income(a)

$

336



$

144



$

897



$

676


Core income (a)(b)

317



159



868



633










Net income per diluted share

$

1.23



$

0.53



$

3.29



$

2.48


Core income per diluted share

1.17



0.58



3.19



2.33


 


September 30, 2018


December 31, 2017

Book value per share

$

42.41



$

45.15


Book value per share excluding AOCI

45.20



45.02


 

(a) 

Results in 2018 benefited from the reduction of the U.S. Federal tax rate from 35% to 21%.

(b)  

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



Results for the Three Months

Ended September 30


Results for the Nine Months

Ended September 30

($ millions)

2018


2017


2018


2017

Net written premiums

$

1,581




$

1,599




$

5,163




$

4,933



NWP change (% year over year)

(1)


%


(2)


%


5


%



%

Net investment income

$

282




$

308




$

869




$

927



Core income

305




167




951




696















Loss ratio excluding catastrophes and development

61.1


%


60.8


%


60.8


%


61.1


%

Effect of catastrophe impacts

2.6




16.5




2.1




7.3



Effect of development-related items

(3.2)




(7.4)




(2.8)




(4.5)



Loss ratio

60.5


%


69.9


%


60.1


%


63.9


%













Expense ratio

33.3


%


33.5


%


33.2


%


34.0


%













Combined ratio

94.2


%


103.7


%


93.7


%


98.2


%

Combined ratio excluding catastrophes and development

94.8


%


94.6


%


94.4


%


95.4


%

  • The combined ratio excluding catastrophes and development increased 0.2 points for the third quarter of 2018 as compared with the prior year quarter driven by a slight increase in the underlying loss ratio partially offset by improvement in the expense ratio.
    For the year-to-date period, the combined ratio excluding catastrophes and development improved 1.0 point as compared with the prior year period driven by 0.3 points of improvement in the underlying loss ratio, and a 0.8 point improvement in the expense ratio.
  • The combined ratio improved 9.5 points for the third quarter of 2018 as compared with the prior year quarter. Net catastrophe losses were $46 million, or 2.6 points of the loss ratio, in the quarter as compared with $269 million, or 16.5 points of the loss ratio, for the prior year quarter. Favorable net prior year development improved the loss ratio by 3.2 points in the quarter as compared with a 7.4 point improvement in the prior year quarter.
    For the year-to-date period, the combined ratio improved 4.5 points as compared with the prior year period. Net catastrophe losses were $106 million, or 2.1 points of the loss ratio, in the current year-to-date period as compared with $342 million, or 7.3 points of the loss ratio, for the prior year period. Favorable net prior year development improved the loss ratio by 2.8 points in the current year-to-date period as compared with a 4.5 point improvement in the prior year period.
  • Net written premiums decreased 1% as compared with the prior year quarter as 3% growth in gross premium, when adjusted for captive business, was offset by a higher level of ceded reinsurance in each of the P&C segments. For the year-to-date period, net written premiums grew 5%.

 

Business Operating Highlights

Specialty



Results for the Three Months

Ended September 30


Results for the Nine Months

Ended September 30

($ millions)

2018


2017


2018


2017

Net written premiums

$

688




$

695




$

2,062




$

2,066



NWP change (% year over year)

(1)


%


(3)


%



%



%

Core income

$

177




$

173




$

531




$

441















Loss ratio excluding catastrophes and development

59.8


%


61.2


%


60.2


%


61.7


%

Effect of catastrophe impacts

2.4




5.0




1.1




2.2



Effect of development-related items

(7.7)




(14.5)




(6.2)




(7.0)



Loss ratio

54.5


%


51.7


%


55.1


%


56.9


%













Expense ratio

32.3


%


31.2


%


31.8


%


31.8


%













Combined ratio

87.0


%


83.1


%


87.1


%


88.8


%

Combined ratio excluding catastrophes and development

92.3


%


92.6


%


92.2


%


93.6


%

  • The combined ratio excluding catastrophes and development improved 0.3 points for the third quarter of 2018 as compared with the prior year quarter driven by a 1.4 point improvement in the underlying loss ratio partially offset by a 1.1 point increase in the expense ratio driven by higher acquisition expenses and lower net earned premiums. For the year-to-date period, the combined ratio excluding catastrophes and development improved 1.4 points.
  • The combined ratio increased 3.9 points for the third quarter of 2018 as compared with the prior year quarter. Net catastrophe losses were $16 million, or 2.4 points of the loss ratio, for the third quarter of 2018, as compared to $35 million, or 5.0 points of the loss ratio, for the prior year quarter. Favorable net prior year development improved the loss ratio by 7.7 points in the quarter as compared with a 14.5 point improvement in the prior year quarter. For the year-to-date period, the combined ratio improved 1.7 points.
  • Net written premiums for Specialty decreased 1% for the third quarter of 2018 as compared with the prior year quarter. For the year-to-date period, net written premiums were consistent.

Commercial



Results for the Three Months

Ended September 30


Results for the Nine Months

Ended September 30

($ millions)

2018


2017


2018


2017

Net written premiums

$

697




$

697




$

2,339




$

2,203



NWP change (% year over year)


%



%


6


%



%

Core income

$

127




$

32




$

403




$

263















Loss ratio excluding catastrophes and development

60.4


%


60.0


%


60.4


%


60.4


%

Effect of catastrophe impacts

3.1




23.9




3.1




11.1



Effect of development-related items




(2.7)




(0.5)




(2.9)



Loss ratio

63.5


%


81.2


%


63.0


%


68.6


%













Expense ratio

33.2


%


34.2


%


33.3


%


35.3


%













Combined ratio

97.4


%


115.9


%


97.0


%


104.4


%

Combined ratio excluding catastrophes and development

94.3


%


94.7


%


94.4


%


96.2


%

  • The combined ratio excluding catastrophes and development improved 0.4 points for the third quarter of 2018 as compared with the prior year quarter due to a 1.0 point improvement in the expense ratio driven by lower employee costs partially offset by a 0.4 point increase in the underlying loss ratio. For the year-to-date period, the combined ratio excluding catastrophes and development improved 0.9 points after adjusting for the Small Business premium rate adjustments.
  • The combined ratio improved 18.5 points for the third quarter of 2018 as compared with the prior year quarter. Net catastrophe losses were $25 million, or 3.1 points of the loss ratio, for the third quarter of 2018, as compared to $176 million, or 23.9 points of the loss ratio, for the prior year quarter. There was no net prior year development effect in the quarter as compared with a 2.7 point improvement in the prior year quarter. For the year-to-date period, the combined ratio improved 7.4 points.
  • Net written premiums for Commercial were consistent for the third quarter of 2018 as compared with the prior year quarter. For the year-to-date period, net written premiums grew 4% after adjusting for the Small Business premium rate adjustments.

 

International



Results for the Three Months

Ended September 30


Results for the Nine Months

Ended September 30

($ millions)

2018


2017


2018


2017

Net written premiums

$

196




$

207




$

762




$

664



NWP change (% year over year)

(5)


%



%


15


%


4


%

Core income (loss)

$

1




$

(38)




$

17




$

(8)















Loss ratio excluding catastrophes and development

66.3


%


62.4


%


64.1


%


62.0


%

Effect of catastrophe impacts

2.1




27.5




1.5




10.3



Effect of development-related items

(0.8)




(1.5)




(0.6)




(1.7)



Loss ratio

67.6


%


88.4


%


65.0


%


70.6


%













Expense ratio

36.3


%


37.5


%


36.8


%


37.2


%













Combined ratio

103.9


%


125.9


%


101.8


%


107.8


%

Combined ratio excluding catastrophes and development

102.6


%


99.9


%


100.9


%


99.2


%

  • The combined ratio excluding catastrophes and development increased 2.7 points for the third quarter of 2018 as compared with the prior year quarter primarily due to a 3.9 point increase in the underlying loss ratio driven by a higher number of property losses in Hardy. This was partially offset by 1.2 points of improvement in the expense ratio driven by higher net earned premiums. For the year-to-date period, the combined ratio excluding catastrophes and development increased 1.7 points.
  • The combined ratio improved 22.0 points for the third quarter of 2018 as compared with the prior year quarter. Net catastrophe losses were $5 million, or 2.1 points of the loss ratio, for the third quarter of 2018, as compared to $58 million, or 27.5 points of the loss ratio, for the prior year quarter. Favorable net prior year development improved the loss ratio by 0.8 points in the quarter as compared with a 1.5 point improvement in the prior year quarter. For the year-to-date period, the combined ratio improved 6.0 points.
  • Net written premiums for International decreased 4% excluding currency fluctuations, for the third quarter of 2018 as compared with the prior year quarter. For the year-to-date period, net written premiums grew 10% excluding currency fluctuations.

 

Life & Group



Results for the Three Months

Ended September 30


Results for the Nine Months

Ended September 30

($ millions)

2018


2017


2018


2017

Net investment income

$

200




$

195




$

598




$

587



Total operating revenues

332




331




996




992



Core income

32




10




36




19



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



Results for the Three Months

Ended September 30


Results for the Nine Months

Ended September 30

($ millions)

2018


2017


2018


2017

Net investment income

$

5




$

6




$

16




$

15



Interest expense

33




39




101




116



Core loss

(20)




(18)




(119)




(82)



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 investor.relations@cna.com.

Definition of Reported Segments

  • Specialty provides management and professional liability and other coverages through property and casualty products and services using a network of brokers, independent agencies and managing general underwriters.
  • Commercial works with an independent agency distribution system and a 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.
  • International provides property and casualty insurance and specialty coverages on a global basis through its operations in Canada, the United Kingdom, Continental Europe and Singapore as well as through its presence at Lloyd's of London.
  • Life & Group primarily includes the results of the individual and group long term care businesses that are in run off.
  • Corporate & Other primarily includes certain corporate expenses, including interest on corporate debt, and the results of certain property and casualty business in run-off, including CNA Re and asbestos and environmental pollution.

Financial Measures

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).

  • Loss ratio is the percentage of net incurred claim and claim adjustment expenses to net earned premiums.
  • Underlying loss ratio represents the loss ratio excluding catastrophes and development.
  • Expense ratio is the percentage of insurance underwriting and acquisition expenses, including the amortization of deferred acquisition costs, to net earned premiums.
  • Dividend ratio is the ratio of policyholders' dividends incurred to net earned premiums.
  • Combined ratio is the sum of the loss, expense and dividend ratios.
  • Underlying combined ratio is the sum of the underlying loss, expense and dividend ratios.
  • Renewal premium change represents the estimated change in average premium on policies that renew, including rate and exposure changes.
  • Rate represents the average change in price on policies that renew excluding exposure change.
  • Retention represents the percentage of premium dollars renewed in comparison to the expiring premium dollars from policies available to renew.
  • New business represents premiums from policies written with new customers and additional policies written with existing customers.

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.


Results for the Three Months

Ended September 30


Results for the Nine Months

Ended September 30

($ millions)

2018


2017


2018


2017

Net income

$

336



$

144



$

897



$

676


Less: Net realized investment gains (losses)

13



(15)



23



43


Less: Net deferred tax asset remeasurement

6





6




Core income

$

317



$

159



$

868



$

633


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.


Results for the Three Months

Ended September 30


Results for the Nine Months

Ended September 30


2018


2017


2018


2017

Net income per diluted share

$

1.23



$

0.53



$

3.29



$

2.48


Less: Net realized investment gains (losses)

0.04



(0.05)



0.08



0.15


Less: Net deferred tax asset remeasurement

0.02





0.02




Core income per diluted share

$

1.17



$

0.58



$

3.19



$

2.33


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.


September 30,

2018


December 31,

2017

Book value per share

$

42.41



$

45.15


Less: Per share impact of AOCI

(2.79)



0.13


Book value per share excluding AOCI

$

45.20



$

45.02


 

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.


Results for the Three Months

Ended September 30


Results for the Nine Months

Ended September 30


($ millions)

2018


2017


2018


2017


Annualized net income

$

1,343



$

574



$

1,196



$

901



Average stockholders' equity including AOCI (a)

11,463



12,099



11,877



12,069



Return on equity

11.7


%

4.7


%

10.1


%

7.5


%










Annualized core income

$

1,270



$

636



$

1,158



$

844



Average stockholders' equity excluding AOCI (a)

12,143



12,028



12,239



12,102



Core return on equity

10.5


%

5.3


%

9.5


%

7.0


%

 

(a)

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.

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 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.

CONTACT:






MEDIA:


ANALYSTS:

Brandon Davis, 312-822-5885


James Anderson, 312-822-7757

 

CNA logo. (PRNewsFoto/CNA Financial Corporation) (PRNewsfoto/CNA)

 

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SOURCE CNA Financial Corporation