CNA
$46.29
Cna Financial
($1.48)
(3.10%)
Earnings Details
1st Quarter March 2018
Monday, April 30, 2018 6:00:00 AM
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Summary

Cna Financial (CNA) Recent Earnings

Cna Financial (CNA) reported 1st Quarter March 2018 earnings of $1.03 per share on revenue of $2.5 billion. The consensus earnings estimate was $0.90 per share on revenue of $2.4 billion. Revenue grew 8.8% 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
$1.03
Earnings Whisper
-
Consensus Estimate
$0.90
Reported Revenue
$2.54 Bil
Revenue Estimate
$2.38 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

CNA Financial Announces First Quarter 2018 Results

CHICAGO, April 30, 2018 /PRNewswire/ -- CNA Financial Corporation (NYSE: CNA) today announced first quarter 2018 net income of $291 million, or $1.07 per share, and core income of $281 million, or $1.03 per share.  Property & Casualty Operations combined ratio for the first quarter was 93.1% compared with 97.2% in the first quarter of 2017.  Net investment income, after tax, was $405 million for the first quarter of 2018.

CNA Financial declared a quarterly dividend of $0.30 per share, payable May 30, 2018 to stockholders of record on May 14, 2018.


Results for the Three Months Ended
March 31

($ millions, except per share data)

2018


2017

Net income(b)

$

291



$

260


Core income (b)(c)

281



235






Net income per diluted share

$

1.07



$

0.96


Core income per diluted share

1.03



0.87









March 31, 2018


December 31, 2017

Book value per share

$

42.10



$

45.15


Book value per share excluding AOCI

$

43.57



$

45.02




(a)  

Adjusted for the Small Business premium rate adjustment in the prior period.

(b) 

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

(c)  

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 had a strong start to 2018, generating core income of $281 million driven by the highest level of pre-tax underlying underwriting income in over 10 years.  This underwriting result was driven by an excellent underlying loss ratio of 60%, lower expense ratio and strong growth," said Dino E. Robusto, Chairman and Chief Executive Officer of CNA Financial Corporation.  "In addition, our run-off long term care business again generated positive core income reflecting our disciplined approach towards managing this operation."

Property & Casualty Operations



Results for the Three Months Ended
March 31

($ millions)

2018


2017

Net written premiums

$

1,813




$

1,632



NWP change (% year over year)

11


%


(2)


%

Net investment income

$

285




$

343



Core income

327




268









Loss ratio excluding catastrophes and development

60.0


%


62.2


%

Effect of catastrophe impacts

2.1




2.2



Effect of development-related items

(2.2)




(2.4)



Loss ratio

59.9


%


62.0


%







Expense ratio

32.8


%


34.9


%







Combined ratio

93.1


%


97.2


%

Combined ratio excluding catastrophes and development

93.2


%


97.4


%

 

  • The combined ratio excluding catastrophes and development improved 4.2 points as compared with the prior year quarter driven by 2.2 points of improvement in the underlying loss ratio and a 2.1 point improvement in the expense ratio driven by higher net earned premiums.
  • The combined ratio improved 4.1 points as compared with the prior year quarter.  Net catastrophe losses were $34 million, or 2.1 points of the loss ratio, in the quarter as compared with $34 million, or 2.2 points of the loss ratio, for the prior year quarter.  Favorable net prior period development improved the loss ratio by 2.2 points in the quarter as compared with a 2.4 point improvement in the prior year quarter.
  • Net written premiums grew 11% in the quarter.  Adjusted for the negative Small Business premium rate adjustment in the prior year period, net written premiums grew 8%.

 

Business Operating Highlights

Specialty



Results for the Three Months Ended
March 31

($ millions)

2018


2017

Net written premiums

$

686




$

670



NWP change (% year over year)

2


%


(1)


%

Core income

$

171




$

137









Loss ratio excluding catastrophes and development

60.3


%


62.9


%

Effect of catastrophe impacts

0.5




0.6



Effect of development-related items

(4.5)




(2.3)



Loss ratio

56.3


%


61.2


%







Expense ratio

31.0


%


31.9


%







Combined ratio

87.5


%


93.2


%

Combined ratio excluding catastrophes and development

91.5


%


94.9


%

 

  •  The combined ratio excluding catastrophes and development improved 3.4 points as compared with the prior year quarter driven by a 2.6 point improvement in the underlying loss ratio and a 0.9 point improvement in the expense ratio.
  • The combined ratio improved 5.7 points for the first quarter of 2018 as compared with the prior year quarter.  Favorable net prior period development improved the loss ratio by 4.5 points in the quarter as compared with a 2.3 point improvement in the prior year quarter.
  • Net written premiums for Specialty increased 2% for the first quarter of 2018 as compared with the prior year quarter due to higher new business and positive renewal premium change.

 

Commercial



Results for the Three Months Ended
March 31

($ millions)

2018


2017

Net written premiums

$

832




$

724



NWP change (% year over year)

15


%


(4)


%

Core income

$

133




$

111









Loss ratio excluding catastrophes and development

59.8


%


62.2


%

Effect of catastrophe impacts

3.9




3.9



Effect of development-related items

(0.7)




(2.2)



Loss ratio

63.0


%


63.9


%







Expense ratio

33.5


%


37.3


%







Combined ratio

97.1


%


101.7


%

Combined ratio excluding catastrophes and development

93.9


%


100.0


%

 

  • After adjusting for the Small Business premium rate adjustment in the prior period, the combined ratio excluding catastrophes and development improved 4.1 points as compared with the prior year quarter driven by 2.4 points of improvement in the underlying loss ratio as well as 1.8 points of improvement in the expense ratio driven by higher net earned premiums.
  • The combined ratio improved 4.6 points; however, it increased 0.9 points excluding the effect of the Small Business premium rate adjustment.  Net catastrophe losses were $29 million, or 3.9 points of the loss ratio, for the first quarter of 2018, as compared to $27 million, or 3.9 points of the loss ratio, for the prior year quarter.  Favorable net prior period development improved the loss ratio by 0.7 points in the quarter as compared with a 2.2 point improvement in the prior year quarter.
  • Net written premiums for Commercial were 15% higher for the first quarter of 2018 as compared with the prior year quarter.  The prior period included an unfavorable premium rate adjustment in Small Business.  Excluding the Small Business premium rate adjustment, net written premiums increased  8% driven by higher new business and positive renewal premium change.

 

International



Results for the Three Months Ended
March 31

($ millions)

2018


2017

Net written premiums

$

295




$

238



NWP change (% year over year)

24


%


1


%

Core income

$

23




$

20









Loss ratio excluding catastrophes and development

59.9


%


59.6


%

Effect of catastrophe impacts

0.7




1.7



Effect of development-related items

(0.2)




(3.0)



Loss ratio

60.4


%


58.3


%







Expense ratio

36.2


%


36.8


%







Combined ratio

96.6


%


95.1


%

Combined ratio excluding catastrophes and development

96.1


%


96.4


%

 

  • The combined ratio excluding catastrophes and development improved 0.3 points as compared with the prior year quarter driven by a 0.6 point decrease in the expense ratio due to higher net earned premiums.
  • The combined ratio increased 1.5 points for the first quarter of 2018 as compared with the prior year quarter.  Favorable net prior period development improved the loss ratio by 0.2 points in the quarter as compared with a 3.0 point improvement in the prior year quarter.
  • Net written premiums for International increased 24%, or 14% excluding currency fluctuations, for the first quarter of 2018 as compared with the prior year quarter due to broad based growth across all of our platforms driven by higher new business, positive renewal premium change and higher retention.

 

Life & Group



Results for the Three Months Ended
March 31

($ millions)

2018


2017

Net investment income

$

200




$

197



Total operating revenues

335




331



Core income

14




4



 

Core income increased $10 million for the first quarter of 2018 as compared with the prior year quarter.   The increase was driven by favorable persistency, and further helped by rate increases.

Corporate & Other



Results for the Three Months Ended
March 31

($ millions)

2018


2017

Net investment income

$

5



$

5


Interest expense

34



38


Core loss

(60)



(37)


 

Core loss increased $23 million for the first quarter of 2018 as compared with the prior year quarter.  The result of retroactive reinsurance accounting driven by additional cessions to the A&EP Loss Portfolio Transfer in the first quarter was a $32 million after-tax non-economic charge compared with $13 million in the prior year quarter.

Net Investment Income

Pretax net investment income decreased $55 million for the first quarter of 2018 as compared with the prior year quarter.  The decrease was driven by limited partnership investments, which returned 1.2% in 2018 as compared with 3.8% in the prior year period.  However, despite the decline in limited partnership income,  net investment income, after tax, increased $16 million for the first quarter of 2018 given stable fixed income returns and the lower tax rate.

About the Company

CNA is the eighth 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 at http://investor.cna.com or you may go to the investor relations pages of the CNA website (www.cna.com) for further details.  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 Robert Tardella at 312-822-4387.

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 March 31

($ millions)

2018


2017

Net income

$

291



$

260


Less: Net realized investment gains

10



25


Core income

$

281



$

235


 

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 March 31


2018


2017

Net income per diluted share

$

1.07



$

0.96


Less: Net realized investment gains

0.04



0.09


Core income per diluted share

$

1.03



$

0.87


 

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.


March 31,
2018


December 31,
2017

Book value per share

$

42.10



$

45.15


Less: Per share impact of AOCI

(1.47)



0.13


Book value per share excluding AOCI

$

43.57



$

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 March 31


($ millions)

2018


2017


Annualized net income

$

1,166



$

1,038



Average stockholders' equity including AOCI (a)

11,835



11,831



Return on equity

9.8


%

8.8


%






Annualized core income

$

1,122



$

941



Average stockholders' equity excluding AOCI (a)

12,018



11,963



Core return on equity

9.3


%

7.9


%



(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.

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

 

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SOURCE CNA Financial Corporation