CNA FINANCIAL CORPORATION |
(Exact name of registrant as specified in its charter) |
Delaware | 1-5823 | 36-6169860 | ||
(State or other jurisdiction | (Commission | (IRS Employer | ||
of incorporation) | File Number) | Identification No.) |
333 S. Wabash, Chicago, Illinois | 60604 | |
(Address of principal executive offices) | (Zip Code) |
NOT APPLICABLE |
(Former name or former address, if changed since last report.) |
CNA Financial Corporation | ||
(Registrant) | ||
Date: October 31, 2016 | By | /s/ D. Craig Mense |
(Signature) | ||
D. Craig Mense Executive Vice President and Chief Financial Officer |
Exhibit No. | Description | |
CNA Financial Corporation press release, issued October 31, 2016, providing information on the third quarter 2016 results of operations. | ||
CNA Financial Corporation financial supplement, posted on its website October 31, 2016, providing supplemental financial information on the third quarter 2016. |
MEDIA: | ANALYSTS: | |
Brandon Davis, 312-822-5167 | James Anderson, 312-822-7757 | |
Sarah Pang, 312-822-6394 | Robert Tardella, 312-822-4387 | |
• | NET INCOME OF $343 MILLION; $1.26 PER SHARE |
• | NET OPERATING INCOME OF $311 MILLION; $1.15 PER SHARE |
• | P&C COMBINED RATIO OF 90.4% |
• | QUARTERLY DIVIDEND OF $0.25 PER SHARE; $2.75 PER SHARE PAID YEAR TO DATE |
Results for the Three Months Ended September 30 | Results for the Nine Months Ended September 30 | ||||||||||||||
($ millions, except per share data) | 2016 | 2015 | 2016 | 2015 | |||||||||||
Net operating income (a) | $ | 311 | $ | 210 | $ | 603 | $ | 567 | |||||||
Net realized investment gains (losses) | 32 | (32 | ) | 15 | (18 | ) | |||||||||
Net income | $ | 343 | $ | 178 | $ | 618 | $ | 549 | |||||||
Net operating income per diluted share | $ | 1.15 | $ | 0.77 | $ | 2.22 | $ | 2.09 | |||||||
Net income per diluted share | 1.26 | 0.66 | 2.28 | 2.03 |
September 30, 2016 | December 31, 2015 | ||||||
Book value per share | $ | 45.08 | $ | 43.49 | |||
Book value per share excluding AOCI | 44.21 | 44.66 |
(a) | Management utilizes the net operating income financial measure to monitor the Company's operations. Please refer herein and to Note O in the Consolidated Financial Statements within CNA's annual Report on Form 10-K for the year ended December 31, 2015 for further discussion of this non-GAAP financial measure. |
Results for the Three Months Ended September 30 | Results for the Nine Months Ended September 30 | ||||||||||||||||||
($ millions) | 2016 | 2015 | 2016 | 2015 | |||||||||||||||
Net written premiums | $ | 1,624 | $ | 1,529 | $ | 4,917 | $ | 4,836 | |||||||||||
NWP change (% year over year) | 6 | % | (2 | ) | % | 2 | % | (3 | ) | % | |||||||||
Net investment income | $ | 328 | $ | 171 | $ | 883 | $ | 860 | |||||||||||
Net operating income | 329 | 263 | 765 | 764 | |||||||||||||||
Net income | 349 | 228 | 779 | 738 | |||||||||||||||
Loss ratio excluding catastrophes and development | 61.8 | % | 61.9 | % | 62.6 | % | 62.0 | % | |||||||||||
Effect of catastrophe impacts | 1.0 | 0.9 | 2.8 | 2.1 | |||||||||||||||
Effect of development-related items | (8.1 | ) | (10.7 | ) | (6.0 | ) | (3.7 | ) | |||||||||||
Loss ratio | 54.7 | % | 52.1 | % | 59.4 | % | 60.4 | % | |||||||||||
Combined ratio | 90.4 | % | 85.7 | % | 94.6 | % | 94.3 | % | |||||||||||
Combined ratio excluding catastrophes and development | 97.5 | % | 95.5 | % | 97.8 | % | 95.9 | % |
Results for the Three Months Ended September 30 | Results for the Nine Months Ended September 30 | ||||||||||||||||||
($ millions) | 2016 | 2015 | 2016 | 2015 | |||||||||||||||
Net written premiums | $ | 733 | $ | 707 | $ | 2,108 | $ | 2,077 | |||||||||||
NWP change (% year over year) | 4 | % | (4) | % | 1 | % | (3 | ) | % | ||||||||||
Net operating income | $ | 195 | $ | 179 | $ | 486 | $ | 451 | |||||||||||
Net income | 201 | 165 | 487 | 440 | |||||||||||||||
Loss ratio excluding catastrophes and development | 62.5 | % | 61.6 | % | 62.5 | % | 61.9 | % | |||||||||||
Effect of catastrophe impacts | 0.2 | 0.5 | 0.7 | 0.7 | |||||||||||||||
Effect of development-related items | (15.9 | ) | (18.6 | ) | (10.6 | ) | (7.1 | ) | |||||||||||
Loss ratio | 46.8 | % | 43.5 | % | 52.6 | % | 55.5 | % | |||||||||||
Combined ratio | 79.9 | % | 74.4 | % | 84.9 | % | 86.6 | % | |||||||||||
Combined ratio excluding catastrophes and development | 95.6 | % | 92.5 | % | 94.8 | % | 93.0 | % |
• | Net operating income increased $16 million for the third quarter of 2016 as compared with the prior year quarter, primarily due to an increase in net investment income partially offset by lower favorable net prior year reserve development and higher underwriting expenses. |
• | The combined ratio increased 5.5 points as compared with the prior year quarter. The loss ratio increased 3.3 points due to lower favorable net prior year reserve development and a higher non-catastrophe current accident year loss ratio. Catastrophe losses were $1 million, or 0.2 points of the loss ratio, as compared to $3 million, or 0.5 points of the loss ratio for the prior year quarter. The expense ratio increased 1.7 points as compared with the prior year quarter. About half of this increase was due to non-recurring underwriting expenses related to the transition to a new service provider for our information technology (IT) infrastructure and employee termination costs resulting from an organization review. The remainder was driven by higher IT spending primarily related to new underwriting platforms. |
• | Net written premiums increased $26 million as compared with the prior year quarter, driven by growth in warranty and surety and continued steady retention. Average rate was flat for the policies that renewed in the third quarter of 2016 while achieving a retention of 87%. |
Results for the Three Months Ended September 30 | Results for the Nine Months Ended September 30 | ||||||||||||||||||
($ millions) | 2016 | 2015 | 2016 | 2015 | |||||||||||||||
Net written premiums | $ | 684 | $ | 642 | $ | 2,172 | $ | 2,118 | |||||||||||
NWP change (% year over year) | 7 | % | 1 | % | 3 | % | (1 | ) | % | ||||||||||
Net operating income | $ | 114 | $ | 75 | $ | 280 | $ | 273 | |||||||||||
Net income | 123 | 54 | 282 | 257 | |||||||||||||||
Loss ratio excluding catastrophes and development | 61.1 | % | 60.4 | % | 61.4 | % | 62.3 | % | |||||||||||
Effect of catastrophe impacts | 1.6 | 1.4 | 4.6 | 4.0 | |||||||||||||||
Effect of development-related items | (0.5 | ) | (1.2 | ) | (1.4 | ) | 0.2 | ||||||||||||
Loss ratio | 62.2 | % | 60.6 | % | 64.6 | % | 66.5 | % | |||||||||||
Combined ratio | 99.8 | % | 95.8 | % | 101.7 | % | 102.1 | % | |||||||||||
Combined ratio excluding catastrophes and development | 98.7 | % | 95.6 | % | 98.5 | % | 97.9 | % |
• | Net operating income increased $39 million for the third quarter of 2016 as compared with the prior year quarter, due to an increase in net investment income partially offset by higher underwriting expenses and higher net loss and loss adjustment expense. |
• | The combined ratio increased 4.0 points as compared with the prior year quarter. The loss ratio increased 1.6 points due to an increase in the current accident year loss ratio and lower favorable net prior year development. Catastrophe losses were $12 million, or 1.6 points of the loss ratio, as compared to $10 million, or 1.4 points of the loss ratio for the prior year quarter. The expense ratio increased 1.9 points as compared with the prior year quarter, primarily due to non-recurring underwriting expenses related to the transition to a new service provider for our IT infrastructure and employee termination costs resulting from an organization review. The expense ratio also increased due to higher IT spending primarily related to a new underwriting platform. |
• | Net written premiums increased $42 million as compared with the prior year quarter, driven by higher retention and new business in middle markets. Average rate was flat for the policies that renewed in the third quarter of 2016 while achieving a retention of 83%. |
Results for the Three Months Ended September 30 | Results for the Nine Months Ended September 30 | ||||||||||||||||||
($ millions) | 2016 | 2015 | 2016 | 2015 | |||||||||||||||
Net written premiums | $ | 207 | $ | 180 | $ | 637 | $ | 641 | |||||||||||
NWP change (% year over year) | 15 | % | (5 | ) | % | (1 | ) | % | (8 | ) | % | ||||||||
Net operating income (loss) | $ | 20 | $ | 9 | $ | (1 | ) | $ | 40 | ||||||||||
Net income | 25 | 9 | 10 | 41 | |||||||||||||||
Loss ratio excluding catastrophes and development | 61.9 | % | 68.0 | % | 66.5 | % | 61.1 | % | |||||||||||
Effect of catastrophe impacts | 1.5 | 0.3 | 4.7 | 0.8 | |||||||||||||||
Effect of development-related items | (8.0 | ) | (15.9 | ) | (6.0 | ) | (6.0 | ) | |||||||||||
Loss ratio | 55.4 | % | 52.4 | % | 65.2 | % | 55.9 | % | |||||||||||
Combined ratio | 93.2 | % | 90.4 | % | 103.4 | % | 93.5 | % | |||||||||||
Combined ratio excluding catastrophes and development | 99.7 | % | 106.0 | % | 104.7 | % | 98.7 | % |
• | Net operating income increased $11 million for the third quarter of 2016 as compared with the prior year quarter, primarily due to improved net accident year non-catastrophe underwriting results and lower foreign exchange losses partially offset by lower favorable net prior year reserve development. |
• | The combined ratio increased 2.8 points as compared with the prior year quarter. The loss ratio increased 3.0 points due to lower favorable net prior year reserve development partially offset by an improved non-catastrophe current accident year loss ratio. Catastrophe losses were $3 million, or 1.5 points of the loss ratio, as compared to $1 million, or 0.3 points of the loss ratio for the prior year quarter. The expense ratio improved 0.2 points as compared with the prior year quarter. |
• | Net written premiums increased $27 million as compared with the prior year quarter. Excluding the effect of foreign currency exchange rates and the timing of reinsurance spend, net written premiums for the third quarter of 2016 increased 15%. The majority of the growth came from middle market products in the UK and Continental Europe and from product lines which are now being delivered across all the international platforms, such as healthcare and technology. Average rate decreased 1% for the policies that renewed in the third quarter of 2016 while achieving a retention of 70%. |
Results for the Three Months Ended September 30 | Results for the Nine Months Ended September 30 | ||||||||||||||||||
($ millions) | 2016 | 2015 | 2016 | 2015 | |||||||||||||||
Total operating revenues | $ | 322 | $ | 318 | $ | 967 | $ | 960 | |||||||||||
Net investment income | 192 | 182 | 567 | 540 | |||||||||||||||
Net operating income (loss) | 6 | (30 | ) | — | (71 | ) | |||||||||||||
Net income (loss) | 17 | (28 | ) | 3 | (65 | ) |
• | Due to the recognition of the premium deficiency and resetting of actuarial assumptions in the fourth quarter of 2015, the operating results for our long term care business in 2016 now reflect the variance between actual experience and the expected results contemplated in our best estimate reserves. In 2015, results of our long term care business reflected variances between actual experience and actuarial assumptions that were locked-in at policy issuance. As a result of the reserve assumption unlocking, the 2016 and 2015 results are not comparable. |
• | The net operating income of $6 million for the third quarter of 2016 was generally in line with expectations, as the impact of favorable morbidity was partially offset by unfavorable persistency in our long term care business. |
Results for the Three Months Ended September 30 | Results for the Nine Months Ended September 30 | ||||||||||||||||||
($ millions) | 2016 | 2015 | 2016 | 2015 | |||||||||||||||
Net investment income | $ | 4 | $ | 1 | $ | 11 | $ | 12 | |||||||||||
Interest expense | 39 | 39 | 119 | 117 | |||||||||||||||
Net operating loss | (24 | ) | (23 | ) | (162 | ) | (126 | ) | |||||||||||
Net loss | (23 | ) | (22 | ) | (164 | ) | (124 | ) |
• | Net operating loss for the third quarter of 2016 was comparable to the prior year quarter. |
Page | |
Consolidated Results | |
Statements of Operations.................................................................................................................................................................................................. | |
Components of Income (Loss), Per Share Data and Return on Equity............................................................................................................................. | |
Selected Balance Sheet Data and Statement of Cash Flows Data................................................................................................................................... | |
Property & Casualty - Results of Operations | |
Property & Casualty........................................................................................................................................................................................................... | |
Specialty............................................................................................................................................................................................................................ | |
Commercial....................................................................................................................................................................................................................... | |
International....................................................................................................................................................................................................................... | |
Non-Core - Results of Operations | |
Life & Group Non-Core...................................................................................................................................................................................................... | |
Corporate & Other Non-Core............................................................................................................................................................................................. | |
Investment Information | |
Investment Summary - Consolidated................................................................................................................................................................................ | |
Investment Summary - Property & Casualty and Corporate & Other Non-Core............................................................................................................... | |
Investment Summary - Life & Group Non-Core................................................................................................................................................................. | |
Investments - Fixed Maturity Securities by Credit Rating.................................................................................................................................................. | |
Components of Net Investment Income............................................................................................................................................................................ | |
Other | |
Claim & Claim Adjustment Expense Reserve Rollforward................................................................................................................................................ | |
Life & Group Non-Core Policyholder Reserves................................................................................................................................................................. | |
Definitions and Presentation.............................................................................................................................................................................................. |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||||||||||
(In millions) | 2016 | 2015 | Change | 2016 | 2015 | Change | |||||||||||||||||
Revenues: | |||||||||||||||||||||||
Net earned premiums | $ | 1,767 | $ | 1,751 | 1 | % | $ | 5,196 | $ | 5,173 | — | % | |||||||||||
Net investment income | 524 | 354 | 48 | 1,461 | 1,412 | 3 | |||||||||||||||||
Net realized investment gains (losses): | |||||||||||||||||||||||
Other-than-temporary impairment (OTTI) losses | (18 | ) | (56 | ) | (56 | ) | (99 | ) | |||||||||||||||
Other net realized investment gains (losses) | 64 | 7 | 82 | 60 | |||||||||||||||||||
Net realized investment gains (losses) | 46 | (49 | ) | 26 | (39 | ) | |||||||||||||||||
Other revenues | 96 | 97 | 293 | 286 | |||||||||||||||||||
Total revenues | 2,433 | 2,153 | 13 | 6,976 | 6,832 | 2 | |||||||||||||||||
Claims, Benefits and Expenses: | |||||||||||||||||||||||
Insurance claims and policyholders' benefits | 1,202 | 1,200 | 3,949 | 4,008 | |||||||||||||||||||
Amortization of deferred acquisition costs | 314 | 319 | 926 | 936 | |||||||||||||||||||
Other operating expenses | 403 | 362 | 1,162 | 1,061 | |||||||||||||||||||
Interest | 39 | 39 | 119 | 117 | |||||||||||||||||||
Total claims, benefits and expenses | 1,958 | 1,920 | (2 | ) | 6,156 | 6,122 | (1 | ) | |||||||||||||||
Income (loss) before income tax | 475 | 233 | 820 | 710 | |||||||||||||||||||
Income tax (expense) benefit | (132 | ) | (55 | ) | (202 | ) | (161 | ) | |||||||||||||||
Net income (loss) | $ | 343 | $ | 178 | 93 | % | $ | 618 | $ | 549 | 13 | % |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||||
(In millions, except per share data) | 2016 | 2015 | 2016 | 2015 | |||||||||||||
Components of Income (Loss) | |||||||||||||||||
Net operating income (loss) | $ | 311 | $ | 210 | $ | 603 | $ | 567 | |||||||||
Net realized investment gains (losses) | 32 | (32 | ) | 15 | (18 | ) | |||||||||||
Net income (loss) | $ | 343 | $ | 178 | $ | 618 | $ | 549 | |||||||||
Diluted Earnings (Loss) Per Common Share | |||||||||||||||||
Net operating income (loss) | $ | 1.15 | $ | 0.77 | $ | 2.22 | $ | 2.09 | |||||||||
Net realized investment gains (losses) | 0.11 | (0.11 | ) | 0.06 | (0.06 | ) | |||||||||||
Diluted earnings (loss) per share | $ | 1.26 | $ | 0.66 | $ | 2.28 | $ | 2.03 | |||||||||
Weighted Average Outstanding Common Stock and Common Stock Equivalents | |||||||||||||||||
Basic | 270.5 | 270.3 | 270.4 | 270.2 | |||||||||||||
Diluted | 271.2 | 270.8 | 271.0 | 270.7 | |||||||||||||
Return on Equity | |||||||||||||||||
Net income (loss) (1) | 11.4 | % | 5.8 | % | 6.9 | % | 5.8 | % | |||||||||
Net operating income (loss) (2) | 10.5 | 6.9 | 6.7 | 6.1 |
(In millions, except per share data) | September 30, 2016 | December 31, 2015 | |||||
Total investments | $ | 46,980 | $ | 44,699 | |||
Reinsurance receivables, net of allowance for uncollectible receivables | 4,577 | 4,453 | |||||
Total assets | 56,859 | 55,045 | |||||
Insurance reserves | 37,753 | 36,486 | |||||
Debt | 2,709 | 2,560 | |||||
Total liabilities | 44,664 | 43,289 | |||||
Accumulated other comprehensive income (loss) (1) | 237 | (315 | ) | ||||
Total stockholders' equity | 12,195 | 11,756 | |||||
Book value per common share | $ | 45.08 | $ | 43.49 | |||
Book value per common share excluding AOCI | $ | 44.21 | $ | 44.66 | |||
Outstanding shares of common stock (in millions of shares) | 270.5 | 270.3 | |||||
Statutory capital and surplus - Combined Continental Casualty Companies (2) | $ | 10,871 | $ | 10,723 |
Three months ended September 30 | 2016 | 2015 | |||||
Net cash flows provided (used) by operating activities | $ | 507 | $ | 505 | |||
Net cash flows provided (used) by investing activities | (437 | ) | (341 | ) | |||
Net cash flows provided (used) by financing activities | (67 | ) | (69 | ) | |||
Net cash flows provided (used) by operating, investing and financing activities | $ | 3 | $ | 95 |
Nine months ended September 30 | 2016 | 2015 | |||||
Net cash flows provided (used) by operating activities | $ | 1,120 | $ | 1,045 | |||
Net cash flows provided (used) by investing activities | (604 | ) | (254 | ) | |||
Net cash flows provided (used) by financing activities | (605 | ) | (739 | ) | |||
Net cash flows provided (used) by operating, investing and financing activities | $ | (89 | ) | $ | 52 |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||||||||||
(In millions) | 2016 | 2015 | Change | 2016 | 2015 | Change | |||||||||||||||||
Gross written premiums | $ | 2,722 | $ | 2,474 | 10 | % | $ | 8,125 | $ | 7,577 | 7 | % | |||||||||||
Net written premiums | 1,624 | 1,529 | 6 | 4,917 | 4,836 | 2 | |||||||||||||||||
Net earned premiums | 1,633 | 1,614 | 1 | 4,796 | 4,762 | 1 | |||||||||||||||||
Net investment income | 328 | 171 | 883 | 860 | |||||||||||||||||||
Other revenues | 100 | 96 | 291 | 272 | |||||||||||||||||||
Total operating revenues | 2,061 | 1,881 | 10 | 5,970 | 5,894 | 1 | |||||||||||||||||
Insurance claims and policyholders' benefits | 900 | 842 | 2,864 | 2,885 | |||||||||||||||||||
Amortization of deferred acquisition costs | 314 | 313 | 926 | 917 | |||||||||||||||||||
Other insurance related expenses | 261 | 228 | 745 | 688 | |||||||||||||||||||
Other expenses | 88 | 92 | 274 | 241 | |||||||||||||||||||
Total claims, benefits and expenses | 1,563 | 1,475 | (6 | ) | 4,809 | 4,731 | (2 | ) | |||||||||||||||
Operating income (loss) before income tax | 498 | 406 | 1,161 | 1,163 | |||||||||||||||||||
Income tax (expense) benefit on operating income (loss) | (169 | ) | (143 | ) | (396 | ) | (399 | ) | |||||||||||||||
Net operating income (loss) | $ | 329 | $ | 263 | 25 | % | $ | 765 | $ | 764 | — | % | |||||||||||
Other Performance Metrics | |||||||||||||||||||||||
Underwriting gain (loss) | $ | 158 | $ | 231 | (32 | ) | % | $ | 261 | $ | 272 | (4 | ) | % | |||||||||
Loss & LAE ratio | 54.7 | % | 52.1 | % | (2.6 | ) | pts | 59.4 | % | 60.4 | % | 1.0 | pts | ||||||||||
Acquisition expense ratio | 19.5 | 19.1 | (0.4 | ) | 19.4 | 19.1 | (0.3 | ) | |||||||||||||||
Underwriting expense ratio | 15.7 | 14.4 | (1.3 | ) | 15.5 | 14.6 | (0.9 | ) | |||||||||||||||
Expense ratio | 35.2 | 33.5 | (1.7 | ) | 34.9 | 33.7 | (1.2 | ) | |||||||||||||||
Dividend ratio | 0.5 | 0.1 | (0.4 | ) | 0.3 | 0.2 | (0.1 | ) | |||||||||||||||
Combined ratio | 90.4 | % | 85.7 | % | (4.7 | ) | 94.6 | % | 94.3 | % | (0.3 | ) | |||||||||||
Combined ratio excluding catastrophes and development | 97.5 | % | 95.5 | % | (2.0 | ) | pts | 97.8 | % | 95.9 | % | (1.9 | ) | pts | |||||||||
Net accident year catastrophe losses incurred | $ | 16 | $ | 14 | $ | 137 | $ | 103 | |||||||||||||||
Effect on loss & LAE ratio | 1.0 | % | 0.9 | % | (0.1 | ) | pts | 2.8 | % | 2.1 | % | (0.7 | ) | pts | |||||||||
Net prior year development and other: (favorable) / unfavorable | $ | (134 | ) | $ | (175 | ) | $ | (297 | ) | $ | (182 | ) | |||||||||||
Effect on loss & LAE ratio | (8.1 | ) | % | (10.7 | ) | % | (2.6 | ) | pts | (6.0 | ) | % | (3.7 | ) | % | 2.3 | pts | ||||||
Rate | — | % | 1 | % | (1 | ) | pts | — | % | 1 | % | (1 | ) | pts | |||||||||
Retention | 83 | 80 | 3 | 84 | 80 | 4 | |||||||||||||||||
New business (1) | $ | 268 | $ | 225 | 19 | % | $ | 799 | $ | 711 | 12 | % |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||||||||||
(In millions) | 2016 | 2015 | Change | 2016 | 2015 | Change | |||||||||||||||||
Gross written premiums | $ | 1,791 | $ | 1,604 | 12 | % | $ | 5,120 | $ | 4,619 | 11 | % | |||||||||||
Net written premiums | 733 | 707 | 4 | 2,108 | 2,077 | 1 | |||||||||||||||||
Net earned premiums | 704 | 706 | — | 2,088 | 2,075 | 1 | |||||||||||||||||
Net investment income | 140 | 76 | 380 | 365 | |||||||||||||||||||
Other revenues | 93 | 86 | 269 | 245 | |||||||||||||||||||
Total operating revenues | 937 | 868 | 8 | 2,737 | 2,685 | 2 | |||||||||||||||||
Insurance claims and policyholders' benefits | 334 | 308 | 1,103 | 1,155 | |||||||||||||||||||
Amortization of deferred acquisition costs | 151 | 150 | 443 | 440 | |||||||||||||||||||
Other insurance related expenses | 77 | 67 | 225 | 202 | |||||||||||||||||||
Other expenses | 78 | 73 | 232 | 209 | |||||||||||||||||||
Total claims, benefits and expenses | 640 | 598 | (7 | ) | 2,003 | 2,006 | — | ||||||||||||||||
Operating income (loss) before income tax | 297 | 270 | 734 | 679 | |||||||||||||||||||
Income tax (expense) benefit on operating income (loss) | (102 | ) | (91 | ) | (248 | ) | (228 | ) | |||||||||||||||
Net operating income (loss) | $ | 195 | $ | 179 | 9 | % | $ | 486 | $ | 451 | 8 | % | |||||||||||
Other Performance Metrics | |||||||||||||||||||||||
Underwriting gain (loss) | $ | 142 | $ | 181 | (22 | ) | % | $ | 317 | $ | 278 | 14 | % | ||||||||||
Loss & LAE ratio | 46.8 | % | 43.5 | % | (3.3 | ) | pts | 52.6 | % | 55.5 | % | 2.9 | pts | ||||||||||
Acquisition expense ratio | 20.0 | 19.6 | (0.4 | ) | 20.0 | 19.7 | (0.3 | ) | |||||||||||||||
Underwriting expense ratio | 12.5 | 11.2 | (1.3 | ) | 12.0 | 11.2 | (0.8 | ) | |||||||||||||||
Expense ratio | 32.5 | 30.8 | (1.7 | ) | 32.0 | 30.9 | (1.1 | ) | |||||||||||||||
Dividend ratio | 0.6 | 0.1 | (0.5 | ) | 0.3 | 0.2 | (0.1 | ) | |||||||||||||||
Combined ratio | 79.9 | % | 74.4 | % | (5.5 | ) | 84.9 | % | 86.6 | % | 1.7 | ||||||||||||
Combined ratio excluding catastrophes and development | 95.6 | % | 92.5 | % | (3.1 | ) | pts | 94.8 | % | 93.0 | % | (1.8 | ) | pts | |||||||||
Net accident year catastrophe losses incurred | $ | 1 | $ | 3 | $ | 14 | $ | 15 | |||||||||||||||
Effect on loss & LAE ratio | 0.2 | % | 0.5 | % | 0.3 | pts | 0.7 | % | 0.7 | % | — | pts | |||||||||||
Net prior year development and other: (favorable) / unfavorable | $ | (112 | ) | $ | (132 | ) | $ | (229 | ) | $ | (151 | ) | |||||||||||
Effect on loss & LAE ratio | (15.9 | ) | % | (18.6 | ) | % | (2.7 | ) | pts | (10.6 | ) | % | (7.1 | ) | % | 3.5 | pts | ||||||
Rate | — | % | 1 | % | (1 | ) | pts | 1 | % | 1 | % | — | pts | ||||||||||
Retention | 87 | 87 | — | 87 | 86 | 1 | |||||||||||||||||
New business | $ | 66 | $ | 67 | (1 | ) | % | $ | 192 | $ | 206 | (7 | ) | % |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||||||||||
(In millions) | 2016 | 2015 | Change | 2016 | 2015 | Change | |||||||||||||||||
Gross written premiums | $ | 718 | $ | 674 | 7 | % | $ | 2,301 | $ | 2,241 | 3 | % | |||||||||||
Net written premiums | 684 | 642 | 7 | 2,172 | 2,118 | 3 | |||||||||||||||||
Net earned premiums | 719 | 705 | 2 | 2,103 | 2,086 | 1 | |||||||||||||||||
Net investment income | 175 | 82 | 465 | 455 | |||||||||||||||||||
Other revenues | 7 | 9 | 21 | 27 | |||||||||||||||||||
Total operating revenues | 901 | 796 | 13 | 2,589 | 2,568 | 1 | |||||||||||||||||
Insurance claims and policyholders' benefits | 449 | 428 | 1,366 | 1,394 | |||||||||||||||||||
Amortization of deferred acquisition costs | 118 | 118 | 351 | 352 | |||||||||||||||||||
Other insurance related expenses | 151 | 128 | 422 | 385 | |||||||||||||||||||
Other expenses | 9 | 10 | 25 | 23 | |||||||||||||||||||
Total claims, benefits and expenses | 727 | 684 | (6 | ) | 2,164 | 2,154 | — | ||||||||||||||||
Operating income (loss) before income tax | 174 | 112 | 425 | 414 | |||||||||||||||||||
Income tax (expense) benefit on operating income (loss) | (60 | ) | (37 | ) | (145 | ) | (141 | ) | |||||||||||||||
Net operating income (loss) | $ | 114 | $ | 75 | 52 | % | $ | 280 | $ | 273 | 3 | % | |||||||||||
Other Performance Metrics | |||||||||||||||||||||||
Underwriting gain (loss) | $ | 1 | $ | 31 | (97 | ) | % | $ | (36 | ) | $ | (45 | ) | 20 | % | ||||||||
Loss & LAE ratio | 62.2 | % | 60.6 | % | (1.6 | ) | pts | 64.6 | % | 66.5 | % | 1.9 | pts | ||||||||||
Acquisition expense ratio | 18.2 | 17.6 | (0.6 | ) | 18.0 | 17.7 | (0.3 | ) | |||||||||||||||
Underwriting expense ratio | 18.9 | 17.6 | (1.3 | ) | 18.7 | 17.7 | (1.0 | ) | |||||||||||||||
Expense ratio | 37.1 | 35.2 | (1.9 | ) | 36.7 | 35.4 | (1.3 | ) | |||||||||||||||
Dividend ratio | 0.5 | — | (0.5 | ) | 0.4 | 0.2 | (0.2 | ) | |||||||||||||||
Combined ratio | 99.8 | % | 95.8 | % | (4.0 | ) | 101.7 | % | 102.1 | % | 0.4 | ||||||||||||
Combined ratio excluding catastrophes and development | 98.7 | % | 95.6 | % | (3.1 | ) | pts | 98.5 | % | 97.9 | % | (0.6 | ) | pts | |||||||||
Net accident year catastrophe losses incurred | $ | 12 | $ | 10 | $ | 95 | $ | 83 | |||||||||||||||
Effect on loss & LAE ratio | 1.6 | % | 1.4 | % | (0.2 | ) | pts | 4.6 | % | 4.0 | % | (0.6 | ) | pts | |||||||||
Net prior year development and other: (favorable) / unfavorable | $ | (5 | ) | $ | (11 | ) | $ | (32 | ) | $ | (1 | ) | |||||||||||
Effect on loss & LAE ratio | (0.5 | ) | % | (1.2 | ) | % | (0.7 | ) | pts | (1.4 | ) | % | 0.2 | % | 1.6 | pts | |||||||
Rate | — | % | 1 | % | (1 | ) | pts | — | % | 2 | % | (2 | ) | pts | |||||||||
Retention | 83 | 76 | 7 | 84 | 77 | 7 | |||||||||||||||||
New business | $ | 135 | $ | 135 | — | % | $ | 418 | $ | 422 | (1 | ) | % |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||||||||||
(In millions) | 2016 | 2015 | Change | 2016 | 2015 | Change | |||||||||||||||||
Gross written premiums | $ | 213 | $ | 196 | 9 | % | $ | 704 | $ | 717 | (2 | ) | % | ||||||||||
Net written premiums | 207 | 180 | 15 | 637 | 641 | (1 | ) | ||||||||||||||||
Net earned premiums | 210 | 203 | 3 | 605 | 601 | 1 | |||||||||||||||||
Net investment income | 13 | 13 | 38 | 40 | |||||||||||||||||||
Other revenues | — | 1 | 1 | — | |||||||||||||||||||
Total operating revenues | 223 | 217 | 3 | 644 | 641 | — | |||||||||||||||||
Insurance claims and policyholders' benefits | 117 | 106 | 395 | 336 | |||||||||||||||||||
Amortization of deferred acquisition costs | 45 | 45 | 132 | 125 | |||||||||||||||||||
Other insurance related expenses | 33 | 33 | 98 | 101 | |||||||||||||||||||
Other expenses | 1 | 9 | 17 | 9 | |||||||||||||||||||
Total claims, benefits and expenses | 196 | 193 | (2 | ) | 642 | 571 | (12 | ) | |||||||||||||||
Operating income (loss) before income tax | 27 | 24 | 2 | 70 | |||||||||||||||||||
Income tax (expense) benefit on operating income (loss) | (7 | ) | (15 | ) | (3 | ) | (30 | ) | |||||||||||||||
Net operating income (loss) | $ | 20 | $ | 9 | 122 | % | $ | (1 | ) | $ | 40 | (103 | ) | % | |||||||||
Other Performance Metrics | |||||||||||||||||||||||
Underwriting gain (loss) | $ | 15 | $ | 19 | (21 | ) | % | $ | (20 | ) | $ | 39 | (151 | ) | % | ||||||||
Loss & LAE ratio | 55.4 | % | 52.4 | % | (3.0 | ) | pts | 65.2 | % | 55.9 | % | (9.3 | ) | pts | |||||||||
Acquisition expense ratio | 22.5 | 22.8 | 0.3 | 21.8 | 22.0 | 0.2 | |||||||||||||||||
Underwriting expense ratio | 15.3 | 15.2 | (0.1 | ) | 16.4 | 15.6 | (0.8 | ) | |||||||||||||||
Expense ratio | 37.8 | 38.0 | 0.2 | 38.2 | 37.6 | (0.6 | ) | ||||||||||||||||
Dividend ratio | — | — | — | — | — | — | |||||||||||||||||
Combined ratio | 93.2 | % | 90.4 | % | (2.8 | ) | 103.4 | % | 93.5 | % | (9.9 | ) | |||||||||||
Combined ratio excluding catastrophes and development | 99.7 | % | 106.0 | % | 6.3 | pts | 104.7 | % | 98.7 | % | (6.0 | ) | pts | ||||||||||
Net accident year catastrophe losses incurred | $ | 3 | $ | 1 | $ | 28 | $ | 5 | |||||||||||||||
Effect on loss & LAE ratio | 1.5 | % | 0.3 | % | (1.2 | ) | pts | 4.7 | % | 0.8 | % | (3.9 | ) | pts | |||||||||
Net prior year development and other: (favorable) / unfavorable | $ | (17 | ) | $ | (32 | ) | $ | (36 | ) | $ | (30 | ) | |||||||||||
Effect on loss & LAE ratio | (8.0 | ) | % | (15.9 | ) | % | (7.9 | ) | pts | (6.0 | ) | % | (6.0 | ) | % | — | pts | ||||||
Rate | (1 | ) | % | (1 | ) | % | — | pts | (1 | ) | % | (1 | ) | % | — | pts | |||||||
Retention | 70 | 75 | (5 | ) | 76 | 77 | (1 | ) | |||||||||||||||
New business (1) | $ | 67 | $ | 23 | 191 | % | $ | 189 | $ | 83 | 128 | % |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||||||||||
(In millions) | 2016 | 2015 | Change | 2016 | 2015 | Change | |||||||||||||||||
Net earned premiums | $ | 134 | $ | 137 | (2 | ) | % | $ | 401 | $ | 412 | (3 | ) | % | |||||||||
Net investment income | 192 | 182 | 567 | 540 | |||||||||||||||||||
Other revenues | (4 | ) | (1 | ) | (1 | ) | 8 | ||||||||||||||||
Total operating revenues | 322 | 318 | 1 | 967 | 960 | 1 | |||||||||||||||||
Insurance claims and policyholders' benefits | 313 | 361 | 976 | 1,045 | |||||||||||||||||||
Amortization of deferred acquisition costs | — | 6 | — | 19 | |||||||||||||||||||
Other insurance related expenses | 37 | 35 | 101 | 104 | |||||||||||||||||||
Other expenses | 2 | 1 | 7 | 10 | |||||||||||||||||||
Total claims, benefits and expenses | 352 | 403 | 13 | 1,084 | 1,178 | 8 | |||||||||||||||||
Operating income (loss) before income tax | (30 | ) | (85 | ) | (117 | ) | (218 | ) | |||||||||||||||
Income tax (expense) benefit on operating income (loss) | 36 | 55 | 117 | 147 | |||||||||||||||||||
Net operating income (loss) | $ | 6 | $ | (30 | ) | 120 | % | $ | — | $ | (71 | ) | N/M | % |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||||||||||
(In millions) | 2016 | 2015 | Change | 2016 | 2015 | Change | |||||||||||||||||
Net earned premiums | $ | — | $ | — | $ | (1 | ) | $ | (1 | ) | |||||||||||||
Net investment income | 4 | 1 | 11 | 12 | |||||||||||||||||||
Other revenues | — | 2 | 3 | 6 | |||||||||||||||||||
Total operating revenues | 4 | 3 | 33 | % | 13 | 17 | (24 | ) | % | ||||||||||||||
Insurance claims and policyholders' benefits | (11 | ) | (3 | ) | 109 | 78 | |||||||||||||||||
Amortization of deferred acquisition costs | — | — | — | — | |||||||||||||||||||
Other insurance related expenses | (3 | ) | — | (4 | ) | (2 | ) | ||||||||||||||||
Other expenses | 57 | 45 | 158 | 137 | |||||||||||||||||||
Total claims, benefits and expenses | 43 | 42 | (2 | ) | 263 | 213 | (23 | ) | |||||||||||||||
Operating income (loss) before income tax | (39 | ) | (39 | ) | (250 | ) | (196 | ) | |||||||||||||||
Income tax (expense) benefit on operating income (loss) | 15 | 16 | 88 | 70 | |||||||||||||||||||
Net operating income (loss) | $ | (24 | ) | $ | (23 | ) | (4 | ) | % | $ | (162 | ) | $ | (126 | ) | (29 | ) | % |
September 30, 2016 | June 30, 2016 | December 31, 2015 | |||||||||||||||||||||
(In millions) | Carrying Value | Net Unrealized Gains (Losses) | Carrying Value | Net Unrealized Gains (Losses) | Carrying Value | Net Unrealized Gains (Losses) | |||||||||||||||||
Fixed maturity securities: | |||||||||||||||||||||||
Corporate and other bonds | $ | 19,818 | $ | 1,831 | $ | 19,214 | $ | 1,591 | $ | 17,760 | $ | 677 | |||||||||||
States, municipalities and political subdivisions: | |||||||||||||||||||||||
Tax-exempt | 10,523 | 1,425 | 10,774 | 1,578 | 10,114 | 1,076 | |||||||||||||||||
Taxable | 2,978 | 510 | 2,999 | 534 | 3,060 | 369 | |||||||||||||||||
Total states, municipalities and political subdivisions | 13,501 | 1,935 | 13,773 | 2,112 | 13,174 | 1,445 | |||||||||||||||||
Asset-backed: | |||||||||||||||||||||||
RMBS | 5,365 | 191 | 5,189 | 195 | 5,072 | 137 | |||||||||||||||||
CMBS | 2,144 | 80 | 2,163 | 83 | 2,197 | 43 | |||||||||||||||||
Other ABS | 959 | 11 | 931 | 3 | 921 | (2 | ) | ||||||||||||||||
Total asset-backed | 8,468 | 282 | 8,283 | 281 | 8,190 | 178 | |||||||||||||||||
U.S. Treasury and obligations of government-sponsored enterprises | 76 | 8 | 92 | 11 | 67 | 5 | |||||||||||||||||
Foreign government | 438 | 23 | 460 | 22 | 346 | 12 | |||||||||||||||||
Redeemable preferred stock | 20 | 2 | 35 | 2 | 35 | 2 | |||||||||||||||||
Total fixed maturity securities | 42,321 | 4,081 | 41,857 | 4,019 | 39,572 | 2,319 | |||||||||||||||||
Equities | 116 | 8 | 123 | 6 | 197 | 6 | |||||||||||||||||
Limited partnership investments | 2,456 | — | 2,542 | — | 2,548 | — | |||||||||||||||||
Other invested assets | 35 | — | 33 | — | 44 | — | |||||||||||||||||
Mortgage loans | 629 | — | 610 | — | 678 | — | |||||||||||||||||
Short term investments | 1,423 | — | 1,384 | 1 | 1,660 | — | |||||||||||||||||
Total investments | $ | 46,980 | $ | 4,089 | $ | 46,549 | $ | 4,026 | $ | 44,699 | $ | 2,325 | |||||||||||
Net receivable/(payable) on investment activity | $ | (98 | ) | $ | (114 | ) | $ | 82 | |||||||||||||||
Effective portfolio duration (in years) | 5.8 | 5.9 | 6.2 | ||||||||||||||||||||
Weighted average rating of fixed maturity securities | A | A | A |
September 30, 2016 | June 30, 2016 | December 31, 2015 | |||||||||||||||||||||
(In millions) | Carrying Value | Net Unrealized Gains (Losses) | Carrying Value | Net Unrealized Gains (Losses) | Carrying Value | Net Unrealized Gains (Losses) | |||||||||||||||||
Fixed maturity securities: | |||||||||||||||||||||||
Corporate and other bonds | $ | 13,701 | $ | 731 | $ | 13,500 | $ | 619 | $ | 12,594 | $ | 96 | |||||||||||
States, municipalities and political subdivisions: | |||||||||||||||||||||||
Tax-exempt | 2,543 | 170 | 2,554 | 189 | 2,441 | 133 | |||||||||||||||||
Taxable | 1,282 | 152 | 1,342 | 172 | 1,579 | 132 | |||||||||||||||||
Total states, municipalities and political subdivisions | 3,825 | 322 | 3,896 | 361 | 4,020 | 265 | |||||||||||||||||
Asset-backed: | |||||||||||||||||||||||
RMBS | 5,075 | 183 | 4,882 | 184 | 4,828 | 131 | |||||||||||||||||
CMBS | 1,990 | 72 | 2,003 | 75 | 2,038 | 37 | |||||||||||||||||
Other ABS | 859 | 9 | 832 | 4 | 837 | (1 | ) | ||||||||||||||||
Total asset-backed | 7,924 | 264 | 7,717 | 263 | 7,703 | 167 | |||||||||||||||||
U.S. Treasury and obligations of government-sponsored enterprises | 51 | 4 | 67 | 7 | 42 | — | |||||||||||||||||
Foreign government | 438 | 23 | 460 | 22 | 346 | 12 | |||||||||||||||||
Redeemable preferred stock | 6 | 1 | 13 | 1 | 13 | 1 | |||||||||||||||||
Total fixed maturity securities | 25,945 | 1,345 | 25,653 | 1,273 | 24,718 | 541 | |||||||||||||||||
Equities | 60 | 5 | 64 | 3 | 87 | 1 | |||||||||||||||||
Limited partnership investments | 2,456 | — | 2,542 | — | 2,548 | — | |||||||||||||||||
Other invested assets | 35 | — | 33 | — | 44 | — | |||||||||||||||||
Mortgage loans | 557 | — | 553 | — | 622 | — | |||||||||||||||||
Short term investments | 1,344 | — | 1,299 | 1 | 1,513 | — | |||||||||||||||||
Total investments | $ | 30,397 | $ | 1,350 | $ | 30,144 | $ | 1,277 | $ | 29,532 | $ | 542 | |||||||||||
Net receivable/(payable) on investment activity | $ | (50 | ) | $ | (113 | ) | $ | 204 | |||||||||||||||
Effective portfolio duration (in years) | 4.1 | 4.1 | 4.3 | ||||||||||||||||||||
Weighted average rating of fixed maturity securities | A | A | A |
September 30, 2016 | June 30, 2016 | December 31, 2015 | |||||||||||||||||||||
(In millions) | Carrying Value | Net Unrealized Gains (Losses) | Carrying Value | Net Unrealized Gains (Losses) | Carrying Value | Net Unrealized Gains (Losses) | |||||||||||||||||
Fixed maturity securities: | |||||||||||||||||||||||
Corporate and other bonds | $ | 6,117 | $ | 1,100 | $ | 5,714 | $ | 972 | $ | 5,166 | $ | 581 | |||||||||||
States, municipalities and political subdivisions: | |||||||||||||||||||||||
Tax-exempt | 7,980 | 1,255 | 8,220 | 1,389 | 7,673 | 943 | |||||||||||||||||
Taxable | 1,696 | 358 | 1,657 | 362 | 1,481 | 237 | |||||||||||||||||
Total states, municipalities and political subdivisions | 9,676 | 1,613 | 9,877 | 1,751 | 9,154 | 1,180 | |||||||||||||||||
Asset-backed: | |||||||||||||||||||||||
RMBS | 290 | 8 | 307 | 11 | 244 | 6 | |||||||||||||||||
CMBS | 154 | 8 | 160 | 8 | 159 | 6 | |||||||||||||||||
Other ABS | 100 | 2 | 99 | (1 | ) | 84 | (1 | ) | |||||||||||||||
Total asset-backed | 544 | 18 | 566 | 18 | 487 | 11 | |||||||||||||||||
U.S. Treasury and obligations of government-sponsored enterprises | 25 | 4 | 25 | 4 | 25 | 5 | |||||||||||||||||
Foreign government | — | — | — | — | — | — | |||||||||||||||||
Redeemable preferred stock | 14 | 1 | 22 | 1 | 22 | 1 | |||||||||||||||||
Total fixed maturity securities | 16,376 | 2,736 | 16,204 | 2,746 | 14,854 | 1,778 | |||||||||||||||||
Equities | 56 | 3 | 59 | 3 | 110 | 5 | |||||||||||||||||
Limited partnership investments | — | — | — | — | — | — | |||||||||||||||||
Other invested assets | — | — | — | — | — | — | |||||||||||||||||
Mortgage loans | 72 | — | 57 | — | 56 | — | |||||||||||||||||
Short term investments | 79 | — | 85 | — | 147 | — | |||||||||||||||||
Total investments | $ | 16,583 | $ | 2,739 | $ | 16,405 | $ | 2,749 | $ | 15,167 | $ | 1,783 | |||||||||||
Net receivable/(payable) on investment activity | $ | (48 | ) | $ | (1 | ) | $ | (122 | ) | ||||||||||||||
Effective portfolio duration (in years) | 8.6 | 8.7 | 9.6 | ||||||||||||||||||||
Weighted average rating of fixed maturity securities | A | A | A |
September 30, 2016 | U.S. Government, Government agencies and Government-sponsored enterprises | AAA | AA | A | BBB | Non-investment grade | Total | ||||||||||||||||||||||||||||||||||||||||||||||||
(In millions) | Fair Value | Net Unrealized Gains (Losses) | Fair Value | Net Unrealized Gains (Losses) | Fair Value | Net Unrealized Gains (Losses) | Fair Value | Net Unrealized Gains (Losses) | Fair Value | Net Unrealized Gains (Losses) | Fair Value | Net Unrealized Gains (Losses) | Fair Value | Net Unrealized Gains (Losses) | |||||||||||||||||||||||||||||||||||||||||
Corporate and other bonds | $ | — | $ | — | $ | 78 | $ | 4 | $ | 701 | $ | 76 | $ | 4,736 | $ | 584 | $ | 12,061 | $ | 1,064 | $ | 2,242 | $ | 103 | $ | 19,818 | $ | 1,831 | |||||||||||||||||||||||||||
States, municipalities and political subdivisions: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tax-exempt | — | — | 857 | 113 | 5,501 | 749 | 3,964 | 522 | 130 | 13 | 71 | 28 | 10,523 | 1,425 | |||||||||||||||||||||||||||||||||||||||||
Taxable | — | — | 321 | 39 | 1,949 | 320 | 687 | 150 | 21 | 1 | — | — | 2,978 | 510 | |||||||||||||||||||||||||||||||||||||||||
Total states, municipalities and political subdivisions | — | — | 1,178 | 152 | 7,450 | 1,069 | 4,651 | 672 | 151 | 14 | 71 | 28 | 13,501 | 1,935 | |||||||||||||||||||||||||||||||||||||||||
Asset-backed: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
RMBS | 4,290 | 158 | 92 | — | 47 | — | 94 | (1 | ) | 61 | — | 781 | 34 | 5,365 | 191 | ||||||||||||||||||||||||||||||||||||||||
CMBS | 56 | — | 418 | 18 | 484 | 26 | 326 | 20 | 590 | 13 | 270 | 3 | 2,144 | 80 | |||||||||||||||||||||||||||||||||||||||||
Other ABS | — | — | 44 | — | 29 | — | 455 | 6 | 431 | 5 | — | — | 959 | 11 | |||||||||||||||||||||||||||||||||||||||||
Total asset-backed | 4,346 | 158 | 554 | 18 | 560 | 26 | 875 | 25 | 1,082 | 18 | 1,051 | 37 | 8,468 | 282 | |||||||||||||||||||||||||||||||||||||||||
U.S. Treasury and obligations of government-sponsored enterprises | 76 | 8 | — | — | — | — | — | — | — | — | — | — | 76 | 8 | |||||||||||||||||||||||||||||||||||||||||
Foreign government | — | — | 83 | 6 | 304 | 15 | 30 | 2 | 21 | — | — | — | 438 | 23 | |||||||||||||||||||||||||||||||||||||||||
Redeemable preferred stock | — | — | — | — | — | — | — | — | 11 | 2 | 9 | — | 20 | 2 | |||||||||||||||||||||||||||||||||||||||||
Total fixed maturity securities | $ | 4,422 | $ | 166 | $ | 1,893 | $ | 180 | $ | 9,015 | $ | 1,186 | $ | 10,292 | $ | 1,283 | $ | 13,326 | $ | 1,098 | $ | 3,373 | $ | 168 | $ | 42,321 | $ | 4,081 | |||||||||||||||||||||||||||
Percentage of total fixed maturity securities | 10 | % | 4 | % | 21 | % | 24 | % | 33 | % | 8 | % | 100 | % |
Consolidated | ||||||||||||||||
Periods ended September 30 | Three Months | Nine Months | ||||||||||||||
(In millions) | 2016 | 2015 | 2016 | 2015 | ||||||||||||
Taxable fixed maturities | $ | 354 | $ | 346 | $ | 1,048 | $ | 1,040 | ||||||||
Tax-exempt fixed maturities | 103 | 103 | 304 | 304 | ||||||||||||
Total fixed maturity securities | 457 | 449 | 1,352 | 1,344 | ||||||||||||
Limited partnership investments | 65 | (93 | ) | 97 | 69 | |||||||||||
Other, net of investment expense | 2 | (2 | ) | 12 | (1 | ) | ||||||||||
Net investment income | $ | 524 | $ | 354 | $ | 1,461 | $ | 1,412 | ||||||||
Fixed maturity securities, after tax | $ | 326 | $ | 326 | $ | 973 | $ | 968 | ||||||||
Net investment income, after tax | 371 | 265 | 1,048 | 1,015 | ||||||||||||
Effective income yield for the fixed maturity securities portfolio, pretax | 4.8 | % | 4.8 | % | 4.8 | % | 4.8 | % | ||||||||
Effective income yield for the fixed maturity securities portfolio, after tax | 3.4 | 3.5 | 3.4 | 3.5 |
Property & Casualty and Corporate & Other Non-Core | ||||||||||||||||
Periods ended September 30 | Three Months | Nine Months | ||||||||||||||
(In millions) | 2016 | 2015 | 2016 | 2015 | ||||||||||||
Taxable fixed maturities | $ | 242 | $ | 242 | $ | 722 | $ | 733 | ||||||||
Tax-exempt fixed maturities | 21 | 23 | 58 | 66 | ||||||||||||
Total fixed maturity securities | 263 | 265 | 780 | 799 | ||||||||||||
Limited partnership investments | 65 | (93 | ) | 97 | 69 | |||||||||||
Other, net of investment expense | 4 | — | 17 | 4 | ||||||||||||
Net investment income | $ | 332 | $ | 172 | $ | 894 | $ | 872 | ||||||||
Fixed maturity securities, after tax | $ | 177 | $ | 180 | $ | 529 | $ | 542 | ||||||||
Net investment income, after tax | 223 | 119 | 605 | 590 | ||||||||||||
Effective income yield for the fixed maturity securities portfolio, pretax | 4.3 | % | 4.3 | % | 4.3 | % | 4.3 | % | ||||||||
Effective income yield for the fixed maturity securities portfolio, after tax | 2.9 | 2.9 | 2.9 | 2.9 |
Life & Group Non-Core | ||||||||||||||||
Periods ended September 30 | Three Months | Nine Months | ||||||||||||||
(In millions) | 2016 | 2015 | 2016 | 2015 | ||||||||||||
Taxable fixed maturities | $ | 112 | $ | 104 | $ | 326 | $ | 307 | ||||||||
Tax-exempt fixed maturities | 82 | 80 | 246 | 238 | ||||||||||||
Total fixed maturity securities | 194 | 184 | 572 | 545 | ||||||||||||
Limited partnership investments | — | — | — | — | ||||||||||||
Other, net of investment expense | (2 | ) | (2 | ) | (5 | ) | (5 | ) | ||||||||
Net investment income | $ | 192 | $ | 182 | $ | 567 | $ | 540 | ||||||||
Fixed maturity securities, after tax | $ | 149 | $ | 146 | $ | 444 | $ | 426 | ||||||||
Net investment income, after tax | 148 | 146 | 443 | 425 | ||||||||||||
Effective income yield for the fixed maturity securities portfolio, pretax | 5.7 | % | 5.8 | % | 5.7 | % | 5.8 | % | ||||||||
Effective income yield for the fixed maturity securities portfolio, after tax | 4.4 | 4.6 | 4.4 | 4.5 |
Three months ended September 30, 2016 (In millions) | Specialty | Commercial | International | P&C Operations | Life & Group Non-Core | Corporate & Other Non-Core | Total Operations | ||||||||||||||||||||
Claim & claim adjustment expense reserves, beginning of period | |||||||||||||||||||||||||||
Gross | $ | 6,414 | $ | 8,973 | $ | 1,409 | $ | 16,796 | $ | 3,382 | $ | 2,797 | $ | 22,975 | |||||||||||||
Ceded | 848 | 569 | 123 | 1,540 | 278 | 2,553 | 4,371 | ||||||||||||||||||||
Net | 5,566 | 8,404 | 1,286 | 15,256 | 3,104 | 244 | 18,604 | ||||||||||||||||||||
Net incurred claim & claim adjustment expenses | 330 | 446 | 117 | 893 | 229 | 1 | 1,123 | ||||||||||||||||||||
Net claim & claim adjustment expense payments | (416 | ) | (573 | ) | (107 | ) | (1,096 | ) | (200 | ) | (8 | ) | (1,304 | ) | |||||||||||||
Foreign currency translation adjustment and other | — | 2 | (11 | ) | (9 | ) | 3 | (1 | ) | (7 | ) | ||||||||||||||||
Claim & claim adjustment expense reserves, end of period | |||||||||||||||||||||||||||
Net | 5,480 | 8,279 | 1,285 | 15,044 | 3,136 | 236 | 18,416 | ||||||||||||||||||||
Ceded | 798 | 600 | 123 | 1,521 | 271 | 2,464 | 4,256 | ||||||||||||||||||||
Gross | $ | 6,278 | $ | 8,879 | $ | 1,408 | $ | 16,565 | $ | 3,407 | $ | 2,700 | $ | 22,672 |
Nine months ended September 30, 2016 (In millions) | Specialty | Commercial | International | P&C Operations | Life & Group Non-Core | Corporate & Other Non-Core | Total Operations | ||||||||||||||||||||
Claim & claim adjustment expense reserves, beginning of period | |||||||||||||||||||||||||||
Gross | $ | 6,269 | $ | 9,183 | $ | 1,347 | $ | 16,799 | $ | 3,220 | $ | 2,644 | $ | 22,663 | |||||||||||||
Ceded | 701 | 607 | 128 | 1,436 | 290 | 2,361 | 4,087 | ||||||||||||||||||||
Net | 5,568 | 8,576 | 1,219 | 15,363 | 2,930 | 283 | 18,576 | ||||||||||||||||||||
Net incurred claim & claim adjustment expenses | 1,097 | 1,357 | 395 | 2,849 | 749 | 3 | 3,601 | ||||||||||||||||||||
Net claim & claim adjustment expense payments | (1,186 | ) | (1,656 | ) | (323 | ) | (3,165 | ) | (585 | ) | (50 | ) | (3,800 | ) | |||||||||||||
Foreign currency translation adjustment and other | 1 | 2 | (6 | ) | (3 | ) | 42 | — | 39 | ||||||||||||||||||
Claim & claim adjustment expense reserves, end of period | |||||||||||||||||||||||||||
Net | 5,480 | 8,279 | 1,285 | 15,044 | 3,136 | 236 | 18,416 | ||||||||||||||||||||
Ceded | 798 | 600 | 123 | 1,521 | 271 | 2,464 | 4,256 | ||||||||||||||||||||
Gross | $ | 6,278 | $ | 8,879 | $ | 1,408 | $ | 16,565 | $ | 3,407 | $ | 2,700 | $ | 22,672 |
September 30, 2016 | |||||||||||
(In millions) | Claim and claim adjustment expenses | Future policy benefits | Total | ||||||||
Long term care | $ | 2,409 | $ | 8,562 | $ | 10,971 | |||||
Structured settlement annuities | 568 | — | 568 | ||||||||
Other | 17 | — | 17 | ||||||||
Total | 2,994 | 8,562 | 11,556 | ||||||||
Shadow adjustments | 142 | 2,445 | 2,587 | ||||||||
Ceded reserves | 271 | 212 | 483 | ||||||||
Total gross reserves | $ | 3,407 | $ | 11,219 | $ | 14,626 |
December 31, 2015 | |||||||||||
(In millions) | Claim and claim adjustment expenses | Future policy benefits | Total | ||||||||
Long term care | $ | 2,229 | $ | 8,335 | $ | 10,564 | |||||
Structured settlement annuities | 581 | — | 581 | ||||||||
Other | 21 | — | 21 | ||||||||
Total | 2,831 | 8,335 | 11,166 | ||||||||
Shadow adjustments | 99 | 1,610 | 1,709 | ||||||||
Ceded reserves | 290 | 207 | 497 | ||||||||
Total gross reserves | $ | 3,220 | $ | 10,152 | $ | 13,372 |
• | Collectively, CNA Financial Corporation (CNAF) and its subsidiaries are referred to as CNA or the Company. |
• | P&C Operations includes Specialty, Commercial and International. |
• | Life & Group Non-Core segment primarily includes the results of long term care businesses that are in run-off. |
• | Corporate & Other Non-Core segment 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. Intersegment eliminations are also included in this segment. |
• | Management uses the net operating income (loss) financial measure to monitor the Company’s operations. Please refer to Note O to the Consolidated Financial Statements within the December 31, 2015 Form 10-K for further discussion of this non-GAAP financial measure. |
• | Management uses underwriting results to monitor insurance operations. Underwriting results are pretax and are calculated as net earned premiums less total insurance expenses, which includes insurance claims and policyholders' benefits, amortization of deferred acquisition costs and other insurance related expenses. |
• | In the evaluation of the results of Specialty, Commercial and International, management uses the loss ratio, the expense ratio, the dividend ratio and the combined ratio. These ratios are calculated using financial results prepared in accordance with accounting principles generally accepted in the United States of America. 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. In addition, management also utilizes rate, retention and new business in evaluating operating trends. 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. |
• | This financial supplement may also reference or contain financial measures that are not in accordance with GAAP. Management utilizes these financial measures to monitor the Company's insurance operations and investment portfolio. Net operating income, which is derived from certain income statement amounts, is used by management to monitor performance of the Company's insurance operations. 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. Based on such analyses, the Company may recognize an other-than-temporary impairment (OTTI) loss on an investment security in accordance with its policy, or sell a security, which may produce realized gains and losses. |
• | Net operating income (loss) is calculated by excluding from net income (loss) the after-tax effects of 1) net realized investment gains or losses, 2) income or loss from discontinued operations and 3) any cumulative effects of changes in accounting guidance. The calculation of net operating income excludes net realized investment gains or losses because net realized investment gains or losses are largely discretionary, except for some losses related to OTTI, and 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 net operating income (loss) for each business segment to assess segment performance. Presentation of consolidated net operating income (loss) is deemed to be a non-GAAP financial measure. For reconciliations of non-GAAP measures to the most comparable GAAP measures and other 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 press release, available at www.cna.com. |
• | Pretax net prior year development and other includes the effects of interest accretion and change in allowance for uncollectible reinsurance and deductible amounts. |
• | The majority of our limited partnership investments employ hedge fund strategies that generate returns primarily through investing in marketable securities in the public fixed income and equity markets. While the Company generally does not invest in highly leveraged partnerships, there are risks which may result in losses due to short-selling, derivatives or other speculative investment practices. The use of leverage increases volatility generated by the underlying investment strategies. |
• | Certain immaterial differences are due to rounding. |
• | N/M = Not Meaningful |
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