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: May 1, 2017 | 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 May 1, 2017, providing information on the first quarter 2017 results of operations. | ||
CNA Financial Corporation financial supplement, posted on its website May 1, 2017, providing supplemental financial information on the first quarter 2017. |
MEDIA: | ANALYSTS: | |
Brandon Davis, 312-822-5167 | James Anderson, 312-822-7757 | |
Sarah Pang, 312-822-6394 | Emma Riza, 312-822-5960 | |
Robert Tardella, 312-822-4387 |
• | Q1 NET INCOME OF $260M; $0.96 PER SHARE |
• | Q1 NET OPERATING INCOME OF $235M; $0.87 PER SHARE |
• | NET INCOME ROE OF 8.8%; NET OPERATING INCOME ROE OF 7.9% |
• | 2017 P&C COMBINED RATIO OF 97.2% VS 96.1% IN 2016 |
• | ADJUSTED 2017 P&C COMBINED RATIO OF 94.8% EX PREMIUM ADJUSTMENT |
• | QUARTERLY DIVIDEND OF $0.25 PER SHARE |
Results for the Three Months Ended March 31 | |||||||
($ millions, except per share data) | 2017 | 2016 | |||||
Net operating income (loss) (a) | $ | 235 | $ | 91 | |||
Net realized investment gains (losses) | 25 | (25 | ) | ||||
Net income (loss) | $ | 260 | $ | 66 | |||
Net operating income (loss) per diluted share | $ | 0.87 | $ | 0.34 | |||
Net income (loss) per diluted share | 0.96 | 0.24 |
March 31, 2017 | December 31, 2016 | ||||||
Book value per share | $ | 43.15 | $ | 44.25 | |||
Book value per share excluding AOCI | 43.49 | 44.89 |
(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, 2016 for further discussion of this non-GAAP financial measure. |
Results for the Three Months Ended March 31 | |||||||||
($ millions) | 2017 | 2016 | |||||||
Net written premiums | $ | 1,632 | $ | 1,668 | |||||
NWP change (% year over year) | (2 | ) | % | — | % | ||||
Net investment income | $ | 343 | $ | 245 | |||||
Net operating income | 268 | 207 | |||||||
Net income | 285 | 191 | |||||||
Loss ratio excluding catastrophes and development | 62.2 | % | 62.0 | % | |||||
Effect of catastrophe impacts | 2.2 | 2.3 | |||||||
Effect of development-related items | (2.4 | ) | (3.6 | ) | |||||
Loss ratio | 62.0 | % | 60.7 | % | |||||
Combined ratio | 97.2 | % | 96.1 | % | |||||
Combined ratio excluding catastrophes and development | 97.4 | % | 97.4 | % |
Results for the Three Months Ended March 31 | |||||||||
($ millions) | 2017 | 2016 | |||||||
Net written premiums | $ | 679 | $ | 684 | |||||
NWP change (% year over year) | (1 | ) | % | (2) | % | ||||
Net operating income | $ | 154 | $ | 127 | |||||
Net income | 158 | 120 | |||||||
Loss ratio excluding catastrophes and development | 62.8 | % | 62.5 | % | |||||
Effect of catastrophe impacts | 0.5 | 0.6 | |||||||
Effect of development-related items | (5.1 | ) | (6.0 | ) | |||||
Loss ratio | 58.2 | % | 57.1 | % | |||||
Combined ratio | 90.2 | % | 89.4 | % | |||||
Combined ratio excluding catastrophes and development | 94.8 | % | 94.8 | % |
• | Net operating income increased $27 million for the first quarter of 2017 as compared with the prior year quarter, primarily due to higher net investment income. |
• | The combined ratio increased 0.8 points as compared with the prior year quarter. The loss ratio increased 1.1 points driven by lower favorable net prior year development. Catastrophe losses were $4 million, or 0.5 points of the loss ratio in the first quarter of 2017, as compared to $4 million, or 0.6 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 decreased $5 million as compared with the prior year quarter driven by lower new business. Average rate increased 1% for the policies that renewed in the first quarter of 2017 while achieving a retention of 88%. |
Results for the Three Months Ended March 31 | |||||||||
($ millions) | 2017 | 2016 | |||||||
Net written premiums | $ | 715 | $ | 748 | |||||
NWP change (% year over year) | (4 | ) | % | (1 | ) | % | |||
Net operating income | $ | 94 | $ | 74 | |||||
Net income | 102 | 62 | |||||||
Loss ratio excluding catastrophes and development | 62.3 | % | 61.6 | % | |||||
Effect of catastrophe impacts | 4.0 | 4.1 | |||||||
Effect of development-related items | 0.7 | (1.5 | ) | ||||||
Loss ratio | 67.0 | % | 64.2 | % | |||||
Combined ratio | 104.9 | % | 101.9 | % | |||||
Combined ratio excluding catastrophes and development | 100.2 | % | 99.3 | % |
• | Net written premiums decreased $33 million for the first quarter of 2017 as compared with the prior year quarter, due to unfavorable premium development driven by a premium adjustment within Small Business partially offset by higher new business within Middle Markets. Average rate was flat for the policies that renewed in the first quarter of 2017 while achieving a retention of 83%. |
• | Net operating income increased $20 million for the first quarter of 2017 as compared with the prior year quarter, due to higher net investment income, lower underwriting expenses and higher favorable net prior year loss reserve development, partially offset by unfavorable premium development driven by the Small Business premium adjustment. |
• | The combined ratio increased 3.0 points for the first quarter of 2017, as compared with the prior year quarter, due to the unfavorable premium development. Excluding the impact of the Small Business premium adjustment on the ratios for both periods, the combined ratio decreased 3.6 points, driven by a 1.4 point decrease in the loss ratio primarily due to higher favorable net prior year loss reserve development and a 2.3 point decrease in the expense ratio primarily due to lower employee costs. |
Results for the Three Months Ended March 31 | |||||||||
($ millions) | 2017 | 2016 | |||||||
Net written premiums | $ | 238 | $ | 236 | |||||
NWP change (% year over year) | 1 | % | 11 | % | |||||
Net operating income | $ | 20 | $ | 6 | |||||
Net income | 25 | 9 | |||||||
Loss ratio excluding catastrophes and development | 59.6 | % | 61.5 | % | |||||
Effect of catastrophe impacts | 1.7 | 2.1 | |||||||
Effect of development-related items | (3.0 | ) | (2.4 | ) | |||||
Loss ratio | 58.3 | % | 61.2 | % | |||||
Combined ratio | 95.1 | % | 99.0 | % | |||||
Combined ratio excluding catastrophes and development | 96.4 | % | 99.3 | % |
• | Net operating income increased $14 million for the first quarter of 2017 as compared with the prior year quarter, due to the favorable period over period effect of foreign currency exchange gains and losses and improved underwriting results. |
• | The combined ratio improved 3.9 points as compared with the prior year quarter. The loss ratio improved 2.9 points, primarily due to an improved current accident year loss ratio driven by a lower level of large losses and higher favorable premium development. Catastrophe losses were $3 million, or 1.7 points of the loss ratio, in the first quarter of 2017 as compared to $4 million, or 2.1 points of the loss ratio, for the prior year quarter. The expense ratio improved 1.0 point in the current quarter, primarily due to foreign currency fluctuations. |
• | Net written premiums were consistent with the prior year quarter. Excluding the effect of foreign currency exchange rates and premium development, net written premiums for the first quarter of 2017 increased 1.1%. Average rate was flat for the policies that renewed in the first quarter of 2017 while achieving a retention of 76%. |
Results for the Three Months Ended March 31 | |||||||||
($ millions) | 2017 | 2016 | |||||||
Total operating revenues | $ | 331 | $ | 318 | |||||
Net investment income | 197 | 187 | |||||||
Net operating income (loss) | 4 | (2 | ) | ||||||
Net income (loss) | 10 | (5 | ) |
• | Net operating results improved $6 million for the first quarter of 2017 as compared with the prior year quarter. The improvement was driven by higher net investment income and favorable morbidity partially offset by unfavorable persistency in the long term care business. |
Results for the Year Ended December 31 | |||||||||
($ millions) | 2017 | 2016 | |||||||
Net investment income | $ | 5 | $ | 3 | |||||
Interest expense | 38 | 42 | |||||||
Net operating loss | (37 | ) | (114 | ) | |||||
Net loss | (35 | ) | (120 | ) |
• | Net operating loss was $37 million, an improvement of $77 million compared with the prior year quarter. This improvement was driven by lower adverse prior year reserve development recorded in 2017 for A&EP under the 2010 Loss Portfolio Transfer. |
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.............................................................................................................................................................................................. |
Three months ended March 31 | |||||||||||
(In millions) | 2017 | 2016 | Change | ||||||||
Revenues: | |||||||||||
Net earned premiums | $ | 1,645 | $ | 1,699 | (3 | ) | % | ||||
Net investment income | 545 | 435 | 25 | ||||||||
Net realized investment gains (losses): | |||||||||||
Other-than-temporary impairment (OTTI) losses | (2 | ) | (23 | ) | |||||||
Other net realized investment gains (losses) | 38 | (13 | ) | ||||||||
Net realized investment gains (losses) | 36 | (36 | ) | ||||||||
Other revenues | 104 | 97 | |||||||||
Total revenues | 2,330 | 2,195 | 6 | ||||||||
Claims, Benefits and Expenses: | |||||||||||
Insurance claims and policyholders' benefits | 1,293 | 1,408 | |||||||||
Amortization of deferred acquisition costs | 305 | 307 | |||||||||
Other operating expenses | 346 | 381 | |||||||||
Interest | 43 | 42 | |||||||||
Total claims, benefits and expenses | 1,987 | 2,138 | 7 | ||||||||
Income (loss) before income tax | 343 | 57 | |||||||||
Income tax (expense) benefit | (83 | ) | 9 | ||||||||
Net income (loss) | $ | 260 | $ | 66 | N/M | % |
Three months ended March 31 | ||||||||
(In millions, except per share data) | 2017 | 2016 | ||||||
Components of Income (Loss) | ||||||||
Net operating income (loss) | $ | 235 | $ | 91 | ||||
Net realized investment gains (losses) | 25 | (25 | ) | |||||
Net income (loss) | $ | 260 | $ | 66 | ||||
Diluted Earnings (Loss) Per Common Share | ||||||||
Net operating income (loss) | $ | 0.87 | $ | 0.34 | ||||
Net realized investment gains (losses) | 0.09 | (0.10 | ) | |||||
Diluted earnings (loss) per share | $ | 0.96 | $ | 0.24 | ||||
Weighted Average Outstanding Common Stock and Common Stock Equivalents | ||||||||
Basic | 270.7 | 270.3 | ||||||
Diluted | 271.7 | 270.9 | ||||||
Return on Equity | ||||||||
Net income (loss) (1) | 8.8 | % | 2.3 | % | ||||
Net operating income (loss) (2) | 7.9 | 3.1 |
(In millions, except per share data) | March 31, 2017 | December 31, 2016 | |||||
Total investments | $ | 45,279 | $ | 45,420 | |||
Reinsurance receivables, net of allowance for uncollectible receivables | 4,395 | 4,416 | |||||
Total assets | 55,201 | 55,233 | |||||
Insurance reserves | 36,663 | 36,431 | |||||
Debt | 2,710 | 2,710 | |||||
Total liabilities | 43,508 | 43,264 | |||||
Accumulated other comprehensive income (loss) (1) | (92 | ) | (173 | ) | |||
Total stockholders' equity | 11,693 | 11,969 | |||||
Book value per common share | $ | 43.15 | $ | 44.25 | |||
Book value per common share excluding AOCI | $ | 43.49 | $ | 44.89 | |||
Outstanding shares of common stock (in millions of shares) | 271.0 | 270.5 | |||||
Statutory capital and surplus - Combined Continental Casualty Companies (2) | $ | 10,415 | $ | 10,748 |
Three months ended March 31, 2017 | 2017 | 2016 | |||||
Net cash flows provided (used) by operating activities | $ | 282 | $ | 334 | |||
Net cash flows provided (used) by investing activities | 354 | (9 | ) | ||||
Net cash flows provided (used) by financing activities | (609 | ) | (469 | ) | |||
Net cash flows provided (used) by operating, investing and financing activities | $ | 27 | $ | (144 | ) |
Three months ended March 31 | |||||||||||
(In millions) | 2017 | 2016 | Change | ||||||||
Gross written premiums | $ | 2,752 | $ | 2,674 | 3 | % | |||||
Net written premiums | 1,632 | 1,668 | (2 | ) | |||||||
Net earned premiums | 1,512 | 1,568 | (4 | ) | |||||||
Net investment income | 343 | 245 | |||||||||
Other revenues | 103 | 94 | |||||||||
Total operating revenues | 1,958 | 1,907 | 3 | ||||||||
Insurance claims and policyholders' benefits | 942 | 957 | |||||||||
Amortization of deferred acquisition costs | 305 | 307 | |||||||||
Other insurance related expenses | 222 | 244 | |||||||||
Other expenses | 89 | 89 | |||||||||
Total claims, benefits and expenses | 1,558 | 1,597 | 2 | ||||||||
Operating income (loss) before income tax | 400 | 310 | |||||||||
Income tax (expense) benefit on operating income (loss) | (132 | ) | (103 | ) | |||||||
Net operating income (loss) | $ | 268 | $ | 207 | 29 | % | |||||
Other Performance Metrics | |||||||||||
Underwriting gain (loss) | $ | 43 | $ | 60 | (28 | ) | % | ||||
Loss & LAE ratio | 62.0 | % | 60.7 | % | (1.3 | ) | pts | ||||
Acquisition expense ratio | 19.8 | 19.4 | (0.4 | ) | |||||||
Underwriting expense ratio | 15.1 | 15.8 | 0.7 | ||||||||
Expense ratio | 34.9 | 35.2 | 0.3 | ||||||||
Dividend ratio | 0.3 | 0.2 | (0.1 | ) | |||||||
Combined ratio | 97.2 | % | 96.1 | % | (1.1 | ) | |||||
Combined ratio excluding catastrophes and development | 97.4 | % | 97.4 | % | — | pts | |||||
Net accident year catastrophe losses incurred | $ | 34 | $ | 36 | |||||||
Effect on loss & LAE ratio | 2.2 | % | 2.3 | % | 0.1 | pts | |||||
Net prior year development and other: (favorable) / unfavorable | $ | (27 | ) | $ | (61 | ) | |||||
Effect on loss & LAE ratio | (2.4 | ) | % | (3.6 | ) | % | (1.2 | ) | pts | ||
Rate | 0 | % | 0 | % | — | pts | |||||
Retention | 83 | % | 84 | % | (1 | ) | pts | ||||
New business | $ | 261 | $ | 262 | — | % |
Three months ended March 31 | |||||||||||
(In millions) | 2017 | 2016 | Change | ||||||||
Gross written premiums | $ | 1,747 | $ | 1,632 | 7 | % | |||||
Net written premiums | 679 | 684 | (1 | ) | |||||||
Net earned premiums | 664 | 682 | (3 | ) | |||||||
Net investment income | 153 | 107 | |||||||||
Other revenues | 94 | 87 | |||||||||
Total operating revenues | 911 | 876 | 4 | ||||||||
Insurance claims and policyholders' benefits | 387 | 391 | |||||||||
Amortization of deferred acquisition costs | 143 | 144 | |||||||||
Other insurance related expenses | 69 | 75 | |||||||||
Other expenses | 81 | 75 | |||||||||
Total claims, benefits and expenses | 680 | 685 | 1 | ||||||||
Operating income (loss) before income tax | 231 | 191 | |||||||||
Income tax (expense) benefit on operating income (loss) | (77 | ) | (64 | ) | |||||||
Net operating income (loss) | $ | 154 | $ | 127 | 21 | % | |||||
Other Performance Metrics | |||||||||||
Underwriting gain (loss) | $ | 65 | $ | 72 | (10 | ) | % | ||||
Loss & LAE ratio | 58.2 | % | 57.1 | % | (1.1 | ) | pts | ||||
Acquisition expense ratio | 19.9 | 19.9 | — | ||||||||
Underwriting expense ratio | 12.0 | 12.2 | 0.2 | ||||||||
Expense ratio | 31.9 | 32.1 | 0.2 | ||||||||
Dividend ratio | 0.1 | 0.2 | 0.1 | ||||||||
Combined ratio | 90.2 | % | 89.4 | % | (0.8 | ) | |||||
Combined ratio excluding catastrophes and development | 94.8 | % | 94.8 | % | — | pts | |||||
Net accident year catastrophe losses incurred | $ | 4 | $ | 4 | |||||||
Effect on loss & LAE ratio | 0.5 | % | 0.6 | % | 0.1 | pts | |||||
Net prior year development and other: (favorable) / unfavorable | $ | (36 | ) | $ | (45 | ) | |||||
Effect on loss & LAE ratio | (5.1 | ) | % | (6.0 | ) | % | (0.9 | ) | pts | ||
Rate | 1 | % | 1 | % | — | pts | |||||
Retention | 88 | % | 88 | % | — | pts | |||||
New business | $ | 57 | $ | 65 | (12 | ) | % |
Three months ended March 31 | |||||||||||
(In millions) | 2017 | 2016 | Change | ||||||||
Gross written premiums | $ | 750 | $ | 779 | (4 | ) | % | ||||
Net written premiums | 715 | 748 | (4 | ) | |||||||
Net earned premiums | 651 | 688 | (5 | ) | |||||||
Net investment income | 178 | 126 | |||||||||
Other revenues | 9 | 6 | |||||||||
Total operating revenues | 838 | 820 | 2 | ||||||||
Insurance claims and policyholders' benefits | 440 | 445 | |||||||||
Amortization of deferred acquisition costs | 116 | 116 | |||||||||
Other insurance related expenses | 126 | 141 | |||||||||
Other expenses | 14 | 5 | |||||||||
Total claims, benefits and expenses | 696 | 707 | 2 | ||||||||
Operating income (loss) before income tax | 142 | 113 | |||||||||
Income tax (expense) benefit on operating income (loss) | (48 | ) | (39 | ) | |||||||
Net operating income (loss) | $ | 94 | $ | 74 | 27 | % | |||||
Other Performance Metrics | |||||||||||
Underwriting gain (loss) | $ | (31 | ) | $ | (14 | ) | (121 | ) | % | ||
Loss & LAE ratio | 67.0 | % | 64.2 | % | (2.8 | ) | pts | ||||
Acquisition expense ratio | 19.1 | 18.4 | (0.7 | ) | |||||||
Underwriting expense ratio | 18.3 | 18.9 | 0.6 | ||||||||
Expense ratio | 37.4 | 37.3 | (0.1 | ) | |||||||
Dividend ratio | 0.5 | 0.4 | (0.1 | ) | |||||||
Combined ratio | 104.9 | % | 101.9 | % | (3.0 | ) | |||||
Combined ratio excluding catastrophes and development | 100.2 | % | 99.3 | % | (0.9 | ) | pts | ||||
Net accident year catastrophe losses incurred | $ | 27 | $ | 28 | |||||||
Effect on loss & LAE ratio | 4.0 | % | 4.1 | % | 0.1 | pts | |||||
Net prior year development and other: (favorable) / unfavorable | $ | 18 | $ | (11 | ) | ||||||
Effect on loss & LAE ratio | 0.7 | % | (1.5 | ) | % | (2.2 | ) | pts | |||
Rate | 0 | % | 0 | % | — | pts | |||||
Retention | 83 | % | 84 | % | (1 | ) | pts | ||||
New business | $ | 139 | $ | 137 | 1 | % |
Three months ended March 31 | |||||||||||
(In millions) | 2017 | 2016 | Change | ||||||||
Gross written premiums | $ | 255 | $ | 263 | (3 | ) | % | ||||
Net written premiums | 238 | 236 | 1 | ||||||||
Net earned premiums | 197 | 198 | (1 | ) | |||||||
Net investment income | 12 | 12 | |||||||||
Other revenues | — | 1 | |||||||||
Total operating revenues | 209 | 211 | (1 | ) | |||||||
Insurance claims and policyholders' benefits | 115 | 121 | |||||||||
Amortization of deferred acquisition costs | 46 | 47 | |||||||||
Other insurance related expenses | 27 | 28 | |||||||||
Other expenses | (6 | ) | 9 | ||||||||
Total claims, benefits and expenses | 182 | 205 | 11 | ||||||||
Operating income (loss) before income tax | 27 | 6 | |||||||||
Income tax (expense) benefit on operating income (loss) | (7 | ) | — | ||||||||
Net operating income (loss) | $ | 20 | $ | 6 | N/M | % | |||||
Other Performance Metrics | |||||||||||
Underwriting gain (loss) | $ | 9 | $ | 2 | N/M | % | |||||
Loss & LAE ratio | 58.3 | % | 61.2 | % | 2.9 | pts | |||||
Acquisition expense ratio | 21.8 | 21.0 | (0.8 | ) | |||||||
Underwriting expense ratio | 15.0 | 16.8 | 1.8 | ||||||||
Expense ratio | 36.8 | 37.8 | 1.0 | ||||||||
Dividend ratio | — | — | — | ||||||||
Combined ratio | 95.1 | % | 99.0 | % | 3.9 | ||||||
Combined ratio excluding catastrophes and development | 96.4 | % | 99.3 | % | 2.9 | pts | |||||
Net accident year catastrophe losses incurred | $ | 3 | $ | 4 | |||||||
Effect on loss & LAE ratio | 1.7 | % | 2.1 | % | 0.4 | pts | |||||
Net prior year development and other: (favorable) / unfavorable | $ | (9 | ) | $ | (5 | ) | |||||
Effect on loss & LAE ratio | (3.0 | ) | % | (2.4 | ) | % | 0.6 | pts | |||
Rate | 0 | % | 0 | % | — | pts | |||||
Retention | 76 | % | 81 | % | (5 | ) | pts | ||||
New business | $ | 65 | $ | 60 | 8 | % |
Three months ended March 31 | |||||||||||
(In millions) | 2017 | 2016 | Change | ||||||||
Net earned premiums | $ | 133 | $ | 131 | 2 | % | |||||
Net investment income | 197 | 187 | |||||||||
Other revenues | 1 | — | |||||||||
Total operating revenues | 331 | 318 | 4 | ||||||||
Insurance claims and policyholders' benefits | 330 | 323 | |||||||||
Amortization of deferred acquisition costs | — | — | |||||||||
Other insurance related expenses | 32 | 33 | |||||||||
Other expenses | 2 | 3 | |||||||||
Total claims, benefits and expenses | 364 | 359 | (1 | ) | |||||||
Operating income (loss) before income tax | (33 | ) | (41 | ) | |||||||
Income tax (expense) benefit on operating income (loss) | 37 | 39 | |||||||||
Net operating income (loss) | $ | 4 | $ | (2 | ) | N/M | % |
Three months ended March 31 | |||||||||||
(In millions) | 2017 | 2016 | Change | ||||||||
Net earned premiums | $ | — | $ | — | |||||||
Net investment income | 5 | 3 | |||||||||
Other revenues | — | 3 | |||||||||
Total operating revenues | 5 | 6 | (17 | ) | % | ||||||
Insurance claims and policyholders' benefits | 21 | 128 | |||||||||
Amortization of deferred acquisition costs | — | — | |||||||||
Other insurance related expenses | — | — | |||||||||
Other expenses | 44 | 54 | |||||||||
Total claims, benefits and expenses | 65 | 182 | 64 | ||||||||
Operating income (loss) before income tax | (60 | ) | (176 | ) | |||||||
Income tax (expense) benefit on operating income (loss) | 23 | 62 | |||||||||
Net operating income (loss) | $ | (37 | ) | $ | (114 | ) | 68 | % |
March 31, 2017 | December 31, 2016 | ||||||||||||||
(In millions) | Carrying Value | Net Unrealized Gains (Losses) | Carrying Value | Net Unrealized Gains (Losses) | |||||||||||
Fixed maturity securities: | |||||||||||||||
Corporate and other bonds | $ | 19,246 | $ | 1,391 | $ | 18,970 | $ | 1,247 | |||||||
States, municipalities and political subdivisions: | |||||||||||||||
Tax-exempt | 10,649 | 847 | 10,430 | 834 | |||||||||||
Taxable | 2,803 | 341 | 2,810 | 346 | |||||||||||
Total states, municipalities and political subdivisions | 13,452 | 1,188 | 13,240 | 1,180 | |||||||||||
Asset-backed: | |||||||||||||||
RMBS | 4,743 | 71 | 5,073 | 69 | |||||||||||
CMBS | 1,935 | 33 | 2,040 | 24 | |||||||||||
Other ABS | 1,049 | 6 | 1,025 | 3 | |||||||||||
Total asset-backed | 7,727 | 110 | 8,138 | 96 | |||||||||||
U.S. Treasury and obligations of government-sponsored enterprises | 103 | 8 | 93 | 10 | |||||||||||
Foreign government | 432 | 13 | 445 | 10 | |||||||||||
Redeemable preferred stock | 20 | 1 | 19 | 1 | |||||||||||
Total fixed maturity securities | 40,980 | 2,711 | 40,905 | 2,544 | |||||||||||
Equities | 120 | 8 | 110 | 4 | |||||||||||
Limited partnership investments | 2,389 | — | 2,371 | — | |||||||||||
Other invested assets | 40 | — | 36 | — | |||||||||||
Mortgage loans | 611 | — | 591 | — | |||||||||||
Short term investments | 1,139 | 1 | 1,407 | 1 | |||||||||||
Total investments | $ | 45,279 | $ | 2,720 | $ | 45,420 | $ | 2,549 | |||||||
Net receivable/(payable) on investment activity | $ | 56 | $ | 81 | |||||||||||
Effective portfolio duration (in years) | 6.2 | 6.1 | |||||||||||||
Weighted average rating of fixed maturity securities | A | A |
March 31, 2017 | December 31, 2016 | ||||||||||||||
(In millions) | Carrying Value | Net Unrealized Gains (Losses) | Carrying Value | Net Unrealized Gains (Losses) | |||||||||||
Fixed maturity securities: | |||||||||||||||
Corporate and other bonds | $ | 13,186 | $ | 462 | $ | 13,137 | $ | 408 | |||||||
States, municipalities and political subdivisions: | |||||||||||||||
Tax-exempt | 2,979 | 78 | 2,883 | 70 | |||||||||||
Taxable | 1,227 | 98 | 1,231 | 101 | |||||||||||
Total states, municipalities and political subdivisions | 4,206 | 176 | 4,114 | 171 | |||||||||||
Asset-backed: | |||||||||||||||
RMBS | 4,560 | 63 | 4,811 | 63 | |||||||||||
CMBS | 1,799 | 29 | 1,894 | 20 | |||||||||||
Other ABS | 932 | 5 | 909 | 3 | |||||||||||
Total asset-backed | 7,291 | 97 | 7,614 | 86 | |||||||||||
U.S. Treasury and obligations of government-sponsored enterprises | 73 | 5 | 68 | 7 | |||||||||||
Foreign government | 432 | 13 | 445 | 10 | |||||||||||
Redeemable preferred stock | 6 | — | 5 | — | |||||||||||
Total fixed maturity securities | 25,194 | 753 | 25,383 | 682 | |||||||||||
Equities | 65 | 5 | 57 | 3 | |||||||||||
Limited partnership investments | 2,389 | — | 2,371 | — | |||||||||||
Other invested assets | 40 | — | 36 | — | |||||||||||
Mortgage loans | 540 | — | 519 | — | |||||||||||
Short term investments | 1,059 | 1 | 1,233 | 1 | |||||||||||
Total investments | $ | 29,287 | $ | 759 | $ | 29,599 | $ | 686 | |||||||
Net receivable/(payable) on investment activity | $ | (35 | ) | $ | 53 | ||||||||||
Effective portfolio duration (in years) | 4.6 | 4.6 | |||||||||||||
Weighted average rating of fixed maturity securities | A- | A |
March 31, 2017 | December 31, 2016 | ||||||||||||||
(In millions) | Carrying Value | Net Unrealized Gains (Losses) | Carrying Value | Net Unrealized Gains (Losses) | |||||||||||
Fixed maturity securities: | |||||||||||||||
Corporate and other bonds | $ | 6,060 | $ | 929 | $ | 5,833 | $ | 839 | |||||||
States, municipalities and political subdivisions: | |||||||||||||||
Tax-exempt | 7,670 | 769 | 7,547 | 764 | |||||||||||
Taxable | 1,576 | 243 | 1,579 | 245 | |||||||||||
Total states, municipalities and political subdivisions | 9,246 | 1,012 | 9,126 | 1,009 | |||||||||||
Asset-backed: | |||||||||||||||
RMBS | 183 | 8 | 262 | 6 | |||||||||||
CMBS | 136 | 4 | 146 | 4 | |||||||||||
Other ABS | 117 | 1 | 116 | — | |||||||||||
Total asset-backed | 436 | 13 | 524 | 10 | |||||||||||
U.S. Treasury and obligations of government-sponsored enterprises | 30 | 3 | 25 | 3 | |||||||||||
Foreign government | — | — | — | — | |||||||||||
Redeemable preferred stock | 14 | 1 | 14 | 1 | |||||||||||
Total fixed maturity securities | 15,786 | 1,958 | 15,522 | 1,862 | |||||||||||
Equities | 55 | 3 | 53 | 1 | |||||||||||
Limited partnership investments | — | — | — | — | |||||||||||
Other invested assets | — | — | — | — | |||||||||||
Mortgage loans | 71 | — | 72 | — | |||||||||||
Short term investments | 80 | — | 174 | — | |||||||||||
Total investments | $ | 15,992 | $ | 1,961 | $ | 15,821 | $ | 1,863 | |||||||
Net receivable/(payable) on investment activity | $ | 91 | $ | 28 | |||||||||||
Effective portfolio duration (in years) | 8.8 | 8.7 | |||||||||||||
Weighted average rating of fixed maturity securities | A | A |
March 31, 2017 | 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 | $ | — | $ | — | $ | 73 | $ | 2 | $ | 636 | $ | 56 | $ | 4,446 | $ | 433 | $ | 11,862 | $ | 798 | $ | 2,229 | $ | 102 | $ | 19,246 | $ | 1,391 | |||||||||||||||||||||||||||
States, municipalities and political subdivisions: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tax-exempt | — | — | 874 | 73 | 5,694 | 465 | 3,811 | 283 | 238 | 14 | 32 | 12 | 10,649 | 847 | |||||||||||||||||||||||||||||||||||||||||
Taxable | — | — | 336 | 28 | 1,901 | 219 | 542 | 96 | 24 | (2 | ) | — | — | 2,803 | 341 | ||||||||||||||||||||||||||||||||||||||||
Total states, municipalities and political subdivisions | — | — | 1,210 | 101 | 7,595 | 684 | 4,353 | 379 | 262 | 12 | 32 | 12 | 13,452 | 1,188 | |||||||||||||||||||||||||||||||||||||||||
Asset-backed: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
RMBS | 3,836 | 20 | 53 | — | 22 | — | 75 | 1 | 51 | — | 706 | 50 | 4,743 | 71 | |||||||||||||||||||||||||||||||||||||||||
CMBS | 56 | — | 351 | 10 | 411 | 12 | 298 | 7 | 529 | 1 | 290 | 3 | 1,935 | 33 | |||||||||||||||||||||||||||||||||||||||||
Other ABS | — | — | 56 | (1 | ) | 61 | 1 | 502 | 3 | 430 | 3 | — | — | 1,049 | 6 | ||||||||||||||||||||||||||||||||||||||||
Total asset-backed | 3,892 | 20 | 460 | 9 | 494 | 13 | 875 | 11 | 1,010 | 4 | 996 | 53 | 7,727 | 110 | |||||||||||||||||||||||||||||||||||||||||
U.S. Treasury and obligations of government-sponsored enterprises | 103 | 8 | — | — | — | — | — | — | — | — | — | — | 103 | 8 | |||||||||||||||||||||||||||||||||||||||||
Foreign government | — | — | 89 | 5 | 291 | 8 | 31 | — | 21 | — | — | — | 432 | 13 | |||||||||||||||||||||||||||||||||||||||||
Redeemable preferred stock | — | — | — | — | — | — | — | — | 11 | 1 | 9 | — | 20 | 1 | |||||||||||||||||||||||||||||||||||||||||
Total fixed maturity securities | $ | 3,995 | $ | 28 | $ | 1,832 | $ | 117 | $ | 9,016 | $ | 761 | $ | 9,705 | $ | 823 | $ | 13,166 | $ | 815 | $ | 3,266 | $ | 167 | $ | 40,980 | $ | 2,711 | |||||||||||||||||||||||||||
Percentage of total fixed maturity securities | 10 | % | 4 | % | 22 | % | 24 | % | 32 | % | 8 | % | 100 | % |
Three months ended March 31 | Consolidated | |||||||
(In millions) | 2017 | 2016 | ||||||
Taxable fixed maturities | $ | 347 | $ | 345 | ||||
Tax-exempt fixed maturities | 108 | 101 | ||||||
Total fixed maturity securities | 455 | 446 | ||||||
Limited partnership investments | 90 | (14 | ) | |||||
Other, net of investment expense | — | 3 | ||||||
Net investment income | $ | 545 | $ | 435 | ||||
Fixed maturity securities, after tax | $ | 329 | $ | 322 | ||||
Net investment income, after tax | 389 | 315 | ||||||
Effective income yield for the fixed maturity securities portfolio, pretax | 4.8 | % | 4.8 | % | ||||
Effective income yield for the fixed maturity securities portfolio, after tax | 3.4 | 3.4 |
Property & Casualty and Corporate & Other Non-Core | ||||||||
Three months ended March 31 | ||||||||
(In millions) | 2017 | 2016 | ||||||
Taxable fixed maturities | $ | 233 | $ | 238 | ||||
Tax-exempt fixed maturities | 23 | 19 | ||||||
Total fixed maturity securities | 256 | 257 | ||||||
Limited partnership investments | 90 | (14 | ) | |||||
Other, net of investment expense | 2 | 5 | ||||||
Net investment income | $ | 348 | $ | 248 | ||||
Fixed maturity securities, after tax | $ | 175 | $ | 174 | ||||
Net investment income, after tax | 235 | 168 | ||||||
Effective income yield for the fixed maturity securities portfolio, pretax | 4.2 | % | 4.2 | % | ||||
Effective income yield for the fixed maturity securities portfolio, after tax | 2.9 | 2.9 |
Three months ended March 31 | Life & Group Non-Core | |||||||
(In millions) | 2017 | 2016 | ||||||
Taxable fixed maturities | $ | 114 | $ | 107 | ||||
Tax-exempt fixed maturities | 85 | 82 | ||||||
Total fixed maturity securities | 199 | 189 | ||||||
Limited partnership investments | — | — | ||||||
Other, net of investment expense | (2 | ) | (2 | ) | ||||
Net investment income | $ | 197 | $ | 187 | ||||
Fixed maturity securities, after tax | $ | 154 | $ | 148 | ||||
Net investment income, after tax | 154 | 147 | ||||||
Effective income yield for the fixed maturity securities portfolio, pretax | 5.8 | % | 5.8 | % | ||||
Effective income yield for the fixed maturity securities portfolio, after tax | 4.5 | 4.5 |
Three months ended March 31, 2017 (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 | $ | 6,149 | $ | 8,894 | $ | 1,328 | $ | 16,371 | $ | 3,358 | $ | 2,614 | $ | 22,343 | |||||||||||||
Ceded | 745 | 589 | 127 | 1,461 | 249 | 2,384 | 4,094 | ||||||||||||||||||||
Net | 5,404 | 8,305 | 1,201 | 14,910 | 3,109 | 230 | 18,249 | ||||||||||||||||||||
Net incurred claim & claim adjustment expenses | 386 | 436 | 115 | 937 | 235 | 1 | 1,173 | ||||||||||||||||||||
Net claim & claim adjustment expense payments | (378 | ) | (556 | ) | (105 | ) | (1,039 | ) | (208 | ) | (5 | ) | (1,252 | ) | |||||||||||||
Foreign currency translation adjustment and other | — | (1 | ) | 14 | 13 | — | 1 | 14 | |||||||||||||||||||
Claim & claim adjustment expense reserves, end of period | |||||||||||||||||||||||||||
Net | 5,412 | 8,184 | 1,225 | 14,821 | 3,136 | 227 | 18,184 | ||||||||||||||||||||
Ceded | 812 | 576 | 118 | 1,506 | 237 | 2,333 | 4,076 | ||||||||||||||||||||
Gross | $ | 6,224 | $ | 8,760 | $ | 1,343 | $ | 16,327 | $ | 3,373 | $ | 2,560 | $ | 22,260 |
March 31, 2017 | |||||||||||
(In millions) | Claim and claim adjustment expenses | Future policy benefits | Total | ||||||||
Long term care | $ | 2,465 | $ | 8,750 | $ | 11,215 | |||||
Structured settlement annuities | 557 | — | 557 | ||||||||
Other | 14 | — | 14 | ||||||||
Total | 3,036 | 8,750 | 11,786 | ||||||||
Shadow adjustments | 100 | 1,530 | 1,630 | ||||||||
Ceded reserves | 237 | 211 | 448 | ||||||||
Total gross reserves | $ | 3,373 | $ | 10,491 | $ | 13,864 |
December 31, 2016 | |||||||||||
(In millions) | Claim and claim adjustment expenses | Future policy benefits | Total | ||||||||
Long term care | $ | 2,426 | $ | 8,654 | $ | 11,080 | |||||
Structured settlement annuities | 565 | — | 565 | ||||||||
Other | 17 | — | 17 | ||||||||
Total | 3,008 | 8,654 | 11,662 | ||||||||
Shadow adjustments | 101 | 1,459 | 1,560 | ||||||||
Ceded reserves | 249 | 213 | 462 | ||||||||
Total gross reserves | $ | 3,358 | $ | 10,326 | $ | 13,684 |
• | 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, 2016 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 i) net realized investment gains or losses, ii) income or loss from discontinued operations and iii) 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. While the Company generally does not invest in highly leveraged partnerships, there are risks inherent in limited partnership investments 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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