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 30, 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 October 30, 2017, providing information on the third quarter 2017 results of operations. | ||
CNA Financial Corporation financial supplement, posted on its website October 30, 2017, providing supplemental financial information on the third 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 |
• | NET CATASTROPHE LOSSES OF $191M AFTER-TAX INCLUDING REINSTATEMENTS |
• | NET INCOME OF $144M; $0.53 PER SHARE; NET INCOME ROE OF 4.7% |
• | NET OPERATING INCOME OF $159M; $0.58 PER SHARE; NOI ROE OF 5.3% |
• | P&C COMBINED RATIO EX CATASTROPHES & DEVELOPMENT OF 94.6% VS 97.5% IN 2016 |
• | QUARTERLY DIVIDEND OF $0.30 PER SHARE; $2.80 PER SHARE PAID YEAR TO DATE |
Results for the Three Months Ended September 30 | Results for the Nine Months Ended September 30 | ||||||||||||||
($ millions, except per share data) | 2017 | 2016 | 2017 | 2016 | |||||||||||
Net operating income (a) | $ | 159 | $ | 311 | $ | 633 | $ | 603 | |||||||
Net realized investment (losses) gains (b) | (15 | ) | 32 | 43 | 15 | ||||||||||
Net income | $ | 144 | $ | 343 | $ | 676 | $ | 618 | |||||||
Net operating income per diluted share | $ | 0.58 | $ | 1.15 | $ | 2.33 | $ | 2.22 | |||||||
Net income per diluted share | 0.53 | 1.26 | 2.48 | 2.28 |
September 30, 2017 | December 31, 2016 | ||||||
Book value per share | $ | 44.88 | $ | 44.25 | |||
Book value per share excluding AOCI | 44.48 | 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. |
(b) | The after-tax net realized investment loss in the current year quarter included a $27 million loss on the early redemption of the Company's $350 million senior notes due November 2019. |
Results for the Three Months Ended September 30 | Results for the Nine Months Ended September 30 | ||||||||||||||||||
($ millions) | 2017 | 2016 | 2017 | 2016 | |||||||||||||||
Net written premiums | $ | 1,599 | $ | 1,624 | $ | 4,933 | $ | 4,917 | |||||||||||
NWP change (% year over year) | (2 | ) | % | 6 | % | — | % | 2 | % | ||||||||||
Net investment income | $ | 308 | $ | 328 | $ | 927 | $ | 883 | |||||||||||
Net operating income | 167 | 329 | 696 | 765 | |||||||||||||||
Net income | 176 | 349 | 750 | 779 | |||||||||||||||
Loss ratio excluding catastrophes and development | 60.8 | % | 61.8 | % | 61.1 | % | 62.6 | % | |||||||||||
Effect of catastrophe impacts | 16.5 | 1.0 | 7.3 | 2.8 | |||||||||||||||
Effect of development-related items | (7.4 | ) | (8.1 | ) | (4.5 | ) | (6.0 | ) | |||||||||||
Loss ratio | 69.9 | % | 54.7 | % | 63.9 | % | 59.4 | % | |||||||||||
Combined ratio | 103.7 | % | 90.4 | % | 98.2 | % | 94.6 | % | |||||||||||
Combined ratio excluding catastrophes and development | 94.6 | % | 97.5 | % | 95.4 | % | 97.8 | % |
Results for the Three Months Ended September 30 | Results for the Nine Months Ended September 30 | ||||||||||||||||||
($ millions) | 2017 | 2016 | 2017 | 2016 | |||||||||||||||
Net written premiums | $ | 705 | $ | 733 | $ | 2,100 | $ | 2,108 | |||||||||||
NWP change (% year over year) | (4 | ) | % | 4 | % | — | % | 1 | % | ||||||||||
Net operating income | $ | 180 | $ | 195 | $ | 470 | $ | 486 | |||||||||||
Net income | 183 | 201 | 486 | 487 | |||||||||||||||
Loss ratio excluding catastrophes and development | 61.2 | % | 62.5 | % | 61.5 | % | 62.5 | % | |||||||||||
Effect of catastrophe impacts | 5.4 | 0.2 | 2.3 | 0.7 | |||||||||||||||
Effect of development-related items | (15.8 | ) | (15.9 | ) | (8.3 | ) | (10.6 | ) | |||||||||||
Loss ratio | 50.8 | % | 46.8 | % | 55.5 | % | 52.6 | % | |||||||||||
Combined ratio | 82.3 | % | 79.9 | % | 87.4 | % | 84.9 | % | |||||||||||
Combined ratio excluding catastrophes and development | 92.7 | % | 95.6 | % | 93.4 | % | 94.8 | % |
• | Net operating income decreased $15 million for the third quarter of 2017 as compared with the prior year quarter, primarily due to higher net catastrophe losses partially offset by improved non-catastrophe current accident year underwriting results. |
• | The combined ratio increased 2.4 points, while the combined ratio excluding catastrophes and development improved 2.9 points, as compared with the prior year quarter. The loss ratio increased 4.0 points driven by higher net catastrophe losses which were $38 million, or 5.4 points of the loss ratio in the third quarter of 2017, as compared to $1 million, or 0.2 points of the loss ratio, for the prior year quarter. The loss ratio excluding catastrophes and development improved 1.3 points. The expense ratio improved 1.2 points as compared with the prior year quarter reflecting both our ongoing efforts to improve productivity and the actions undertaken in last year's third and fourth quarters to reduce expenses. |
• | Net written premiums decreased $28 million as compared with the prior year quarter largely driven by the timing of certain renewals. Renewal premium change was flat. Retention remained strong at 89% and new business was at relatively consistent levels. |
Results for the Three Months Ended September 30 | Results for the Nine Months Ended September 30 | ||||||||||||||||||
($ millions) | 2017 | 2016 | 2017 | 2016 | |||||||||||||||
Net written premiums | $ | 687 | $ | 684 | $ | 2,169 | $ | 2,172 | |||||||||||
NWP change (% year over year) | — | % | 7 | % | — | % | 3 | % | |||||||||||
Net operating income | $ | 25 | $ | 114 | $ | 234 | $ | 280 | |||||||||||
Net income | 28 | 123 | 258 | 282 | |||||||||||||||
Loss ratio excluding catastrophes and development | 59.9 | % | 61.1 | % | 60.5 | % | 61.4 | % | |||||||||||
Effect of catastrophe impacts | 23.9 | 1.6 | 11.1 | 4.6 | |||||||||||||||
Effect of development-related items | (1.4 | ) | (0.5 | ) | (1.5 | ) | (1.4 | ) | |||||||||||
Loss ratio | 82.4 | % | 62.2 | % | 70.1 | % | 64.6 | % | |||||||||||
Combined ratio | 117.2 | % | 99.8 | % | 105.9 | % | 101.7 | % | |||||||||||
Combined ratio excluding catastrophes and development | 94.7 | % | 98.7 | % | 96.3 | % | 98.5 | % |
• | Net operating income decreased $89 million for the third quarter of 2017 as compared with the prior year quarter driven by higher net catastrophe losses. |
• | The combined ratio increased 17.4 points and the combined ratio excluding catastrophes and development improved 4.0 points as compared with the prior year quarter. The loss ratio increased 20.2 points driven by higher net catastrophe losses partially offset by improved non-catastrophe current accident year underwriting results. Net catastrophe losses were $173 million, or 23.9 points of the loss ratio, in the third quarter of 2017 as compared to $12 million, or 1.6 points of the loss ratio, for the prior year quarter. Catastrophe-related reinsurance reinstatement premium was $1 million for the third quarter of 2017. The loss ratio excluding catastrophes and development improved 1.2 points. The expense ratio improved 2.8 points as compared with the prior year quarter reflecting both our ongoing efforts to improve productivity and the actions undertaken in last year's third and fourth quarters to reduce expenses. |
• | Net written premiums increased $3 million as compared with the prior year quarter, driven by higher new business within Middle Markets, as well as strong retention of 85% and positive renewal premium change. |
Results for the Three Months Ended September 30 | Results for the Nine Months Ended September 30 | ||||||||||||||||||
($ millions) | 2017 | 2016 | 2017 | 2016 | |||||||||||||||
Net written premiums | $ | 207 | $ | 207 | $ | 664 | $ | 637 | |||||||||||
NWP change (% year over year) | — | % | 15 | % | 4 | % | (1 | ) | % | ||||||||||
Net operating (loss) income | $ | (38 | ) | $ | 20 | $ | (8 | ) | $ | (1 | ) | ||||||||
Net (loss) income | (35 | ) | 25 | 6 | 10 | ||||||||||||||
Loss ratio excluding catastrophes and development | 62.4 | % | 61.9 | % | 62.0 | % | 66.5 | % | |||||||||||
Effect of catastrophe impacts | 27.5 | 1.5 | 10.3 | 4.7 | |||||||||||||||
Effect of development-related items | (1.5 | ) | (8.0 | ) | (1.7 | ) | (6.0 | ) | |||||||||||
Loss ratio | 88.4 | % | 55.4 | % | 70.6 | % | 65.2 | % | |||||||||||
Combined ratio | 125.9 | % | 93.2 | % | 107.8 | % | 103.4 | % | |||||||||||
Combined ratio excluding catastrophes and development | 99.9 | % | 99.7 | % | 99.2 | % | 104.7 | % |
• | Net operating results decreased $58 million for the third quarter of 2017 as compared with the prior year quarter driven by higher net catastrophe losses and lower favorable net prior year loss reserve development. |
• | The combined ratio increased 32.7 points and the combined ratio excluding catastrophes and development increased 0.2 points as compared with the prior year quarter. The loss ratio increased 33.0 points driven by higher net catastrophe losses and lower favorable net prior year loss reserve development. Net catastrophe losses were $58 million, or 27.5 points of the loss ratio in the third quarter of 2017 as compared to $3 million, or 1.5 points of the loss ratio, for the prior year quarter. Catastrophe-related reinsurance reinstatement premium was $5 million for the third quarter of 2017. The loss ratio excluding catastrophes and development was 0.5 points higher than the prior year quarter. The expense ratio improved 0.3 points as compared with the prior year quarter. |
• | Net written premiums for the third quarter of 2017 were consistent as compared with the prior year quarter. |
Results for the Three Months Ended September 30 | Results for the Nine Months Ended September 30 | ||||||||||||||||||
($ millions) | 2017 | 2016 | 2017 | 2016 | |||||||||||||||
Total operating revenues | $ | 331 | $ | 322 | $ | 992 | $ | 967 | |||||||||||
Net investment income | 195 | 192 | 587 | 567 | |||||||||||||||
Net operating income | 10 | 6 | 19 | — | |||||||||||||||
Net income | 12 | 17 | 31 | 3 |
• | Net operating income improved $4 million for the third quarter of 2017 as compared with the prior year quarter. Our long term care business continued to produce results generally in line with our 2015 reset assumptions. |
Results for the Three Months Ended September 30 | Results for the Nine Months Ended September 30 | ||||||||||||||||||
($ millions) | 2017 | 2016 | 2017 | 2016 | |||||||||||||||
Net investment income | $ | 6 | $ | 4 | $ | 15 | $ | 11 | |||||||||||
Interest expense | 39 | 39 | 116 | 119 | |||||||||||||||
Net operating loss | (18 | ) | (24 | ) | (82 | ) | (162 | ) | |||||||||||
Net loss | (44 | ) | (23 | ) | (105 | ) | (164 | ) |
• | Net operating loss improved $6 million for the third quarter of 2017 as compared with the same period in 2016. |
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) | 2017 | 2016 | Change | 2017 | 2016 | Change | |||||||||||||||||
Revenues: | |||||||||||||||||||||||
Net earned premiums | $ | 1,806 | $ | 1,767 | 2 | % | $ | 5,185 | $ | 5,196 | — | % | |||||||||||
Net investment income | 509 | 524 | (3 | ) | 1,529 | 1,461 | 5 | ||||||||||||||||
Net realized investment gains (losses): | |||||||||||||||||||||||
Other-than-temporary impairment (OTTI) losses | (5 | ) | (18 | ) | (9 | ) | (56 | ) | |||||||||||||||
Other net realized investment gains (losses) | (19 | ) | 64 | 71 | 82 | ||||||||||||||||||
Net realized investment gains (losses) | (24 | ) | 46 | 62 | 26 | ||||||||||||||||||
Other revenues | 107 | 96 | 318 | 293 | |||||||||||||||||||
Total revenues | 2,398 | 2,433 | (1 | ) | 7,094 | 6,976 | 2 | ||||||||||||||||
Claims, Benefits and Expenses: | |||||||||||||||||||||||
Insurance claims and policyholders' benefits | 1,480 | 1,202 | 4,053 | 3,949 | |||||||||||||||||||
Amortization of deferred acquisition costs | 309 | 314 | 926 | 926 | |||||||||||||||||||
Other operating expenses | 381 | 403 | 1,091 | 1,162 | |||||||||||||||||||
Interest | 41 | 39 | 124 | 119 | |||||||||||||||||||
Total claims, benefits and expenses | 2,211 | 1,958 | (13 | ) | 6,194 | 6,156 | (1 | ) | |||||||||||||||
Income (loss) before income tax | 187 | 475 | 900 | 820 | |||||||||||||||||||
Income tax (expense) benefit | (43 | ) | (132 | ) | (224 | ) | (202 | ) | |||||||||||||||
Net income (loss) | $ | 144 | $ | 343 | (58 | ) | % | $ | 676 | $ | 618 | 9 | % |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||||
(In millions, except per share data) | 2017 | 2016 | 2017 | 2016 | |||||||||||||
Components of Income (Loss) | |||||||||||||||||
Net operating income (loss) | $ | 159 | $ | 311 | $ | 633 | $ | 603 | |||||||||
Net realized investment gains (losses) | (15 | ) | 32 | 43 | 15 | ||||||||||||
Net income (loss) | $ | 144 | $ | 343 | $ | 676 | $ | 618 | |||||||||
Diluted Earnings (Loss) Per Common Share | |||||||||||||||||
Net operating income (loss) | $ | 0.58 | $ | 1.15 | $ | 2.33 | $ | 2.22 | |||||||||
Net realized investment gains (losses) | (0.05 | ) | 0.11 | 0.15 | 0.06 | ||||||||||||
Diluted earnings (loss) per share | $ | 0.53 | $ | 1.26 | $ | 2.48 | $ | 2.28 | |||||||||
Weighted Average Outstanding Common Stock and Common Stock Equivalents | |||||||||||||||||
Basic | 271.2 | 270.5 | 271.1 | 270.4 | |||||||||||||
Diluted | 272.1 | 271.2 | 272.0 | 271.0 | |||||||||||||
Return on Equity | |||||||||||||||||
Net income (loss) (1) | 4.7 | % | 11.4 | % | 7.5 | % | 6.9 | % | |||||||||
Net operating income (loss) (2) | 5.3 | 10.5 | 7.0 | 6.7 |
(In millions, except per share data) | September 30, 2017 | December 31, 2016 | |||||
Total investments | $ | 46,747 | $ | 45,420 | |||
Reinsurance receivables, net of allowance for uncollectible receivables | 4,332 | 4,416 | |||||
Total assets | 56,582 | 55,233 | |||||
Insurance reserves | 37,309 | 36,431 | |||||
Debt | 2,857 | 2,710 | |||||
Total liabilities | 44,413 | 43,264 | |||||
Accumulated other comprehensive income (loss) (1) | 107 | (173 | ) | ||||
Total stockholders' equity | 12,169 | 11,969 | |||||
Book value per common share | $ | 44.88 | $ | 44.25 | |||
Book value per common share excluding AOCI | $ | 44.48 | $ | 44.89 | |||
Outstanding shares of common stock (in millions of shares) | 271.2 | 270.5 | |||||
Statutory capital and surplus - Combined Continental Casualty Companies (2) | $ | 10,805 | $ | 10,748 |
Three months ended September 30 | 2017 | 2016 | |||||
Net cash flows provided (used) by operating activities | $ | 379 | $ | 507 | |||
Net cash flows provided (used) by investing activities | (329 | ) | (437 | ) | |||
Net cash flows provided (used) by financing activities | 4 | (67 | ) | ||||
Net cash flows provided (used) by operating, investing and financing activities | $ | 54 | $ | 3 | |||
Nine months ended September 30 | 2017 | 2016 | |||||
Net cash flows provided (used) by operating activities | $ | 894 | $ | 1,120 | |||
Net cash flows provided (used) by investing activities | (218 | ) | (604 | ) | |||
Net cash flows provided (used) by financing activities | (673 | ) | (605 | ) | |||
Net cash flows provided (used) by operating, investing and financing activities | $ | 3 | $ | (89 | ) |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||||||||||
(In millions) | 2017 | 2016 | Change | 2017 | 2016 | Change | |||||||||||||||||
Gross written premiums | $ | 2,712 | $ | 2,722 | — | % | $ | 8,242 | $ | 8,125 | 1 | % | |||||||||||
Net written premiums | 1,599 | 1,624 | (2 | ) | 4,933 | 4,917 | — | ||||||||||||||||
Net earned premiums | 1,670 | 1,633 | 2 | 4,782 | 4,796 | — | |||||||||||||||||
Net investment income | 308 | 328 | 927 | 883 | |||||||||||||||||||
Other revenues | 107 | 100 | 316 | 291 | |||||||||||||||||||
Total operating revenues | 2,085 | 2,061 | 1 | 6,025 | 5,970 | 1 | |||||||||||||||||
Insurance claims and policyholders' benefits | 1,173 | 900 | 3,069 | 2,864 | |||||||||||||||||||
Amortization of deferred acquisition costs | 309 | 314 | 926 | 926 | |||||||||||||||||||
Other insurance related expenses | 249 | 261 | 702 | 745 | |||||||||||||||||||
Other expenses | 87 | 88 | 268 | 274 | |||||||||||||||||||
Total claims, benefits and expenses | 1,818 | 1,563 | (16 | ) | 4,965 | 4,809 | (3 | ) | |||||||||||||||
Operating income (loss) before income tax | 267 | 498 | 1,060 | 1,161 | |||||||||||||||||||
Income tax (expense) benefit on operating income (loss) | (100 | ) | (169 | ) | (364 | ) | (396 | ) | |||||||||||||||
Net operating income (loss) | $ | 167 | $ | 329 | (49 | ) | % | $ | 696 | $ | 765 | (9 | ) | % | |||||||||
Other Performance Metrics | |||||||||||||||||||||||
Underwriting gain (loss) | $ | (61 | ) | $ | 158 | (139 | ) | % | $ | 85 | $ | 261 | (67 | ) | % | ||||||||
Loss & LAE ratio | 69.9 | % | 54.7 | % | (15.2 | ) | pts | 63.9 | % | 59.4 | % | (4.5 | ) | pts | |||||||||
Acquisition expense ratio | 19.5 | 19.5 | — | 19.4 | 19.4 | — | |||||||||||||||||
Underwriting expense ratio | 14.0 | 15.7 | 1.7 | 14.6 | 15.5 | 0.9 | |||||||||||||||||
Expense ratio | 33.5 | 35.2 | 1.7 | 34.0 | 34.9 | 0.9 | |||||||||||||||||
Dividend ratio | 0.3 | 0.5 | 0.2 | 0.3 | 0.3 | — | |||||||||||||||||
Combined ratio | 103.7 | % | 90.4 | % | (13.3 | ) | 98.2 | % | 94.6 | % | (3.6 | ) | |||||||||||
Combined ratio excluding catastrophes and development | 94.6 | % | 97.5 | % | 2.9 | pts | 95.4 | % | 97.8 | % | 2.4 | pts | |||||||||||
Net accident year catastrophe losses incurred | $ | 269 | $ | 16 | $ | 342 | $ | 137 | |||||||||||||||
Effect on loss & LAE ratio | 16.5 | % | 1.0 | % | (15.5 | ) | pts | 7.3 | % | 2.8 | % | (4.5 | ) | pts | |||||||||
Net prior year development and other: (favorable) / unfavorable | $ | (129 | ) | $ | (134 | ) | $ | (215 | ) | $ | (297 | ) | |||||||||||
Effect on loss & LAE ratio | (7.4 | ) | % | (8.1 | ) | % | (0.7 | ) | pts | (4.5 | ) | % | (6.0 | ) | % | (1.5 | ) | pts | |||||
Rate | — | % | (1 | ) | % | 1 | pts | — | % | (1 | ) | % | 1 | pts | |||||||||
Renewal premium change | 2 | 3 | (1 | ) | 1 | 2 | (1 | ) | |||||||||||||||
Retention | 85 | 84 | 1 | 86 | 85 | 1 | |||||||||||||||||
New business | $ | 270 | $ | 268 | 1 | % | $ | 823 | $ | 799 | 3 | % |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||||||||||
(In millions) | 2017 | 2016 | Change | 2017 | 2016 | Change | |||||||||||||||||
Gross written premiums | $ | 1,764 | $ | 1,791 | (2 | ) | % | $ | 5,188 | $ | 5,120 | 1 | % | ||||||||||
Net written premiums | 705 | 733 | (4 | ) | 2,100 | 2,108 | — | ||||||||||||||||
Net earned premiums | 703 | 704 | — | 2,056 | 2,088 | (2 | ) | ||||||||||||||||
Net investment income | 134 | 140 | 407 | 380 | |||||||||||||||||||
Other revenues | 99 | 93 | 291 | 269 | |||||||||||||||||||
Total operating revenues | 936 | 937 | — | 2,754 | 2,737 | 1 | |||||||||||||||||
Insurance claims and policyholders' benefits | 358 | 334 | 1,144 | 1,103 | |||||||||||||||||||
Amortization of deferred acquisition costs | 153 | 151 | 445 | 443 | |||||||||||||||||||
Other insurance related expenses | 68 | 77 | 209 | 225 | |||||||||||||||||||
Other expenses | 85 | 78 | 248 | 232 | |||||||||||||||||||
Total claims, benefits and expenses | 664 | 640 | (4 | ) | 2,046 | 2,003 | (2 | ) | |||||||||||||||
Operating income (loss) before income tax | 272 | 297 | 708 | 734 | |||||||||||||||||||
Income tax (expense) benefit on operating income (loss) | (92 | ) | (102 | ) | (238 | ) | (248 | ) | |||||||||||||||
Net operating income (loss) | $ | 180 | $ | 195 | (8 | ) | % | $ | 470 | $ | 486 | (3 | ) | % | |||||||||
Other Performance Metrics | |||||||||||||||||||||||
Underwriting gain (loss) | $ | 124 | $ | 142 | (13 | ) | % | $ | 258 | $ | 317 | (19 | ) | % | |||||||||
Loss & LAE ratio | 50.8 | % | 46.8 | % | (4.0 | ) | pts | 55.5 | % | 52.6 | % | (2.9 | ) | pts | |||||||||
Acquisition expense ratio | 20.0 | 20.0 | — | 20.0 | 20.0 | — | |||||||||||||||||
Underwriting expense ratio | 11.3 | 12.5 | 1.2 | 11.8 | 12.0 | 0.2 | |||||||||||||||||
Expense ratio | 31.3 | 32.5 | 1.2 | 31.8 | 32.0 | 0.2 | |||||||||||||||||
Dividend ratio | 0.2 | 0.6 | 0.4 | 0.1 | 0.3 | 0.2 | |||||||||||||||||
Combined ratio | 82.3 | % | 79.9 | % | (2.4 | ) | 87.4 | % | 84.9 | % | (2.5 | ) | |||||||||||
Combined ratio excluding catastrophes and development | 92.7 | % | 95.6 | % | 2.9 | pts | 93.4 | % | 94.8 | % | 1.4 | pts | |||||||||||
Net accident year catastrophe losses incurred | $ | 38 | $ | 1 | $ | 47 | $ | 14 | |||||||||||||||
Effect on loss & LAE ratio | 5.4 | % | 0.2 | % | (5.2 | ) | pts | 2.3 | % | 0.7 | % | (1.6 | ) | pts | |||||||||
Net prior year development and other: (favorable) / unfavorable | $ | (112 | ) | $ | (112 | ) | $ | (176 | ) | $ | (229 | ) | |||||||||||
Effect on loss & LAE ratio | (15.8 | ) | % | (15.9 | ) | % | (0.1 | ) | pts | (8.3 | ) | % | (10.6 | ) | % | (2.3 | ) | pts | |||||
Rate | (1 | ) | % | — | % | (1 | ) | pts | — | % | 1 | % | (1 | ) | pts | ||||||||
Renewal premium change | — | 2 | (2 | ) | 2 | 2 | — | ||||||||||||||||
Retention | 89 | 88 | 1 | 89 | 88 | 1 | |||||||||||||||||
New business | $ | 64 | $ | 66 | (3 | ) | % | $ | 187 | $ | 192 | (3 | ) | % |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||||||||||
(In millions) | 2017 | 2016 | Change | 2017 | 2016 | Change | |||||||||||||||||
Gross written premiums | $ | 722 | $ | 718 | 1 | % | $ | 2,321 | $ | 2,301 | 1 | % | |||||||||||
Net written premiums | 687 | 684 | — | 2,169 | 2,172 | — | |||||||||||||||||
Net earned premiums | 741 | 719 | 3 | 2,097 | 2,103 | — | |||||||||||||||||
Net investment income | 161 | 175 | 482 | 465 | |||||||||||||||||||
Other revenues | 7 | 7 | 25 | 21 | |||||||||||||||||||
Total operating revenues | 909 | 901 | 1 | 2,604 | 2,589 | 1 | |||||||||||||||||
Insurance claims and policyholders' benefits | 615 | 449 | 1,481 | 1,366 | |||||||||||||||||||
Amortization of deferred acquisition costs | 120 | 118 | 354 | 351 | |||||||||||||||||||
Other insurance related expenses | 133 | 151 | 387 | 422 | |||||||||||||||||||
Other expenses | 6 | 9 | 31 | 25 | |||||||||||||||||||
Total claims, benefits and expenses | 874 | 727 | (20 | ) | 2,253 | 2,164 | (4 | ) | |||||||||||||||
Operating income (loss) before income tax | 35 | 174 | 351 | 425 | |||||||||||||||||||
Income tax (expense) benefit on operating income (loss) | (10 | ) | (60 | ) | (117 | ) | (145 | ) | |||||||||||||||
Net operating income (loss) | $ | 25 | $ | 114 | (78 | ) | % | $ | 234 | $ | 280 | (16 | ) | % | |||||||||
Other Performance Metrics | |||||||||||||||||||||||
Underwriting gain (loss) | $ | (127 | ) | $ | 1 | N/M | % | $ | (125 | ) | $ | (36 | ) | N/M | % | ||||||||
Loss & LAE ratio | 82.4 | % | 62.2 | % | (20.2 | ) | pts | 70.1 | % | 64.6 | % | (5.5 | ) | pts | |||||||||
Acquisition expense ratio | 17.9 | 18.2 | 0.3 | 18.0 | 18.0 | — | |||||||||||||||||
Underwriting expense ratio | 16.4 | 18.9 | 2.5 | 17.3 | 18.7 | 1.4 | |||||||||||||||||
Expense ratio | 34.3 | 37.1 | 2.8 | 35.3 | 36.7 | 1.4 | |||||||||||||||||
Dividend ratio | 0.5 | 0.5 | — | 0.5 | 0.4 | (0.1 | ) | ||||||||||||||||
Combined ratio | 117.2 | % | 99.8 | % | (17.4 | ) | 105.9 | % | 101.7 | % | (4.2 | ) | |||||||||||
Combined ratio excluding catastrophes and development | 94.7 | % | 98.7 | % | 4.0 | pts | 96.3 | % | 98.5 | % | 2.2 | pts | |||||||||||
Net accident year catastrophe losses incurred | $ | 173 | $ | 12 | $ | 235 | $ | 95 | |||||||||||||||
Effect on loss & LAE ratio | 23.9 | % | 1.6 | % | (22.3 | ) | pts | 11.1 | % | 4.6 | % | (6.5 | ) | pts | |||||||||
Net prior year development and other: (favorable) / unfavorable | $ | (13 | ) | $ | (5 | ) | $ | (24 | ) | $ | (32 | ) | |||||||||||
Effect on loss & LAE ratio | (1.4 | ) | % | (0.5 | ) | % | 0.9 | pts | (1.5 | ) | % | (1.4 | ) | % | 0.1 | pts | |||||||
Rate | — | % | (3 | ) | % | 3 | pts | — | % | (2 | ) | % | 2 | pts | |||||||||
Renewal premium change | 2 | 5 | (3 | ) | 1 | 4 | (3 | ) | |||||||||||||||
Retention | 85 | 84 | 1 | 86 | 84 | 2 | |||||||||||||||||
New business | $ | 137 | $ | 135 | 1 | % | $ | 429 | $ | 418 | 3 | % |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||||||||||
(In millions) | 2017 | 2016 | Change | 2017 | 2016 | Change | |||||||||||||||||
Gross written premiums | $ | 226 | $ | 213 | 6 | % | $ | 733 | $ | 704 | 4 | % | |||||||||||
Net written premiums | 207 | 207 | — | 664 | 637 | 4 | |||||||||||||||||
Net earned premiums | 226 | 210 | 8 | 629 | 605 | 4 | |||||||||||||||||
Net investment income | 13 | 13 | 38 | 38 | |||||||||||||||||||
Other revenues | 1 | — | — | 1 | |||||||||||||||||||
Total operating revenues | 240 | 223 | 8 | 667 | 644 | 4 | |||||||||||||||||
Insurance claims and policyholders' benefits | 200 | 117 | 444 | 395 | |||||||||||||||||||
Amortization of deferred acquisition costs | 36 | 45 | 127 | 132 | |||||||||||||||||||
Other insurance related expenses | 48 | 33 | 106 | 98 | |||||||||||||||||||
Other expenses | (4 | ) | 1 | (11 | ) | 17 | |||||||||||||||||
Total claims, benefits and expenses | 280 | 196 | (43 | ) | 666 | 642 | (4 | ) | |||||||||||||||
Operating income (loss) before income tax | (40 | ) | 27 | 1 | 2 | ||||||||||||||||||
Income tax (expense) benefit on operating income (loss) | 2 | (7 | ) | (9 | ) | (3 | ) | ||||||||||||||||
Net operating income (loss) | $ | (38 | ) | $ | 20 | N/M | % | $ | (8 | ) | $ | (1 | ) | N/M | % | ||||||||
Other Performance Metrics | |||||||||||||||||||||||
Underwriting gain (loss) | $ | (58 | ) | $ | 15 | N/M | % | $ | (48 | ) | $ | (20 | ) | (140 | ) | % | |||||||
Loss & LAE ratio | 88.4 | % | 55.4 | % | (33.0 | ) | pts | 70.6 | % | 65.2 | % | (5.4 | ) | pts | |||||||||
Acquisition expense ratio | 23.0 | 22.5 | (0.5 | ) | 22.4 | 21.8 | (0.6 | ) | |||||||||||||||
Underwriting expense ratio | 14.5 | 15.3 | 0.8 | 14.8 | 16.4 | 1.6 | |||||||||||||||||
Expense ratio | 37.5 | 37.8 | 0.3 | 37.2 | 38.2 | 1.0 | |||||||||||||||||
Dividend ratio | — | — | — | — | — | — | |||||||||||||||||
Combined ratio | 125.9 | % | 93.2 | % | (32.7 | ) | 107.8 | % | 103.4 | % | (4.4 | ) | |||||||||||
Combined ratio excluding catastrophes and development | 99.9 | % | 99.7 | % | (0.2 | ) | pts | 99.2 | % | 104.7 | % | 5.5 | pts | ||||||||||
Net accident year catastrophe losses incurred | $ | 58 | $ | 3 | $ | 60 | $ | 28 | |||||||||||||||
Effect on loss & LAE ratio | 27.5 | % | 1.5 | % | (26.0 | ) | pts | 10.3 | % | 4.7 | % | (5.6 | ) | pts | |||||||||
Net prior year development and other: (favorable) / unfavorable | $ | (4 | ) | $ | (17 | ) | $ | (15 | ) | $ | (36 | ) | |||||||||||
Effect on loss & LAE ratio | (1.5 | ) | % | (8.0 | ) | % | (6.5 | ) | pts | (1.7 | ) | % | (6.0 | ) | % | (4.3 | ) | pts | |||||
Rate | 1 | % | (1 | ) | % | 2 | pts | — | % | (1 | ) | % | 1 | pts | |||||||||
Renewal premium change | 4 | (1 | ) | 5 | 1 | (1 | ) | 2 | |||||||||||||||
Retention | 73 | 74 | (1 | ) | 78 | 78 | — | ||||||||||||||||
New business | $ | 69 | $ | 67 | 3 | % | $ | 207 | $ | 189 | 10 | % |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||||||||||
(In millions) | 2017 | 2016 | Change | 2017 | 2016 | Change | |||||||||||||||||
Net earned premiums | $ | 136 | $ | 134 | 1 | % | $ | 404 | $ | 401 | 1 | % | |||||||||||
Net investment income | 195 | 192 | 587 | 567 | |||||||||||||||||||
Other revenues | — | (4 | ) | 1 | (1 | ) | |||||||||||||||||
Total operating revenues | 331 | 322 | 3 | 992 | 967 | 3 | |||||||||||||||||
Insurance claims and policyholders' benefits | 322 | 313 | 980 | 976 | |||||||||||||||||||
Amortization of deferred acquisition costs | — | — | — | — | |||||||||||||||||||
Other insurance related expenses | 32 | 37 | 96 | 101 | |||||||||||||||||||
Other expenses | 2 | 2 | 5 | 7 | |||||||||||||||||||
Total claims, benefits and expenses | 356 | 352 | (1 | ) | 1,081 | 1,084 | — | ||||||||||||||||
Operating income (loss) before income tax | (25 | ) | (30 | ) | (89 | ) | (117 | ) | |||||||||||||||
Income tax (expense) benefit on operating income (loss) | 35 | 36 | 108 | 117 | |||||||||||||||||||
Net operating income (loss) | $ | 10 | $ | 6 | 67 | % | $ | 19 | $ | — | N/M | % |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||||||||||
(In millions) | 2017 | 2016 | Change | 2017 | 2016 | Change | |||||||||||||||||
Net earned premiums | $ | — | $ | — | $ | (1 | ) | $ | (1 | ) | |||||||||||||
Net investment income | 6 | 4 | 15 | 11 | |||||||||||||||||||
Other revenues | — | — | 1 | 3 | |||||||||||||||||||
Total operating revenues | 6 | 4 | 50 | % | 15 | 13 | 15 | % | |||||||||||||||
Insurance claims and policyholders' benefits | (15 | ) | (11 | ) | 4 | 109 | |||||||||||||||||
Amortization of deferred acquisition costs | — | — | — | — | |||||||||||||||||||
Other insurance related expenses | — | (3 | ) | (2 | ) | (4 | ) | ||||||||||||||||
Other expenses | 52 | 57 | 146 | 158 | |||||||||||||||||||
Total claims, benefits and expenses | 37 | 43 | 14 | 148 | 263 | 44 | |||||||||||||||||
Operating income (loss) before income tax | (31 | ) | (39 | ) | (133 | ) | (250 | ) | |||||||||||||||
Income tax (expense) benefit on operating income (loss) | 13 | 15 | 51 | 88 | |||||||||||||||||||
Net operating income (loss) | $ | (18 | ) | $ | (24 | ) | 25 | % | $ | (82 | ) | $ | (162 | ) | 49 | % |
September 30, 2017 | June 30, 2017 | December 31, 2016 | |||||||||||||||||||||
(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 | $ | 19,588 | $ | 1,619 | $ | 19,406 | $ | 1,560 | $ | 18,970 | $ | 1,247 | |||||||||||
States, municipalities and political subdivisions: | |||||||||||||||||||||||
Tax-exempt | 11,075 | 1,101 | 10,972 | 996 | 10,430 | 834 | |||||||||||||||||
Taxable | 2,881 | 393 | 2,854 | 369 | 2,810 | 346 | |||||||||||||||||
Total states, municipalities and political subdivisions | 13,956 | 1,494 | 13,826 | 1,365 | 13,240 | 1,180 | |||||||||||||||||
Asset-backed: | |||||||||||||||||||||||
RMBS | 5,005 | 99 | 4,921 | 86 | 5,073 | 69 | |||||||||||||||||
CMBS | 1,900 | 42 | 1,952 | 45 | 2,040 | 24 | |||||||||||||||||
Other ABS | 1,061 | 14 | 1,061 | 11 | 1,025 | 3 | |||||||||||||||||
Total asset-backed | 7,966 | 155 | 7,934 | 142 | 8,138 | 96 | |||||||||||||||||
U.S. Treasury and obligations of government-sponsored enterprises | 115 | — | 115 | 2 | 93 | 10 | |||||||||||||||||
Foreign government | 445 | 6 | 449 | 11 | 445 | 10 | |||||||||||||||||
Redeemable preferred stock | 20 | 2 | 19 | 1 | 19 | 1 | |||||||||||||||||
Total fixed maturity securities | 42,090 | 3,276 | 41,749 | 3,081 | 40,905 | 2,544 | |||||||||||||||||
Equities | 129 | 11 | 118 | 10 | 110 | 4 | |||||||||||||||||
Limited partnership investments | 2,311 | — | 2,380 | — | 2,371 | — | |||||||||||||||||
Other invested assets | 42 | — | 42 | — | 36 | — | |||||||||||||||||
Mortgage loans | 722 | — | 646 | — | 591 | — | |||||||||||||||||
Short term investments | 1,453 | 1 | 1,333 | — | 1,407 | 1 | |||||||||||||||||
Total investments | $ | 46,747 | $ | 3,288 | $ | 46,268 | $ | 3,091 | $ | 45,420 | $ | 2,549 | |||||||||||
Net receivable/(payable) on investment activity | $ | (114 | ) | $ | (194 | ) | $ | 81 | |||||||||||||||
Effective portfolio duration (in years) | 6.0 | 6.1 | 6.1 | ||||||||||||||||||||
Weighted average rating of fixed maturity securities | A | A | A |
September 30, 2017 | June 30, 2017 | December 31, 2016 | |||||||||||||||||||||
(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 | $ | 13,410 | $ | 517 | $ | 13,253 | $ | 502 | $ | 13,137 | $ | 408 | |||||||||||
States, municipalities and political subdivisions: | |||||||||||||||||||||||
Tax-exempt | 2,840 | 119 | 2,892 | 106 | 2,883 | 70 | |||||||||||||||||
Taxable | 1,252 | 104 | 1,249 | 102 | 1,231 | 101 | |||||||||||||||||
Total states, municipalities and political subdivisions | 4,092 | 223 | 4,141 | 208 | 4,114 | 171 | |||||||||||||||||
Asset-backed: | |||||||||||||||||||||||
RMBS | 4,829 | 93 | 4,744 | 79 | 4,811 | 63 | |||||||||||||||||
CMBS | 1,777 | 38 | 1,822 | 41 | 1,894 | 20 | |||||||||||||||||
Other ABS | 943 | 10 | 942 | 8 | 909 | 3 | |||||||||||||||||
Total asset-backed | 7,549 | 141 | 7,508 | 128 | 7,614 | 86 | |||||||||||||||||
U.S. Treasury and obligations of government-sponsored enterprises | 86 | (2 | ) | 86 | (1 | ) | 68 | 7 | |||||||||||||||
Foreign government | 445 | 6 | 449 | 11 | 445 | 10 | |||||||||||||||||
Redeemable preferred stock | 6 | 1 | 5 | — | 5 | — | |||||||||||||||||
Total fixed maturity securities | 25,588 | 886 | 25,442 | 848 | 25,383 | 682 | |||||||||||||||||
Equities | 64 | 7 | 64 | 7 | 57 | 3 | |||||||||||||||||
Limited partnership investments | 2,311 | — | 2,380 | — | 2,371 | — | |||||||||||||||||
Other invested assets | 42 | — | 42 | — | 36 | — | |||||||||||||||||
Mortgage loans | 618 | — | 570 | — | 519 | — | |||||||||||||||||
Short term investments | 1,412 | 1 | 1,235 | — | 1,233 | 1 | |||||||||||||||||
Total investments | $ | 30,035 | $ | 894 | $ | 29,733 | $ | 855 | $ | 29,599 | $ | 686 | |||||||||||
Net receivable/(payable) on investment activity | $ | (151 | ) | $ | (164 | ) | $ | 53 | |||||||||||||||
Effective portfolio duration (in years) | 4.4 | 4.4 | 4.6 | ||||||||||||||||||||
Weighted average rating of fixed maturity securities | A | A- | A |
September 30, 2017 | June 30, 2017 | December 31, 2016 | |||||||||||||||||||||
(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 | $ | 6,178 | $ | 1,102 | $ | 6,153 | $ | 1,058 | $ | 5,833 | $ | 839 | |||||||||||
States, municipalities and political subdivisions: | |||||||||||||||||||||||
Tax-exempt | 8,235 | 982 | 8,080 | 890 | 7,547 | 764 | |||||||||||||||||
Taxable | 1,629 | 289 | 1,605 | 267 | 1,579 | 245 | |||||||||||||||||
Total states, municipalities and political subdivisions | 9,864 | 1,271 | 9,685 | 1,157 | 9,126 | 1,009 | |||||||||||||||||
Asset-backed: | |||||||||||||||||||||||
RMBS | 176 | 6 | 177 | 7 | 262 | 6 | |||||||||||||||||
CMBS | 123 | 4 | 130 | 4 | 146 | 4 | |||||||||||||||||
Other ABS | 118 | 4 | 119 | 3 | 116 | — | |||||||||||||||||
Total asset-backed | 417 | 14 | 426 | 14 | 524 | 10 | |||||||||||||||||
U.S. Treasury and obligations of government-sponsored enterprises | 29 | 2 | 29 | 3 | 25 | 3 | |||||||||||||||||
Foreign government | — | — | — | — | — | — | |||||||||||||||||
Redeemable preferred stock | 14 | 1 | 14 | 1 | 14 | 1 | |||||||||||||||||
Total fixed maturity securities | 16,502 | 2,390 | 16,307 | 2,233 | 15,522 | 1,862 | |||||||||||||||||
Equities | 65 | 4 | 54 | 3 | 53 | 1 | |||||||||||||||||
Limited partnership investments | — | — | — | — | — | — | |||||||||||||||||
Other invested assets | — | — | — | — | — | — | |||||||||||||||||
Mortgage loans | 104 | — | 76 | — | 72 | — | |||||||||||||||||
Short term investments | 41 | — | 98 | — | 174 | — | |||||||||||||||||
Total investments | $ | 16,712 | $ | 2,394 | $ | 16,535 | $ | 2,236 | $ | 15,821 | $ | 1,863 | |||||||||||
Net receivable/(payable) on investment activity | $ | 37 | $ | (30 | ) | $ | 28 | ||||||||||||||||
Effective portfolio duration (in years) | 8.6 | 8.7 | 8.7 | ||||||||||||||||||||
Weighted average rating of fixed maturity securities | A | A | A |
September 30, 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 | $ | — | $ | — | $ | 59 | $ | 1 | $ | 569 | $ | 50 | $ | 4,364 | $ | 456 | $ | 12,451 | $ | 1,016 | $ | 2,145 | $ | 96 | $ | 19,588 | $ | 1,619 | |||||||||||||||||||||||||||
States, municipalities and political subdivisions: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tax-exempt | — | — | 1,019 | 100 | 5,795 | 579 | 4,074 | 387 | 152 | 20 | 35 | 15 | 11,075 | 1,101 | |||||||||||||||||||||||||||||||||||||||||
Taxable | — | — | 356 | 30 | 1,971 | 266 | 528 | 98 | 26 | (1 | ) | — | — | 2,881 | 393 | ||||||||||||||||||||||||||||||||||||||||
Total states, municipalities and political subdivisions | — | — | 1,375 | 130 | 7,766 | 845 | 4,602 | 485 | 178 | 19 | 35 | 15 | 13,956 | 1,494 | |||||||||||||||||||||||||||||||||||||||||
Asset-backed: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
RMBS | 4,222 | 43 | 24 | 1 | 23 | — | 77 | (1 | ) | 38 | 1 | 621 | 55 | 5,005 | 99 | ||||||||||||||||||||||||||||||||||||||||
CMBS | 49 | — | 308 | 11 | 407 | 13 | 322 | 8 | 561 | 5 | 253 | 5 | 1,900 | 42 | |||||||||||||||||||||||||||||||||||||||||
Other ABS | — | — | 32 | (3 | ) | 92 | 1 | 476 | 7 | 461 | 9 | — | — | 1,061 | 14 | ||||||||||||||||||||||||||||||||||||||||
Total asset-backed | 4,271 | 43 | 364 | 9 | 522 | 14 | 875 | 14 | 1,060 | 15 | 874 | 60 | 7,966 | 155 | |||||||||||||||||||||||||||||||||||||||||
U.S. Treasury and obligations of government-sponsored enterprises | 115 | — | — | — | — | — | — | — | — | — | — | — | 115 | — | |||||||||||||||||||||||||||||||||||||||||
Foreign government | — | — | 101 | 3 | 279 | 2 | 35 | 1 | 30 | — | — | — | 445 | 6 | |||||||||||||||||||||||||||||||||||||||||
Redeemable preferred stock | — | — | — | — | — | — | — | 1 | 11 | 1 | 9 | — | 20 | 2 | |||||||||||||||||||||||||||||||||||||||||
Total fixed maturity securities | $ | 4,386 | $ | 43 | $ | 1,899 | $ | 143 | $ | 9,136 | $ | 911 | $ | 9,876 | $ | 957 | $ | 13,730 | $ | 1,051 | $ | 3,063 | $ | 171 | $ | 42,090 | $ | 3,276 | |||||||||||||||||||||||||||
Percentage of total fixed maturity securities | 10 | % | 5 | % | 22 | % | 23 | % | 33 | % | 7 | % | 100 | % |
Consolidated | ||||||||||||||||
Periods ended September 30 | Three Months | Nine Months | ||||||||||||||
(In millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Taxable fixed maturities | $ | 349 | $ | 354 | $ | 1,047 | $ | 1,048 | ||||||||
Tax-exempt fixed maturities | 106 | 103 | 320 | 304 | ||||||||||||
Total fixed maturity securities | 455 | 457 | 1,367 | 1,352 | ||||||||||||
Limited partnership investments | 51 | 65 | 157 | 97 | ||||||||||||
Other, net of investment expense | 3 | 2 | 5 | 12 | ||||||||||||
Net investment income | $ | 509 | $ | 524 | $ | 1,529 | $ | 1,461 | ||||||||
Fixed maturity securities, after tax | $ | 328 | $ | 326 | $ | 987 | $ | 973 | ||||||||
Net investment income, after tax | 363 | 371 | 1,096 | 1,048 | ||||||||||||
Effective income yield for the fixed maturity securities portfolio, pretax | 4.7 | % | 4.8 | % | 4.7 | % | 4.8 | % | ||||||||
Effective income yield for the fixed maturity securities portfolio, after tax | 3.4 | 3.4 | 3.4 | 3.4 |
Property & Casualty and Corporate & Other Non-Core | ||||||||||||||||
Periods ended September 30 | Three Months | Nine Months | ||||||||||||||
(In millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Taxable fixed maturities | $ | 237 | $ | 242 | $ | 706 | $ | 722 | ||||||||
Tax-exempt fixed maturities | 21 | 21 | 67 | 58 | ||||||||||||
Total fixed maturity securities | 258 | 263 | 773 | 780 | ||||||||||||
Limited partnership investments | 51 | 65 | 157 | 97 | ||||||||||||
Other, net of investment expense | 5 | 4 | 12 | 17 | ||||||||||||
Net investment income | $ | 314 | $ | 332 | $ | 942 | $ | 894 | ||||||||
Fixed maturity securities, after tax | $ | 174 | $ | 177 | $ | 526 | $ | 529 | ||||||||
Net investment income, after tax | 211 | 223 | 637 | 605 | ||||||||||||
Effective income yield for the fixed maturity securities portfolio, pretax | 4.2 | % | 4.3 | % | 4.2 | % | 4.3 | % | ||||||||
Effective income yield for the fixed maturity securities portfolio, after tax | 2.8 | 2.9 | 2.9 | 2.9 |
Life & Group Non-Core | ||||||||||||||||
Periods ended September 30 | Three Months | Nine Months | ||||||||||||||
(In millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Taxable fixed maturities | $ | 112 | $ | 112 | $ | 341 | $ | 326 | ||||||||
Tax-exempt fixed maturities | 85 | 82 | 253 | 246 | ||||||||||||
Total fixed maturity securities | 197 | 194 | 594 | 572 | ||||||||||||
Limited partnership investments | — | — | — | — | ||||||||||||
Other, net of investment expense | (2 | ) | (2 | ) | (7 | ) | (5 | ) | ||||||||
Net investment income | $ | 195 | $ | 192 | $ | 587 | $ | 567 | ||||||||
Fixed maturity securities, after tax | $ | 154 | $ | 149 | $ | 461 | $ | 444 | ||||||||
Net investment income, after tax | 152 | 148 | 459 | 443 | ||||||||||||
Effective income yield for the fixed maturity securities portfolio, pretax | 5.6 | % | 5.7 | % | 5.7 | % | 5.7 | % | ||||||||
Effective income yield for the fixed maturity securities portfolio, after tax | 4.4 | 4.4 | 4.4 | 4.4 |
Three months ended September 30, 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 | $ | 6,229 | $ | 8,586 | $ | 1,442 | $ | 16,257 | $ | 3,417 | $ | 2,505 | $ | 22,179 | |||||||||||||
Ceded | 869 | 558 | 142 | 1,569 | 230 | 2,281 | 4,080 | ||||||||||||||||||||
Net | 5,360 | 8,028 | 1,300 | 14,688 | 3,187 | 224 | 18,099 | ||||||||||||||||||||
Net incurred claim & claim adjustment expenses | 357 | 611 | 200 | 1,168 | 256 | 2 | 1,426 | ||||||||||||||||||||
Net claim & claim adjustment expense payments | (465 | ) | (580 | ) | (113 | ) | (1,158 | ) | (200 | ) | (6 | ) | (1,364 | ) | |||||||||||||
Foreign currency translation adjustment and other | — | — | 37 | 37 | 3 | — | 40 | ||||||||||||||||||||
Claim & claim adjustment expense reserves, end of period | |||||||||||||||||||||||||||
Net | 5,252 | 8,059 | 1,424 | 14,735 | 3,246 | 220 | 18,201 | ||||||||||||||||||||
Ceded | 811 | 571 | 216 | 1,598 | 222 | 2,188 | 4,008 | ||||||||||||||||||||
Gross | $ | 6,063 | $ | 8,630 | $ | 1,640 | $ | 16,333 | $ | 3,468 | $ | 2,408 | $ | 22,209 |
Nine months ended September 30, 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 | 1,141 | 1,470 | 444 | 3,055 | 744 | 4 | 3,803 | ||||||||||||||||||||
Net claim & claim adjustment expense payments | (1,293 | ) | (1,717 | ) | (317 | ) | (3,327 | ) | (619 | ) | (15 | ) | (3,961 | ) | |||||||||||||
Foreign currency translation adjustment and other | — | 1 | 96 | 97 | 12 | 1 | 110 | ||||||||||||||||||||
Claim & claim adjustment expense reserves, end of period | |||||||||||||||||||||||||||
Net | 5,252 | 8,059 | 1,424 | 14,735 | 3,246 | 220 | 18,201 | ||||||||||||||||||||
Ceded | 811 | 571 | 216 | 1,598 | 222 | 2,188 | 4,008 | ||||||||||||||||||||
Gross | $ | 6,063 | $ | 8,630 | $ | 1,640 | $ | 16,333 | $ | 3,468 | $ | 2,408 | $ | 22,209 |
September 30, 2017 | |||||||||||
(In millions) | Claim and claim adjustment expenses | Future policy benefits | Total | ||||||||
Long term care | $ | 2,566 | $ | 8,891 | $ | 11,457 | |||||
Structured settlement annuities | 550 | — | 550 | ||||||||
Other | 16 | — | 16 | ||||||||
Total | 3,132 | 8,891 | 12,023 | ||||||||
Shadow adjustments | 114 | 1,919 | 2,033 | ||||||||
Ceded reserves | 222 | 230 | 452 | ||||||||
Total gross reserves | $ | 3,468 | $ | 11,040 | $ | 14,508 |
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 renewal premium change, rate, retention and new business in evaluating operating trends. Renewal premium change represents the estimated change in average premium on policies that renew, including rate and exposure changes. Rate represents the average change in price on policies that renew excluding exposure change. Exposure represents the measure of risk used in the pricing of the insurance product. Retention represents the percentage of premium dollars renewed in comparison to the expiring premium dollars from policies available to renew. Rate, renewal premium change and retention presented for the prior year is updated to reflect subsequent activity on policies written in the period. 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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