MEDIA: | ANALYSTS: | |
Brandon Davis, 312-822-5885 | Al Miralles, 312-822-5605 |
• | Q2 NET INCOME OF $151M, $0.55 PER SHARE |
• | Q2 CORE INCOME OF $99M, $0.36 PER SHARE |
• | Q2 P&C COMBINED RATIO OF 112.3%, UNDERLYING COMBINED RATIO OF 93.4% |
• | Q2 NET CATASTROPHE LOSSES OF $301M, OR 17.5 POINTS OF LOSS RATIO |
• | CATASTROPHE LOSSES INCLUDE $182M DUE TO COVID-19, $61M FROM CIVIL UNREST AND $58M FROM SEVERE WEATHER RELATED EVENTS |
• | QUARTERLY DIVIDEND OF $0.37 PER SHARE |
Results for the Three Months Ended June 30 | Results for the Six Months Ended June 30 | ||||||||||||||
($ millions, except per share data) | 2020 | 2019 | 2020 | 2019 | |||||||||||
Net income | $ | 151 | $ | 278 | $ | 90 | $ | 620 | |||||||
Core income (a) | 99 | 294 | 207 | 612 | |||||||||||
Net income per diluted share | $ | 0.55 | $ | 1.02 | $ | 0.33 | $ | 2.28 | |||||||
Core income per diluted share | 0.36 | 1.08 | 0.76 | 2.25 |
June 30, 2020 | December 31, 2019 | ||||||
Book value per share | $ | 42.91 | $ | 45.00 | |||
Book value per share excluding AOCI | 42.34 | 44.81 |
(a) | Management utilizes the core income (loss) financial measure to monitor the Company's operations. Please refer herein to the Reconciliation of GAAP Measures to Non-GAAP Measures section of this press release for further discussion of this non-GAAP measure. |
Results for the Three Months Ended June 30 | Results for the Six Months Ended June 30 | ||||||||||||||||||
($ millions) | 2020 | 2019 | 2020 | 2019 | |||||||||||||||
Gross written premiums ex. 3rd party captives | $ | 2,132 | $ | 2,000 | $ | 4,239 | $ | 3,987 | |||||||||||
GWP ex. 3rd party captives change (% year over year) | 7 | % | 6 | % | |||||||||||||||
Net written premiums | $ | 1,930 | $ | 1,874 | $ | 3,793 | $ | 3,680 | |||||||||||
NWP change (% year over year) | 3 | % | 3 | % | |||||||||||||||
Net investment income | $ | 324 | $ | 303 | $ | 442 | $ | 663 | |||||||||||
Core income | 96 | 298 | 218 | 612 | |||||||||||||||
Loss ratio excluding catastrophes and development | 59.5 | % | 60.8 | % | 59.9 | % | 60.7 | % | |||||||||||
Effect of catastrophe impacts | 17.5 | 2.2 | 10.9 | 2.9 | |||||||||||||||
Effect of development-related items | 1.4 | (1.1 | ) | 0.4 | (0.9 | ) | |||||||||||||
Loss ratio | 78.4 | % | 61.9 | % | 71.2 | % | 62.7 | % | |||||||||||
Expense ratio | 33.6 | % | 33.4 | % | 33.2 | % | 33.7 | % | |||||||||||
Combined ratio | 112.3 | % | 95.7 | % | 104.8 | % | 96.8 | % | |||||||||||
Combined ratio excluding catastrophes and development | 93.4 | % | 94.6 | % | 93.5 | % | 94.8 | % |
• | The combined ratio excluding catastrophes and development improved 1.2 points as compared with the prior year quarter. In addition to a 0.4 point benefit related to COVID-19, the underlying combined ratio improved 0.8 points over the same period last year including a half point improvement in the loss ratio and a 0.3 point improvement in the expense ratio. |
• | The combined ratio increased 16.6 points as compared with the prior year quarter. Net catastrophe losses were $301 million, or 17.5 points of the loss ratio in the second quarter of 2020 compared with $38 million, or 2.2 points of the loss ratio, for the prior year quarter. Catastrophe losses in the second quarter of 2020 include $182 million related to COVID-19; $103 million for Specialty, $43 million for Commercial and $36 million for International. The losses were substantially driven by healthcare professional liability with additional impacts from workers' compensation, management liability, commercial property, trade credit and surety. Due to the recent timing of the event, emergence pattern of claims and long tail nature of certain exposures the losses are substantially classified as incurred but not reported (IBNR) reserves. |
• | Unfavorable net prior period development increased the loss ratio by 1.4 points in the quarter compared with 1.1 points of favorable development decreasing the loss ratio in the prior year quarter. Unfavorable net prior period development in the current quarter includes a previously announced $50 million pretax charge for mass tort exposures, primarily due to New York reviver statute-related claims. |
• | The U.S. P&C segments, excluding third party captives, generated gross written premium growth of 8% and net written premium growth of 4%. Excluding third party captives, gross written premiums grew 7% and net written premiums grew 3% for P&C overall. |
Results for the Three Months Ended June 30 | Results for the Six Months Ended June 30 | ||||||||||||||||||
($ millions) | 2020 | 2019 | 2020 | 2019 | |||||||||||||||
Gross written premiums ex. 3rd party captives | $ | 811 | $ | 755 | $ | 1,552 | $ | 1,485 | |||||||||||
GWP ex. 3rd party captives change (% year over year) | 7 | % | 5 | % | |||||||||||||||
Net written premiums | $ | 742 | $ | 713 | $ | 1,436 | $ | 1,411 | |||||||||||
NWP change (% year over year) | 4 | % | 2 | % | |||||||||||||||
Core income | $ | 90 | $ | 161 | $ | 186 | $ | 330 | |||||||||||
Loss ratio excluding catastrophes and development | 59.9 | % | 59.9 | % | 59.7 | % | 60.2 | % | |||||||||||
Effect of catastrophe impacts | 15.0 | 0.1 | 8.2 | 1.0 | |||||||||||||||
Effect of development-related items | (2.9 | ) | (2.6 | ) | (2.3 | ) | (2.9 | ) | |||||||||||
Loss ratio | 72.0 | % | 57.4 | % | 65.6 | % | 58.3 | % | |||||||||||
Expense ratio | 32.0 | % | 33.1 | % | 32.1 | % | 33.0 | % | |||||||||||
Combined ratio | 104.2 | % | 90.7 | % | 97.9 | % | 91.5 | % | |||||||||||
Combined ratio excluding catastrophes and development | 92.1 | % | 93.2 | % | 92.0 | % | 93.4 | % |
• | The combined ratio excluding catastrophes and development improved 1.1 points as compared with the prior year quarter due to a 1.1 point improvement in the expense ratio driven by lower underwriting expenses and higher net earned premiums. The underlying loss ratio was consistent with the prior year quarter. |
• | The combined ratio increased 13.5 points as compared with the prior year quarter. Net catastrophe losses were $105 million, or 15.0 points of the loss ratio in the second quarter of 2020, nearly all due to COVID-19, compared with $1 million, or 0.1 points of the loss ratio, for the prior year quarter. Favorable net prior period development improved the loss ratio by 2.9 points in the quarter compared with a 2.6 point improvement in the prior year quarter. |
• | Gross written premiums, excluding third party captives, grew 7% and net written premiums grew 4% for the second quarter of 2020 driven by strong rate. |
Results for the Three Months Ended June 30 | Results for the Six Months Ended June 30 | ||||||||||||||||||
($ millions) | 2020 | 2019 | 2020 | 2019 | |||||||||||||||
Gross written premiums ex. 3rd party captives | $ | 1,044 | $ | 958 | $ | 2,103 | $ | 1,891 | |||||||||||
GWP ex. 3rd party captives change (% year over year) | 9 | % | 11 | % | |||||||||||||||
Net written premiums | $ | 949 | $ | 912 | $ | 1,899 | $ | 1,761 | |||||||||||
NWP change (% year over year) | 4 | % | 8 | % | |||||||||||||||
Core income | $ | 20 | $ | 120 | $ | 44 | $ | 259 | |||||||||||
Loss ratio excluding catastrophes and development | 59.0 | % | 61.7 | % | 60.1 | % | 61.9 | % | |||||||||||
Effect of catastrophe impacts | 19.0 | 4.9 | 12.8 | 5.1 | |||||||||||||||
Effect of development-related items | 6.0 | (0.1 | ) | 3.0 | (0.3 | ) | |||||||||||||
Loss ratio | 84.0 | % | 66.5 | % | 75.9 | % | 66.7 | % | |||||||||||
Expense ratio | 33.9 | % | 32.6 | % | 33.6 | % | 33.2 | % | |||||||||||
Combined ratio | 118.5 | % | 99.7 | % | 110.1 | % | 100.5 | % | |||||||||||
Combined ratio excluding catastrophes and development | 93.5 | % | 94.9 | % | 94.3 | % | 95.7 | % |
• | The combined ratio excluding catastrophes and development improved 1.4 points as compared with the prior year quarter which reflects a 0.7 point net benefit related to COVID-19 from lower loss frequency as a result of shelter in place restrictions and an adverse impact from a reduction in estimated audit premiums. These items decreased the loss ratio by 1.8 points and increased the expense ratio by 1.1 points. |
• | Excluding the impacts of COVID-19, the underlying combined ratio improved 0.7 points due to the loss ratio. |
• | The combined ratio increased 18.8 points as compared with the prior year quarter. Net catastrophe losses were $151 million, or 19.0 points of the loss ratio in the second quarter of 2020 compared with $37 million, or 4.9 points of the loss ratio, for the prior year quarter. Catastrophe losses in the second quarter of 2020 include $43 million related to COVID-19, $61 million related to civil unrest and $47 million related primarily to severe weather related events. Unfavorable net prior period development increased the loss ratio by 6.0 points in the quarter compared with 0.1 points of favorable development decreasing the loss ratio in the prior year quarter. |
• | Gross written premiums, excluding third party captives, grew 9% and net written premiums grew 4% for the second quarter of 2020 due to strong rate and higher new business. |
Results for the Three Months Ended June 30 | Results for the Six Months Ended June 30 | ||||||||||||||||||
($ millions) | 2020 | 2019 | 2020 | 2019 | |||||||||||||||
Gross written premiums | $ | 277 | $ | 287 | $ | 584 | $ | 611 | |||||||||||
GWP change (% year over year) | (3 | ) | % | (4 | ) | % | |||||||||||||
Net written premiums | $ | 239 | $ | 249 | $ | 458 | $ | 508 | |||||||||||
NWP change (% year over year) | (4 | ) | % | (10 | ) | % | |||||||||||||
Core (loss) income | $ | (14 | ) | $ | 17 | $ | (12 | ) | $ | 23 | |||||||||
Loss ratio excluding catastrophes and development | 59.9 | % | 60.1 | % | 60.1 | % | 58.5 | % | |||||||||||
Effect of catastrophe impacts | 19.9 | 0.2 | 11.9 | 1.3 | |||||||||||||||
Effect of development-related items | (1.2 | ) | (0.1 | ) | (0.7 | ) | 2.7 | ||||||||||||
Loss ratio | 78.6 | % | 60.2 | % | 71.3 | % | 62.5 | % | |||||||||||
Expense ratio | 36.7 | % | 37.3 | % | 36.1 | % | 37.2 | % | |||||||||||
Combined ratio | 115.3 | % | 97.5 | % | 107.4 | % | 99.7 | % | |||||||||||
Combined ratio excluding catastrophes and development | 96.6 | % | 97.4 | % | 96.2 | % | 95.7 | % |
• | The combined ratio excluding catastrophes and development improved 0.8 points as compared with the prior year quarter due to a 0.2 point improvement in the underlying loss ratio primarily driven by lower loss frequency from the impact of COVID-19 as well as 0.6 points of improvement in the expense ratio driven by lower acquisition and underwriting expenses. |
• | The combined ratio increased 17.8 points for the second quarter of 2020 as compared with the prior year quarter. Net catastrophe losses were $45 million, or 19.9 points of the loss ratio in the second quarter of 2020, predominantly due to COVID-19, compared with less than $1 million, or 0.2 points of the loss ratio, for the prior year quarter. Favorable net prior year development improved the loss ratio by 1.2 points in the quarter compared with a 0.1 point improvement in the prior year quarter. |
• | Excluding currency fluctuations, gross written premiums decreased 1% and net written premiums decreased 2% for the second quarter of 2020 driven by the continued impact of the strategic exit from certain Lloyd’s business classes, offset by growth in Europe. |
Results for the Three Months Ended June 30 | Results for the Six Months Ended June 30 | ||||||||||||||||||
($ millions) | 2020 | 2019 | 2020 | 2019 | |||||||||||||||
Net investment income | $ | 206 | $ | 205 | $ | 414 | $ | 409 | |||||||||||
Total operating revenues | 332 | 335 | 667 | 670 | |||||||||||||||
Core income | 14 | 7 | 18 | 17 |
Results for the Three Months Ended June 30 | Results for the Six Months Ended June 30 | ||||||||||||||||||
($ millions) | 2020 | 2019 | 2020 | 2019 | |||||||||||||||
Net investment income | $ | 4 | $ | 7 | $ | 7 | $ | 14 | |||||||||||
Interest expense | 31 | 34 | 62 | 68 | |||||||||||||||
Core loss | (11 | ) | (11 | ) | (29 | ) | (17 | ) |
Results for the Three Months Ended June 30 | Results for the Six Months Ended June 30 | ||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||
Pretax net investment income | $ | 534 | $ | 515 | $ | 863 | $ | 1,086 | |||||||||||
Net investment income, after tax | 436 | 420 | 709 | 885 |
• | Specialty provides management and professional liability and other coverages through property and casualty products and services using a network of brokers, independent agencies and managing general underwriters. |
• | Commercial works with a network of brokers and independent agents to market a broad range of property and casualty insurance products and services to small, middle-market and large businesses. |
• | International underwrites property and casualty coverages on a global basis through two insurance companies based in the U.K. and Luxembourg, a branch operation in Canada as well as through our Lloyd's Syndicate. |
• | Life & Group primarily includes the results of the individual and group long term care businesses that are in run off. |
• | Corporate & Other primarily includes certain corporate expenses, including interest on corporate debt, and the results of certain property and casualty business in run-off, including CNA Re and asbestos and environmental pollution (A&EP). |
• | Loss ratio is the percentage of net incurred claim and claim adjustment expenses to net earned premiums. |
• | Underlying loss ratio represents the loss ratio excluding catastrophes and development. |
• | Expense ratio is the percentage of insurance underwriting and acquisition expenses, including the amortization of deferred acquisition costs, to net earned premiums. |
• | Dividend ratio is the ratio of policyholders' dividends incurred to net earned premiums. |
• | Combined ratio is the sum of the loss, expense and dividend ratios. |
• | Underlying combined ratio is the sum of the underlying loss, expense and dividend ratios. |
• | Renewal premium change represents the estimated change in average premium on policies that renew, including rate and exposure changes. |
• | Rate represents the average change in price on policies that renew excluding exposure change. For certain products within Small Business, where quantifiable, rate includes the influence of new business as well. |
• | 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. |
Results for the Three Months Ended June 30 | Results for the Six Months Ended June 30 | ||||||||||||||
($ millions) | 2020 | 2019 | 2020 | 2019 | |||||||||||
Net income | $ | 151 | $ | 278 | $ | 90 | $ | 620 | |||||||
Less: Net investment gains (losses) | 52 | (16 | ) | (117 | ) | 8 | |||||||||
Core income | $ | 99 | $ | 294 | $ | 207 | $ | 612 |
Results for the Three Months Ended June 30 | Results for the Six Months Ended June 30 | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Net income per diluted share | $ | 0.55 | $ | 1.02 | $ | 0.33 | $ | 2.28 | |||||||
Less: Net investment gains (losses) | 0.19 | (0.06 | ) | (0.43 | ) | 0.03 | |||||||||
Core income per diluted share | $ | 0.36 | $ | 1.08 | $ | 0.76 | $ | 2.25 |
June 30, 2020 | December 31, 2019 | ||||||
Book value per share | $ | 42.91 | $ | 45.00 | |||
Less: Per share impact of AOCI | 0.57 | 0.19 | |||||
Book value per share excluding AOCI | $ | 42.34 | $ | 44.81 |
Results for the Three Months Ended June 30 | Results for the Six Months Ended June 30 | |||||||||||||||
($ millions) | 2020 | 2019 | 2020 | 2019 | ||||||||||||
Annualized net income | $ | 603 | $ | 1,114 | $ | 179 | $ | 1,240 | ||||||||
Average stockholders' equity including AOCI (a) | 11,003 | 11,771 | 11,930 | 11,652 | ||||||||||||
Return on equity | 5.5 | % | 9.5 | % | 1.5 | % | 10.6 | % | ||||||||
Annualized core income | $ | 394 | $ | 1,178 | $ | 413 | $ | 1,225 | ||||||||
Average stockholders' equity excluding AOCI (a) | 11,461 | 11,873 | 11,827 | 12,031 | ||||||||||||
Core return on equity | 3.4 | % | 9.9 | % | 3.5 | % | 10.2 | % |
(a) | Average stockholders' equity is calculated using a simple average of the beginning and ending balances for the period. |