-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CJrRlcBytfgACZ/P8nLKjMNrk+jRnCd27lsW/uLK69y3mpj23YjRI34Ddsnl71E/ jK7o7F0H9y0FCTEewSqosg== 0000021175-98-000010.txt : 19980807 0000021175-98-000010.hdr.sgml : 19980807 ACCESSION NUMBER: 0000021175-98-000010 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980630 ITEM INFORMATION: FILED AS OF DATE: 19980806 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CNA FINANCIAL CORP CENTRAL INDEX KEY: 0000021175 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 366169860 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-05823 FILM NUMBER: 98678512 BUSINESS ADDRESS: STREET 1: CNA PLZ CITY: CHICAGO STATE: IL ZIP: 60685 BUSINESS PHONE: 3128225000 MAIL ADDRESS: STREET 1: CNA PLAZA CITY: CHICAGO STATE: IL ZIP: 60685 8-K 1 FORM 8-K =============================================================================== SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------------------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported) August 5, 1998 ------------------------------------- CNA FINANCIAL CORPORATION (Exact Name of Registrant as Specified in Charter) Delaware 1-5823 36-6169860 (State or Other Jurisdiction (Commission (IRS Employer of Incorporation) File Number) Identification No.) CNA Plaza, Chicago, Illinois 60685 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code (312) 822-5000 (Former Name or Former Address, if Changed Since Last Report) =============================================================================== Item 5. Other Events CNA Reports Second Quarter Earnings and Estimate of Reorganization Charges Board of Directors Approves Share Repurchase Program CHICAGO, August 5, 1998 -- CNA Financial Corporation (NYSE: CNA) announced its earnings for the second quarter and an estimated range of charges related to reorganization activities in several of its businesses. Second Quarter Results and Six-Month Comparisons Net income for the second quarter of 1998 was $210 million, or $1.12 per share, compared with $235 million, or $1.26 per share, for the same quarter in 1997. Excluding net realized investment gains and losses, net income for the second quarter of 1998 amounted to $64 million, or $0.33 per share, compared with $126 million, or $0.67 per share, for the same quarter in 1997. Net realized investment gains for the second quarter of 1998 were $146 million, or $0.79 per share, compared with $109 million, or $0.59 per share, for the comparable period in 1997. (The company does not have any dilutive instruments related to its common shares. Accordingly, basic and diluted earnings are the same.) Catastrophe losses had an unfavorable impact on earnings of $82 million after tax, or $0.44 per share, for the second quarter of 1998 as compared to an unfavorable impact of $29 million, or $0.16 per share, for the second quarter of 1997. Consolidated revenues for the second quarter of 1998 were $4.4 billion compared with $4.2 billion for the second quarter of 1997. "CNA's results reflect continued soft market conditions, as well as higher catastrophe losses compared to last year," said CNA Chairman and Chief Executive Officer Dennis H. Chookaszian. "As a market leader in many lines of insurance, CNA is taking decisive action to increase both customer satisfaction and shareholder value as we continue to face intense price competition." Net income for the first six months of 1998 was $443 million, or $2.37 per share, compared with $412 million, or $2.21 per share, for the first six months of 1997. Excluding net realized investment gains and losses, net income for the first six months of 1998 amounted to $181 million, or $0.96 per -more- -2- share, compared with $262 million, or $1.40 per share, for the first six months of 1997. Net realized investment gains were $262 million, or $1.41 per share, for the first half of 1998, compared with net realized investment gains of $150 million, or $0.81 per share, for the same period in 1997. Catastrophe losses were $98 million after tax, or $0.53 per share, for the first six months of 1998, as compared to $49 million, or $0.27 per share, for the comparable period of 1997. Consolidated revenues for the first six months of 1998 were $8.8 billion, compared to $8.4 billion for the first six months of 1997. Estimated Reorganization Charges Separately, CNA announced current estimates of the financial implications of its initiatives to achieve world-class performance. The announcement encompasses all of its 29 strategic business units (SBUs), as well as corporate support areas. The company anticipates finalizing its plan by year-end 1998 and estimates that it will record a pre-tax charge of $100 million to $140 million for restructuring costs. Also, over the next 12 to 18 months, the company expects additional pre-tax transition costs of $200 million to $260 million related to the restructuring. The pre-tax impact on third-quarter earnings from these reorganization charges is estimated to be $175 million to $260 million. "World-class companies continually innovate and change. CNA is committed to providing quality products and service, and being a leader in our chosen markets," said Chookaszian. "Most of our SBUs are market leaders today and are growing. Over the past three years, CNA has achieved record shareholder equity, net income, and premium revenue," Chookaszian said. "We are building an even stronger future with our customers and distribution partners from this position of strength." Among the actions expected as part of the organizational changes are * closing several facilities * consolidating certain processing locations * reducing CNA's current workforce of approximately 24,000 employees by about 10 percent * enhancing computer systems While the company has not finalized its analysis of anticipated costs savings, it estimates that its world-class initiatives, which include the restructuring plan as well as revenue growth and operating efficiencies, will result in anticipated reductions of approximately 200 basis points in the company's expense ratio, and savings of approximately $300 million to $350 million on an annualized basis. The company expects a portion of the anticipated savings will be realized beginning in the latter part of 1998 and to achieve this reduced expense level within 18 months. -more- -3- "We regret the impact that job losses will have on our employees who are affected," Chookaszian said. "We are committed to treating them professionally during this transition." CNA Financial Corp. Board Chairman Edward J. Noha said, "Over the past 20 years CNA has responded successfully to significant challenges in the insurance marketplace while maintaining an unshakable commitment to financial strength." Share Repurchase Program Approved The board of directors has today approved a plan to purchase, in open market or privately negotiated transactions, its outstanding common stock from time to time as market conditions warrant. "The share repurchase program demonstrates our confidence in CNA's long term prospects and is consistent with our efforts to enhance shareholder value," said Chookaszian. CNA ranks among the top 10 U.S. insurance groups with 1997 revenues of $17 billion. Headquartered in Chicago, CNA is a leading multiline insurer, serving individuals and businesses with a broad range of insurance products and insurance-related services. CNA products and services are marketed through multiple distribution channels, including independent agents, brokers, general agents and direct sales. Since 1897, CNA has built on a foundation of financial strength, stability and commitment to customers and business partners. CNA is the registered service mark and trade name of CNA Financial Corporation. Shares of CNA Financial Corporation have traded at a split-adjusted high of $53.260 and a low of $36.460 for the 52-week period ending August 4, 1998. FORWARD LOOKING STATEMENT The statements contained in this press release which are not historical facts are forward-looking statements that involve risks and uncertainties, including, but not limited to, product and policy demand and market responses, the effect of economic conditions, the impact of competitive products, policies and pricing, product and policy development, regulatory changes and conditions, rating agency policies and practices, development of claims and the effect on loss reserves, the performance of reinsurance companies under reinsurance contracts with the Company, investment portfolio developments and reaction to market conditions, the results of financing efforts, the actual closing of contemplated transactions and agreements and other risks detailed in the Company's Securities and Exchange Commission filings. No assurance can be given that the actual results of operations and financial condition will conform to the forward-looking statements contained herein. # # # TABLES TO FOLLOW NOTE: A conference call for the investment community will be held from 3:00 to 3:30 p.m. Eastern Daylight Time today. On the conference call will be Dennis Chookaszian, chairman and CEO of CNA, and W. James MacGinnitie, chief financial officer of CNA. Participants can access the call by dialing 800-754-1053. The call is available to the media, but questions will be restricted to the investment community. A taped replay of the call will be available, beginning one hour after the call ends, until 6:00 p.m. Eastern Daylight Time on Thursday, August 6, 1998, by dialing 888-893-5820. CNA FINANCIAL CORPORATION
- ----------------------------------------------------------------------------------------------------------- 1998 1997 ------------------------ --------------------------- In Earnings In Earnings (In millions of dollars, except per share data) Millions Per Share Millions Per Share - ----------------------------------------------------------------------------------------------------------- THREE MONTHS ENDED JUNE 30 Revenues.......................................... $ 4,430 - $ 4,243 - Net Income Excluding Net Realized Investment Gains/Losses......................... $ 64 $ 0.33 $ 126 $ 0.67 Net Realized Investment Gains .................... 146 0.79 109 0.59 ------- --------- ------- ------------ ------------- Net Income........................................ $ 210 $ 1.12 $ 235 $ 1.26 ------- --------- ------------ ------------- SIX MONTHS ENDED JUNE 30 Revenues......................................... $ 8,757 - $ 8,375 - Net Income Excluding Net Realized Investment Gains/Losses........................ $ 181 $ 0.96 $ 262 $ 1.40 Net Realized Investment Gains ................... 262 1.41 150 0.81 ------- --------- ---------- ------------- Net Income....................................... $ 443 $ 2.37 $ 412 $ 2.21 ------- --------- ---------- ------------- - ----------------------------------------------------------------------------------------------------------- FINANCIAL POSITION JUNE 30 DECEMBER 31 (In millions of dollars, except per share data) 1998 1997 - ----------------------------------------------------------------------------------------------------------- Stockholders' Equity.............................. $ 8,787 $ 8,309 Net Unrealized Appreciation Included in Stockholders' Equity............ 627 589 Book Value per Common Share....................... 46.59 44.01 Weighted Average Outstanding Shares of Common Stock................................. 185.4 185.4 - -------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------- SUPPLEMENTAL FINANCIAL DATA SECOND QUARTER SIX MONTHS PERIOD ENDED ENDED JUNE 30 1998 1997 1998 1997 (In millions of dollars) - -------------------------------------------------------------------------------------------------- NET INCOME (EXCLUDING NET REALIZED INVESTMENT GAINS/LOSSES): Property and Casualty................................ $ 74 $ 125 $ 200 $ 264 Life................................................. 20 24 38 47 ------ ------ ----- ----- Total Insurance..................................... 94 149 238 311 Interest Expense and Other............................ (30) (23) (57) (49) ====== ====== ===== ===== $ 64 $ 126 $ 181 $ 262 ====== ====== ===== ===== REALIZED INVESTMENT GAINS (LOSSES), NET OF TAX AND POLICYHOLDERS' INTEREST: Property and Casualty............................... $ 122 $ 82 $ 208 $ 94 Life................................................ 25 26 55 44 ------ ------ ----- ----- Total Insurance................................... 147 108 263 138 Other............................................... (1) 1 (1) 12 ====== ====== ===== ===== $ 146 $ 109 $ 262 $ 150 ====== ====== ===== ===== - --------------------------------------------------------------------------------------------------
CNA FINANCIAL CORPORATION STATEMENT OF CONSOLIDATED OPERATIONS
- -------------------------------------------------------------------------------------- PERIOD ENDED JUNE 30 SECOND QUARTER SIX MONTHS 1998 1997 1998 1997 (In millions of dollars, except per share data) - -------------------------------------------------------------------------------------- Revenues: Premiums........................................ $ 3,467 $ 3,348 $ 6,835 $ 6,695 Net investment income........................... 558 547 1,120 1,111 Realized investment gains ...................... 232 172 415 238 Other........................................... 172 176 387 331 ------- -------- ------ -------- 4,429 4,243 8,757 8,375 ------- -------- ------ -------- Benefits and expenses: Insurance claims and policyholders' benefits.... 2,937 2,860 5,787 5,752 Other operating expenses........................ 1,208 1,041 2,355 2,053 ------- -------- ------ -------- 4,145 3,901 8,142 7,805 ------- -------- ------ -------- Income before income tax...................... 284 342 615 570 Income tax expense................................ 74 107 172 158 ------- ------- ------ -------- Net income $ 210 $ 235 $ 443 $ 412 ====================================================================================== EARNINGS PER SHARE Net income ....................................... $ 1.12 $ 1.26 $ 2.37 $ 2.21 ====== ======= ====== ======= Weighted average outstanding shares of common stock (in millions of shares).............. 185.4 185.4 185.4 185.4 ======================================================================================
CNA FINANCIAL CORPORATION
- ----------------------------------------------------------------------------------------------- SUPPLEMENTAL STATUTORY DATA - OPERATIONS SECOND QUARTER SIX MONTHS PERIOD ENDED JUNE 30 1998 1997 1998 1997 (In millions of dollars, except ratios) - ----------------------------------------------------------------------------------------------- PROPERTY/CASUALTY COMPANIES: Premiums written............................ $ 2,846 $ 2,834 $ 5,818 $ 5,506 Premiums earned............................. 2,638 2,565 5,189 5,031 Underwriting loss........................... (349) (308) (687) (660) Investment income........................... 420 444 845 872 Trade ratios: Loss....................................... 79.1% 78.6% 78.5% 79.0% Combined (before policyholder dividends)... 109.6% 107.7% 108.7% 109.1% Dividends to policyholders................. 1.0% 0.7% 0.9% 0.9% LIFE COMPANIES: Premium income............................. 876 890 1,777 1,849 CNA INSURANCE NET PREMIUM VOLUME - -------------------------------- Property/Casualty: Commercial.................................. $ 2,298 $ 2,502 $ 4,698 $ 4,657 Personal.................................... 479 478 988 936 Involuntary Risks........................... 69 (146) 132 (87) Life: Individual.................................. 197 218 429 449 Group....................................... 679 672 1,348 1,400 -------- --------- --------- --------- $ 3,722 $ 3,724 $ 7,595 $ 7,355 ======== ========= ========= ========= - ----------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SUPPLEMENTAL STATUTORY DATA - FINANCIAL POSITION JUNE 30 DECEMBER 31 (In millions of dollars, except ratios) 1998 1997 - ------------------------------------------------------------------------------- PROPERTY/CASUALTY COMPANIES: Estimated statutory surplus......................... $ 7,019 $ 7,123 Estimated written to surplus ratio.................. 1.5 1.4 Claim and claim expense reserves.................... $ 24,164 $ 24,088 Ratio of reserves to twelve months premium revenue........................................... 2.4 2.4 LIFE COMPANIES: Statutory surplus................................... $ 1,281 $ 1,224 Life insurance in force............................. 351,347 311,598 - -------------------------------------------------------------------------------
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CNA FINANCIAL CORPORATION Date: August 6, 1998 By: S\W. JAMES MACGINNITIE -------------- --------------------- W. James MacGinnitie Senior Vice President and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----