CNA Posts $1.8 Billion 3Q Loss, Cut By Moody’s

Chicago-based insurer CNA Financial Corp. reported a net loss for the third quarter of 2003 of $1.8 billion, or $7.94 per share, as compared with net income of $54 million, or 24 cents per share, for the same period in 2002. The net loss for the nine months ended Sept. 30, 2003 was $1.6 billion, or $7.39 per share, compared with net income of $105 million, or $0.47 per share, for the same period in 2002.

The net prior year development consisted of $978 million after-tax related to core reserves and $517 million after-tax related to asbestos, environmental pollution and mass tort reserves (APMT).

The primary factors that led to the net prior year development were the previously announced third quarter of 2003 comprehensive reserve reviews, which included construction defect and other volatile exposures, and a ground up analysis of APMT exposures.

The net prior year development also resulted in additional cessions to the company’s reinsurance contracts, including the corporate aggregate reinsurance treaties. These additional cessions resulted in $67 million of after-tax interest expense, which is recorded as a reduction in net investment income.

In response to the company’s announcement, Moody’s Investors Service lowered CNA’s long- and short-term credit ratings — senior unsecured debt to “Baa3” from “Baa2,” rating for commercial paper to “Prime-3” from “Prime-2”), as well as those of its supported debt-issuing subsidiaries and the insurance financial strength ratings of its principal U.S.-based life insurance subsidiaries, Continental Assurance Co. and Valley Forge Life Insurance Co. (to “Baa1” from “A2”).

Moody’s did confirm the insurance financial strength ratings of CNA’s principal property-casualty insurance subsidiaries — members of the Continental Casualty Co. and Continental Insurance Co. intercompany pools — at “A3.”

Topics Profit Loss